TiP

I get a fair bit of correspondence one way and another.

A lot are from kind people wanting to draw my attention to stuff they think I will find interesting.

I am grateful to them all for remembering me.

Some, of course, are from people representing special interests wanting me to write about them – a readership of 150 to 350 people a day (it’s seasonal) has its attractions.

(The “unique browser” tally for February on this website was 5,520 – that’s 174 per cent better than in the same month of 2011 when we were still getting going with this blog.)

A small, but important, part of correspondence comes from good friends whose experience and expertise I value highly, kindly including me in debates. I learn a lot from this stuff.

Some, though not a lot, are from grumpy people who don’t like my slant on the world and think I’m a minion of the devil. I always swish my tail, smile and pass on when these arrive; never, never does one enter in to debate with these folk because winning is absolutely impossible.

A little bit comes from those who are well-intentioned but obsessive about issues – perceived climate change is one obviously – and who decry my attempts to be cynical or amusing, wishing to point out that I am contributing to a poorer world for my grandsons and others.

We are all entitled to our opinions.

Not sufficient missives come bearing payment from clients and other publications these days. The GFC has not been kind to consultants and writers among many others.

One correspondent whose material is always of strong interest is my friend Graeme Bethune, principal of EnergyQuest.

Graeme and his team, based in Adelaide, are widely recognised as among the best providers of data, insights and analysis about the upstream petroleum industry.

He held senior positions at Santos for many years and is today ranked in the top five per cent of more than 30,000 experts in energy, transport and industry consulting on the books of the Gerson Lehrman Energy & Industries Council.

He launched his quarterly report in February 2006, then a 50-page collation of mostly production tables and charts. The 25th edition has just landed in my in-box, three times as long as the debut issue and containing a wealth of information and analysis.

Each edition is a “must read” for me and the latest one is timely indeed because gas supply and gas prices seem to be a topic lots of people, including those in the local coal business, want to discuss.

As Bethune points out in the new “Energy Quarterly,” Origin Energy’s Grant King believes east coast gas prices will reach export parity in a few years’ time.

He draws attention to something else King has said which had passed under my radar first time round: it’s the coal price that matters for baseload generation, King argues, because the gas price doesn’t really matter for intermediate and peaking power.

King can see black coal prices reaching export parity, especially in New South Wales.

Bethune also quotes AGL Energy forecasting that, as legacy black coal contracts roll off, the fuel (which currently sells in NSW at $2.15 per gigajoule) will move up in to the $2.50 to $2.70 range.

I still have at my elbow Port Jackson Partners’ Edwin O’Young’s talk to my “Powering Australia” conference in Melbourne last September when he calculated that a $1.5/GJ increase in the black coal price would add $14 per megawatt hour to its wholesale generation costs.

Toss in the fact that a $27 per tonne carbon price would add a further $26/MWh to the cost of coal-fired generation and note, as Bethune reports, that black coal’s share of NSW power supply was 91 per cent in 2011 and you have another rough power bill beast slouching towards consumers to join network costs.

Remember that a third of both national residential and business customers call NSW home.

As I had occasion to point out the other day, there is no one Good Book that tells you all you need to know about what’s happening in electricity.

The likes of Bethune, O’Young, the people at the federal Bureau of Resources & Energy Economics and papers like the recent Grattan Institute review, the Ernst & Young look at where peak demand is going and last November’s J.P.Morgan client briefing on electricity supply are all contributing to drawing together a complex picture.

And, of course, those of us who strive to understand what is going on always find media reports useful pointers, even though we often wonder how on earth a reporter came to that landing.

My emails lit up quietly on Friday morning with “have you seen today’s Business Spectator” messages when the “KGB” – Alan Kohler, Bob Gottliebsen and Stephen Bartholomeusz – published a lengthy interview with Grant King.

Of course I had – as a writer for the “Spectator,” it is an early port of call each morning – but I appreciate the kindness of others in ensuring I am in the loop.

The stand-out comments in this interview for me are two:

King has given the federal Coalition the plainest of warnings that it should be careful issuing messages to generators that they are on notice the carbon policies will be up-ended after the next election and they will be stuck with any long-term contracts including carbon costs that they write in the interim.

As King says, if the consequence of the Coalition position is that energy suppliers stop writing long-term contracts and hedging against carbon risk, it will “bring upon our market and our customers a far greater discomfort than is necessary.”

This just reinforces the fact that, the closer the Coalition gets to an election it expects to win, the more it needs to think before it speaks about energy matters.

“Unintended consequences” are the curse of dodgy policymaking and neither householders nor businesses will thank T.Abbott & Co for making the power price pain worse.

King’s other big point in my book is his comment that the current moderation in electricity demand – I see Bethune attributing the fall in consumption since 2009, including a one per cent decline on the east coast between the 2011 and 2010 December quarters, to price increases, the inroads of solar PV, increased efficiency and reduced economic activity – means that new baseload generation won’t be built “this side of 2020.”

Alan Kohler’s reaction on the KGB tape was “Wow,that’s incredible,” but King’s point is that it makes most sense to keep building open-cycle gas generation in the present environment and that the RET legislation requires a lot more wind farms to be constructed this decade, thus crowding out baseload options.

In this context, King’s other thought bubble that will make more than a few politicians gulp, or shriek if they are Green, is how the next big (ie baseload) generation will be fuelled.

“I can tell you,” said King,”that it is more likely to be coal (than gas) at current carbon prices because $23 a tonne does not fundamentally change (their) relative competitiveness.”

The Origin Energy boss had a sting in this tale, however.

He also pointed out that the best resource available in a more carbon-constrained economy will be his Purari River hydro-electric project in Papua New Guinea, opening, he added, “an extra-ordinary opportunity” post-2020 for internationally competitive, energy-intensive manufacturing to be located in north Queensland – to which the scheme is intended to deliver energy via high-technology transmission links across the Torres Strait.

There’s nothing simple about the electricity picture, which is why contributions such as those from EnergyQuest are so valuable and why I personally am pleased to get all the messages that come rolling in over my ‘phone and PC.

(You can find out more about Dr Bethune’s publication on www.energyquest.com.au.)

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