Climate Council analysis finds ‘considerable cause’ for review into gentailer conduct in SA

18.08.16 By
This article is more than 7 years old

South Australia’s power companies made over $178 million in net margin during the July high price events, a new Climate Council report has found.

The analysis, which reveals for the first time the financial returns the power companies made during the price spikes, finds the gas powered “gentailers” appeared on the evidence to engage in deliberately unpredictable bidding behaviour to inflate the price of electricity on the wholesale spot markets. These increases have since flowed into future hedge contract prices.

Removal of the Heywood Interconnector during the winter peak, combined with AGL making some of its Torrens Island capacity “unavailable” and Engie “mothballing” Pelican Point, created the “perfect storm” and put gas gentailers in powerful position to raise prices.

The analysis also found:

“This analysis demonstrates why increasing reliance on high-priced gas is not a viable solution to reduce power prices or tackle climate change,” The Climate Council’s Andrew Stock, an energy expert and author of the analysis, said.

“Reducing South Australia’s exposure to price spikes would be best achieved through more low cost renewable energy from a diverse range of sources and by adding a third interstate link to New South Wales.

“More renewable energy, increased interconnection and in-state fast response energy storage in South Australia will reduce the market power of the gentailers as well as achieving the transition away from fossil fuels required to tackle climate change

“South Australia needs more competition from more supply sources, not less, to put downward pressure on power prices.”

More gas generation will only continue higher electricity prices and higher volatility in South Australia, and undermine the state’s global leadership on renewables and tackling climate change, Climate Council CEO Amanda McKenzie said.

“Increasing reliance on gas will also increase greenhouse emissions, and increase risks of fugitive methane emissions – a potent greenhouse gas. Both are contrary to national greenhouse gas reduction commitments,” she said.

“The electricity sector is the nation’s biggest producer of greenhouse gas. It‘s biggest transformation in a century is underway to a future focussed on renewables. We need to ensure this delivery reinforces the nation’s greenhouse reduction targets as well as secure electricity supply for consumers.”

You can find the full report here.

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