A few voices have started to pick up on this. Adam Bandt and Matt Keane last week demanded that coal be included in discussions about reining the Evil Gas Cartel.
Keane reiterated it over the weekend:
“We welcome any move that puts downward pressure on power prices. However, I’m concerned we are running out of time for a gas reservation policy to work.”
“And you can’t just use a gas reservation policy when coal is setting the spot price for electricity more than 50 per cent of the time.
“If you are going to have a cap on gas prices you need to have a cap on coal prices as well.”
There is a good reason for Matt Keane’s awareness. Coal is more specifically a problem for NSW and QLD power prices. The other states in the National Electricity Market – VIC, SA and TAS – are not exposed to tradeable black coal.
VIC runs on landlocked brown coal and is not exposed to international prices. Gas peakers address its power spikes. SA and TAS are dominated by renewables and firming gas power.
The following chart nicely captures the problem for the northern states:
A few points:
- The greater volatility in the orange line is the role of intermittent renewables.
- Power prices are more consistent in the blue line but more expensive.
- Finally, the two lines track one another because of the role of gas but also because it is a single market and price differences will arbitrage out. Crucially, the dual fuel crises affect one another. When coal is short there is more need for gas and so prices rise across the network not just within coal states.
Fixing gas will do a lot to fix power prices but it will not end the shock. Coal states will keep the moving average price of power higher than it should be even when less gas is being used in the system. This is the pattern of the spread between NSW/QLD prices and VIC/SA/TAS we have seen emerge over the past few months as the crisis has ratcheted down a little amid attacks upon the Evil Gas Cartel.
The simple fact is, Big Coal is also raping the east coast of Australia with prices that are utterly preposterous given it is all profitable at $60/t and much of is literally dirt cheap:
Big Coal is less concentrated than the Evil Gas Cartel and it is better taxed as well, so I would hesitate to describe it as a cartel. But your friend, it is not.
Albo’s idiots are so far behind the out-of-control energy crisis that it boggles the mind. They have no solution to gas and are yet to even mention coal.
The government needs to declare a national energy emergency to create a mood of crisis and then smash both gas and coal as a single unit with either local price caps or export levies.
