Investor News

Hazelwood power station closure drives up bills, forces gas reliance

Anyone following the story of wholesale electricity price rises since the closure of Hazelwood power station won't be surprised by the below article in yesterday's Herald Sun ($).

Key points:

  • Household power bills have soared 16% since the abrupt closure of Hazelwood
  • Wholesale power prices have jumped from being the cheapest in Australia to second most expensive behind South Australia
  • Victoria became a net importer for the first time in a decade
  • Driving the price increase was a 500% increase in gas-fired power fill to the gap.

We managed to get through summer without major blackouts, but the cost was high.

If you love crunching data, you can go to the AEMO website and source half-hourly generation and price data.

Let's compare summer 2016-17, before the closure of Hazelwood, to summer 2017-18, after its closure.

PeriodMWhWholesale Cost$MWh
Dec 2016 to Feb 2017              10,062,588 $    647,482,932.87 $   64.35
Dec 2017 to Feb 2018              10,754,313 $ 1,334,982,919.20 $ 124.13
Increase                   691,725 $    687,499,986.33 $   59.79

As you can see, consumption was up 691,725 MWh or about 7% for the corresponding 90-day summer period. That output is roughly equivalent to the capacity of the 312MW Laverton North gas-fired power station.

But the total wholesale cost doubled from ~$647m to ~$1.33Bn. On a weighted average cost basis, that meant an increase of 93% or ~$60 per MWh.

With this data in hand, it's easy to see the direct financial impact of closing Hazelwood.

Are there any positives?

In the article Environment Victoria tries hard to put a green spin on things, citing the reduction of 12 million tonnes of CO2 emissions (on an annual basis). There's no doubt that is substantial. But if you apportion the increased wholesale cost of electricity over summer against the ~3 million tonnes of CO2 avoided during the period, we get a de facto carbon price of ~$229 per tonne. Sure, the intent wasn't strictly CO2 reduction, and EV notes it was a side benefit, but it's a very costly side benefit.


Hazelwood power station closure drives up bills, forces gas reliance

29 March 2018 | Herald Sun | Rob Harris and Tom Minear

THE closure of Hazelwood has driven up power bills across the country and forced a greater reliance on gas that is expected to lead to an alarming shortage within four years.

Source: Hazelwood power station closure drives up bills, forces gas reliance | Herald Sun