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Parkinson: another day, another carbon price beat-up

The front page stories in today’s mainstream media about bailouts for Australia’s biggest brown coal generators are not quite what they seem.

The Australian Financial Review and The Australian  — the Bill and Ben of anti-carbon price rhetoric — cited the case of the 1542MW Hazelwood brown coal generator, which they said had to be rescued by their international owners GDF-Suez, as a result of the imminent carbon price.

Well, not quite. Both stories failed to mention that the refinancing of Hazelwood through internal means had been foreshadowed as far back as October, 2010, when GDF (partially owned by the French government) was in the process of merging with Hazelwood’s owner International Power.

This was mentioned again in Monday’s press release. More than $3 billion was set aside for the refinancing of loans such as Hazelwood’s as and when they fell due. The Hazelwood loan accounted for $652 million of that.

Hazelwood is an ageing facility, and it has been clear to the owners for some time that they were unlikely to get financing from banks on the terms they wanted — with or without a carbon price. The fall in wholesale prices — caused by easing demand and the impact of renewables — is also a key factor. Still, the owners had no need to ask the government for help or emergency loans through its specifically designed Energy Security Council.

In fact, in another part of the GDF press release overlooked by the papers (well, the release was three paragraphs long), GDF said it had no problems getting refinancing for an even bigger debt facility of $1.06 billion for the 955MW Loy Yang B brown coal generator, which is more modern and efficient than Hazelwood.

In fact, the release points out (albeit buried in the third paragraph), that banks were falling over themselves to get onto the Loy Yang B syndicate, despite the carbon price. New bank members had joined. “The new debt facility was well supported, particularly by the Australian and Asia-Pacific banks”, everyone will be delighted to hear.

The more pertinent quotes came from the AFR’s interview with professor Ross Garnaut, who noted that the brown coal generators would last a lot longer than most people anticipated, and if there was a rationalisation — it was because there was too much capacity.

Professor Garnaut cited falling demand from higher energy prices, and the impact of newly installed wind and solar energy that had resulted in lower wholesale prices and excess capacity in the generation market.

The effect of the carbon price on wholesale electricity prices will be counteracted by the fact we have a considerable surplus of base-load power capacity in Australia and that is pushing down wholesale prices,” he told the AFR.

Even with the carbon price, the wholesale price of electricity in real terms is lower than in 2006. But the real price of electricity to households and businesses has increased entirely as a result of the way we regulate prices associated with distribution, transmission [costs] and retail sales.”

He told the AFR the first day of the carbon price scheme would not be a “big day” in Australian economic history in terms of actual changes. “The changes will be incremental,” he said.

*This article was originally published at RenewEconomy 

7
  • 1
    CliffG
    Posted Tuesday, 26 June 2012 at 12:17 pm | Permalink

    “Even with the carbon price, the wholesale price of electricity in real terms is lower than in 2006. But the real price of electricity to households and businesses has increased entirely as a result of the way we regulate prices associated with distribution, transmission [costs] and retail sales.”

    Can someone do a bit more analysis of these details for me.

    My bills have skyrocketed. And can anything be done about “the way we (who’s that?) regulate prices associated with distribution, transmission and retail sales”? I’m freezing!

  • 2
    Damotron
    Posted Wednesday, 27 June 2012 at 11:58 am | Permalink

    News Limited seems hell bent on destroying its own credibility and is doing a good job of it.

  • 3
    Frank Campbell
    Posted Wednesday, 27 June 2012 at 4:46 pm | Permalink

    Just received a letter from our power retailer: price to go up 12% immediately- “largely due to the carbon price”…

    No doubt on Garnault’s income, this is indeed “incremental”.

  • 4
    Same Stale Shoes
    Posted Thursday, 28 June 2012 at 3:25 am | Permalink

    Frank, from memory the carbon tax is responsible for an expected 10% rise in your electricity prices. But don’t look at that in isolation, you should look into what compensation will be awarded to you to figure out its cost to you in real terms.

  • 5
    Frank Campbell
    Posted Thursday, 28 June 2012 at 9:02 am | Permalink

    SSShoes:

    Indeed, but the “compensation” illustrates the absurd economics of the tax: the cost of virtually everything will rise, not only domestic electricity. The intention is to change behaviour, but big “polluters” will receive virtually full compensation from the revenue raised, which will enable business as usual. The remaining $13 billion or so left will not be used for renewables research but handed to mendicant corporations to spend on wind and domestic solar- which are very expensive and cannot provide useful power by definition (unreliable, miniscule). This entrenches vast capital expenditure in fixed assets which are redundant/obsolete the moment they are installed. Capital is squandered- for decades.

    The entire scheme is a moronic carousel of cash. Emissions will not be reduced. The credibility of all Green politics is subverted- and that’s what really appalls me, as a Green voter.

  • 6
    MJPC
    Posted Thursday, 28 June 2012 at 12:17 pm | Permalink

    Frank, your letter was interesting in that we had a salesperson from Origin energy at the front door willing to give us a generous rebate on the energy charges from Integral energy to the extent that they would pay our $100 penalty for changing suppliers mid-contract.

    As we have solar panels and heat pump HWS we have a subsantial credit amassed, so any rebate will mean nothing apart from increasing our credit, as we are very frugal with power usage. I see in the media today that the carbon price will see a further benefit for solar users in that a buy back price has been determined.

    As far as I am concerned it has already done something positive for renewables without even being introduced as yet.

    As for the twin towers of News limited journalistic integrity; todays newspaper is tomorrows base lining for the cocky’s cage!

  • 7
    Frank Campbell
    Posted Thursday, 28 June 2012 at 6:11 pm | Permalink

    MJPC: yes, retailers are really pushing churn. This adds substantially to costs, which we all pay, of course. We recently changed retailers- after quite a few years- because according to “Energy Watch”, an alleged broker, our company was offering 10% bigger discounts to other customers - but not us. They’d lied, in writing. The day after, Energy Watch (which we’d never heard of) was exposed as a sleazy operation- the CEO resigned and fled abroad. Power companies cancelled contracts with EW.

    Just another example of regulatory failure- which we all have to pay for.

    Many times, including this week, we’ve been tempted to go solar. We won’t though, because the system is inherently corrupt: subsidises a fragment of the middle class at the expense of all others. Solar subsidies also have nothing to do with the carbon tax, as they predate it by years. World-wide, feed-in tariffs are being rolled back fast. We’ll probably go solar when all rorts have been removed. Apparently a fair feed-in tariff would be around 7 cents KwHr.

    The other motive for solar is getting stronger: get free of utility companies. What we’ve seen recently makes us puke. We provide our own water, gas and heat, so just the damned power grid to get rid of next…

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