Queensland’s publicly owned coal fired power stations could become a drain on taxpayer funds, with a new assessment finding that some may never again be profitable.
A new analysis produced by the Queensland Conservation Council has forecast the profitability of the Queensland government’s owned coal generation businesses, including Stanwell Corporation and CS Energy, predicting they will be losing money by 2023-24.
Between them, Stanwell Corporation and CS Energy operate the bulk of Queensland’s coal fired generation fleet.
QCC examined the whole of the two company’s businesses, including their retail electricity businesses, but found that the emergence of competing clean energy projects and falling wholesale electricity prices would diminish their profitability within just a few years.
“This analysis only looks at operating profits to 2024-25. Beyond 2025, profits could continue to tumble. Renewable energy, particularly through the NSW Roadmap, is likely to keep prices flat or falling beyond 2025,” the QCC report says.
“Queensland’s coal generators will also require more maintenance. AEMO expect Stanwell to have to invest more than $1bn in routine refurbishments of Stanwell and Tarong power stations between 2025 – 2030. The Callide C4 incident demonstrated the vulnerability of coal to catastrophic and expensive failure.”
“Stanwell’s coal revenue sharing agreement with Coronado will end in 2026. Under our analysis, this arrangement is the only thing keeping Stanwell in profit from 2023-24,” it adds.
Stanwell Corp’s portfolio includes the 1,460MW Stanwell power station and the 1,400MW Tarong coal plant, while CS Energy operates the 750MW Kogan Creek power station and owns a majority of the 1,525MW Callide power station complex. All of the generators run on black coal.
QCC predicts the 2020-21 financial year could be the last year that CS Energy delivers a profit, with the company facing the combined challenges of falling wholesale electricity prices and the ongoing fallout of the Callide C power station being rendered inoperable by an explosion in a generator unit.
“From 2021-22, we forecast that CS Energy will be unprofitable. This does not include any write-downs, or impairments, of assets, or rebuilding Callide C4. The Queensland Government would have to prop up CS Energy by $430m over four years,” the analysis says.
The government owned entities have traditionally been sources of additional funds for the Queensland government, delivering the benefits of profits earned by the power stations through annual dividends paid to the government. But falling revenues have mean they have already been forced to write-off a combined $1 billion from their value as a result of falling coal generator profitability.
“The Queensland Government can no longer rely on its coal power stations to bring in revenue. Their profitability is tanking and creating a giant budget black hole,” QCC director Dave Copeman said.
The analysis was published ahead of the Queensland government’s state budget, which will include a further $1.5 billion commitment from the Palaszczuk government to make direct investments in new clean energy projects and an expansion of the state’s clean manufacturing and materials sectors.
“Refusing to acknowledge the transition to renewable energy and the looming profitability crisis for coal power will only lead to uncertain futures for workers, and high carbon emissions,” Copeman said.
“The Queensland Government needs to open its eyes to the new reality and set out a clear plan to minimise its exposure to losses in coal.”
“The first step has to be replacing Callide C4 with renewables and storage, instead of rebuilding. Queenslanders want reliable, cheap, clean electricity. The best way to guarantee this is by investing in renewable energy and storage – not coal power.”
The Queensland government has been hesitant to acknowledge the need to begin planning for the closure of the state’s coal generators, with former Stanwell CEO Richard Van Breda, stepping down soon after delivering a speech that flagged the need to begin planning for transition plans for workers at the company’s coal plants.