Alinta’s $1.2 billion bid to buy Liddell power station – including an offer of $250 million in cash to current owner AGL – and keep it running beyond 2022 is the first bright spark in the energy debate.
In recent years, naysayers have derided the importance of baseload power stations and claimed the market has turned away from coal.
But it is clear that Alinta’s offer is in the best interests of families and businesses in NSW.
Just look at what Alinta did in Victoria following their purchase of Loy Yang B, the coal-fired power station in Victoria. Days after securing Loy Yang B from Engie, they announced they were now in a position to lower power bills 2.8 per cent for the average customer.
That kind of price relief would be warmly welcomed in New South Wales where power prices rose between 10-20 per cent last year. Families and businesses in the Hunter simply cannot cope with energy price rises of that scale year after year. For a region blessed with an abundance of resources, it is mind-boggling that energy prices are among the highest in the world.
Refusal to sell Liddell by owner AGL would mean more cheap and reliable energy would be retired from the national grid, resulting in even higher prices (if that is even possible).
The owner’s counter proposal to replace Liddell primarily relies on building a new gas peaking power station, as well as a mix of renewables and battery storage.
The problem with shifting from coal-fired power stations to gas peaking plants is that it too entrenches higher power prices for industry and households.
That’s because – as the CSIRO has said – electricity generated by gas peaking plants is more expensive than baseload coal power stations. Gas peaking plants only spring into action when demand is highest, relying on high wholesale power prices to turn a profit. They are probably best described as a very expensive stop-gap measure.
As the Prime Minister remarked last year, gas is the final element to come into play when it comes to determining the price of energy for consumers. That’s because it is used to top up energy supply when demand is high.
The reality is that gas prices have sky-rocketed despite Australia having vast gas reserves. Does it cause you discomfort to know that as a consumer, you pay far more to use gas for energy than people pay in the countries to which we export gas? Yes, that really does grate, doesn’t it.
It’s our resource, we as a nation own it, but we pay more to use it than the people we sell it to. Go figure.
And shifting from coal to gas will exacerbate already elevated gas prices. Last month ACCC chairman Rod Sims said “high gas prices are a threat to Australian industry’s competitiveness”. A new gas peaking power station will require more expensive gas, rather than using the Hunter Valley’s high-quality coal that has kept the lights on for decades.
AGL are on track to make $1 billion profit this year. Alinta are offering $250 million in cash to AGL who bought Liddell in 2014 for $0 from the NSW Government.
That’s a very good return by anyone’s standards. A refusal to sell the asset appears contrary to the best interests of business and consumers in NSW.
