Large-scale energy projects to get help
- November 29, 2019
- By Admin: Ida Nelson
- Comments: 00
New large-scale energy projects may be able to apply for taxpayer support as part of a Morrison Government program.
Energy Minister Angus Taylor has today called for expressions of interest for its Underwriting New Generation Investments program, which will allow power plant investors to apply for financing options.
In order to be eligible, the project must be capable of delivering capacity of at least 30 megawatts and would have to be either gas, coal, batteries or pumped hydro.
Assistance would come in the form of loans or could also involve underwriting floor prices and underwriting cap prices. This means the government may accept “contingent liability” for these prices and would guarantee generators would be able to sell electricity at an agreed price.
However, the government has not yet revealed how much taxpayer money would be put towards the program.
The government may also be stopped from signing any contracts before the next election with Labor and The Greens supporting a bill to prevent it from underwriting new coal-fired power.
The program would back projects that had interest from customers for at least the first three years of supply and had secured a “significant” equity contribution.
The proposal appears to be much broader than what the Australian Competition and Consumer Commission (ACCC) originally suggested. It wanted underwriting available for projects that produced low-cost power of about $45-$50 per megawatt-hour. It believed the project should already have contracts from customers wanting to buy the power produced in the first few years and that underwriting only be available in years six to 15 of the project.
The Morrison Government’s Registration of Interest process will help the government to design the program including eligibility criteria before companies are invited to submit applications.
Through the process the government wants to identify a pipeline of projects, how they should be funded and what the demand is from the market.
Greenfield and brownfield projects will be eligible and includes upgrades or life extensions of existing coal-fired generators.
“This program will drive down electricity prices for householders by increasing competition and increasing supply in the market,” Energy Minister Angus Taylor said.
“Our program will secure energy for key commercial and industrial customers, increase competition in the market, and lower wholesale prices — which will ensure lower power prices for Australian families and businesses.”
The program, to be run over four years until 2022-23, aims to encourage the development of “firmed” energy that would be available to provide reliable power 24 hours a day.
It forms part of a number of measures Prime Minister Scott Morrison has announced to address energy prices and reliability following the dumping of Malcolm Turnbull’s National Energy Guarantee.
Companies will be able to register their interest until January 23.
COMPANIES ARE LOOKING TO AMERICA
The high cost of power in Australia is prompting investors to look to the US, where households and businesses pay about two to three times less.
A United States Studies Centre report released on Wednesday warns the Australian economy will be hurt if local energy prices remain the same.
“Manufacturers we spoke to repeatedly rated the United States as vastly more attractive for investment because of the relatively high cost of electricity and gas in Australia,” USSC CEO Simon Jackman said.
“For large, industrial consumers of energy, Australian prices are simply making us uncompetitive.”
Over the past decade, power bills for households and businesses have increased by 73 per cent, the researchers found.
But in the same period, household electricity bills in the US have remained fairly steady while industrial users benefited from a 10 per cent fall in prices.
Looking to gas, the average price for households decreased by about 30 per cent over the past decade, as industry saw a 50 per cent drop in their bills. The amount of coal in the US energy mix has gone down about 40 per cent in the past decade, with more gas than coal now in the equation.
This has helped drive down prices.
Australia should therefore look to natural gas as the right resource to help the sector transition to renewable energy, the study says.
Increased supply of affordable domestic gas will reduce prices as well as carbon emissions in the long-term, the report states.
AMERICA HAS ALREADY MET PARIS TARGET
The US has already met its Paris Agreement emissions reduction target in the electricity sector, due to bumping the amount of gas in its energy mix to 36 per cent from 27 per cent in the past decade.
Australia should lift moratoriums on gas exploration, subsidise gas infrastructure expenditure and introduce a formal domestic gas reservation policy, the report suggests.
Household electricity prices in Australia increased by more than 14 per cent between March 2016 and June 2018, the report states.
This was partially driven by the 2017 closure of Victoria’s Hazelwood power station.
The report warns that the inevitable closure of coal-fired power plants will see prices continue to rise.
Dow Chemical Australia president Louis Vega says the report highlights how important the right policy settings are for the economy.
“Without a bold and concerted effort to deploy an energy policy for Australia, consumers will continue to see the incredible rise in costs and the terrible effects of those higher costs on jobs, economic growth and energy security,” he said.