Industry splurge leaves out gentailers
A split has emerged over energy investment, with integrated retailers stalling new generation, even as developers set the seal on a record year of new commitments.
Renewable energy and storage projects totalling more than $20 billion of investment have now been committed to across the country, according to new figures released by the Clean Energy Council.
The new investment will add 14.6 gigawatts of renewable energy, equivalent to more than seven times the capacity of the Liddell Power Station — or over four times the energy output of the Liddell Power Station after adjusting for the capacity factor.
Fund manager Infrastructure Capital Group, meanwhile, has launched a $1bn fund, announcing a $100 million commitment from the Clean Energy Finance Corporation — its biggest ever — to invest in new renewables projects.
And if the capital pool wasn’t already swollen, federal Energy Minister Angus Taylor launched an uncapped four-year scheme to stimulate investment in new generation by underwriting floor prices, cap prices and loans.
And the government has a decision to make as a shareholder in Snowy Hydro about whether to go ahead with the $4bn Snowy 2.0 expansion now that the board has approved it.
That’s the mother of all investment programs, with investors and developers saying the lack of policy certainty is not a significant deterrent.
“We don’t think it is any impediment — perhaps only at the margins,” ICG chief executive Tom Laidlaw said.
“The results speak for themselves — the money is flowing.
“We think we can invest now with confidence, regardless of what is happening at the federal level. The bigger risk for us is what might happen to technology costs.”
The investment bonanza is, however, happening outside the big integrated players, who serve 69 per cent of the National Electricity Market (that includes all states and territories except Western Australia).
Snowy may be the only one of the big gentailers — owners of retail and generation businesses — that is planning investment.
Origin Energy and EnergyAustralia last week declared a freeze on new investment in the face of divestment powers the government is seeking as part of its “big stick” re-regulation of the electricity market.
Origin CEO Frank Calabria said proposed legislation unveiled last week discriminated against the gentailer model because they were the ones threatened with divestment if found to be gouging customers.
“But it is the predominant business model because it is able to manage the costs and lower the risks of supplying electricity,” Mr Calabria said.
While the gentailers are usually regarded as AGL, Origin and EnergyAustralia, the group also includes Snowy at No 4 — with 1.1 million customers through its Red and Lumo brands.
Alinta, the former WA utility, has mounted a serious push into the eastern states with the purchase of Loy Yang B in Victoria and a failed attempt to prise the Liddell generator in NSW away from Liddell.
And much to Mr Taylor’s discomfort, figures emerged this week showing Snowy earns more in profit than EnergyAustralia — despite having fewer than half its 2.6 million customers.
At $464m that’s $464 per customer, versus $457m or $176 per customer for EA.
The record profits reported by the top-tier gentailers have made for an uncomfortable time with Canberra.
That was made all the more acute recently as the energy regulator revealed huge price increases over 2017-18 for most households.
More customers were on hardship programs and fewer were coming out.
The average debt for these hardship programs ranged from $916 in NSW to $1694 in South Australia.