"It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong." Richard P. Feynman

Tuesday, July 19, 2011

Energy Providers could go Broke!

The Australian Government has moved into a full Orwellian mode with the Energy Minister now in charge of shutting down Energy and  taxpayer-funded carbon tax information ads full of disinformation .
The soon to be Minister for Blackouts Martin Ferguson has indicated that 3 billion dollars will not be available for closing Hazelwood and payment will be "modest" ensuring that never again will major players build power stations in this country.
Contrary to what observers may have gleaned by this lame Government's record Ferguson says there there is no "bottomless pit of taxpayer dollars". This is a remarkable discovery and should be conveyed to Julia Gillard as soon as possible as she seems unaware of it! The Labor Government is taking a chainsaw to the low cost energy pillars supporting our economy. After financially assaulting the energy providers with a plan to put them out of business  the Government is offering loans to keep them afloat because we need them! Figure that one out.

While the government will be asked to pay almost $3 billion to shut down Victoria's Hazelwood plant, the Department of Resources, Energy and Tourism has insisted in a new fact sheet on the plan that the payment made to close the power stations will be "modest".
"It refers to the fact that there is no bottomless pit of taxpayer dollars," Mr Ferguson told The Australian yesterday.
His department is responsible for implementing the strategy to retire 2000 megawatts of brown-coal power, which forms part of the Prime Minister's clean energy plan released last week.
New analysis from the Energy Supply Association of Australia of the government's package, provided exclusively to The Australian, concludes that just eight or nine of 31 power stations that produce baseload power will receive assistance and finds that generators will pay $15bn more for carbon permits than they are getting in assistance in the first five years of the scheme.
The group also warns that a key plank of the government's package for electricity generators - emergency federal government loans to head off financial failure, but at rates above the commercial market - could be viewed cynically as a revenue grab by the commonwealth.
As part of its carbon tax package, the government has promised to set up an energy security fund that will give $5.5bn in free permits and cash up to 2016-17.
But this is skewed towards the most emissions-intensive generators - the privately owned brown coal electricity generators in Victoria and South Australia - and will cover only 23 per cent of their expected carbon liability during that time.
Figures from Macquarie Generation, which is owned by the NSW government, have suggested that a carbon price could wipe more than $2bn from the book value of its assets and add about $600 million to its yearly costs.
Macquarie Generation chief Russell Skelton said the firm had commissioned modelling on the impact of the carbon tax package on the business. But he said that because the allocation of free permits was skewed in favour of the privately owned brown-coal generators, revenues to the state governments could be crimped and prices increased.
"Taxpayers of NSW are effectively the owners of us. They see a reduction in revenues that their government has available," Mr Skelton said.
ESAA chief executive Brad Page warned that coal-fired generators could enter into fewer of the hedge contracts with retailers that are used to lock in prices and cushion against the massive price volatility in the high-risk spot market.
Instead, generators could sell power on to the spot market, where prices can reach $12,500/megawatt hour - well above the averages of $30-$40/MWh- to maximise their earnings.
This would increase electricity prices as the Australian Energy Regulator estimates that prices need to spike for only three hours a year to drive up the annual spot price by almost 10 per cent.
"It also means that competition is likely to be reduced as the independent, second-tier retailers can't get hedge contracts and either take risks that could see them go broke or are out of business anyway as they can't sell contracts without adequate hedge cover," Mr Page said.

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