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Powers forward prices may disappoint


Source: AFR, 16 Jan 2015

You wouldn’t know it from your electricity bill, but the wholesale power market is in trouble.

The NSW government’s failure in December to sell Delta Coastal’s Vales Point coal-fired power plant hints at the problems. Not only was there no sale, but there were no known bidders at any price for the last asset sold in the state’s $2.1 billion sell-off of its power stations.

Snowy Hydro, which paid $234 million for Delta’s other power station, the Colongra gas-fired peaking plant, had pulled out of the running in November – with mutterings of the dire state of the wholesale market, which meant it was better off contracting for the supplies it needed rather than loading itself up with a generator that would also spoil the clean, green image of its growing electricity retail business.

Federal Industry Minister Ian Macfarlane describes the market as suffering from “chronic oversupply”, with almost 9000 megawatts – or 15 per cent – of surplus capacity.

Meanwhile, the future of the RET – a not insignificant factor playing into the oversupply – remains in political limbo. Uncertainty also hangs over the future take-up of solar power amid reducing state subsidies, energy efficiency efforts and whether the weaker Australian dollar would drive an uptick in industrial demand down the track.

With the sale of the Queensland power plants looming as early as this year, the market will be closely watched in the months ahead.