AGL attributed the write-down to much lower wholesale prices,which they think will be sustained due to “lower technology costs” (in other words new renewable generators will produce electricity much more cheaply than the prices that their coal generators have been paid in the past).
They also singled out “policy measures to underwrite new build of electricity generation”. This refers,in the main,to the recently legislated policy of the NSW government to ensure that 12,000 megawatts of additional renewable electricity generation is built in the state by 2030. AGL,and its NSW coal generator peers,bitterly opposed this policy.
This is a painful write-down for AGL’s shareholders and one which the subsequent share price movement suggests they had not fully anticipated. Painful though it is,it is likely to be just the beginning of the pain that new renewable electricity generators have in store for the old fossil fuel generators.
For too long Australia’s electricity consumers have been held hostage by a fossil fuel-dominated oligopoly that has sought (and mostly so far succeeded) in protecting its legacy fossil fuel positions by going slow on the development of cheaper renewable alternatives. As a result,while about 20 per cent of Australia’s electricity now comes from the wind and sun,only 8 per cent of the electricity that AGL sells comes from these sources.
AGL’s own customers almost certainly produce far more electricity from solar panels on the roofs of their homes and businesses than AGL does from the small amount of solar generation it owns or contracts.
The write-downs are the first substantive indication that Australia’s big fossil fuel electricity generators are feeling the heat that their peers in other rich countries have long had to face.