New South Wales will demand thermal coalminers set aside as much as 10% of their output for domestic users in a bid to make price cap impacts more equal across the sector.
The move, announced on Thursday, is the latest government intervention in energy markets to limit price increases and avoid a repeat of last June’s coal supply shortages that helped trigger a suspension of the national electricity market.
In December, the Albanese government imposed one-year price caps on gas and black coal in an attempt to lower electricity prices. Big energy users said this week that the gas industry was still behaving like “a bunch of bullies”.
Matt Kean, the NSW energy minister and treasurer, is aiming to introduce the new requirements for miners to set aside about 7% to 10% of their production for the local market after further consultations with the industry.
“This coal cap scheme will see NSW doing our part at the request of the Albanese government to contribute to the national solution of this national problem,” Kean said in a statement.
“I know those currently providing coal for the local market will appreciate that companies enjoying super profits on the back of the war in Ukraine will now do their part for the domestic market. Of course they should provide Australian production for Australian consumers.
“These new arrangements will help even the playing field among coal producers.”
Under the federal government’s plans, agreed to by the NSW government, black coal prices for domestic use are capped at $125 a tonne. Compensation for power stations that burn coal above that price, paid for by the commonwealth, may reach hundreds of millions of dollars. Gas prices are capped at $12 a gigajoule.
Stephen Galilee, the chief executive of the NSW Minerals Council, slammed the government’s move as “a clumsy, politically motivated market intervention designed in haste, with little or no consultation”.
“The policy will have no meaningful impact on electricity prices, but will come at a significant economic cost,” Galilee said.
He demanded Kean release all modelling and analysis undertaken to justify the move, including the expected impact on NSW energy prices and the relation to the coal price cap.
“Extending the policy to coal producers not currently involved in domestic coal supply is a radical change of approach that highlights how extremely rushed this policy process has been,” Galilee said.
Risks included disrupting supply chains and also undermining the state’s reputation as an investment destination and trade partner, he said.
