Coal hard facts about power shore up AGL’s stance on Liddell
The simple facts from where Andy Vesey sits are that wind power is now at least 38 per cent cheaper than coal, solar is 16 per cent cheaper and the gaps are getting wider by the day.
That explains why Vesey is holding the line against the Prime Minister Malcolm Turnbull’s push to extend the life of an ageing coal plant.
The market has long known AGL generates over 90 per cent of its power from coal but we are talking about future production not history.
AGL’s marketing the future because that is what its customers want to see and those customers also happen to be voters.
Right now, concerns number one, two and three are power prices and few care where it comes from so long as it’s cheaper.
The maths from AGL’s perspective work like this: a coal fired plant costs $110 a megawatt hour to run.
This compares to wind at $55 an hour plus another $25 an hour of so called firming power, which is the back-up provided by a gas-fired plant to cover the wind if there is none or if it is too strong for the turbines. A solar plant works out at $70 an hour plus $25 firming power.
These are the numbers.
The reason why power prices have sky rocketed is the law of supply and demand, including in gas.
ACCC boss Rod Sims has in the past pounded the table about the evils of the big generators being owned by the big retailers including AGL.
He has lost twice now in court on the issue and, according to Frontier Economics in work done for AGL, it actually works the other way, retailers owning power tends to mitigate price increases.
Sims UK comrades at the UK Competition Marketing Authority concluded in its report on the industry last year “we have not identified any areas in which vertical integration is likely to have a detrimental impact on competition for independent suppliers and generators. In addition we consider that there may be some efficiencies resulting from vertical integration which may be passed through to customers.”
The politics is equally simple, punters are hopping mad that after decades of political inaction they are paying record-high rates for their power.
If you are a politician who has failed to make any decisions to help the punters, the convenient response is to find another villain.
That person is Andy Vesey who certainly doesn’t help himself by unloading $1.2 million worth of stock in the middle of the political storm. Selling company shares at any time is a bad look for a chief executive but right now it is shocking.
That said, it’s time to get the facts straight on energy policy and for some decisions from Canberra.
