The prime minister, Scott Morrison, was satisfied of just one factor this week as information got here of an $8bn bid to purchase the nation’s greatest greenhouse fuel emitter so as to shut its coal crops early.
“Let me be actually clear about one thing,” Morrison mentioned. “We have to be sure that our coal-fired era of electrical energy runs to its life, as a result of if it doesn’t, electrical energy costs go up, they don’t go down.”
A extra unequivocal assertion could be laborious to come back by. However is Morrison proper?
“There is perhaps some reality to it, however that essentially creates the mistaken image,” says Tony Wooden, an power and local weather coverage professional on the Grattan Institute.
So what’s really taking place?
Final weekend it emerged that tech billionaire Mike Cannon-Brookes and Canadian asset administration firm Brookfield had launched their extraordinary takeover bid for power generator and retailer AGL.
The AGL board knocked the bid again, and now the Cannon-Brookes consortium is weighing up its subsequent steps.
Wooden says if AGL was taken over underneath a tough timeframe set out by Cannon-Brookes, this might give Australia’s power market about eight years’ discover to plan and put together (that’s rather a lot longer than the statutory three and half years).
“So even when there’s a worth enhance – and it’s not clear there could be – then what occurs to switch these coal crops is what’s going to dictate costs. However costs don’t at all times simply go up – that’s not true. However there may be an underlying market response.”
Dr Dylan McConnell, an power methods professional on the College of Melbourne says Morrison’s assertion had an inbuilt assumption that “nothing else will get constructed to switch the coal crops” when that isn’t what’s being proposed.
It’s a local weather plan
However first, what does Cannon-Brookes wish to do?
AGL has three giant coal-fired energy crops that at the moment emit about 40.5m tonnes of CO2 a yr, in accordance with information from the Clear Vitality Regulator.
Two of them – Loy Yang A in Victoria and Bayswater in New South Wales – occupy the highest two locations on a listing of the nation’s highest emitting energy stations.
Loy Yang A is Victoria’s greatest energy station and releases 16.6 Mt of CO2 into the environment a yr from burning brown coal. Earlier this yr AGL mentioned it will deliver ahead its deliberate closure from 2048 to 2045.
AGL’s black coal energy station at Bayswater – the state’s greatest energy asset – emits 14 Mt a yr. The corporate needs to shut it between 2030 and 2033 – at the very least two years forward of a earlier 2035 plan.
A 3rd energy station – Liddel, near Bayswater – will begin shutting this yr, which means an finish to the 9.9Mt of CO2 that’s launched yearly from burning black coal.
Cannon-Brookes – an outspoken advocate for local weather motion and renewable power – and his companions need all of the coal crops closed by about 2030.
He says the consortium has $20bn to spend to switch the electrical energy generated by the coal crops with renewable power and storage, saying confidently this might decrease costs, not raise them.
From a local weather change perspective, the broad problem going through governments around the globe is to get off fossil fuels as shortly as attainable.
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When Morrison mentioned this week the federal government was “very dedicated” to working coal crops till the tip of their lives, it’s an excellent time to recollect the federal government has signed a world local weather settlement “to achieve international peaking of greenhouse fuel emissions as quickly as attainable.”
Eraring error
The continuing AGL story got here after a serious announcement final week that Origin was to deliver ahead the closure of its Eraring coal plant station – Australia’s greatest energy station – to 2025. That’s seven years sooner than anticipated.
This arrange the intriguing dynamic of Australia’s emissions discount minister, Angus Taylor, expressing his “bitter disappointment” {that a} plant that pumps out 13 Mt of CO2 a yr was going to shut early.
Taylor additionally took the chance to remind Australians that after the sudden 2017 closure of the Hazelwood coal plant in Victoria – on the time the nation’s dirtiest energy station – energy costs went up by 85%. Trigger = impact?
The conclusion some would possibly draw is closing a coal plant sooner than anticipated causes costs to go up. However McConnell says the Hazelwood story is an “ingrained narrative” that’s too simplistic and principally mistaken.
Energy costs did go up across the time of the Hazelwood closure however McConnell says the dominant trigger was the worldwide worth of fuel and the best way Australia’s electrical energy market works.
McConnell led a examine these worth rises.
He says whereas Hazelwood closing did have some direct impact, what was way more necessary was that homeowners of coal crops within the electrical energy market knew that fuel was costly.
This led some to strategically “shadow worth” their gas-fired opponents to make gives to provide electrical energy at increased prices that have been simply in need of the value of fuel.
McConnell provides it’s a extra sophisticated set of occasions than the less complicated concept of 1 factor (the closure of Hazelwood) main to a different (increased costs).
“It’s extra complicated to elucidate that opening up the fuel export market to worldwide costs then flowed into the home electrical energy market. However that’s a lot nearer to the reality of what occurred.”