Latest Buzz...


Thursday, January 3, 2013

NSW Coal Exports to Double

New South Wales - The State Infrastructure Strategy 2012 – 2032

A few extracts.
Note coal exports planned to surge.
Climate change takes back seat to New South Wales government's budget reliance on coal royalties? See comment below on falling global price for thermal coal.
Infrastructure NSW - Coal Exports to more than double
Infrastructure NSW - Coal Exports to More than Double

Comment on coal investments facing downward price trend

Australian thermal coal monthly price - Newcastle/Port Kembla - New South Wales
Australian thermal coal monthly price - Newcastle/Port Kembla - New South Wales
Any investments by New South Wales related to coal mining are under threat. The long term trend is towards falling demand, increasing world supply of coal and growing competition from cheap natural gas. Investments in rail freight, port facilities, and mines create increasing financial threats to New South Wales Government revenues. Commercial investment banks funding coal-related infrastructure projects are exposed to risks on a scale similar to the Global Financial Crisis —
Spanish Banks Try to Build Their Way Out of Home Glut

MADRID—On a weedy dirt lot here, lender Bankia is pursuing its answer to a banking and property crisis that has left Spain with a glut of around one million vacant homes. Its approach: Build even more.

Since its property bubble burst in early 2008, the Spanish financial sector has been dogged by fears that it has put off doing a deep clean of the estimated $224 billion (€176 billion) in troubled assets sitting on its books.

Peak demand

While energy demand is declining, peak demand has grown at nearly two percent per annum. The ‘gap’ between average energy and peak demand drives the price up further as more infrastructure is needed for less time.

Nationally, it is estimated that over $11 billion of infrastructure is used for less than one percent of the time.

Infrastructure NSW has concluded that there are insufficient incentives on electricity network businesses to manage peak demand and there is evidence that:
  • forecasts of demand (for capital planning) are conservative and do not take into account the potential of demand management, including price elasticities
  • high level analysis of data on energy flows are not used to any extent in capital planning
  • automation and active configuration and balancing of electricity supply systems are not used to avoid capital expenditure. This has contributed to the high level of electricity distribution investment and consequent high prices.
(Page 150)

Energy snapshot

  • The NSW Government has $30 billion invested in electricity infrastructure (in State Owned Corporations (SOC)). This is $26 billion in network businesses and $4 billion in generation businesses. The electricity sector accounts for 27 percent of past capital and 28 percent of all the Government’s future capital program.
  • The electricity sector has invested an average of $2 billion a year for the past decade. The capital plans of the businesses are to double this to an average of $4 billion a year for the next decade to 2021.
(Page 149)

Prices and demand

The NSW economy has traditionally benefited from the competitive advantage of low priced energy based upon abundant reserves of coal. This long term competitive advantage has all but disappeared over the last 5 to 10 years.

The era of low cost energy is over. High levels of investment in electricity networks and the proliferation of primarily Federal Government renewable energy schemes have caused the average electricity retail bill to double over the past eight years for NSW residential customers, from around $800 to near $1,600 per annum.

NSW prices have also grown faster than prices in other States, ... [in fact - faster than EVERY State except South Australia, so the proliferation of primarily Federal Government renewable energy schemes cannot be as significant as this NSW report suggests].

This is shown in Figure 11.2 below.
Average Electricity Retail Prices 2001-11
Figure 11.2 Average Electricity Retail Prices 2001-11

(Page 149)