Beware power of the woke cowboy capitalists

AGL’s rejection of the Mike Cannon-Brookes bid has averted a power crisis for the moment but he’s not going away.

That enterprises work better in private hands has been an article of conservative faith since the days of Margaret Thatcher and John Howard.

There is absolutely no doubt that bloated payrolls, inefficiency and lack of imagination readily flourish in businesses that can never go broke because the government owns them. Hence privatisation usually means more dynamism and lower costs to consumers despite the need to provide a decent return to shareholders.

But what about businesses in monopolistic industries with little competition and huge barriers to entry that are no longer being run to provide a good product and value to shareholders but to pander to woke shareholder activism or even to make a political point? If they are essential services, should they be left in private hands?

For decades electricity generation was the business of state governments because the private sector didn’t have the patient capital to make the massive investments required. Almost inevitably, the power industry was union-dominated, featherbedded and prone to extortionate wage demands. This largely stopped from the 1990s as most state governments began to corporatise and then privatise their generators, and by the early 2000s Australia had one of the world’s most efficient and competitive power sectors with the lowest prices to consumers.

But since then, in response to concerns about climate change and the weight of industry superfunds dictating politics to corporate boardrooms, the electricity market has been increasingly corrupted, so now the principal goal of our power system is less about producing electricity affordably and reliably than it is to get emissions down as far and as fast as possible. In the process, real wholesale power prices have almost doubled during the past 1½ decades, and heavy industries such as steel and aluminium are at risk of becoming uncompetitive and migrating overseas.

What we’ve discovered is, with existing technology, it’s impossible to reduce emissions drastically while keeping the lights on 24/7 because wind and solar power are cheap only when the wind blows and the sun shines. As well, too much intermittent, weather-dependent power dam­ages the economics of baseload power, especially from coal.

If government were still in charge of running our power generators, at some point politicians would have to level with the public and explain that we can have low emissions or cheap, reliable power but not both.

Instead, private sector companies are in charge with no obligation to explain themselves to the public, with a perverse incentive to shut coal to increase their profits and increasingly hostage to woke activist shareholders whose main interest is getting out of coal. The result is the kind of posturing we’ve seen in the past few years, starting with Hazelwood in Victoria in 2016: companies closing down their coal-fired power stations to get green bragging rights and boast about getting out of dirty, polluting energy while making their remaining coal-fired power stations more valuable as power prices rise.

Unlike governments, which get the blame when essential services become more expensive and less reliable, private businesses can shrug their shoulders and blame market forces (and the government) for blackouts and rationing, while crying all the way to the bank.

When AGL announced in 2017 it would be closing by 2022 the Liddell Power Station, then producing about 15 per cent of NSW’s power, the Turnbull government asked the company to keep the plant open or to sell it to someone who would. The company agreed to extend Liddell’s life by one year (to 2023) but point-blank refused to sell because it didn’t want another competitor.

Likewise, when Origin Energy made its shock announcement last week to bring forward the closure of the giant Eraring power station near Newcastle (supplying almost 20 per cent of NSW’s power) by seven years to 2025, it transpired that the company had refused a state government request to buy or to lease the plant to keep it operating. For the second time, an energy company has put its commercial self-interest and its bogus green credentials ahead of maintaining an essential service.

To avoid the forecast 1000-megawatt shortfall in NSW energy needs created by the imminent closure of Liddell, the federal government (through its wholly owned business Snowy Hydro) now is building a gas-fired power station in the Hunter.

But its only response so far to the news of Eraring’s impending closure has been to make the obvious point that replacing a 2900MW baseload power station with a 700MW battery that can run for just few hours is “delusional”. After all, while power stations create power, batteries just store it; it is generation that’s key.

The real problem, though, is that forced to choose between good PR and doing their job properly, too many public companies take the soft option, especially when it’s taken for granted that cutting emissions ranks with increasing diversity and inclusion as the holy grail of modern business.

This new woke brand of capitalism became even more obvious last weekend when tech billionaire Mike Cannon-Brookes made an $8bn bid for AGL with the express purpose of getting it out of coal even sooner.

Not for Cannon-Brookes the company’s existing aim to exit coal by 2045 (itself recently accelerated); he wants AGL completely out of coal within a decade, even though coal currently is almost 70 per cent of the east coast’s power supply. Even greener-than-green NSW Energy Minister Matt Kean thinks Cannon-Brookes’s goal is impossible.

A chronic power crisis has been averted for the moment by AGL’s rejection of the Cannon-Brookes bid, but he’s not going away and what it has highlighted is the danger of companies being taken over for political rather than business reasons.

The bottom line is that an essential service such as electricity shouldn’t be hostage to a woke billionaire on a vanity project.

Normally, where Cannon-Brookes or anyone else wants to put their money would be entirely up to them. If he wants to sink his money into developing new renewable power sources, good luck to him (although subsidies should be abolished). But no one should be allowed to jeopardise an essential service to make a political point.

Back in 2011, two leftist millionaires bought the Triabunna wood chip mill in Tasmania to keep it closed. That was the start of a trend: very rich people using their money to manipulate society, whether it’s Clive Palmer spending millions on advertising in an attempt to buy votes to stack the parliament or Cannon-Brookes trying to buy an energy company to stop it producing energy. When someone exploits the market to take a business out of the market, that’s less market forces at work than anti-market forces. It’s an abuse of the market that no pro-market government should feel compelled to accept.

If Scott Morrison wants to show he’s serious about keeping the lights on, he’d take steps to acquire the Eraring plant compulsorily (on just terms, of course) and keep it running until there’s an alternative source of baseload power. Likewise with AGL’s coal assets if Cannon-Brookes eventually gets hold of them, only to close them down.

With the world entering the gravest security crisis in decades, the last thing we need is an indulgent frolic further weakening our power system.

Peta Credlin is the host of Credlin on Sky News, 6pm weeknights.