One day after the PM appeared to throw his support behind the development of a new coal plant for Australia – to shore up the nation’s “continuous power sources” – AGL Energy CEO Andy Vesey has delivered a couple of energy market home truths and clarifications: renewables will be the only source of new baseload energy in Australia, and coal cannot compete.
In the opening address at Australian Energy Week in Melbourne on Wednesday, Vesey – who heads the country’s biggest owner of coal-fired power station – said that technology was driving the new market direction, which was to large-scale renewables, firmed up by gas and soon battery storage.
The only coal plants that would be built, he added, would be “bespoke” – rather like an expensive, made-to-fit suit.
“There’s a lot of misinformation out there,” Vesey told the conference. “I hear a lot of different things. The fundamental issue is technology is driving this new direction.
“What’s the new baseload for us? It’s going to be large-scale renewables. It’ll be firmed up by probably open-cycle gas and, eventually, when storage comes down, that’s what it will be.
“We don’t see anything baseload other than renewables,” he said.
Yet, he continued, “you’ll hear people tell you how coal, it can compete. But… all you need to think about is economies of scale of production versus economies of manufacturing.
“Solar plants, the more you make the cheaper they get. …Wind turbines, the same thing. The more you make the cheaper it gets.
“It would work with (coal) plants too. …Large coal plants, supercritical plants and even what I hope comes around one day, carbon capture and sequestration; the more you make the cheaper they’ll get.
“But guess how many you’re going to make? They’re bespoke. Prices of large-scale generating plants haven’t moved in over 20 years,” Vesey said.
“The starting points today, even when you firm up renewables so they look exactly like the same capacity as large-scale …fossil generation, we believe the numbers tell a very clear story.”
In reference to the Finkel Review on energy security, Vesey said that whatever was decided, bipartisan support was critical to enable a smooth transition, considering that transition was happening already, with or without the blessings of the policymakers.
“We’re not waiting for clarity, we’re not waiting for certainty,” he said. “Would it be good? Absolutely. To get bipartisan support would be an amazing way to unleash the energy and investment that people want to make in this system. That is the thing what will ultimately drive down prices… that’s what you need, is investment.
“And nothing gives you investment like policy certainty,” he said.
“(The Finkel Review) is just about getting something that people can agree on, and saying, ‘We’re done with this now, these are the rules – invest’.
“We’ll invest and we’ll compete in the market, and y’all can decide which is the best deal or the best solution, but let us know what this boundaries are. Because what we’re doing now is not sustainable.
“Storage being efficient, and the other pieces, yeah we have to wait for those prices to come along and that’s why you need some kind of transition mechanism.
“I would have called that transition mechanism an EIS, but you can call it anything you want. Because you want to manage a smooth transition. Because in our market, when you don’t have smooth transitions… bad things happen. What are those bad things? Price spikes.
“Remember, that at the end of the day, unless we can stimulate new investment in the system, it will not be a question of price, it will be a question of who pays. Because at the end of the day, somebody pays.”