Federal Energy Minister Angus Taylor has clearly lost the plot, taking centre stage to claim credit for spending $600m on a 660MW gas peaking plant in the Hunter Valley which according to his industry regulator is surplus to capacity.
Snowy Hydro boss Paul Broad has played Taylor for a sucker almost as well as he did Malcolm Turnbull when he as prime minister agreed to spend untold billions under the Snowy 2.0 project.
A smart politician would have left it to Broad to talk about his Hunter Valley plans, except of course there is a by-election in the area this weekend.
The timing of his announcement on the eve of a NSW by-election tells you all you need to know about the cynicism on display from a minister who is frankly intellectually better than that.
The same guy has spent $2.4bn this week to underwrite the losses of the two remaining refineries, Ampol and Viva, while giving them full access to their upside in the cyclic industry.
Taylor plucked from the air the figure of 1000MW as being needed to offset the closure of Liddell in 2023, when market regulator AEMO said at most 250MW was needed to fill the reliability gap.
AEMO welcomed Taylor’s move which is a little like your three-year-old welcoming the arrival of Father Christmas — any investment in the electricity market is good.
Whether it’s the least costly option is another issue altogether.
Now Taylor says we are not talking about reliability gaps, we are talking about “the capacity to keep prices low”, so he is gold plating the system to increase supply to keep prices down.
The logic slips when you realise the Hunter plant is a peaking plant which may run for 2 per cent of the year.
Taylor is a seriously smart person, so even in a by-election you have to wonder how someone with his capacity and background could expect the public to believe spending $600m on a peaking plant which will operate at best 2 or 3 cent of the time will help prices go down.
The same person managed to ignore the mass increase in rooftop solar power as he and other punters put solar panels on their homes as having some impact on wholesale electricity prices.
Taylor said it was all due to his big stick legislation.
The legislation did force retailers to pass on cuts to wholesale prices but as is the way with all regulation it had a downside and that was cutting price competition under the default market offer.
That meant industry rivals like Alinta were locked out of the game of price cuts because everyone just stuck to the government set price under the default regimen.
The Hunter investment comes just weeks after one industry player, EnergyAustralia, committed to spending $300m on a new peaking gas plant ready for hydrogen conversion to fit in with the NSW government hydrogen hub in Port Kembla.
NSW kicked in $60m for the development and the feds threw $5m into the hat.
EA chair Graham Bradley must surely be scratching his head and wonder just why his company bothered.
Canberra has just overbid him and worse in a way which threatens to raise prices not lower them.
The EA plant will deliver reliable power to 150,000 homes.
As a guide a 100MW plant can power around 150,000 homes.
The way Taylor has played this game you have to question why any of the majors would commit to new generation investment again because they know if they don’t Taylor will simply come to the table.
The reason the Hunter snafu may increase prices is because Snowy’s Paul Broad controls the so called caps market in NSW.
The electricity market works on constant auctions matching demand and supply but events can move prices dramatically from the present spot price in NSW of $35 per megawatt hour to as high as $15,000MWh to a low of minus $1200MWh.
To protect themselves against big swings the industry takes out reinsurance which works like options so you pay to ensure if the price went above $300MWh that is all you will pay.
The biggest supplier in the caps market is Paul Broad at Snowy Hydro because he has the power to quickly generate more hydro power to fill the gaps.
This market power is boosted by Wednesday’s decision to build a new gas peaking plant in the Hunter.
Taylor used to work with ACCC boss Rod Sims at Port Jackson Partners so he knows about the laws of supply and demand which in this case means Broad on Wednesday considerably boosted his market power which gives him the potential to control prices.
The caps market works to affect prices without actually having to turn on the switch which is where Broad’s power is boosted.
All of which runs counter to the Taylor rhetoric.
His old colleague Sims will of course be watching the space carefully which again makes you wonder just what sort of policy game Taylor is playing.
But then again here is a Minister who is fond of saying he is not running a communist state but this week committed $3bn of our taxpayer funds to firstlunderwrite the losses of two listed petrol refiners and then stumped over market players in handing price control to the government-owned producer Snowy Hydro.
AICD gets its way
Proxy advisers have responded with the expected horror to the government’s scrutiny of their already regulated work.
The review was one of the many items on the JobKeeper junkie AICD’s wishlist granted by the federal government.
The AICD as previously noted collected $5m in JobKeeper payments last year.
Ownership Matters has reported in its submission to the Treasury review that in its 11 years corporate Australia has copped 141 strikes where more than 25 per cent of shareholders voted against the pay report. In 131 of these the following year the company changed its pay policy and the no vote fell by 23 per cent.
Over its time 7426 resolutions were considered of which 96.2 per cent were passed, six rejected but in five of these the company was under takeover, and 38 were withdrawn.
Both sets of figures show contrary to the JobSeeker junkie’s fears shareholders have approved the overwhelming number of proposals and the changes have come from shareholder engagement resulting in policy changes. None of which looks too heinous.
More Coverage
