In a furious reaction to owners of coal-fired power generators bringing forward closure dates and the attempted acquisition of AGL by Mike Cannon-Brookes and Brookfield, federal Energy Minister Angus Taylor is using the last moments before the election to push through rule changes that would make it far harder to accelerate closure of coal-fired power plants.
In a humiliation that illustrated how much the Morrison government’s refusal to have an energy policy has sidelined it, Origin Energy announced in February it was bringing forward the closure of its deadly Eraring coal-fired power plant in the Hunter Valley by seven years to 2025. It did so after extensive consultations with NSW Treasurer Matt Kean, then the minister for energy and the environment, but without the climate denialist Taylor having a clue what was happening.
An angry Taylor lashed out at Origin at the time, claiming falsely that the closure would push up electricity prices.
At the same time, AGL announced it was bringing forward the closure of Bayswater in NSW and Loy Yang A in Victoria to 2033 and 2045, respectively, though no one outside those companies believes either plant will make it to those dates.
Now Taylor is seeking revenge on the companies by writing to the compliant Australian Energy Market Commission (AEMC) to demand changes to the National Electricity Rules. Taylor wants to extend the notice period for the closure of generators from three and a half years to five years.
The notice of closure requirement, a recommendation of the Finkel Review, was imposed in 2018. The previous year AGL had enraged the Turnbull government by confirming the closure of another highly dangerous Hunter Valley coal-fired plant, Liddell, in 2022. Liddell will now close by next April.
Taylor’s demand for the AEMC to nearly double the length of the notice period, if it had been in place in February, would have forced Origin to keep Eraring open at least another year, despite its obsolescence and the uncompetitively expensive coal-fired power it generates.
It would also act as a deterrent to any company bringing forward plans to close the last of Australia’s ageing and uncompetitive coal-fired power generators, with Taylor looking to prohibit any company from closing a plant before late 2027, no matter how uneconomic it is.
That would function as a deterrent to bids such as that launched by Cannon-Brookes and Canadian infrastructure giant Brookfield for AGL, which would have invested heavily in the company’s renewable assets and shuttered its increasingly loss-making fossil fuel assets.
In the coal bunker
Taylor also wants to prevent owners from getting around the closure notice requirements by deeming mothballing of generators to be effective closure. Owners will also be banned from making “speculative notices of closure when the generator has no actual intention to close the plant on the specified date … to prevent generators from engaging in behaviour that could create uncertainty in the market”.
The rule changes also have potentially significant ramifications for AGL’s splitting of its coal-fired assets into a new company, Accel, from its main energy portfolio. Shareholders are due to vote from mid-June after an independent expert’s report on the split. Taylor’s attempt to re-write the rules will complicate the split and make Accel appear less competitive to investors who may be wondering how the new company will function when banks and insurance companies are reluctant to do business with fossil fuels.
Analysts already worry the AGL split might see the proposed value of Accel set so low (in order to attract investors) that it destroys some of the residual value in the assets and leaves them stranded. Taylor’s proposal could very well see the independent expert’s report on the split come down against the deal if the company will be prevented by the government from freely managing its assets.
The independent expert’s report on the split was already being viewed as a major test of what passes for energy policy under the current government — and not just its implications for coal-fired generator owners like AGL and Origin but the Queensland government, which also owns coal-fired power stations. You can be sure the Palaszczuk government will not allow a demand from an energy minister in his dying days to govern what it wants to do with its assets.
Taylor’s latest approach follows his failure to impose a “coal-keeper tax” on households last year that would have seen ordinary families paying up to $400 a year extra in power bills in order to keep fossil fuel generators going. It’s an extraordinary move for a government that, briefly, insisted it was all about “can-do capitalism” rather than “don’t-do government”, but appears keen on the latter approach when it comes to keeping fossil fuels going.
Given the possibility of defeat at the election, it looks very much like Taylor and Morrison seeking to control the energy market and impose fossil fuel power beyond the political grave.
