The Great Divide: Economy on the Brink – Australia’s Biggest Steel Manufacturer Set to Suffer 93% Increase in Power Costs

Energy firms gaming system: BlueScope Steel boss
The Australian
Matt Chambers
12 October 2017

BlueScope Steel chief executive Paul O’Malley says power prices will rise under a clean energy target if baseload sources such as NSW’s Liddell coal-fired power station close, and that a more urgent 10-year baseload transition plan is needed.

Mr O’Malley, whose Port Kembla steelworks is at risk of substantial damage in the event of a power outage, does not think AGL Energy’s plan to replace Liddell with a mix of gas, renewables, storage and demand-shedding offers a reliable alternative.

Speaking after BlueScope’s annual general meeting in Melbourne yesterday, Mr O’Malley launched a stinging criticism of the role of energy companies, accusing them of gaming the debate over power supply. “We have to stop the gaming that’s going on here and call it as it is,” he said.

Mr O’Malley, who has warned of an energy crunch for years, questioned the role in the debate of power companies that said they could not invest in more capacity without policy certainty.

“Does society and industry exist to guarantee the returns of the energy industry, or is the energy industry an essential service that should be supporting society and industry?

“I’m struggling with the fact that everything we are meant to do is give the energy companies investment certainty — I’m not sure that’s why we’re here.”

AGL Energy plans to close the 2000MW Liddell power plant in 2022, when it is about 50 years old, saying extending the plant would not be economic.

Rather than accede to Malcolm Turnbull’s requests to extend its life or sell to someone who will, AGL chief Andy Vesey has vowed to present a detailed plan to the federal government to replace the ageing plant with renewables, gas storage and demand-shedding.

However, Mr O’Malley said he was unconvinced, noting that when French company Engie closed the 1600MW Hazelwood power station in Victoria this month, the power price jumped 25 per cent.

“There is no technology today that has the capability Hazelwood had for 24 hours a day, seven days a week reliability and security, and there is no capability today to replace Liddell,” he said.

“Industry runs 24/7, hospitals run 24/7. What I’m concerned about is that the system that is developed is going to run 18 hours a day, 6½ days a week.”

Mr O’Malley said prices would stay high if Liddell were not extended or replaced by equivalent baseload power.

“And yet people will say under a CET, for instance, power prices are going to go down. Not without Hazelwood and Liddell they’re not.”

He said he was concerned about blackouts this summer after Hazelwood’s closure.

“My concern … is there is not enough baseload and that shedding does not take into account the jobs and livelihoods at risk because of inadequate planning in our system.” …
The Australian

Here’s an extract from Paul O’Malley’s address to BlueScope’s shareholders (available here bluescope-mdceo-agm-speech-2017):

ENERGY

Turning briefly to major public policy issues that affect our business. When we announced our half-year results in February this year, I warned of an imminent energy supply catastrophe.  At the full year results I said the catastrophe was now happening.

More specifically however, you as shareholders should be aware that BlueScope’s Australian electricity costs are forecast to increase 93% between FY2016 and FY2018, with gas costs increasing 33% over the same period. And these sorts of increases are being faced by manufacturers, businesses and households across the country – dampening investment and employment, and squeezing household budgets.

The increase in domestic gas prices since 2015 has cost Australian gas users approximately $3.5 billion per annum. For electricity, the cost to users of rising electricity prices is over $3.7 billion per annum.

And so, in the first significant breakthrough in this national crisis, the Company welcomed the recent announcement by the Federal Government that it had secured a guarantee on gas supply from the major gas companies.

The Prime Minister announced on Wednesday 27 September that domestic gas supply will meet the expected shortfall over the next two years. This is good news, as it means the start of a properly functioning gas market – one where prices can be expected to moderate as more sellers meet customers’ demand and commercial offerings reflect global markets. In due course this should be of benefit to BlueScope – and all Australian energy consumers.

Your Company and its peers in Manufacturing Australia have lobbied long and hard for this sort of initiative and we applaud the Federal Government for achieving this outcome.

While political debate continues, there remains one constant truth in all this – Australia must have baseload power for Australia’s everyday life and its economy to run in an orderly manner.

Debating future coal or gas, hydro, nuclear or renewable energy supply, is fine – so long as there is a sensible transition over the next 10 years that secures our everyday life and living.

Without an adequate 10 year transition plan that addresses electricity affordability and reliability – we are condemned to even higher prices and more reliability issues.

11 October 2017

Paul O’Malley: on the right side of The Great Divide.

 

STT wouldn’t expect many businesses to survive a 93% increase in input costs over 2 financial years. But an energy hungry business like BlueScope has almost no hope of surviving a power price hike of that magnitude, over that time frame.

If Paul O’Malley’s forecast of a 93% increase in power costs is realised, BlueScope will join the throng of businesses that, over the next few years, will pack up stumps and head offshore, where power is still delivered reliably and at affordable prices: think China and the USA, for a start.

But it’s this observation from Paul O’Malley that really defines Australia’s energy crisis:

“Does society and industry exist to guarantee the returns of the energy industry, or is the energy industry an essential service that should be supporting society and industry? I’m struggling with the fact that everything we are meant to do is give the energy companies investment certainty — I’m not sure that’s why we’re here.”

20 years ago in this Country, no such question would have been asked. A place blessed with abundant reserves of coal, gas and uranium (and among the world’s largest exporter of all three essential commodities) surely shouldn’t be top ranked for energy costs? But, so it is.

The reason it got there, is pretty simple: governments at all levels and politicians of all persuasions determined to destroy Australia’s power market by introducing policies which favoured the chaos delivered by wind and solar power.

Now we have the head of the Australian Energy Market Operator, in concert with the hapless Federal Energy Minister, Josh Frydenberg, telling power consumers that they’ll be rewarded for not using power.

Insanity doesn’t cover it. That simply implies some malfunction in mental faculty. This goes way beyond congenital idiocy. It is deliberate. And it is malicious.

Audrey Zibelman and her co-travellers know full well what they are doing, and why.

In fairness to Josh Frydenberg, he probably has no real idea of the consequences of the policies he now peddles. Although, with zealots it’s always hard to tell.

Since Alan Finkel released his unicorns and pixie dust review of Australia’s energy market, the bright line distinction between those who get it and those who don’t has become oh so clear.

The Country is now divided into camps: those who understand that economies require secure, reliable and affordable power; and those eager to line their pockets from the largest single industry subsidy scheme and the greatest wealth transfer in Commonwealth history.

The former, like former PM Tony Abbott, keenly appreciate that the outcome for Australians and their wealth and prosperity is existential. The latter appear willing to sacrifice both, in order to ensure Australia’s hitherto enviable wealth and prosperity is an exclusive preserve, only enjoyed by a very limited few. And, the likes of Frydenberg, Turnbull and Zibelman have already determined who gets to prosper at the expense of the many. Watching Frydenberg cavorting with AGL’s Andrew Vesey at last week’s wind and sun cult love-in in Sydney gave a pretty fair clue.

When BlueScope is eventually driven out of business or offshore, thousands of blue-collar jobs will go, never to return. There will be nothing to replace them.

This Country got wealthy on cheap energy.

Now it is going to destroy itself by way of an obsession with unreliable energy, that all but a well-heeled few will be able to afford. Or, more to the point, be able to afford their own generators, panels and batteries (albeit, with the panels and batteries paid for by the working poor, who can afford neither).

Blackouts and load shedding are guaranteed, this summer and beyond. And it is literally every man, woman and child for themselves.

Power costs, as Paul O’Malley predicts, will more than double again over the next two or three years.

In Australia’s wind power capital, South Australia they’re already the highest in the world. And its Liberal opposition (which has a chance of gaining power at the State election in March next year) has policies which will guarantee much more of the same.

Its gormless leader, Steven ‘Holler-for-a’ Marshall is promising $100 million of taxpayers’ money to fund batteries to be installed in middle-class homes across the state. Households that are already sheathed in subsidised solar panels and which enjoy guaranteed feed in tariffs as high as $0.54 a kilowatt hour for the power they send back to the grid. And he wants more windmills and mega-batteries, just like his notional ‘opponent’, Jay Weatherill; a choice between Tweedledee and Tweedledum, if ever there was one. STT is not sure who the Liberals believe they’re representing? Clearly, neither side has any interest in business, pensioners or the working poor.

Let’s call it ‘The Great Divide’. The moment when a cynical elite destroyed the model which once allowed and encouraged ambitious working people to succeed and prosper on their own wit and merit, rather than as a result of rorting or gaming some government scheme, scam or subsidy.

Paul O’Malley is right. Anyone with a modicum of common sense and compassion struggles with Australia’s so-called ‘energy policy’.

The elevation of man-made carbon dioxide gas to the “greatest moral challenge of our time”, soon led to a cult-like worship of windmills and solar panels.

The rest, as they say is history.

Unless its political and media class gets on the right side of The Great Divide very soon, Australia’s wealth and prosperity will be a matter of history, too.

Audrey Zibleman measures BlueScope’s chances of
surviving her maniacal RET Crusade.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Peter Pronczak says:

    STT: “Insanity doesn’t cover it. That simply implies some malfunction in mental faculty. This goes way beyond congenital idiocy. It is deliberate. And it is malicious.”
    “Does society and industry exist to guarantee the returns of the energy industry, or is the energy industry an essential service that should be supporting society and industry?”

    If the above statement and question are put together then the truth is evident in the question: Does government exist for the common good and general welfare or is it there to control citizens for the benefit of the monetary system?

    The inescapable answer is the party political system of left vs. right has, since economic consensus, hidden the truth of politics being about right vs. wrong.

    So STT is correct, “It is deliberate.” It is called Malthusian and which ever way you cut it it is about population reduction, it is about divide and conquer; country against country, neighbour against neighbour, competition (our National Competition Policy is a salute to Adam Smith’s ‘invisible hand (that picks your pocket) with a level playing field’: What the British monarchy protection of the City of London Corp., calls ‘the great game’. If it is not understood that the NCP is about taking from the poor to give to the rich, then all is lost.

    A large company with guts would take on the hand in glove government and opposition, obtain a plant from the likes of http://www.nuscalepower.com/ anchor it offshore with a 201km extension lead.
    That would certainly be thought provoking.

  2. Jackie Rovensky says:

    “Does society and industry exist to guarantee the returns of the energy industry, or is the energy industry an essential service that should be supporting society and industry?
    Never a more apt and important question has been asked in relation to our energy supplies.
    It’s one our political leaders need to absorb and keep referring to whenever the Renewable industry knocks on their door.
    If the Liberals both State and Federal want to be elected at their next elections they have to remember this question and answering it remember who they are there to serve.
    They need to get rid of their ‘Labor’ policy advisors and hire some who have their brains turned on, someone who can research and evaluate the mess this country is now in and how it got there. They need to be able to provide advice that is relevant, accurate and that will stand clear of Labors continued failing policies.
    How often were we told that Renewables would be our savior, and wind would be able to provide all our energy needs when and where we wanted it? That the wind would always be blowing somewhere – but they didn’t say where, because if you look at wind turbine production across the Eastern Grid you will see the statement is ludicrous.
    How often have we been told renewables will not need baseload power as a backup, and consider what they are now having to do to find a way of backing up failing wind production. They also have to consider what the cost has been socially and economically for this nation of a failed system of energy supply to a modern society, and how much it is going to cost to rectify this failing system and how much that is going to cost the people of this nation in addition to the existing cost of energy to the end user, that is the household, business, service, farming and manufacturing industry.
    How often has the renewable industry told us it is all grown up and they can be relied on, yet they still demand subsidies and planning regulations created around their desire to install their torture towers anywhere they want to – that is as close to the grid connection as they can get, without interference from local residents or concerned citizens of this nation?
    How often have we been told Renewables are clean when Turbines and Solar panels are manufactured using some of the ‘dirtiest’ components in the world, and drastically pollute vast areas of countries where the turbines and/or components are manufactured.
    How often have we been told renewables would bring down energy prices, yet we have only seen energy prices rise. How often have we been told today’s turbines are better than yesterdays, because they now have new technology when all that has happened is the turbines and their blades have got bigger – the technology is still the same.
    How many more lies do our Politicians have to be told before they accept they have been fooled? How long will it take for them to accept the only technology that can provide us with all the energy we need when we need it, at a reasonable price, is to use coal in new plants, or go down the path of nuclear? Hydro is OK, but as we saw in Tasmania last year you need it to rain to be sure of enough to run hydro to a level that will provide security.
    Why do we keep selling coal and uranium overseas if we are determined not to use it ourselves?
    Voting is compulsory and as a voter I would like to know those who want my vote are intelligent people who can understand plane English, who have common-sense, who can accept when they have been made a fool off by an industry and its backslapping mates, a person who can understand when their advisors have failed them and find new ones who are capable of providing advise that is rational and well thought through. I would like to know they would not be swayed by any academics report that is full of bias it should never be taken seriously.
    I would like to know that those who want my vote have our nation’s people’s future at the forefront of their deliberations and not their own aggrandisement or a personal desire to simply sit in a seat in parliament and do nothing of any value for the nation.
    The time for backslapping and bowing to a failed industry is over, there is no time left for people to sit on benches and sleep in Parliaments while Australia sinks under the weight of turbines and massive solar farms while the people languish in poverty and despair.

  3. Unlike many Australian CEOs, too lilly-livered to call the renewables scam for what it is, Paul O'Malley is one who clearly has the strength of his convictions.  Oh for a few more like him!

    Unfortunately Australia's present energy policy is a certain recipe for economic disaster – simply substitute the word Australia for the word America in this video.

  4. Be prepared for the ramping up of green propaganda and lies. No other state or country of equal size and with such a wealth of natural resources has progressed as far as South Australia and Australia on the renewable train. The eco-worriers are adamant that base load power is irrelevant to smart, renewable grids. The eyes of the world are turning towards the Australian experiment. For the progressive greens, solar and wind HAS to succeed in Oz. Failure in Australia Is not an option. Be prepared for money and propaganda to flood the media channels and blackouts to be glossed over and blamed on fossil fuels/privatization or anything else except wind and solar. Good luck.

  5. Weasels 2 Go says:

    Engineers interested in power generation have known for the last 15 to 20 years that about 20% was the maximum amount of non dispatchable (available on demand) power most national grids could handle whilst supplying a dependable power supply to industry and homes.

    Dispatchable power consisted then and now of coal, gas, nuclear and hydro power. The big two in Australia namely coal and to a lesser extent gas, are unbeatable in providing large quantities of reliable and inexpensive power. If you wish to raise the cost of these generators you reduce their output, run them on standby and low output and change that output frequently.

    We have a cruel cabal that is perfectly happy pushing that process in order to maximise their profits and votes. The Cabal basically includes the deluders and liars, the ignorant and willing believers and dodgy politicians.and their advisers.

    Let us allocate 20% of our power market at any time to the producers of renewables, but remove their subsidy progressively over say 3 years. Power costs will tumble.

    No more wind farms to be built until they can fully guarantee continuity of supply and meet market prices.

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