Queensland election: Labor’s report backs LNP’s coal power plan
An analysis ordered by the Palaszczuk government has backed the viability of the Liberal National Party’s proposal for a coal-fired power station to be built by the private sector in north Queensland.
The leaked report, commissioned by the Department of Energy and Water Supply, has found the proposed new "ultra-supercritical" power station would be profitable despite Labor claims that the project would never be built because it "did not stack up".
Consultants Energy Edge concluded in the February report that under current wholesale power and coal prices, a new-generation plant of 750 megawatts would cover its costs and be valued at more than $730 million.
The LNP last year announced a policy to "facilitate the development" of the private-sector power station, saying north Queensland was being stung by power transmission costs, with the most northern coal-fired power station being in Rockhampton.
The LNP says three private-sector proponents have expressed interest in building the multi-billion-dollar power station if there is a change of government.
One Nation also backs the plan, but is pushing for it be built and owned by the state government.
LNP leader Tim Nicholls seized on the report, saying a profitable entrant into the market would ensure greater competition and drive down power prices.
"The LNP will build with the private sector a high-efficiency, low-emissions coal-fired power station in north Queensland to increase energy security and lower wholesale electricity prices," he said. The Premier had ruled it out, but the report showed it would be highly profitable, he said.
Such a station would produce power at half the price of last year’s average wholesale price. "More supply and cheaper electricity is a central plank of the LNP’s economic plan to create 500,000 jobs over 10 years," he said.
A subsequent briefing note about the report to the department director-general Paul Simshauser said the assessment had not analysed the effect of the proposed station on power prices.
Although the LNP has not specified the capacity or site of its proposed power station, the report did the analysis based on a 750MW station in the Galilee Basin, where Adani plans to open its Carmichael coalmine.
The report looked at five market scenarios with a mixture of wholesale power and coal prices and, in two instances, considered the effect if a $40-a-tonne carbon tax were levied.
It concluded that with wholesale prices of $75 per megawatt hour - $7MWh below the average for 2017-18 - and a coal price near its current level of about $4 a gigajoule, the net present value of the net profit after tax would be $734m. If the coal price halved, the value would double to $1.68 billion and the power station would be "highly profitable". The report said the station would lose money if wholesale power prices fell to $40MWh, or to $50MWh and a carbon tax of $40 a tonne were levied over its 40-year life.
A spokesman for government did not respond to questions about the report. However, a leaked briefing note about the report says it does not assess the effect on power prices. "While the report considers a range of wholesale pricing scenarios, these are not modelled scenarios but reflect nominal prices over the study period," the note said, adding it did not account for changes in the market.
It also did not assess the USC plant’s effect on power prices, and did not outline capital or financing costs - "critical assumptions" in understanding the plant’s viability.
Energy Minister Mark Bailey has previously rejected the LNP’s plan as a return to "expensive old technology", saying the north would benefit from renewable energy sources being built.
Thursday, November 02, 2017
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