More than $1 billion has been wiped off the value of Queensland government owned coal and gas generators, as falling electricity demand and the growth of wind and solar slash profits, with the Queensland Audit Office warning that further cuts are in store.
A new report published by the Queensland Audit Office has detailed how more than $1 billion has been wiped off the value of Queensland government owned fossil fueled generators, as falling wholesale electricity prices slash generator profits.
The Queensland Audit Office conducts regular reviews of various state government owned entities, finding that while the state’s network and energy retail businesses remained comparatively stable, the state’s fossil fuel generators faced ongoing cuts to profits.
The audit office found that profits generated by government owned generators, including those controlled by Stanwell Corporation, CS Energy and CleanCo, had fallen by 88 per cent in the 2019-20 financial year to just $204 million combined, due to a fall in wholesale electricity prices.
This resulted in a dramatic reduction in dividends delivered back to the Queensland government, used to pay for government services and initiatives, which fell 54 per cent to just $1 billion. However, the audit office noted that a total of $1.5 billion in value was returned to Queensland energy users through energy rebates and bill relief.
The steep reduction in profits had forced the public entities to issue revised valuations for their generation portfolio, recording significant write-downs in the value of the coal and gas power stations. Stanwell Corporation recorded a $720 million write-down, representing almost one-fifth of the entity’s asset value, while CS Energy recorded its own write-downs worth $353 million.
CleanCo, which has been established to operate the state government’s investments in zero emissions projects, recorded a write-down of $35 million, after reducing the value of the 385MW Swanbank E gas power station to zero, as it now considers the power station unprofitable to run.
The Queensland Audit Office said that both Stanwell and CS Energy had primarily written down the value of their coal-fired power stations, due to the combined impacts of falling electricity demand, the growth in supplies from renewable energy sources, and falling gas prices.
“Queensland continues to have the lowest wholesale electricity prices in the National Electricity Market, and they have reduced further this year. This influences the price customers pay, but also contributes to the significant reduction in revenues and values of assets for the generators,” the audit office said.
“The profits of the transmission and distribution businesses continue to decline. This is largely driven by decisions of the Australian Energy Regulator to reduce the revenue they can earn from their core business activities. We expect to see this trend continue in the next financial year.”
As RenewEconomy reported last year, Stanwell Corporation was forced to write down the value of the Tarong and Stanwell coal-fired generators, while CS Energy recorded write-downs to the value of the Callide B and C coal generators.
Renewable energy advocacy group Solar Citizens said that the changing economics of electricity generation meant that fossil fuel generators would continue to become an increasingly unattractive investment, and the Queensland government should look to exit the coal generation business.
“Coal stations aren’t very flexible, so when Queensland’s hundreds of thousands of solar rooftops are generating cheap energy during the day, they can lose a lot of money,” Solar Citizens’ Queensland campaigner, Stephanie Gray, said.
“It’s absurd that the Queensland Government is still expecting coal plants that are bleeding money to run until the end of their technical lives. Taxpayers will be funding polluting coal stations to stay online decades after they’re profitable.’
“It’s in the best interest of Queenslanders if the state and federal governments plan for a rapid transition to clean energy. They need to be upfront with the community and provide certainty for workers who will be affected by inevitable generator closures,” Gray added.