ELS Fortnightly News Wrap Up #6

Each fortnight, the team at ELS publish a news digest covering energy and sustainability. We read for our own pleasure but to save you time we identify a handful of pertinent articles from Australia and around the globe and add our own commentary. It used to be an internal memo but we kept being asked to share it, so here it is.

This fortnight has been a nothing short of a roller coaster in the energy space, with some truly unreal developments. Here are seven of the best for your weekend reading:

Power giant AGL fights back over wind farm blackout ‘failure’ claims
Stop the press, we have officially seen it all! The Australian Energy Regulator has launched court action against a number of companies over the South Australian statewide blackout in 2016. This is an interesting development to say the least given the court action is based on an investigation conducted by the AER (that they will not release). We also find it curious that the investigation excludes any of the fossil fuel generators that failed to deliver on their ‘black start’ capabilities (despite being paid handsomely for offering these services). We’d also like to highlight an interesting comment in the article from Angus Taylor on how Australians expect the power to stay on and generation needing to perform properly, including in tough circumstances… perhaps he hasn’t looked at how the coal fired power stations fared last summer!

Domestic gas supplies to be reserved in bid to lower power bills
The Feds are starting to give additional consideration to domestic gas prices. While still very much in planning, establishing a national gas reservation would appear long overdue. WA has seen the success of such a plan and subsequently enjoy significantly lower gas prices than on the eastern seaboard of Australia. The interaction with the electricity market will be quite an interesting one too, with gas generators often setting the price. Of even more interest will be the new found competition between gas generators and battery storage and any changes to price arbitrage opportunities for large scale batteries operators.

Commonwealth Bank warns climate change could slash farm productivity
CBA has released a new report looking at the long term impacts of climate change to farm productivity. Needless to say it does not make for pretty reading with productivity declines of 50% for some grain growing regions and profitability falls of up to 40% for the livestock industry predicted. We are quite keen to see how government and industry bodies respond to the report especially concerning the implementation of additional adaptation and mitigation initiatives. The IPCC also released a global report looking at food supply, summarised here, that makes for similarly bleak reading…

AGL delays closure of Liddell power plant after battle with government
This is quite a development and public victory for the Coalition, pressuring AGL into a back flip on previous commitments to close Liddell in 2022. Quite an interesting throwaway from Angus Taylor who states “we want to see existing coal and gas generation stay in the market, running at full tilt.” As mentioned last fortnight, we are already seeing daytime electricity prices come down dramatically due to renewables and given the large pipeline, specifically of solar projects, this trend will likely continue. Relying on an ageing coal fired power station in an increasingly dynamic market is a bold strategy, but if Liddell is humming along during summer, they’ll probably pocket a handy profit.

Victoria solar rebate “disaster” continues as August quota fills within two hours
The failure of a non-market mechanism once again playing out for all to see. The Victorian Government is holding steadfast that there are no problems with their policy but they have created a boom/bust market from one that was humming along quite nicely. We will be amazed if nothing changes by the end of the year and it serves as a warning to other states looking at implementing similar schemes.

Corporate PPAs take out chunk of Origin electricity sales
An interesting take on a quarterly update provided by Origin showing business volumes decreasing 10% on the previous quarter and 9% from June 2018 levels. The author of the article has laid the the blame for the volume decrease squarely at the feet of the renewable energy corporate PPA market. We have seen an increasing number of large energy users sign agreements with renewable energy projects to lock in low cost electricity over a longer time period. This situation is no doubt being watched by many (including Origin shareholders) to see how the effects of corporate PPA’s and companies ‘going it alone’ impact the big gentailers. It’s only early days, but the changing dynamics of the market are definitely something to keep track of.

‘Nuclear energy is never profitable’, new study slams nuclear power business case
A new report has come out of a think tank in Germany that examined 674 nuclear power plants constructed since 1951. The report found that, even under the best case scenario, the investment was a loss making one. This is not entirely surprising given the government support required for projects such as Hinkley Point C in the UK to get off the ground, but it paints a pretty damning picture for those looking at nuclear as a serious option for Australia’s future energy mix. Luckily our current federal government has an ‘open mind’ on nuclear power.

ELS Fortnightly News Wrap Up #5