Effect of Carbon Tax On Power Generators

Electricity generators have warned they are facing a cash-flow crunch of hundreds of millions of dollars in order to buy carbon tax permits as the latest greenhouse gas emissions figures suggest that power companies will be responsible for over half of the $7.7bn to be raised in the first year of the policy.

Data from the Climate Change Department shows that 170 million tonnes of carbon dioxide emissions were created by the power generation sector in the 2010-11 financial year, which could mean a carbon tax bill of $3.9bn if repeated next year.

The latest greenhouse emissions figures show that coal-fired stations were the nation’s top five carbon dioxide emitters in 2010-11. Emissions from the sector have fallen about six million tonnes over the past 12 months.

The two NSW state-owned generators – Macquarie Generation and Delta Electricity – were the two biggest emitters in 2010-11, with 20.3 million tonnes and 19.8 million tonnes in CO2 emissions respectively. Assuming the same levels were reached next year, each company would pay in excess of $400m in carbon tax.

The companies have said that they would try to recoup the cost through higher electricity prices, but because prices are set by the national electricity market, they are uncertain how much they will be able to recover.

The government warns that the National Greenhouse and Energy Reporting figures may not be an accurate guide to next year’s carbon tax liability. This is because the reporting is for holding companies, and some of their emissions may not be subject to the carbon tax.

But several of the big power companies have confirmed that their reported NGER figures broadly represent emissions they would be liable for under the carbon tax.

The chief executive of the Electricity Supply Association of Australia, Matthew Warren, said some companies might have to pay hundreds of millions of dollars for permits in advance of when the electricity was generated and sold.

Mr Warren said the Investor Reference Group estimated that electricity generators would need to hold positions on $6bn worth of forward permits to maintain current levels of electricity contracts.

Climate Change Minister Greg Combet’s spokesperson said the government had announced that loans would be made available to generators for the forward purchasing of carbon permits. This was in addition to $5.5bn in assistance for the emissions-intensive generators.

“It is essential Australia begins to transform this sector so our economy remains competitive as the world moves to tackle climate change by reducing carbon emissions.”

The government will put more than $4bn into household assistance this year to offset higher prices caused by the carbon tax.

by Australian Solar Quotes

The Author

I took an interest in the Australian energy sector close to ten years ago and since then have monitored the trends, technologies and direction of the Australian Energy Market. I was drawn to the Australian solar market in 2008 and since then have worked heavily in the field. I am partnered with national and international solar energy companies, from manufacturers of solar panel and inverter technology, online software developers that introduce tools to quote, monitor and manage solar power systems and media organisations who like myself, closely monitor the solar and renewable energy sector.

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