September 8th 2018

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Articles from this issue:

COVER STORY Caution with gender transitioning: children's futures at risk

EDITORIAL Turnbull the architect of his own demise

CANBERRA OBSERVED Coal-Hand ScoMo pulls off an accidental coup

ENERGY Daniel Andrews' sun worship turns delusional

MEDICINE AND POLITICS Sacrificial Virgins: Is Gardasil even necessary?

FOREIGN AFFAIRS Turkey-U.S. dispute further destabilises Middle East

GLOBAL BAILOUT Follow those zeroes! U.S. Federal Reserve doled out $US29 trillion to save the world

POLITICS AND SOCIETY Business next to fall to 'progress'

OPINION The Victorian ALP observed from up close

SPECIAL BOOK REVIEW Assault on Kokoda Track heroes fails evidence test

BOOK LAUNCH Live not by lies. An appraisal of Patrick J. Byrne's new book, Transgender: One Shade of Grey

CINEMA In praise of horror: That most visceral of genres

MUSIC Aretha Franklin: A singer of spiritual intensity

BOOK REVIEW A self-defeating experiment?

BOOK REVIEW The four firms that rule the world


EDITORIAL Power companies in clover after closures

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Power companies in clover after closures

by Peter Westmore

News Weekly, September 8, 2018

AGL, Origin Energy and Energy Australia admit rising prices due to closures of coal-fired power stations

New Energy Minister Angus Taylor has turned his attention to the larger energy companies as he attempts to rein in the surging electricity prices that have accompanied the shift to renewable energy sources such as wind and solar.

The key question, however, is what the Government is going to do to deal with the consequences of the closure of large base-load power stations.

Responding to a report by the Australian Competition and Consumer Commission (ACCC) and consumer complaints that the large electricity companies have been “price gouging”, the three largest electricity generators have said that rising power prices have been driven by the closure of coal-fired power stations in South Australia and Victoria.

With the closure of the giant Liddell Power Station in New South Wales, owned by AGL, in 2022, the situation is only going to get worse unless something is done urgently.

Meanwhile, the larger power companies have announced record profits for 2017–18.

Just last month, AGL reported a 194.4 per cent increase in full-year profit to $1.587 billion. AGL, which is also a major electricity retailer, is the largest generator of electricity in Australia, producing over 20 per cent of the electricity that enters the National Energy Market.

While spruiking its green credentials in national television advertising, AGL actually generates most of its electricity from coal. AGL has publicly announced that it will close its remaining coal-fired power stations as it switches to renewable energy.

The second largest generator, Origin Energy, produces 13 per cent of the power for the National Energy Market. Origin posted a $218 million profit in the last financial year, a major turnaround from the $2.2 billion loss the previous year.

The huge loss in 2016–17 was due to a big write-down in the value of the company’s stake in the APLNG natural gas joint venture in Gladstone, Queensland, due to low oil and gas prices in international markets. Prices have since substantially recovered.

The third largest generator, Energy Australia, is an electricity generation, electricity and gas retailing private company that is owned by Hong Kong-based and listed CLP Group. It produces about 10 per cent of the electricity for the National Energy Market.

Last month, CLP Group reported a tripling in first-half profit from its Australian operations of $390 million, a 198 per cent increase on the $131 million in the same period the year before. Its annual profit is expected to be around $800 million.

Soaring prices

When challenged about soaring profits at a time when many businesses and families are having difficulty paying surging prices, the electricity companies blamed the closure of the Southern Power Station in South Australia and Hazelwood in Victoria for cutting available base-load power, and pushing up demand.

This points to the need to increase despatchable power, which provides the basis for a secure and reliable electricity system. Despite repeated claims by the Greens and the ALP that renewable energy is actually cheaper, the reality is that when all costs are considered, and subsidies are removed, renewables are both more expensive and, critically, less reliable, as they rely on bright sunlight and winds.

In the absence of sunlight and wind, the stability of the system relies on despatchable power coming from hydroelectricity, gas and coal. The Greens and their allies have effectively thwarted the development of any hydroelectric plants since the 1980s.

While wholesale prices of electricity have risen dramatically over recent years, it is also true that the energy companies have been making larger profits on their retailing operations.

In its recent report on electricity pricing, Restoring electricity affordability and Australia’s competitive advantage, the ACCC analysed the underlying causes of Australia’s electricity crisis, and some of the measures put forward to deal with it.

It said: “In [power] generation, against ACCC advice, the Queensland and New South Wales (NSW) governments made decisions regarding the operation and ownership of generation assets giving rise to concentrated markets …

“In NSW, as one example, both generators owned by Macquarie Generation were sold to AGL, missing an opportunity to deliver a competitive market structure by selling them to separate buyers.”

One of the two generators was the Liddell Power Station, which AGL will close in 2022.

The ACCC report also said: “Most state governments put in place exces­sively generous solar feed-in tariff schemes with a view to encouraging consumers to install solar photovoltaic (PV) systems.

“Under these schemes, the subsidy paid to consumers for the energy produced by their systems outweighed, by many multiples, the value of that energy. Take-up of the schemes exceeded all expectations, in part due to dramatic declines in solar PV installation costs.

“The substantial cost of the schemes continues to be spread across all electricity users.”

Until the Government commits to rebuilding base-load power, electricity prices will continue to rise and reliability will continue to fall.

Peter Westmore is publisher of News Weekly.

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April 4, 2018, 6:45 pm