TRUenergy Pty. and AGL Energy Ltd. called for an Australian emissions trading system to spur investment to replace coal-fired power plants and said they look forward to working with new Climate Change Minister Greg Combet.
Continued doubts about whether the government will impose a price on carbon emissions would threaten spending, including as much as A$3 billion ($2.8 billion) Melbourne-based TRUenergy is ready to invest in gas-fired generation, Richard McIndoe, managing director of the CLP Holdings Ltd. unit, said today.
“We all would like a price on carbon,” McIndoe said in an interview in Sydney. “The issue is not about an ETS. The issue is one of transitional assistance. If it’s not done in this government and if this uncertainty continues, not for two to three years, but four to five years, and nobody is building, then you will have power shortages and insufficient capacity.”
Prime Minister Julia Gillard has tasked Combet, a former union leader, with leading an effort to impose a price on carbon to curb emissions in Australia, the world’s largest exporter of coal. Combet, 52, who was sworn in yesterday in Canberra, previously assisted Penny Wong in the climate change portfolio.
“He understands each part of the equation,” McIndoe said. “He understands the investors. He understands the importance of maintaining job security and not closing vast tracks of Hunter Valley and Latrobe Valley power stations. He also understands that an emissions trading scheme, longer term, is the most efficient way to provide a lower carbon economy.”
TRUenergy has a A$5 billion portfolio of generation and retail assets and operates the Yallourn coal-fired station in the Latrobe Valley east of Melbourne, Australia’s second-largest city, its website shows. Yallourn supplies 22 percent of Victoria state’s electricity needs.
Michael Fraser, chief executive officer of Sydney-based AGL Energy, said the company had discussed government amendments to the nation’s renewable energy target with Combet. AGL has said it accelerated plans for the A$1 billion Macarthur wind farm in the state of Victoria after the Australian Senate approved revisions to laws aimed at encouraging renewable energy.
“He got his head around complicated issues quickly,” Fraser said in an interview in Sydney yesterday. “It’s a difficult portfolio that’s going to require a lot of negotiation skills, and I think he has a demonstrated track record.”
While a price on carbon in Australia is inevitable, “it’s going to be very difficult” to achieve in the next two or three years, Fraser said.
Risk to Investment
“I don’t think anyone can predict how this is going to unfold, but if there isn’t legislative change, you won’t get large-scale investments like replacing coal-fired power stations with gas to make a real difference,” he said.
AGL rose 1.8 percent to A$15.82 at the market’s 4:10 p.m. close in Sydney. The stock has climbed 13 percent this year, compared with a 4.3 percent drop in the benchmark S&P/ASX 200 Index.
Australian lawmakers should consider an emissions-trading system that applies only to electricity generation and excludes transport and agriculture, Fraser said at a conference today.
“When you look at Canberra and you look at the political difficulties, and you look at the interests of stakeholders around the country, one of the things I would reflect on is that perhaps we have been too ambitious in trying to introduce an all-encompassing CPRS or emissions-trading scheme,” he said.
TRUenergy’s McIndoe said the government’s prior carbon pollution reduction plan introduced while Kevin Rudd was prime minister would have “impaired the company’s business by several hundred million dollars” and addressed the power industry last. McIndoe said in the interview he supports the AGL chief’s idea.
“I think Michael Fraser is right,” he said.
Gillard, who held on to power after the closest election in 70 years, won support from the Greens Party in exchange for setting up a climate change committee to move toward the introduction of a carbon price. The Greens benefited from a surge in support in the Aug. 21 election after the ruling Labor Party deferred its cap-and-trade plan until after 2012.