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Newcastle Herald
Newcastle Herald
Business
Matthew Kelly

Surging power prices pushing Hunter manufacturer offshore

Peter McKinnon

Beresfield manufacturer Peter McKinnon makes no bones about it - energy prices are likely to result in him taking a significant part of his operation offshore.

That scenario moved a step closer to reality this week when the Australian Energy Market Operator (AEMO) chief executive Daniel Westerman said there was no guarantee that the clean energy transition would result in cheaper prices.

It wasn't the news that Mr McKinnon, whose business Omnia employs about 40 people in the manufacture of omni-directional wheels, wanted to hear.

"We are Australian made. We want to keep manufacturing here but with taxes and power prices it's just very difficult," he said.

"If your competitors aren't paying the same for power and the other costs then you've got to, at some point, relent or lose market share. For us that would mean manufacturing in Vietnam."

Mr Westerman was asked during a senate inquiry on Wednesday if he could provide an assurance that the government's energy plan would lower power prices for Australians. He replied: "I can't guarantee that, no."

Daniel Westerman says it's impossible to give a guarantee that power bills will fall. (Dean Lewins/AAP PHOTOS).

He added that AEMO's modelling was focused on the cheapest way to roll out infrastructure needed to support a net-zero powergrid run on renewables.

"And what I would say is we try to be quite clear about the communication of our message, which is that the integrated system plan, which considers these things - generation, storage and major transmission upgrades - is the lowest cost pathway," Mr Westerman said.

Mr McKinnon has invested $250,000 in a 200 kilowatt solar system in addition to other energy saving initiatives, but his power bill still comes in at about $20,000 a month.

A major energy retailer ceased negotiations for a new power contract with Mr Kinnon earlier this year when he advised that he had solar installed.

"Having solar gives us some level of saving but when you factor in energy pricing, it becomes a very tough thing," he said.

AEMO's latest system plan puts a $122 billion price tag on core infrastructure needed to reach net-zero by 2050. The costing does not account for new power poles and wiring.

Mr McKinnon said he believed it would probably take decades to pay off the hundreds of billions of dollars that are being invested in new clean energy generation and transmission infrastructure.

"These companies have to get their costs back somehow. How does that factor into the cost of power moving forward?," he said.

AEMO said wholesale prices in June averaged 23 per cent higher than the same period last year. Major generation outages and transmission line works saw extreme price volatility in NSW.

Low wind speeds and rainfall led to increases in prices in South Australia, Tasmania, Victoria but they fell in Queensland.

Prices have dropped to an average of $45 last month because of increased renewables output.

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