Grand old lady needs a new life

In September last year, after Malcolm Turnbull called on AGL to commit to keeping its Liddell Power Station open for five years beyond its planned 2022 closure or sell it, the energy giant invited media for a tour of the 46-year-old plant in NSW’s Hunter Valley to showcase its faults. Liddell was “an old lady and you can’t ask an old lady to run a marathon a few days in a row without falling over”, journalists were told. Fast forward six months and a potential alternative is at hand, with Chinese conglomerate Shandong Ruyi, majority owner of Cubbie cotton station in southwest Queensland, willing to buy and invest in Liddell, as The Australian revealed this week.

Scott Morrison has taken a strong lead in confirming that the government would approve a sale to the Chinese company under foreign investment rules. Shandong Ruyi, a major textile company, has partnered Chinese state-owned company ­Huaneng Power on power projects, including building low-emission, coal-fired plants in Pakistan.

The Liddell station is not for sale. But AGL has rejected claims it was holding on to it as it wanted power prices to stay high to boost profits. AGL reportedly plans to replace coal-fired power with gas, renewables and a battery. The Prime Minister would do well to double down in supporting his Treasurer’s stand and urge AGL to sell to a buyer that regards the plant as viable. On Tuesday, Greg Brown reported that former Australian rugby union captain Nick Farr-Jones, on behalf of the Shandong Ruyi Group, his client, had written to Mr Turnbull in December to tell him the group was interested in buying Liddell. Shandong Ruyi was “prepared to invest in latest-­technology, low-emission, coal-fired power”, Mr Farr-Jones wrote. The company would review the Liddell plant with a view to extending its life to “provide reliable, lower cost power to NSW”. Unfortunately for consumers and small businesses struggling with soaring power bills, Mr Turnbull did not raise the issue with AGL.

Last week, Energy Minister Josh Frydenberg wrote in these pages that the Turnbull government was concerned about the impact of AGL’s proposed closure of Liddell, which “supplies more than 10 per cent of NSW’s demand, including providing power for more than one million homes and contributing to the energy needs of large industrial customers such as the Tomago aluminium smelter”. The national grid needs that power, at least for the foreseeable future. Last week, we reported that Liddell’s closure might cause power outages because only 100MW of the replacement capacity had been funded so far. In South Australia, as the new Marshall government sorts out the energy mess left behind by Labor, it is looking to build a new interconnector to NSW to boost SA electricity supplies. The continuation of Liddell would help ensure a more reliable and cost-effective supply was available.

At this week’s Global Food Forum, sponsored by The Australian, Australia’s exorbitant power costs — despite our nation being one of the richest in natural resources — have been identified as a major problem for food producers. Sunny Verghese, co-founder of the Singapore food company Olam International, told the forum that Australia had the highest energy costs of any of the 70 countries in which Olam, Australia’s largest almond producer, did business. Despite Australia’s comparative advantage in power generation, Mr Verghese correctly described the system as “broken” — an indictment on decades of failure by successive federal and state governments.

His concerns were reinforced by Australian Competition & Consumer Commission chairman Rod Sims, who said high energy prices were the biggest crisis facing the nation. Mr Sims said the focus should be on affordability because of the high cost of guaranteeing reliability of supply. Consumers expect both, which is why the Chinese proposal for Liddell is worth pursuing. As Mr Frydenberg wrote, the focus must be on driving more dispatchable power into the market.