The largest onshore abalone growing company in the southern hemisphere, whose power bill is set to rise by $650,000, has joined mining giant BHP Billiton in warning that unreliable and expensive energy costs in the southern states are killing investment and jobs.
Malcolm Turnbull said he shared those concerns: “How can you attract investment to your state if not only is your wholesale cost of energy the highest in Australia but it’s not even reliable?”
Yumbah Aquaculture at Port Lincoln, on South Australia’s west coast, received an electricity contract quote for $1.35 million, $650,000 more than its current $700,000 contract.
An amalgamation last month of the former Southseas Abalone operations at Port Lincoln, Kangaroo Island, Bicheno on Tasmania’s east coast and Narrawong near Portland in Victoria’s southwest has made Yumbah a major energy-intensive user as it supplies more than 500 tonnes of premium abalone each year.
Yumbah’s Port Lincoln manager, Tom Hyde, said skyrocketing electricity prices in South Australia, worsened by the close of the state’s last coal-fired power station in May, were crippling operations.
The company was now planning to invest in more of its own back-up power generators, with South Australia having suffered two major blackouts in little more than two months because the state, powered by a 45 per cent renewable energy mix, has an over-reliance on an interconnector with Victoria.
The Eyre Peninsula onshore abalone farmer knows without a reliable source of baseload electricity, he cannot pump water through the tanks where $10m worth of his molluscs grow.
“We always thought we had sufficient back-up power but we’re going to have to invest in more because of the situation in South Australia. We have to keep the pumps going,” he said.
“We’re land-based abalone farmers and power is a huge part of our industry. It’s not just affordability, it’s reliability, and if the power goes down our stock dies, and you can’t insure molluscs.”
Mr Hyde harvests about 600 tonnes of greenlip abalone annually, more than half of that from his Point Boston farm, 640km west of Adelaide.
Yumbah exports about 90 per cent of its stock, and his abalone is in high demand throughout Southeast Asia. A 93 per cent increase in Yumbah’s power bill for next year means future expansion plans have to be cancelled.
“We’ve just purchased the land next door at Point Boston with the hope of expanding but now that’s put on hold until the South Australian problem has been addressed,” he said.
BHP’s Olympic Dam mine in South Australia’s far north faces similar problems. Olympic Dam asset president Jacqui McGill said the September blackout and last week’s outage had cost the miner $100m.
Lack of power reliability and rising costs was of “deep concern” to BHP Billiton’s board as it considered any further investment in Olympic Dam, which employs 3000 people in South Australia.
“We operate and sell into a market where we compete with people around the globe, not just in Australia. Having competitive pricing of power and security of supply of power is paramount for any business,” Ms McGill said.
The Prime Minister “absolutely agrees” with BHP’s concerns, and warned the looming closure of Hazelwood coal-fired power plant in Victoria “will and has already added to the wholesale price of electricity”.
South Australian Premier Jay Weatherill promised to bring more competition into the state’s energy market to increase capacity, lower prices and improve reliability.