From Watts Up With That?

Essay by Eric Worrall

I doubt President Trump even heard of this company but his magic apparently somehow caused its collapse.

‘Contagion risk’: Zen Energy collapse sends shockwaves through renewables industry

Ryan Cropp and Primrose Riordan
Jul 17, 2026 – 5.00am

The collapse of the Ross Garnaut-backed renewable power retailer Zen Energy is set to have a contagion effect across Australia’s electricity sector, with several large clean energy developments left without a stable long-term buyer for their power.

The retailer tipped into administration earlier this month after its strategy of buying renewable energy from wind, solar and battery projects on long-term contracts and selling it to large electricity users came unstuck in the face of volatile power markets.

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Tony Wood, a senior fellow at the Grattan Institute think tank, said Zen had been at the mercy of difficult market and regulatory conditions.

“When you’ve got complex structures with multiple parties and cross-party arrangements, you can easily get a contagion problem,” he said. “People take risks, and once its starts unravelling it’s really hard to stop. When the shit hits the fan a lot of people get shit on their face.”

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In those documents, Zen blamed its troubles on wavering Australian government policy and a post-Trump world that was hostile to emissions reduction.

…Read more: https://www.afr.com/policy/energy-and-climate/zen-collapse-poses-contagion-risk-for-renewables-projects-20260716-p60fxh

Other than blaming President Trump, the company blames a “poorly positioned” hedged portfolio.

Garnaut-backed Zen Energy sinks to $35m loss as volatile prices bite

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The accounts, which have not been audited, were revealed in a note published by Income Asset Management, one of its debt investors. The note said the shortfall against budget was “largely driven by poor results in the June quarter, when the hedged portfolio was poorly positioned in relation to unusually low and volatile wind conditions and was adversely exposed at times to elevated spot prices”.

…Read more: https://www.afr.com/policy/energy-and-climate/garnaut-backed-zen-energy-sinks-to-35m-loss-as-volatile-prices-bite-20240826-p5k5h8

Think of hedging a portfolio as like poll balancing. If a person wants to balance on a pole, they need to continuously adjust their position to prevent the pole from toppling over. A hedged portfolio, a portfolio stuffed full of unstable but potentially highly profitable financial instruments which want to topple over, also needs to be continuously adjusted to stay balanced. But this strategy of continuous balancing goes to hell if liquidity dries up. If the value of some of the unstable financial instruments collapses to such an extent nobody wants to buy them, then your portfolio can no longer be adjusted, and the pole topples over.

This collapse in liquidity, and subsequent failure to keep portfolios balanced, is what sent a bunch of banks to the wall during the Obama subprime mortgage crash, and it also appears to be what caused such massive losses at Zen energy.

Quite how President Trump figures in adverse conditions in Australia’s renewable energy market, I’d love to hear that explanation in detail. Australia’s energy and climate minister Chris Bowen continuously assures us renewables are the cheapest option, so those renewables companies which haven’t collapsed recently should be giving Australia some kind of competitive advantage. But maybe renewable operators don’t have to provide details when they invoke President Trump’s name, to explain disastrous losses of other people’s money.