How AGL is having its cake and eating it

The government must act and this does not involve doling out even more favours to the unreliable renewables sector.

AGL boss Andy Vesey at Parliament House in Canberra.

Thanks to the Yanks, I say. We owe a debt of gratitude to energy company AGL and its loquacious American-born chief executive who has come here on a 457 visa.

The good thing is that AGL is a household name and so when the CEO tells us the company is changing and moving out of coal, we tend to sit up and listen. And some of us ask questions.

So how come our new American pal can tell us that the company is changing when it so recently bulked up on big purchases of coal-fired electricity assets? Recall that AGL was the successful bidder for the NSW government-owned power stations in the Hunter Valley, Liddell and Bayswater, in 2014. That’s right, three years ago.

Note also that AGL owns a very big (brown) coal-fired electricity plant in the Latrobe Valley in Victoria.

In fact, AGL is the biggest provider of coal-fired electricity in the country and more than 90 per cent of its (rising) profits is sourced from fossil fuels.

But we are still told to believe that the company is changing by moving into that rent-seeking space: renewables. But if you look at AGL’s profile of production, renewables are small beer and will remain so for a considerable period of time.

Now some might think hypocrisy by having to put up with the company’s marketing messages, egged on by a bunch of staffers some of whom have been trained by none other than Mr Inconvenient Truth himself, Al Gore.

But where you think hypocrisy, I think misleading and deceptive. I can’t believe that the Australian Competition & Consumer Commission hasn’t launched a case against AGL for using false information to attract customers. Surely a company that derives over 90 per cent of its profits from coal and gas can’t portray itself as green as grass.

And don’t think that AGL as a retailer — arguably such vertical integration should never have been allowed — is saintly in its behaviour towards customers. It is up there with the others in ditching discounted offers without telling customers and acting in a self-serving way.

So why do I say that we should be grateful to AGL? Its recent behaviour, its stated intentions to close Liddell (all 2000 megawatts) and comments from the Yank have all belled the cat for the public by exposing the distorted Australian electricity market as an expensive and unreliable racket. It is now clear that the government must act and this does not involve doling out even more favours to the unreliable renewables sector.

Let me be clear: the clean energy target is just another subsidy swindle that will favour AGL but also Origin, Energy Australia and assorted other renewable energy companies, many of them overseas owned.

The CET is perfect for AGL. It can bulk up its renewable assets with the obscene subsidies handed out by electricity consumers and directly by taxpayers (think Victoria and the ACT) while cashing in big time on its large legacy coal and gas assets. It just doesn’t get any better for the company.

Wholesale prices will continue to soar, particularly after Liddell closes. But if the Yank is still around, we will be bombarded with the message that the company is undertaking the journey to the green world of renewables — with expensive firming capacity, of course — and we should all hold hands and join him in this wonderful path to the future.

Indeed, by 2030, if the Chief Scientist has his way, 42 per cent of all electricity will be generated by renewable energy and our electricity prices will be even higher by world standards.

But we won’t have to worry about meeting our Paris emissions commitments because all our energy-intensive industry will have closed and relocated to countries with cheaper and more reliable electricity. It won’t do anything for global emissions, but we will be able to feel good about ourselves — or not, as the case may be.

While I’m in the game of thanking Yanks, we should also extend a hand of appreciation to the new head of the Australian Energy Market Operator. Her experience in the game was based in New York, which is the size of a handkerchief compared with our eastern states electricity grid. Her schtick is demand-management.

This involves bribing consumers and businesses to use less electricity when told to do so and in exchange receive some monetary compensation. It’s a bit like BHP telling its customers to demand less iron ore and BHP will pay its customers for doing so. Oh that’s right, BHP would never do that because that’s not how market economics works.

But let’s get back to this Yank’s you-beaut idea. I’m assuming she has never actually experienced an Australian summer heatwave, but let’s leave that to one side.

The idea is that you ask households to turn down or off their air conditioners when it gets really hot — you know it makes sense — and they will receive some small discount on their electricity bill.

Think this one through. Those on low incomes are most likely to be attracted to this type of offer, including older people on the pension or on low fixed incomes. Sitting in their small dog boxes, because the government thinks it is selfish for older people not to downsize (thanks for that tip, Scott Morrison), they will be able to endure seven days of 40C-plus heat happy in the knowledge that they will save a few bob on their bill. It’s a form of voluntary load-shedding.

And then there are the factories that will be ordered to power down and receive a few bucks. But the physical constraints and loss of efficiency for many of factories mean this is not a good deal. Rather than power down from time to time, the owners of these factories may take the rational course and power down permanently rather than put up with expensive, unreliable electricity.

So let’s all doff our caps to the Yanks. They have shown us the future. But if you don’t like the look of it, my advice is to campaign for cheap, reliable electricity we can all access when and where we need it.