Originally posted to the Australian. Written by Luke Griffiths. Read more here.
Flawed figures and no expert advice underpinned the former South Australian Labor government’s “election stunt” of hastily purchased emergency diesel generators, an independent report has found.
The total cost of the nine generators, including maintenance and operation, would be $610 million — more than 40 per cent more than Labor’s estimate.
The report by top silk Mark Livesey into the lease and upcoming purchase of the generators was tabled in parliament yesterday.The overall cost of Labor’s go-it-alone energy plan, which included the world’s biggest lithium-ion battery built by Elon Musk’s Tesla, is now $815m, significantly higher than the $550m announced by former premier Jay Weatherill and his then energy minister Tom Koutsantonis in March last year.
Labor’s plan followed a series of blackouts in South Australia that came after the closure of the state’s only coal-fired power plant in May 2016.
The generators, with combined capacity of 276 megawatts, have never been used and will be leased to the private sector after summer. They are currently installed at two locations in Adelaide’s north and south, but were due to be relocated to a single site within a year.
Mr Livesey raised concern about Labor’s procurement process, which involved it exercising an option to purchase the generators from APR Energy ahead of when a decision had to be made and just months out from the state election in March.
He said State Procurement Board approval was “probably required” to make the purchase. “That was not done,” he said.
Mr Livesey said there was “sparse” evidence in favour of the government owning a permanent, emergency energy generator but the Liberals were contractually bound to go ahead with the purchase. A $227m bill is due next month.
Energy Minister Dan van Holst Pellekaan described the purchase as “no more than an expensive election stunt by a government that had failed to provide reliable power at an affordable price”.
Labor initially leased the generators, which were to be converted to gas after two years and not involved in the national electricity market, at a cost of $115m.
Mr van Holst Pellekaan said the independent report was an indictment on Labor’s decision-making. “It exposes how, seemingly without any expert advice, Labor rushed into owning permanent generators at huge expense, which will likely not be needed in the future,” he said.
With the Australian Energy Market Operator predicting a one-in-10 chance of South Australia experiencing a blackout this summer, the government will retain control of the generators until April next year. It will then lease them to the private sector under a 25-year arrangement to “maximise value” for taxpayers.
Mr Koutsantonis yesterday claimed the new Liberal government was “privatising this publicly owned power plant”.
Grattan Institute energy program director Tony Wood backed the decision to seek to lease the generators. “Given … the money has been spent effectively, I think putting them into the private sector and finding their best home is a very good idea,” he said.