In 2002, then Labor Premier, Mike Rann hitched South Australia’s wagon to wind power. 15 years later, his successors and former subjects get to reap what he sowed. A grid on the brink of collapse, routine load shedding and statewide blackouts have left South Australia an international laughing stock.
Its vapid Premier, Jay Weatherill occupies a delusional netherworld in which wind power can do no wrong. Among the lines spun about SA’s power pricing and supply calamity, is one which blames network costs for retail power prices which are now fully double those of neighbouring Victoria. However, its generation costs are soon to triple those of Victoria (see above) and as to the reasons why, see our post: Economic Train Wreck: Wind Power Obsession Triples Power Prices in South Australia
Political fudging and blame shifting aside, for thousands of businesses and families the consequences of SA’s attempt to run on sunshine and breezes are serious; and they’re all too real.
Power spike hits South Australian shopping centres
18 January 2017
A group that controls South Australian shopping centres worth $400 million has said a near-doubling of electricity prices is driving up costs, putting its retailer tenants under pressure and threatening to undermine the jobs of the 2500 workers they employ.
Armada Funds Management has added its voice to the range of businesses, including international miner BHP Billiton, food producer Vili’s and defence company BAE Systems, which are concerned about the rocketing costs of power in South Australia.
The Sydney-based commercial property funds management group, which has more than $700m invested across the country, has warned rising power prices could affect future investment decisions in the state.
Hefty price hikes for wholesale power and an unreliable supply have been aggravated by the closure of the state’s last coal-fired power station and renewables accounting for more than a more than 40 per cent of the state’s energy mix.
Chris Monaghan, Armada’s managing director and a former head of USB’s investment banking property team, told The Australian costs for purchasing electricity for shopping centres in South Australia had increased by 87 per cent during peak times last year and 101 per cent in off-peak periods. Costs would increase again this year a further 57 per cent at peak periods and 15 per cent off-peak.
The total extra cost to landlords could run into hundreds of thousands of dollars.
“Such sharp rises place enormous pressure on the viability of our retailers, who are part of the lifeblood of the South Australian economy,” Mr Monaghan said.
He stressed Armada wanted to continue doing business in South Australia but like other firms was frustrated and concerned about the impact of high energy prices, which had been linked to the state Labor government’s “ideological rush to renewables, at the expense of existing power stations”.
“We have 300 businesses in our centres that pay these (higher power) costs,” Mr Monaghan said.
“Within those businesses, there are around 2500 employees. If those businesses go bad, then that directly affects employment.”
South Australia already has the nation’s highest unemployment rate, and that is certain to worsen when Holden shuts its Adelaide vehicle manufacturing plant in October.
Armada since 2006 has managed property funds on behalf of institutions, wholesale clients and investors across the country and has interests of almost $400m in Adelaide shopping centres Arndale Central, Hollywood Plaza and Ingle Farm.
Nino Pilaia, who has been running Meats-N-More Carvery & Spuds at the Ingle Farm centre’s food court for a decade, yesterday said his cost of doing business had never been greater.
His business was among those affected by power blackouts last year and ever-increasing energy costs. “For this little place here of about 30sq m, it is about $1200 a month, which is ridiculous,” Mr Pilaia said. “The rising cost of power has hit us hard, but you can’t keep on passing on the costs to consumers — you have to try and absorb it. It’s money out of my pocket, it’s as simple as that.
“I employ one other part-time person. I can’t afford to employ anyone else, especially with the price of power — everybody is in the same boat. The power costs are a business killer.”
Armada last month was linked to a $120m deal with a Canberra shopping centre complex and in late 2015 secured the backing of a major Middle Eastern fund to buy a mid-sized shopping centre in Dandenong, in outer Melbourne, from GPT Group for $197m.
“We deal nationally with both on-shore and offshore institutions and things such as power costs impact decisions — we just bought something in Canberra and yet there have been four sub-regional shopping centres available in South Australia recently that we didn’t bid for,” Mr Monaghan said.
“If the (state) government wants money invested in South Australia, they need to think about how their policies have an impact.”
Electricity prices and reliability of supply remain hot-button issues in South Australia, ahead of a state election due in March next year.
Armada has joined scores of major businesses in objecting to the government’s rush to embrace renewables, leaving the state vulnerable to blackouts and price spikes. Armada says the transition should occur over the long term, not the short term, given that Australia is resources-rich.
Malcolm Turnbull yesterday highlighted his longstanding belief in coal as part of the world’s energy mix for the foreseeable future, saying every credible agency and research group had underlined coal’s ongoing importance.
South Australian Premier Jay Weatherill last week told ABC radio a lack of competition was to blame for high power prices, a claim rejected by the industry.