Day 240: 'Too cheap to ignore'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 240.
Today in summary: retailer submissions on Victoria’s default offer say it would lift some customers’ power bills; there are signs China may be lifting its moratorium on Australian coal; and AEMO looks at how it will model future energy scenarios.
— Sophie
Today’s policy spin level: 💨💨💨
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The AFR reports on submissions made by electricity retailers to Victoria’s Essential Services Commission, which will make its final recommendation on the state’s proposed default offer for electricity prices next month. It looks at the submission from Momentum Energy, part of Hydro Tasmania, which says the mechanism could push up prices for some customers who currently get cheaper deals. All 26 submissions are available on the ESC’s website. The default offer is set to apply from July 1st.
Non-state-owned power companies in China have started buying new contracts for Australian coal, which could mean the informal Chinese restrictions may be lifted by May, according to a Credit Suisse report, the SMH reports. The Credit Suisse report says the power companies have started to buy May contracts at US$57-US$58 per tonne:
“It is not yet clear whether they [the power companies] are taking a risk on imports because it’s too cheap to ignore or they have been given the heads-up by authorities that the informal restrictions may be lifted in May.
With this uncertainty, producers remain cautious about Chinese demand, as there remains a risk that importers may default on contracts if they misjudged, leaving distressed cargoes on the water. For the grades [of coal] China buys, the prospect is looking slightly better.”
AEMO will model a “step change” scenario which includes a quicker transition to renewables and closing of coal plants under its next Integrated System Plan, reports RenewEconomy, which says AEMO has made a commitment to do this “in a series of workshops and consultations with industry members over the past few weeks”.
RenewEconomy reports on submissions made by various interested parties as part of AEMO’s consultation on its forecasting and planning work, and says many submissions urged AEMO to plan for a zero-emissions scenario, where the grid is 100% renewable, in the next ISP - which spans 20 years. It says:
“AEMO currently plans to announce which scenarios it will model on May 16 – just two days before the election. But this may be moved given the sensitivity of the subject and the Coalition’s refusal to believe that even a 50 per cent renewable energy share would be anything other than “economy-wrecking.”
The Commentariat
The market’s response to Aramco’s debut bond last week is “more proof that oil will remain the life blood of the global economy for many decades to come”, writes Andy Critchlow at The Telegraph, republished in the SMH.
“In a world where oil investment is becoming socially too toxic for some institutional investors to handle, Aramco's debt has still proved too enticing for Wall Street to ignore. There is no shortage of buyers for Saudi Arabia's crude, and prices pushing above $US70 per barrel make its oil producing giant's debt even more appealing.
Despite these worries, money talks. Aramco's recent bond sale success proves that the age of oil won't end soon.”
Three more things
Delays in ratifying a maritime border treaty between Australia and Timor-Leste has resulted in Australia continuing to receive millions of dollars worth of oil revenue, the Guardian reports. It says the government, which signed the treaty in March 2018, failed to ratify the deal before the election was announced, meaning Australian still gets 10% of the revenue from the Bayu-Undan fields - estimated between A$350,000 and A$2.9 million per week. Foreign affairs minister Marise Payne said work is underway to pass remaining legislation, while Labor did not respond to requests for comment, the Guardian says.
In South Australia, Leigh Creek Energy wants to build a A$3 billion underground coal gasification project, though there are environmental concerns and questions about the economics of the end product, reports the AFR. The company got certification that 1153 petajoules of underground gas reserves are ‘proven and probable’ last month, and is now running a tender process for the gas, but the process - banned in Queensland in 2017 - would still need South Australian government approval.
An Australian startup, Solpod, says its movable solar panels can better meet businesses’ needs, the SMH reports. The Melbourne-made panels are assembled in a demountable frame and attached to the roof with adhesive foam, reducing installation time, the SMH reports.