Chris Bowen’s coal price cap will push prices up: experts

Energy market experts have said that a key plank of the Albanian government’s plan cap power prices will at best be ineffective and at worst actually cause electricity bills to rise because we are still waiting for “the cavalry to arrive” in the form of enough renewable sources .

According to a report by consulting group Boardroom Energy which was sent to senior ministers in the NSW government Wednesday, calls by Energy Minister Chris Bowen for states to impose price caps are in fact “impractical” and “(risk exacerbating electricity price increases.”

“Even if a cap could be applied and did result in lower coal supply costs than otherwise, it is unlikely to materially impact wholesale electricity prices,” the report, which was commissioned by the NSW Minerals Council, states.

“If a cap persists over the longer term, it will impact long-term supply decisions … which will only put upward pressure on electricity prices.”

Rather than capping prices at $125 per tonne, as has been reported, the report says that the government should look at delaying the closure of the Eraring and Liddell power plants until there is enough renewable capacity to replace them.

The report also found that coal prices play only a small part in the retail cost of power, with natural gas a much greater driver of day to day prices.

Former CEO of the Australian Energy Council, Matthew Warren, one of the co-authors of the report said that the problem NSW faced was not prices but supply.

“The issue is not the cost of coal, it’s that there is not enough energy in the system,” Mr Warren said.

“If you cap the price of coal, you are making the market pay less for that energy, so miners will either keep it in the ground or sell it overseas to someone willing to pay more.”

“This is a global problem – we are waiting for the cavalry to arrive – because while renewables will help they take time to build and scale and connect up.”

“We can’t fix Ukraine or the global supply crunch but what we can do is make sure we have enough energy when we need it next winter – which is why we should not decommission old coal plants but keep them around in case we need them .”

NSW and Queensland received a proposal from the Albanese government Tuesday asking that the states impose price caps on coal, potentially recalling parliaments in the process, but the issue of compensation for coal miners remained unsolved.

“(We’ve) methodically worked through, come up with options and ideas, which mean that the various jurisdictions use the powers best available to them for the most impact,” Mr Bowen told ABC’s Radio National Wednesday.

Mr Bowen’s office declined to comment on the findings of the report Wednesday evening.

Originally published as We need more power, not price caps, to avoid blackout disaster


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