Day 85: 'Serious bottlenecks'
An introductory weekday newsletter from Schwartz Media. Counting the days since Australia had an energy policy.
Good morning and welcome to day 85.
Today in summary: Energy companies aren’t happy with the government’s planned new generation underwriting; NSW will advance its transmission link upgrades to shore up its renewables supply; and Labor says the government’s divestment threats would fit better in Venezuela than Australia.
— Sophie
Today’s policy spin level: 💨💨💨
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Energy companies are lobbying against the Morrison government’s planned underwriting of new generation, warning it would reduce private investment, reports the AFR. Meridian Energy, Infrastructure Partners Australia and the Clean Energy Council submitted against the plan, and Meridian’s CEO Ed McManus told the AFR that government investment could cause the market to disintegrate.
“The more the government do things, the more private investors hold back. The more private investors hold back, the more there is a need for government to do things.”
The NSW state government will release a plan today on upgrading transmission links to improve the state’s power grid. NSW energy minister Don Harwin told the AFR the improved links were crucial to accommodate renewable energy.
"We know that industry won't invest if they can't connect. There are serious bottlenecks at the moment and in some parts of the state there is such limited transmission capacity that they can not bring on new projects.”
NSW will bring forward the $1.15 billion link upgrade to Snowy Hydro to 2024, from 2030 and shift the $1.3 billion SA-NSW interconnector to 2023, from the mid-2020s, while upgrades to the state’s links with Victoria and Queensland will happen as scheduled within the next few years.
Labor’s Treasury spokesman Chris Bowen will criticise the government’s big stick divestment threat to power companies as “more attuned with what we see in Venezuela, not Australia”. At a Sydney investment banking conference today, Bowen will criticise the government for bowing to populism, The Australian reports.
“Nothing screams ‘sovereign risk’ more than new powers for a minister to break up businesses, but that is exactly what the Liberal Party is running with.”
The Commentariat
Natural gas prices in the US are seeing a strong, sustained move upward, and this could continue, writes Jim Collins for Forbes. Collins says there’s skyrocketing demand for natural gas, with the US consuming over 10% more natural gas in the third quarter from a year earlier, while inventories are 15% lower than a year ago.
“Imports could be viewed as a quick fix to low natgas inventories, but owing to the molecular hyperactivity of pure CH4 (methane,) natgas is just not that easy to move from place to place… If I have learned one thing in following the energy markets for the past 15 years, it is that supply imbalances tend to take longer than the market initially estimates to rebalance.”
Three more things
A report from investment bank Lazard shows new wind and solar generation has become cheaper than running existing coal plants in many parts of the US, suggesting coal plant closures are likely to continue.
OPEC is set to cut oil production after a meeting next month, with Saudi Arabia and Russia both signalling they may reduce supply. The news comes after the Wall Street Journal reported that a Saudi think tank, the King Abdullah Petroleum Studies and Research Center, has been studying the possible effects on oil markets of a breakup of OPEC.
IEEFA estimates that Australia’s thermal coal export industry is in decline, as higher coal prices and emissions control costs have led to higher industry costs. Thermal coal miner Glencore “failed to provide a complete picture” in its latest update, it said.
“We contend that the current boom in thermal coal prices is short term, and is accelerating the decline of the industry by undermining the viability of new import coal fired power plant proposals.”