Welcome to the Mclowd Community Newsletter.

AGL’s $2.69 billion in write-downs shows the severe headwinds faced by Australian energy companies caused by plunging wholesale electricity prices.
AGL blows $1.9b on wind, AFR Feb 5th


Back in 2016 the Dubai Government received a bid for an 800MW solar power plant of just US$0.029 per kWh. That figure represented per unit price deflation of some 50% over the previous couple of years.

By the time the Qatari Government issued a tender for an identical project last year, the bids had fallen a further 50% to just US$0.01567 per kWh.

To put this in some context, a typical Australian household uses 20 kilowatts of electricity per day, which would translate into a wholesale cost of just $12 per month.

As per the above AFR article, wholesale prices in Australia are now following the same trajectory, and for very similar reasons. (Despite more than a decade of Climate Wars, nothing has been able to prevent prices from ultimately declining towards their globally-defined marginal cost).

Macroeconomic Policy

Had 21st century macroeconomic policy reflected the deflationary reality impacting Australia’s National Electricity Market, we would have seen over the last twenty years:

  • Improved standards of living across the world (imagine the people of New Delhi having access to both clean air and near-free electricity)
  • As a consequence a reduction in inequality
  • A proportionate reduction in our ecological footprint

Instead monetary and fiscal policymakers have spent that time defending ‘tailpipe economics’ with vast amounts of debt.

With the result that:

  • Overall standards of living are stagnating
  • Inequality is soaring
  • What was originally a manageable risk (similar to CFC’s and the Montreal Protocol in the 1980’s) appears to be morphing into something else entirely


The AGL share price is at a 13-year low, and the shareholders have misplaced nearly $3 billion in capital.

It is important to note that nothing Phillip Lowe or Josh Frydenburg (or their predecessors) have done in that time has protected the stakeholders from that outcome.

And while the proximate cause for the recent write-downs is the decline in wholesale electricity prices, the ultimate cause lies in ignorance.

Ignorance of the deflationary context in which that capital was originally deployed.


Ashley Porter
Managing Director
Mclowd Pty Ltd