Hazelwood closure ‘would expose electricity users to price volatility’
Speculation that Hazelwood power station may close sparked warnings that major energy users face volatility in prices.
Mounting speculation that French utility giant Engie would close the Hazelwood coal-fired power station sparked fresh warnings that major energy users face more volatility in electricity prices, but rival generators could receive a fillip.
Amid conjecture about a potential closure as early as March, Global-Roam managing director Paul McArdle said “the consensus view in the market is prices will rise” if Hazelwood was closed. “The short answer is yes, the hard question is by how much,” Mr McArdle added.
He said the “effect will be most felt in Victoria but all interconnected regions will feel the pinch”.
Frontier Economics managing director Danny Price said prices would rise and become more volatile if Hazelwood was shuttered.
Earlier this year, Frontier published a paper that found an exit of a major brown coal-fired generator in Victoria would cause a short-term cost shock, a short-term increase in generator market power and long-term structural change.
“The remaining generators, they will welcome this move,” Mr Price said.
Yesterday, Victorian Treasurer Tim Pallas said the government did not know the future of the plant, but Engie was “considering the issue of closure”. “They’re working it through at board level and they haven’t made a decision yet.”
In Australia, Engie has maintained no decision has been made for Hazelwood, but there have been media reports that Engie is set to walk away from the 1600MW plant if a buyer is not found.
The head of the Grattan Institute’s energy program, Tony Wood, said there would continue to be sufficient capacity on the east coast if Hazelwood closed. The slack could be picked up from black coal-fired power from NSW, while it was possible the other Victorian brown coal generators would run harder.
“Closure of Hazelwood should be good news for Loy Yang A and Yallourn, via higher prices, at least for now,” Mr Wood said. “It will mean environmentalists will turn their guns on those two next.”
Watermark Funds Management investment analyst Delian Entchev said pool prices in Victoria had already risen ahead of expectations of a tighter demand-supply balance. “Who misses out? It’s mostly the industrial users because every six months they will get repriced onto a higher price.”
