No one would be happier than me if the life of Liddell Power Station can be extended. I just doubt it’s possible. But one thing is certain, it's impossible in the absence of high electricity prices, the very thing we want to avoid.
In 2015 AGL announced that it would close the generator when it turns 50. Like any machine, an electricity generator can run only for so long before the cost of keeping it going becomes too great. AGL has concluded that after 2022, Liddell will no longer be commercially viable.
Politicians have known for a long time that the lives of all our big coal-fired generators must come to an end. Bayswater, Eraring and Vales Point will follow Liddell but, hopefully, not for at least 10 years, and maybe not for 20 years.
For a long time I’ve been saying we need to plan for their closure. To make sure that we retain our title as the power house of NSW and to keep as many jobs in the sector as is possible by building new gas and renewable generation here.
But the energy companies are reluctant to invest in new generation while they don’t know what the energy market rules are, or what they are going to be in the future. That’s also the reason we are facing an energy crisis, demand is outstripping supply because consumption is growing but generation capacity is not growing fast enough.
Five years ago Tony Abbott started promising to abolish the so-called “carbon tax”. In fact it wasn’t technically a tax, it was a market mechanism for pricing carbon, something John Howard, Brendan Nelson, Malcolm Turnbull, Kevin Rudd, Julia Gillard and Bill Shorten have all, at some point, promised to do. Abbott’s promise was popular among many, but it was reckless. When he abolished it after the 2013 election, he put nothing in its place. It’s ironic that the abolition of the “carbon tax” is now forcing up electricity prices.
Everyone knows (some just don’t admit to it) that like most developed countries, we need a market-based mechanism for reducing our greenhouse gas emissions. It’s also true that such a scheme is inevitable; it’s just a matter of time.
So investors want to know what the new scheme will look like. They won’t invest until they do.
The current Prime Minister hand-picked the Chief Scientist (Alan Finkel) to have yet another review. He recommended we re-establish a market-based mechanism. He calls it the Clean Energy Target (CET). The CET is yet another form of market-based mechanism for reducing greenhouse gas emissions.
But the Prime Minister won’t embrace it. Not yet anyway, too many in his party oppose it. So the uncertainty continues and the energy crisis looms larger. Out of political desperation and in an attempt to avoid blame for rising electricity prices and possible blackouts, last week Malcolm Turnbull declared he was talking with AGL about keeping Liddell operating for a few extra years. He then said he was talking to them about selling it.
Either way, it means his latest policy is to maybe do something different in five years. That won’t keep the lights on or keep prices down this summer. In any case, I still doubt it will happen and if it does, it will come at enormous cost to the taxpayer and will further delay our transition to new generation technologies. We risk missing the boat.
One thing is certain, we need to act and act quickly.