Writing in today’s Financial Review, Michael Read reports: “Federal Labor’s landmark policy to build 1 million new homes in five years is on track to fail..” Great opening line, seething with dark humour. Politicians in charge, make decisions, failure arrives on cue.

Also on track to fail is the Australian Energy system. Liddell power generation station will be shut down this month. In a statement yesterday, the NSW energy minister said this;

Now, Liddell generates 1,200 MW of electricity. What happens to the energy system when 1,200 MW is removed? To get an understanding, look at the supply and demand in the eastern region of Australia on this business day.

NSW is demanding around 6,000MW but generating around 5,500 MW and so is importing from QLD. VIC and TAS also need to import. Liddell meets about 20% of NSW needs. In total, around 17,000 MW is being demanded across these states. Take out Liddell, and the supply across the eastern half of the country drops by around 7%.

Can that 7% shortfall be made up by other sources? That is difficult to imagine. Power generation is easy when using nuclear or coal fired generators. We don’t have nuclear and we have been shutting down coal fired generators, Liddell being just the latest. Wind and solar are ineffective. What will happen to prices and supply? The exact opposite of what the Energy Minister says.

Prices will rise. Supply constraints will be applied through brown outs. The politicians will try to cap prices. The market will be chaotic. Households and business will suffer. It’s all on track to fail.