Powering Australia: Navigating a new electricity supply era

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G A

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ELECTRIC

ITY SUPPLY ERA

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POWERING AUSTRALIA | VOL 5

Policy makers are seeking to launch a step-change in electricity supply

and consumption in Australia. The federal government plans to reduce

coal-fired power stations’ role to meeting 43 per cent of demand by 2020.

This will mark the nation’s first major step toward a decarbonised economy.

PROUDLY ENDORSED BY

APIA • Australian Power Institute • Clean Energy Council

Energy Networks Association • ERAA • NGF • ESAA

n a v i g a t i n g a n e w e l e c t r i c i t y s u p p ly e r a

Contents2

Contents

IntroductIon

Pursuing a softer environmental footPrint

Prepare yourself for a step-change in electricity supply and consumption in Australia.

12 focusing on Policy certainty and a framework for investment

extract from a speech by the federal Minister for Resources and energy Martin Ferguson.

18 a major national infrastructure challenge

By 2020, coal will no longer be the overwhelmingly dominant source of fuel for electricity generation.

36 the need for a national energy Policy

More than $10 billion worth of electricity is traded every year in a market that operates 24 hours a day.

44 towards a national energy Policy

the government’s promise of an energy white paper has whetted the industry’s appetite.

52 nuclear versus Power Poor

How and when is Australia going to decarbonise its electricity supply? Is nuclear power the answer?

PoWeRInG AUstRALIA VoLUMe 5 3

58 fuel Poverty emerges as a real issue

end-user power prices in 2015 are likely to be twice what they were in 2008.

58 conditions may brighten for solar Power

CsIRo believes future advances will enable the sun to meet 30 per cent of our power needs.

64 Premier state’s Prime suPPly challenge

nsW’s population has more than doubled since the mid-1950s and is heading for 7.6 million by the end of the decade.

72 new energy vision for the west

Western Australia lacks a long-term energy plan. Its last comprehensive energy policy was developed in 1979.

80 how big a boon is gas for generation?

once again gas appears ready to play a golden role in electricity production.

84 interstate energy trading on the rise

How a $2 billion surge in investment transformed the future for wind generated energy.

88 the solar flagshiP Program

Preparing to reduce future carbon dioxide emissions from power stations by 10.8 million tonnes.

RoLL oF HonoUR4

RoLL oF HonoURMAjoR

Australian Coal Association

Ge

IBM

siemens Ltd

sMeC Australia

suntech Power Australia Pty Ltd

toshiba International Corporation

transGrid

Key

AGL energy Limited

Ausgrid

eneRGeX Limited

Gentrack

Granite Power Limited

Horizon Power

Institute for Mineral and energy Resources

Vestas

Western Power

Wilson transformer Company Pty Ltd


tHe FUtURe Is eLeCtRICIty. It Is

UneqUALLed In BeInG ABLe to tRAnsFeR

LARGe AMoUnts oF eneRGy At tHe sPeed

oF LIGHt And MULtIPLe FUeL soURCes

CAn Be Used to GeneRAte It. It WILL

PRoVIde MoRe And MoRe oF yoUR eneRGy

needs In tHe FUtURe. It Is sIMPLy tHe

Most eXCItInG eneRGy seCtoR to Be In.”

tony ConCAnnon, eXeCUtIVe dIReCtoR,

InteRnAtIonAL PoWeR AUstRALIA

IntRodUCtIon6

IntRodUCtIonPURsUInG A soFteR enVIRonMentAL FootPRInt

We are now beginning a decade in which policymakers are seeking to

launch a step-change in electricity supply and consumption in Australia.

the exercise is complicated by the fact that the availability of

electricity over past decades has fostered a great dependency in

modern society, making power the third fundamental need of

communities, along with food and clean water. When the power

supply falters today, countless activities in homes, industry, shops,

offices and hospitals are put at risk – and its growing cost affects

both household and business budgets.

Having come to depend on to a great extent in most parts of

the country on comparatively cheap fossil-fuelled electricity, we are

embarking on a process in which the carbon emissions intensity of

the industry is expected to be significantly improved, the generation

mix to be substantially different, networks to be greatly upgraded and

expanded, smart meters with time-of-use tariffs to be standard for

households and the cost of electricity to be much higher than today.

In the decade ahead, the federal government (as explained in its

energy resource assessment published in the past year) plans to

move Australia on to a power path that, by 2030, will have reduced

the role of coal-fired generation to supplying 43 per cent of demand,

increased the contribution of gas-fired plant to 37 per cent and grown

the renewable generators’ share of consumption to 20 per cent.

Pursuing this path will require a capital outlay of more than $20

million a day on network augmentation, about $6 million a day on

building wind farms and other renewable plants, and about the same

each day on providing gas-fired power stations. In total, it will require

capital expenditure of more than $130 billion over the decade. Looking

out to 2030, it is suggested that overall investment in the industry

could amount to $220 billion.

the role solar power (whether in residential rooftop arrays or

in utility-scale developments) and geothermal energy will play in

the 2030 electricity supply chain depends on both technological

developments and the willingness of governments to provide

subsidies considerably larger than those available today. the same

may be said about the prospects for carbon capture and storage

achieving a commercial breakthrough, which would open new

opportunities for coal-fired generation and impose a new cost

pressure on gas plants.

In tHe deCAde AHeAd, tHe FedeRAL GoVeRnMent PLAns to MoVe

AUstRALIA on to A PoWeR PAtH tHAt, By 2030, WILL HAVe RedUCed

tHe RoLe oF CoAL-FIRed GeneRAtIon to sUPPLyInG 43 PeR Cent

oF deMAnd, InCReAsed tHe ContRIBUtIon oF GAs-FIRed PLAnt to

37 PeR Cent And GRoWn tHe ReneWABLe GeneRAtoRs’ sHARe oF

ConsUMPtIon to 20 PeR Cent.”

KeItH oRCHIson, edItoR

IntRodUCtIon8

Whether political and community sentiment about

any role for nuclear generation in Australia will change

this decade, especially in the wake of the Fukushima

crisis, can only be a matter for speculation.

Whether the world’s governments can find a way to

develop a new decarbonisation plan to succeed the Kyoto

agreement, which expires next year, is equally speculative.

this year’s United nations summit meeting in durban,

south Africa, will need to move far beyond the last two

(Copenhagen and Cancun) to even begin the development

of a new treaty, an issue of major importance to Australia

because success in this endeavour could lead to a

substantial change in the current commitment to drive

down national greenhouse gas emissions to 5 per cent

below 2000 levels by 2020.

this target is now estimated to require annual abatement

by 2020 of 160 million tonnes – equivalent to closing

Hazelwood power station 10 times over. just meeting it will

require the closure of a number of coal-fired power stations

on Australia’s east coast, while pursuit of a higher goal

would once again change the debate about nuclear

energy, drive more coal plant closures (many of them

owned by state governments) and see renewable energy

advocates intensifying their pressure for subsidies for

zero-emission technologies.

the degree of success achieved by the federal

government in introducing a price on carbon emissions in

the 2011–12 financial year will determine how the new

electricity path is pursued. the long debate on the issue

over more than three years has created so much uncertainty

for private sector investors that actual generation

development is now at a low point after the development

of 10,000MW in the previous 10 years.

All states (and both territories) have substantial skin in

this game and none more so than the largest electricity

supply/demand region, new south Wales, where the

emphatic change of government in March 2011 means that

almost every aspect of the local electricity industry is now in


play. How the new nsW government acts on electricity

policy in the year ahead will be an important factor, both

on the east coast and for the nation, especially in terms of

decarbonisation developments.

Politics has been a factor in electricity supply for at least

the six decades of the modern era and they will be a major

one in the decade ahead. At least three federal elections

and two each in nsW, queensland and Victoria – the areas

containing 80 per cent of national demand and supply

capacity – will take place between now and 2020. Power

prices, electricity reliability and security, plus the

decarbonisation debate, clearly will be major political issues

over the decade. the current investor uncertainty, if allowed

to continue, will be a cancer eating at the ambitions of

policymakers for a new model power sector.

A major step in providing the roadmap, not just for

the decade ahead but also for the years to 2030, will be

production by the federal government of the much-delayed

energy White Paper, now promised for delivery in draft late

this year and in final form in 2012. this paper – and the

resolution of key issues such as placing a price on carbon

and settling the emissions target – is central to success in

ensuring a secure and affordable power system with a softer

environmental footprint at the decade’s end.

Far from being the end of the process, what we achieve

by 2020 will only represent the start of a great shift to a

decarbonised economy.

Keith orchison

editor

CoMPAny PRoFILeCoMPAny PRoFILe10

aGL is one of Australia’s leading renewable energy

companies and is Australia’s largest private owner, operator

and developer of renewable generation assets.

AGL has major investments in hydro and wind, as well as

ongoing developments in key renewable areas, including

solar, geothermal, biomass, bagasse and landfill gas. AGL

also operates retail, merchant energy and upstream gas

businesses and has over three million customer accounts.

As a company that was founded in 1837, AGL

understands the importance of taking a long-term view. At

AGL, sustainability is about recognising that if we want our

business to continue to be successful and respected, we

need to do the right thing by our shareholders, employees,

customers, the broader community and the environment now.

AGL’s sustainability performance has been recognised

internationally by independent experts. It is the only

Australian integrated energy company included on the dow

jones sustainability World Index 2010/11 and is a constituent

of the Ftse4Good Index.

AGL

AGL owns and/or operates more than 3700MW of

generation capacity across base, peaking and intermediate

plants. More than one quarter of this is renewable generation

sourced from hydro, wind, landfill, biomass, bagasse and

solar sources. the remainder of our portfolio is

predominantly gas-fired generation. AGL also owns and/or

operates coal seam gas exploration and production in five

petroleum basins across new south Wales, queensland and

south Australia. AGL’s ownership of 2P coal seam gas

reserves has grown rapidly to 2029Pj.

AGL is committed to leading Australia in minimising the

effects of climate change, investing in sustainable energy

businesses and working on innovative environmentally

friendly projects. AGL’s power generation portfolio includes

more than 1100MW of renewable energy. A further 670MW of

renewable generation is currently under construction.

AGL’s Bogong Hydro Power Project was named Most

outstanding Clean energy Project at the ecogen 2010 Clean

energy Awards.www.agl.com.au | see page 96 for details


austraLia is a world leader in exporting coal. It’s also

set to be a world leader in reducing greenhouse emissions

from coal.

Carbon capture and storage (CCs) is a necessary part of

the global response to climate change. deployed at scale, CCs

will reduce carbon emissions from coal- and gas-fired power

stations and other industrial processes by up to 90 per cent.

With more than $36 billion in exports in 2009–10, coal

is Australia’s largest export commodity. the coal industry

directly employs some 40,000 Australians and another

100,000 indirectly. Black coal is used to generate more

than half of Australia’s electricity and the royalties from

coal currently underpin state government budgets in nsW

and queensland.

RedUCInG CoAL-BAsed GReenHoUse eMIssIons

the Australian coal industry has already committed more

than $1 billion through the CoAL21 Fund to developing and

trialling carbon capture and storage projects across Australia.

developing low emissions technologies for coal is

important because coal will continue to produce significant

amounts of the world’s energy for decades to come. the

United states and major developing economies like India and

China will continue to burn their own massive coal reserves.

that’s also why japan (Australia’s largest export market

for coal), the United states, the european Union and China are

all investing in the development of CCs technologies.

Around the world there are at least 234 CCs projects at

various stages of development. twelve of them are in

Australia. We are already demonstrating Co2 storage at the

Co2CRC otway Project, and soon the Gorgon LnG Project in

Western Australia will be the largest Co2 storage project in the

world, storing up to 3.5 million tonnes per annum.

Responding to climate change ultimately depends on

developing and using low emission technologies such as

CCs. Australia is leading the world in many aspects of

developing and demonstrating this important technology,

including through the $1.68 billion CCs Flagships Program

and the coal industry’s $1 billion CoAL21 Fund.

. www.australiancoal.com.au | see page 96 for details

CHAPteR 0112

FoCUsInG on PoLICy CeRtAInty And A FRAMeWoRK FoR InVestMent

01


enerGy is something that is more and more the subject

of public debate. Public discussion is very much focused on

increases in electricity prices and the pressures they place

on household budgets. What is often missing from this

picture, however, is the immense changes we have seen in

electricity usage – both at an industry and household level.

In terms of households, increased energy usage has

been very much a symptom of our changing lifestyle.

Let me illustrate this in the context of my own lifetime.

I was born in 1953. two years later, Australia’s

population was around 9 million and the median house

cost approximately $8000. At this time average household

energy consumption in new south Wales and queensland

was 2 MWh per annum. this was an era when outside

toilets and laundries were still very common, but it

preceded the introduction of clothes dryers and television,

which came in 1956.

By 1970 Australia’s population had grown to around

12.5 million and the average house price had increased to

around $12,000. Average household energy consumption

had doubled to 4 MWh per annum. It was an era where

people were buying more appliances – electric kettles

replaced kettles that were heated on the stove, hair dryers

and hair curlers were common and people were starting

to add a second bathroom to their homes.

jump forward 38 years to 2008 and hair straighteners

had replaced hair rollers, and a living room was not

complete without a six-appliance power board. Multiple

televisions and dVd players were to be found throughout

the house, along with computers, printers, playstations,

mobile phone chargers and a myriad of other electrical

gadgets. In the meantime, air conditioner use had grown

almost exponentially, car use had grown significantly and

air travel had gone from being the domain of the rich to

being accessible to almost everyone.

By this stage, the Australia population had grown

to almost 22 million, median house prices were around

$450,000 and average household energy consumption

had reached 7.9 MWh per annum. People were using

more electricity than ever before.

In teRMs oF HoUseHoLds,

InCReAsed eneRGy UsAGe HAs

Been VeRy MUCH A syMPtoM oF

oUR CHAnGInG LIFestyLe.”

tHe Hon MARtIn FeRGUson,

FedeRAL MInIsteR FoR ResoURCes And eneRGy

CHAPteR 0114

We ARe CURRentLy LIVInG

tHRoUGH An eXtReMeLy

stRonG PICK UP In GLoBAL

deMAnd FoR eneRGy. tHe

sIMPLe FACt Is tHAt tHe eRA oF

CHeAP eneRGy HAs PAssed.”

tHe Hon MARtIn FeRGUson, FedeRAL MInIsteR

FoR ResoURCes And eneRGy

over the period 1998 to 2010, Brisbane saw a 35 per cent

increase in the number of households. At the same time peak

electricity demand increased by 104 per cent, and the

number of households with an air conditioner installed

increased from 23 per cent to 72 per cent, with 34 per cent

of homes running two or more air conditioners.

Clearly, reducing or moderating the increase in peak

demand is an important national objective. one way to limit

it is to introduce time-of-use pricing, so that consumers will

face higher costs in times of higher demand.

yet in an environment where we are at near full

employment and our economy, our population and our

energy exports are all growing, there is no quick fix to

artificially hold electricity prices below where they need to

be to maintain reliability. tempting as it may be, suppressing

prices through regulation or market barriers would create

even more pain in the longer term by delivering inefficient

investment outcomes which, in turn, would either mean

higher bills for consumers or reduced reliability.

We are currently living through an extremely strong pick

up in global demand for energy. the simple fact is that the

era of cheap energy has passed.

In the long run, the most effective way to minimise

price rises will be to make energy markets as efficient as

possible. Reform is key to delivering this efficiency. the

last 20 years have been a period of continuous bipartisan

micro-economic reform in our domestic energy markets.

We have seen the creation of the national electricity market

and over time previously state-owned assets have

been privatised.

today, our electricity market leads the world in terms

of efficiency, reliability and in facilitating competition – a fact

acknowledged by the International energy Agency. yet our

economy relies more than ever on secure, accessible energy.

the future investment challenge is significant. the

Australian energy Market operator last year forecast that

between $72 billion and $82 billion will be needed for new

electricity generation and transmission by 2030. Add to this


further investment in distribution networks, gas pipelines and

associated infrastructure and overall investment in the sector

to 2030 could exceed $220 billion.

that’s why the government is focused on providing

policy certainty and putting in place the frameworks to

enable investment decisions to go ahead sooner rather

than later. We also want to see this investment directed

towards an energy mix that will help reduce our greenhouse

gas emissions – but this must occur in a way that stacks

up commercially and is determined by market forces.

Government policies, such as the renewable energy

target and a carbon price, fit with this market-based

approach. It means new technologies will be market

tested and only the best and most viable will be

deployed at scale.

the efficiencies the market drives are critical to

managing cost pressures, but the government also has a

role in supporting research and development, addressing

market gaps and bringing on innovation.

Major reform requires proper planning and that is why

my department is continuing work on an energy White Paper,

looking at a range of plausible future energy and greenhouse

gas-related scenarios. I intend to release a draft energy White

Paper by the end of this year before finalisation next year.

While the white paper will help us understand and plan for

the future, it is not about predicting or mandating outcomes.

In my view, an effective energy policy framework should

provide accessible, reliable and competitively priced energy

for all Australians. At the same time it should maximise

opportunities for economic and social growth and

encourage ongoing investment and development, including

in sustainable and clean energy.

the white paper will provide a long-term strategic

framework intended to give investors, consumers and

planners confidence in our energy future.

An edited extract from a speech by the federal Minister for

Resources and Energy Martin Ferguson to CEDA

left Constructing and maintaining distribution network lines will remain one

of the major cost issues in electricity supply this decade.

16 CoMPAny PRoFILe

ausGrid supplies electricity to 1.6 million homes and

businesses via a network that spans more than 22,000

square kilometres, and includes 1.4 million small household

customers and around 200,000 small business and large

industrial customers.

the network comprises 50,000 kilometres of above

and below ground cables, 500,000 power poles, 30,000

distribution substations and 200 zone and sub-transmission

substations. Ausgrid is the only electricity provider in

Australia to run both a transmission and distribution electricity

network. the network supplies one quarter of the customers

in the entire national electricity Market.

AUsGRId eLeCtRICIty netWoRK

www.ausgrid.com.au | see page 96 for details

In addition to serving a diverse customer base – which

includes Australia’s largest and oldest city via transmission

cables that cross sydney Harbour, Botany Bay and White

Bay – the network crosses dense and rugged bushland to

supply the fast growing regions of the Central Coast and

Lower Hunter, through to major coalmines and isolated

rural areas.

When electricity use is at its peak, the Ausgrid network

transports more electricity than tasmania and south

Australia combined.

About half of Ausgrid’s major substations were built

in the 1960s and 1970s. this equipment has performed

well over the years, but the time has come to replace it.

so Ausgrid has commenced one of Australia’s largest

infrastructure programs – the $8 billion replacement and

renewal of its electricity network.

Based on world-leading technology, the network will

include the nation’s first commercial-scale smart grid, after

being chosen to deliver the Australian Government’s Smart

Grid, Smart City program.

Ausgrid is also one of the largest employers of

apprentices in nsW, each of whom will play a vital role in

the realisation of Ausgrid’s essential infrastructure plans.


eneRGeX

enerGeX provides the electricity for everything that’s

happening in south east queensland. the electricity

distributor supplies power to around 1.3 million homes and

businesses and is one of queensland’s largest and fastest

growing organisations. At the core of the business are

distribution assets worth more than $8.8 billion and 3800

skilled and committed staff working to keep the power

flowing. In addition to electricity, eneRGeX delivers high

levels of network performance and customer service.

However, a dynamically growing distribution area and rising

energy demands are making the task of supplying electricity

more challenging.

safety is a key priority of eneRGeX. Field crew and

support staff are on standby throughout the year to respond

to emergency situations, particularly during severe weather

events. the january 2011 flood event challenged eneRGeX’s

emergency response capability, devastating areas of

eneRGeX’s south east queensland distribution area. some

300,000 homes and businesses lost power as substations

were immersed in water and power poles displaced.

Power restoration is integral to recovery and the process

was driven by eneRGeX’s commitment to its values and a

methodical approach to planning and assessment. As safety

was the number one driver in the flood response, pre-emptive

steps were taken and electrical assets de-energised before

water approached.

Four hundred crews and many support staff worked

tirelessly throughout the preparation and restoration

process, and just three days after flood levels peaked

100,000 homes had power restored.

the future remains bright in south east queensland.

eneRGeX is planning and building the electricity network

via a $5 billion-plus five-year capital expenditure program

to ensure the network will meet the increasing demand for

electricity and provide safe, efficient and reliable power to

all customers.

“Just three days after flood levels peaked 100,000 homes had power restored.”

www.energex.com.au | see page 96 for details

CHAPteR 0218

A MAjoR nAtIonAL InFRAstRUCtURe InVestMent CHALLenGe

02


Game chanGinG is an overworked expression, but

it is hard not to use it about electricity supply in the new

decade. By 2020 the Australian power industry, on current

indications, will have undergone significant renewal and

will be approaching the point where coal will no longer

be overwhelmingly dominant in fuelling generation.

en route the industry will spend tens of billions of dollars

– on building renewable energy generation, on construction

of peaking and base-load gas generation, on upgrading

and augmenting networks, probably on new transmission

links and probably on rolling out smart meters.

the latest estimates suggest that capital outlays

could exceed $130 billion in 10 years and $220 billion

over 20 years, many times the size of the national

broadband network.

As is now well demonstrated in public debate, what

happens to electricity supply this decade is important to

all Australians. Low-cost electricity has been underpinning

of our lifestyle, economic growth and international

competitiveness since the end of World War II, more than

60 years ago. It is now increasingly accepted that power

bills by mid-decade will be double what they were in 2008.

Change in the industry seldom occurs rapidly. It takes

place over decades, as was the case with the 1990s

reforms to disaggregate the sector and introduce

competition. As consultants Port jackson Partners

point out, two decades after these changes began to

revolutionise the industry, whether they will deliver lasting

benefits in Australia is yet to be determined.

the underlying issue is not the plant and equipment

being introduced at a cost of billions, but the east coast

market in which they and their owners have to operate –

the so-called national electricity Market, which does not

include Western Australia or the northern territory.

to date what has been created is not a single east coast

market, as intended by prime minister Paul Keating and state

premiers like nick Greiner and Wayne Goss. “In many

respects,” say Port jackson Partners, “we have five markets

not one and the current and potential benefits from the 1990s

reforms are therefore much less than they can or should be.”

CHAPteR 0220

this said, the expenditure proposed for even the first

half of this new decade is considerable.

Credit ratings agency Fitch Ratings, in its 2011 review of

Australian power and utilities, has estimated that vertically-

integrated energy businesses will spend up to $25 billion on

low carbon emission and renewable energy generation in

the period to 2016, assuming the introduction of a carbon

price. In the absence of the carbon charge, Fitch says that

generation outlays could be about $7 billion lower.

to this can be added tens of billions of dollars to be

spent on networks. Fitch Ratings points out that, on current

regulatory determinations, capital outlays on distribution

systems will exceed $6 billion in a year for the first time in

2010–11 and pass $7 billion next financial year. It sees

expenditure on distribution being above $6 billion per year

from 2010–11 to 2013–14 and the capital outlays for

transmission exceeding $2 billion annually for all this period.

In addition, Fitch says, consideration must now be

given to capital expenditure by the gas supply industry

to deliver fuel to electricity generators in a decarbonising

environment. It expects that the increased demand for

gas by power stations will require new investment in gas

storage capacity.

even so, the ongoing need for coal supplies by existing

generation will also drive capital investment, with the major

play in the next few years being the new Cobbora mine in

new south Wales, critical to the fuel supply and budget

management of the three state-owned generators,

Macquarie Generation, delta electricity and eraring energy.

Under existing nsW government policy, the mine, estimated

to cost $1.5 billion, will be commissioned in 2015 and will

enter long-term supply contracts at prices intended to be

below the current coal market levels.

While developments such as Cobbora will continue

to excite political and media attention, the major wave of

capital expenditure this decade is still likely to be in the

network sector. some believe it may exceed $90 billion by

2020, more than double the projected outlay on the national

broadband network, although the scale of expenditure is

now under attack from critics of the regulatory regime.

the increased electricity network capex requirement

has three main causes:

1. the continuing need to serve high energy and maximum

demand growth as a result of a rising population and

increases in average household electricity consumption

from energy-intensive consumer products.

Above Australia is burning more than 50 million tonnes of black

coal and over 70 million tonnes of brown coal a year. deciding

which power stations to close this decade is critically import..


tHe onGoInG need FoR CoAL sUPPLIes By eXIstInG GeneRAtIon WILL

ALso dRIVe CAPItAL InVestMent, WItH tHe MAjoR PLAy In tHe neXt FeW

yeARs BeInG tHe neW CoBBoRA MIne In neW soUtH WALes.”

FItCH RAtInGs CRedIt RAtInGs AGenCy

CHAPteR 0222

2. the need to continuously reinforce and upgrade

transmission capacity to transfer energy from new

generation developments to load centres.

3. the now urgent requirement to replace ageing and

obsolete network assets in an environment where many

of them are 50 to 60 years old.

the issue of aged assets was highlighted in south

Australia on the last day of january this year when, with

temperatures at extreme summer levels, Adelaide’s eastern

suburbs suffered substantial blackouts.

etsA Utilities, the provider of power distribution services

in south Australia, explained the problem thus: “state-wide,

consumption from 820,000 residential and business

customers peaked at 3399MW at 5pm and stayed there

as people returned home to evening temperatures above

39 degrees.

“eighty of the 40,000 transformers in the Adelaide

metropolitan area suffered fuse failure.

“the main contributor to the fuse issue is changes in

localised demand patterns in the past few years as people

have installed new air-conditioning, extended their homes

and bought new electrical equipment. the changes only

become apparent in extreme conditions, requiring load

re-balancing on the transformers.”

electricity demand in Adelaide, mirroring the situation in

other mainland capital cities, is rising at 2.2 per cent a year,

with the increase in some suburbs exceeding 5 per cent

annually. the Australian energy Regulator, although it

denied 28 per cent of etsA Utilities’ bid for capital spending

between 2011 and 2015, has approved a capex outlay of

$1.7 billion (58 per cent more than in the five years to 2010)

for the first half of this decade.

With network charges contributing about 45 per cent

of end-user power bills, the outlays approved for etsA

and other network service providers nationally represent

the spearhead of a politically charged electricity price

environment that is already making headlines in the media

across Australia.

In new south Wales, for example, according to the

AGL energy economics unit, media coverage of the industry

rose 140 per cent in the last two years of the past decade.

While business ownership and the cost of power remain

dominant in the media’s perception of the industry, the

ability of participants to finance their massive outlays is an

important issue and will, according to Fitch Ratings, rise in

prominence early in the new decade.

should a carbon price be introduced, Fitch says,

generators could seek up to $13 billion in new debt this

decade. this will leave the private sector seeking to raise a

similar amount in equity, an onerous task in the current global

economic environment.

there will be an early credit focus on Victorian merchant

generators, which are mostly project-financed and run on

brown coal. they face significant refinancing next year, Fitch

Ratings points out. “Refinancing will be tough should capital

markets conclude that a carbon price will result in stranded,

or economically-impaired, plant.” Fitch estimates that these

generators collectively have $2.4 billion in project finance

bank debt maturing in 2012.

In this situation, as the agency says, federal government

compensation for generators that experience losses from the

introduction of a carbon price will be a key factor.

somewhat lost in the broad view of the industry, but still

important to how it functions this decade, is the queensland

government’s plan, announced late in 2010, to restructure

its state-owned generation sector, creating two businesses

instead of the three that exist today with the aim of improving

operating synergies and the enterprises’ economics.

the state government has transferred some of stanwell

Corporation’s assets to Cs energy and combined the

remainder with the existing tarong energy portfolio, but it

has ruled out following up the restructuring with any further

privatisation of the industry.

As management consultants deloitte have pointed out in

a review of the Australian generation sector, one of the major

factors now influencing generation is the unwillingness of

east coast governments to further invest in power stations,

owing to the budget pressures on them in other areas such

as health and education.

since World War II the industry has been dominated by

the construction of taxpayer-owned power plant such as the

queensland government-commissioned Kogan Creek power

station (2007), but governments expect the private sector to

augment supply capacity in the future.

In turn, as deloitte says, this makes investor confidence

in the national and state policy regimes a critical factor in

decisions on what power plant is built, using what fuel, where

and in what time frame.

Assuming a carbon price, Fitch Ratings has estimated

that wind farm development and construction of combined-

cycle gas turbine (CCGt) plants for use in base-load

generation will dominate the generation capital outlays.


It sees the federal government’s renewable

energy target, which requires 20 per cent of national

consumption to be provided by renewable power at

the decade’s end, as driving $10.5 billion investment in

wind farms by 2015 while investors will spend $11.4 billion

on CCGt generation.

the balance of expenditure on power plant, according

to Fitch, will be invested in open-cycle gas turbine (oCGt)

plants for meeting peak demands and also to provide

back up for intermittent wind power.

not included in these estimates is the proposed capital

expenditure on large-scale solar generation. the federal

government plans to provide $1.5 billion in support to solar

investors and expects the grants to leverage about another

$3 billion in private sector investment.

the first announcements of the federal government

grants have now been made.

Also not included in forecasts of expenditure is origin

energy’s bold plan to bring electricity to Australia from

offshore for the first time in the nation’s history.

the company, in a joint venture with a business owned

by the Papua new Guinea government, has announced

that it wants to build a 1800MW hydro-electric power

station on the Purani River in PnG and bring the bulk of

the power to northern Australia via a series of transmission

systems – a 100-kilometre onshore line in PnG, two

undersea cables, each equivalent to tasmania’s Basslink,

crossing torres strait, and 800 kilometres of line from near

Weipa to the main transmission grid outside townsville.

to date, origin has only said the Purani River scheme

cost will run to “many billions of dollars”, but analysts have

claimed that an outlay of about $8 billion is in prospect.

the project’s tentative commissioning date is 2018 and,

|if it eventuates, will make a substantial contribution to

the queensland government’s ability to meet its goal

of providing 9000GWh a year of renewable energy

by 2020.

Another aspect outside the radar of current electricity

capital outlays is the proposed Copperstring transmission

link between Mt Isa and townsville.

substantial augmentation of interconnectors between

south Australia, Victoria and nsW may enable the eyre

Peninsula, which has a world-class wind resource, to

become a “green hub” for east coast generation.

these network additions would form important

segments in the $8.3 billion “neMlink” transmission

development mooted by the Australian energy Market

operator in its strategic review for this decade, a series of

projects that would include doubling the Basslink system

between tasmania and Victoria and strengthening the

nsW high voltage assets.

overall, game-changing? Most certainly.

AssUMInG A CARBon PRICe, FItCH

RAtInGs HAs estIMAted tHAt

WInd FARM deVeLoPMent And

ConstRUCtIon oF CoMBIned-

CyCLe GAs tURBIne (CCGt)

PLAnts FoR Use In BAse-LoAd

GeneRAtIon WILL doMInAte

CAPItAL oUtLAys.”


24 CoMPAny PRoFILe

For most of the last century, our electrical grids stood as an engineering marvel of the modern age and a global symbol of progress. The cheap, abundant power they brought changed the way the world worked – filling homes, streets, businesses, towns and cities with light and power.

But these grids are products of a time when energy was cheap, environmental impact wasn’t measured and consumers weren’t even part of the equation. Back then, the power system could be centralised, closely managed and supplied by a relatively small number of large power plants. It was designed to distribute power in one direction only – not to respond to the global dynamics of energy supply and demand.

In today’s context, the world’s grids are incredibly wasteful. With little or no intelligence to balance loads or monitor power flows, the world loses enough electricity annually to power India, Germany and Canada combined.

Around 80 per cent of energy consumed in Australia is generated from centralised, carbon-intensive power stations, accounting for one third of the nation’s net greenhouse gas emissions.

Fortunately, our energy can be made smart. It can be managed like the complex global system it is.

We can now put sensors into everything from the meter in the home and the turbines in the plants to the network itself. In fact, the intelligent utility system actually looks a lot more like the Internet than like a traditional grid. It can be linked to thousands of power sources – including climate-friendly ones like wind and solar. All of this intelligence generates new data, which advanced analytics can turn into insight, so that better decisions can be made in real time. Decisions by individuals and businesses on how they can consume differently. Decisions by utility companies on how they can better manage loads. Decisions by governments

and societies on how to preserve our environment. The whole system can become more efficient, reliable, adaptive… smart.

IBM® scientists and industry experts are working on smart energy solutions like these around the world. We’re working with utility companies both in Australia and globally to accelerate the adoption of smart grids to help make them more efficient and give customers better usage information. We’re working on seven of the world’s 10 largest automated meter management projects and are also trialling intelligent meters locally. We’re even exploring how to turn millions of future electric vehicles into a distributed storage system, so excess power can be harnessed and returned to the system.

Our electrical grids can be symbols of progress again – if we build the entire system with intelligence. And we can. See how IBM is contributing to this aim at Smart Utilities Australia & New Zealand 2011. It’s the region’s largest conference and exhibition, focusing on the latest in smart metering, smart grids and smart homes, and we’re proud to be part of it.

Come along and see the latest developments in the electricity and water utility industry. Benefit from new insights and lessons learnt globally that can be applied locally, and maximise great networking opportunities with utility industry colleagues from the region and beyond.

Whether you’re representing a retailer or distributor, don’t miss this great opportunity to learn how to build a smarter grid, and contribute toward a smarter planet.

Visit IBM at Smart Utilities 2011 Conference and Exhibition, Sydney Convention Centre, November 8-10th. For more information go to ibm.com/events/au/utilities

© Copyright IBM Australia Limited 2011 ABN 79 000 024 733 © Copyright IBM Corporation 2011 All Rights Reserved.TRADEMARKS: IBM, the IBM logos, ibm.com, Smarter Planet, Let’s build a smarter planet and the planet icon are trademarks of IBM Corp registered in many jurisdictions worldwide. Other company, product and services marks may be trademarks or services marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml IBMNCA0608

Smarter power for a smarter planet.

Conversations for a smarter planet:

IBMNCA0608_Powering_Aus_ad_FIN.indd 1 13/07/11 2:58 PM


For most of the last century, our electrical grids stood as an engineering marvel of the modern age and a global symbol of progress. The cheap, abundant power they brought changed the way the world worked – filling homes, streets, businesses, towns and cities with light and power.

But these grids are products of a time when energy was cheap, environmental impact wasn’t measured and consumers weren’t even part of the equation. Back then, the power system could be centralised, closely managed and supplied by a relatively small number of large power plants. It was designed to distribute power in one direction only – not to respond to the global dynamics of energy supply and demand.

In today’s context, the world’s grids are incredibly wasteful. With little or no intelligence to balance loads or monitor power flows, the world loses enough electricity annually to power India, Germany and Canada combined.

Around 80 per cent of energy consumed in Australia is generated from centralised, carbon-intensive power stations, accounting for one third of the nation’s net greenhouse gas emissions.

Fortunately, our energy can be made smart. It can be managed like the complex global system it is.

We can now put sensors into everything from the meter in the home and the turbines in the plants to the network itself. In fact, the intelligent utility system actually looks a lot more like the Internet than like a traditional grid. It can be linked to thousands of power sources – including climate-friendly ones like wind and solar. All of this intelligence generates new data, which advanced analytics can turn into insight, so that better decisions can be made in real time. Decisions by individuals and businesses on how they can consume differently. Decisions by utility companies on how they can better manage loads. Decisions by governments

and societies on how to preserve our environment. The whole system can become more efficient, reliable, adaptive… smart.

IBM® scientists and industry experts are working on smart energy solutions like these around the world. We’re working with utility companies both in Australia and globally to accelerate the adoption of smart grids to help make them more efficient and give customers better usage information. We’re working on seven of the world’s 10 largest automated meter management projects and are also trialling intelligent meters locally. We’re even exploring how to turn millions of future electric vehicles into a distributed storage system, so excess power can be harnessed and returned to the system.

Our electrical grids can be symbols of progress again – if we build the entire system with intelligence. And we can. See how IBM is contributing to this aim at Smart Utilities Australia & New Zealand 2011. It’s the region’s largest conference and exhibition, focusing on the latest in smart metering, smart grids and smart homes, and we’re proud to be part of it.

Come along and see the latest developments in the electricity and water utility industry. Benefit from new insights and lessons learnt globally that can be applied locally, and maximise great networking opportunities with utility industry colleagues from the region and beyond.

Whether you’re representing a retailer or distributor, don’t miss this great opportunity to learn how to build a smarter grid, and contribute toward a smarter planet.

Visit IBM at Smart Utilities 2011 Conference and Exhibition, Sydney Convention Centre, November 8-10th. For more information go to ibm.com/events/au/utilities

© Copyright IBM Australia Limited 2011 ABN 79 000 024 733 © Copyright IBM Corporation 2011 All Rights Reserved.TRADEMARKS: IBM, the IBM logos, ibm.com, Smarter Planet, Let’s build a smarter planet and the planet icon are trademarks of IBM Corp registered in many jurisdictions worldwide. Other company, product and services marks may be trademarks or services marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml IBMNCA0608

Smarter power for a smarter planet.

Conversations for a smarter planet:

IBMNCA0608_Powering_Aus_ad_FIN.indd 1 13/07/11 2:58 PM

CHAPteR 0326

tHe need FoR A nAtIonAL eneRGy PoLICy

03


at the outset, let’s be clear: the neM is not, and never

will be, what it claims to be: a national electricity market.

this is because geography dictates that two large pieces

of Australia – the northern territory and Western Australia

– cannot be part of the market. Leaving this aside, the

neM’s vital statistics are pretty impressive. It supports

power supply of around 220,000GWh a year from 80

generators (with a combined capacity of 42,000MW)

to 19 million Australians living on the east coast, using

40,000 kilometres of transmission lines and cables.

demand in the market is forecast to rise by about

70,000GWh a year this decade, requiring new generation

construction of about 8000MW. this figure, of course,

like so much else, may be affected by a new carbon

price regime.

the neM stretches over 5000 kilometres from far

north queensland to tasmania and west to Port Augusta

in south Australia. just keeping its backbone, the

transmission network, in working order now involves capital

outlays of $2 billion a year — that’s $6 million per day. Up to

$10 billion in projects is committed to proceed,

including around $2 billion in routine works on the system.

More than $10 billion worth of electricity is traded every

year in a market that operates 24 hours a day, seven days a

week, with five-minute despatch intervals and 30-minute

trading intervals.

In addition, say consultants ACIL tasman, it is one of

the most volatile commodity markets in the world, posing

“significant risk” to physical market participants — which

are managed through hedge contracts setting electricity

prices well in advance of demand.

Looking forward, its efficient management is important

not only to the nation’s economic health and our community

lifestyle, but also to the national ambition to decarbonise the

economy in a big way over the next 10, 20 and 30 years.

More than a few of the players in the market now feel

that the time has come to give the neM a thorough

shake-up in order to cope with decarbonisation. Central to

their concern is that the fact the “national electricity objective”,

which drives the legislation which underpins the market,

CHAPteR 0328

focuses on the long-term interests of consumers with respect

to price, quality of supply, reliability, safety and security – but

not environmental issues.

they argue that Australian energy Market Commission,

which oversights the neM, is not able to consider what rule

changes are needed to facilitate the federal renewable

energy target, which requires 20 per cent of supply to be

from zero emission generators by 2020.

this, and much more, is now under consideration by the

AeMC, which has launched a review into strategic priorities

for energy market development. this will be the key guide for

federal, state and territory energy ministers, meeting under

the umbrella of the Council of Australian Governments, when

they come to make a decision on how far and how fast to

change the neM.

It is not going to be an easy job, given the substantial

investment required in new generation capacity on the east

coast over the next 10 to 20 years, the lower appetite of

investors for risk, the uncertainty surrounding carbon policy

and the unprecedented growth of renewable power that is

now mandated.

Change to the market set-up, however, has never been

straightforward. the design of the neM back in the 1990s

was a long, drawn-out affair. It absorbed a large amount of

the time of power supply leaders, the wider business

community, lawyers, economists and a small army of federal,

state and territory bureaucrats over some eight years.

When completed, it had transformed power supply from

the fiefdom of government-owned public monopolies to a

competitive system for supplying wholesale energy and retail

services complemented by a substantial regulatory system

for the monopoly network sector.

the neM was officially launched in 1998, and dr Paul

simshauser, AGL energy’s chief economist and professor of

finance at Griffith University’s Business school, says it has

led to substantial gains in productive, allocative and dynamic

efficiency in the energy sector.

“By any measure,” he says, “the neM has been

extraordinarily successful micro-economic reform.”

this is not just hometown sentiment. As simshauser

points out, the neM is widely and frequently acknowledged

in north America and europe as one of the most successful

micro-economic reforms in the power industry globally.

the national Generators Forum adds that the creation of

the market has ensured that demand is being served by

more efficient use of existing plant than when the separate

state markets held sway and governments over-built capacity.

the efficiency of the neM, says the nGF, rests on the central

dispatch process “which is highly transparent and efficiently

matches supply and demand at the lowest available prices”.

so what is there not to like about the neM? quite

a lot, according to constant critics such as the energy

Users Association of Australia, which has about 100

members, including many of the nation’s largest

industrial energy users.

What the business community feels about the issue is

important because, although most of the media publicity is

about power issues applying to residential users, more than

70 per cent of electricity supplied in Australia is consumed

by the business sector – in industry and commerce.

According to the Australian Industry Group, the nation’s

businesses are now spending $13 billion a year on their

power service – and most of this outlay takes place on the

east coast. Given that there are now many, including the

AIG, predicting that end-user power bills in 2015 will be

double what they were three years ago, driven by rising

network charges and the costs of such features as the

renewable energy target, solar feed-in tariffs and the

proposed carbon price, commerce and industry is facing a

multi-billion dollar increase in its spending on energy and is

pressing constantly for improvements to the playing field.

High on the list of eUAA hobby-horses is a

fundamental feature of the market: the neM is a so-called

“energy only” market, relying on a high price cap to ensure

reliability of supply. In a time of rapidly changing

conditions, with a rising reliance on intermittent renewable

generation to meet carbon abatement ambitions, this

feature needs to be changed, says the eUAA executive

director Roman domanski.

the environmental movement’s concerns about the neM

go deeper than this. dr Hugh saddler, in a paper on national

energy security published under the aegis of the Centre for

Climate economics and Politics at the Australian national

University’s Crawford school of economics and

Government, points out that federal, state and territory

ministers, meeting as the Ministerial Council on energy of

the Council of Australian Governments, decided in 2004 that

the objective of the electricity market, set out in the national

electricity Law, should be to promote efficient investment

and operation of power services with respect to price,

quality, safety, reliability and security – but deliberately

chose not to include environmental issues.


rIght the national energy strategy needs

to deal with the delivery of power over

networks as well as modes of generation.

CHAPteR tItLe30

the ministers said: “environmental objectives are

more appropriately dealt with in other policy instruments.”

“the consequence,” says saddler, “is that, contrary

to the approach advocated by the International energy

Agency and adopted in Britain (on which our power market

is modelled), climate change mitigation is entirely external

to Australia’s domestic energy policy and divorced from,

rather than integrated with, key energy policy objectives,

including energy security.”

the result, he adds, is that the need respond to climate

change is not only treated in Australia as external to and

separate from energy policy, it is given a lower priority than

preserving the economic benefits of the existing market.

the energy Users Association sums all this up by

arguing that the market needs to change in line with

emerging energy usage patterns and energy policies.

“Under a traditional approach,” it says, “peak demand

growth can be met only through ever-increasing investment

in generation and network capacity. If an alternative is not

adopted, the traditional approach will begin to yield

increasingly inefficient investment and pricing outcomes.”

the energy Retailers Association says that, while it is

comfortable with the market’s ability to manage network

security and stability issues, it is concerned about

transmission congestion because of the rising levels of

renewable generation in the supply mix. “An increase in

the level of congestion has negative implications for the

efficiency of dispatch,” the Association adds, “as it could

result in higher cost generation being dispatched ahead

of lower cost sources.”

the suppliers’ main lobby group, the energy supply

Association of Australia (esAA), acknowledges that whether

the energy-only design is capable of providing the necessary

price signals to sustain existing generation capacity and to

encourage new power station investment is a key question.

“Under an energy-only model,” it says, “the only payment

generators receive for their plant is the price of the electricity

they produce. no payment is made for being available to

produce. Generators are reliant on periods of higher

electricity spot prices (as a result of high demand, outages

and/or transmission constraints) to make a return on capital

and to obtain sufficient revenues to fund new investment.”

esAA argues that the energy-only approach has

worked effectively over the 12-year life of the neM to deliver

new investment (although, it concedes, very little private

sector base-load investment) and to provide incentives for

power stations to be available when there are tight

supply and demand conditions.

“However,” it says, “the inherent volatility associated

with spot market prices is a potential source of concern for

governments and, in practice, they demand a higher level

of reliability than the market is designed to deliver.”

Governments respond to this by putting caps on retail

prices and on the spot market price, leading, according to

esAA, to a situation where they are blunting signals that

are required to reward generators and to indicate that new

investment is needed.

this creates what the industry calls the “missing money”

problem – revenue generators would have earned if not for

government-imposed market constraints.

the national Generators Forum cautions “changing this

successful market would be a high risk venture which could

jeopardise energy security”. Invoking the real or perceived


successes of different market models in other countries, it

argues, is not sufficient evidence that similar changes here

are bound to be successful. Conditions overseas are usually

very different to what they are here.

After taking a market approach to electricity supply for

more than decade, the issues with which stakeholders

wrestled in the early 1990s, and the solutions they found,

have come under strong scrutiny. Increasingly, critics are

querying how well the neM is coping with a different set of

challenges to those envisaged almost two decades ago.

Paul simshauser notes that, during the first decade of

electricity supply reform, the neM was oversupplied with

generation capacity and delivered reliable, low-priced

energy, enabling the cost of earlier investment to be

“harvested” successfully.

“As a result,” he says, ”the neM has been in the main a

good news story. However, generation and network capacity

stocks have been gradually exhausted. Meeting future

increases in demand will involve material power system

augmentation costs and a cocktail of pressures is now

building up in every facet of the supply chain.” the other

critical aspect for the market is an increasing amount of the

policy activity that affects its function is occurring beyond the

aegis of the neM’s watchdog and operators.

In its submission to the AeMC review, the national

Generators Forum noted: “A market achieves its best

outcomes if it has sound design and is left to run without

intervention. Both state and federal governments have

introduced distortions, which, to date, have been

moderate. “It is important that future policies recognise

the benefits a market can bring and are designed not to

impact on [its] performance.”

Jon Stanford

left Critics wonder how generators like Cs energy’s plant at

Kogan will cope with the rapidly shifting set of challenges faced

by the neM.

A MARKet ACHIeVes Its Best

oUtCoMes IF It HAs soUnd

desIGn And Is LeFt to RUn

WItHoUt InteRVentIon.”

tHe nAtIonAL GeneRAtoRs FoRUM

CoMPAny PRoFILe32

AeroderivAtive gAs turbines

Ge is the leading supplier of aeroderivative gas turbine

generator packages for utility, petroleum, industrial and

marine applications.

this gas turbine product line is derived from the Ge

aircraft engines that propel the world’s safest, cleanest and

most efficient airliners. the letters “LM” stand for ‘Land and

Marine’ applications, the common industry term for Ge’s

aeroderivatives. Ge’s continued investment in research and

development of aircraft engine technology enables our LMs

to maintain their leadership in performance, operational

flexibility and lifecycle value to the customer.

LMs are efficient and ‘manoeuvrable’ machines delivered

in compact modules for rapid deployment to new power

stations. they inherit the reliability, availability and

maintainability of the Ge aircraft engine, and we support

them with our highly experienced field service team based

in Australia.

More operAtionAl flexibility And dependAbility

Ge’s LM product line spans from 18 to 100MW in output,

and operates with a variety of fuels and emission control

technologies. Ge LMs have gained a strong uptake in the

industry, with total operating experience in excess of

92 million hours and over 3300 operational units.

these turbines have been selected for a range of

mission-critical applications in Australia and new Zealand,

including:

u power generation for the world’s leading iron ore and

gold mining operations in the Pilbara

u power and gas compression for LnG facilities on the

north West shelf, darwin and in Gladstone

u base-load and peaking power for utilities in Karratha,

darwin, Perth, Auckland and new Plymouth

u electric power and direct drive propulsion for the navy’s

warships, including Australia’s newest air warfare

destroyers and amphibious ships.

In Australia and new Zealand, there are 120 LMs

in service or on order, most of which are packaged by

Ge energy.

Ge

the Most flexible And efficient gAs turbine

the LMs100 is Ge energy’s latest generation aeroderivative

packaged power plant. delivering over 100MW on a gross

electrical basis and thermal efficiency of 44 per cent in

simple cycle applications, powerful LMs100s like those

pictured on this page at Contact energy’s stratford Power

station in new Zealand, are the most fuel-efficient simple

cycle gas turbines in the world today. the LMs100 is

uniquely suited to handling the varied duties of utility

peaking, mid-merit, and base-load operations. Combined

cycle applications are in service in europe, and the LMs100

will provide power for the 2014 Winter olympics in a

cogeneration application.


Ge

www.ge-energy.com/lms100 | see page 97 for details

the unique features that underpin the LMs100’s selection

by customers in Australia and new Zealand include:

u Best in Class efficiency – 44 per cent simple cycle

efficiency at full power, and greater than 37 per cent

efficiency at 50 per cent load

u sustained performance – on hot days and at high

elevation enabled by compressor intercooling.

u Fast start and rapid ramp rate – from cold steel to full

load in less than 10 minutes, and load-following at

50MW per minute.

u operational availability of 97%, thanks to the

packaged plant with modular engine maintenance,

like that for airline engines

A ge ecoMAginAtionsM product

the LMs100 is an ecomagination-certified product by Ge,

which means that its innovative attributes deliver both

environmental and operating benefits to customers.

u environmental benefit – over the course of a

2300-hour peaking season, an LMs100™ turbine

system running at full capacity avoids the emission of

31,000 tonnes of Co2 when compared with a simple

cycle frame gas turbine.

u operating benefit – over the same season, an

LMs100™ can reduce natural gas consumption by

566,000 gigajoule (Gj), or $4.53m at $8.00 per Gj,

when compared with a typical 50Hz simple cycle

frame gas turbine system. In addition, the reduced

emissions of Co2 yield a benefit of more than

$713,000 at a Co2 price of $23 per tonne.

34 CoMPAny PRoFILe

Gentrack is a specialist developer of smart billing,

CRM, collections and meter data management solutions for

energy and water utility companies. established over 20

years ago, Gentrack lives by its core values of agility, ability

and attitude – all of which ensure it continues to win business

against larger eRP-based competitors, thanks to its flagship

products Gentrack Velocity and mdAtA21.

Gentrack Velocity is a smart billing and CRM product

designed for electricity, water and gas utilities. It is one of the

few utility software products that offers multi-utility billing and

is considered a leader in its ability to integrate mass market,

time-of-use and network billing processes to create one

complete solution. designed to lower a utility’s cost to serve,

Gentrack Velocity is proven to streamline processes, enable

utilities to transform the customer experience and maximise

benefits of smart grid and smart metering technologies.

Gentrack Velocity is used by over 40 utilities in 10 countries.

mdAtA21 is Gentrack’s specialist meter data

management software for energy and water utilities,

providing the tools they require to handle large volumes of

interval meter data from smart grid technologies. Built using

the proven dnA of Gentrack Velocity, mdAtA21 is designed

to streamline and automate complex data management

activities, enabling utilities to make stronger investment

decisions and to provide more information to customers to

drive sustainable energy practices.

As well as developing its own software, Gentrack is

accountable for end-to-end project delivery, including

implementation, ongoing product support and maintenance.

“Maintaining a direct relationship with our utility and

airport customers is fundamental to our business,” says

Gentrack Ceo james docking. “Where other vendors use

third parties to deploy their software, our customers look to

our own systems and industry experts to ensure project

success. our people are passionate about the solutions they

deliver and we have a history of actually delivering what we

say we are going to deliver.”

GentRACK

“Maintaining a direct relationship with

our utility and airport customers is

fundamental to our business,”

james docking, CEO, GENTRACK

www.gentrack.com | see page 97 for details


Granite poWer’s vision and business is focused on

low-to-medium temperature, low cost, zero carbon energy

recovery and associated activities including:

u Heat conversion technology development – known as

“GRAneX®” – for application to power generation

opportunities involving the moderate temperature heat

resources from:

• Recovered waste heat (RWH)

• Conventional geothermal (CG)

• engineered geothermal systems (eGs)

• solar-thermal (st) sources

u Zero carbon power station development – as a project

and technology developer, an owner and as the operator

for other owners.

GRAneX®, the company’s primary focus, is heat

conversion technology which offers up to an 80 per cent

improvement in net electricity able to be generated from a

given low-to-medium temperature heat resource (relative to

conventional organic rankine cycle technology). After

adjusting for relative costs and the specifics of each

particular application opportunity, this equates to about a

33-36 per cent reduction in the unit cost of power. this offers

the prospect of net savings from shifting to zero carbon

power generation technology.

GRAneX® provides a compelling case for the

commercial merits of recovery of industrial waste heat

and on-site power generation – a case that is not

associated with alternative, traditional technologies. this

means the opening up a new market for power generation,

the reduction in exposure to mains-supply ‘brown-outs’

for companies and their plants and the reduction of

the requirements for expansion of the existing mains

power grid.

GRAneX® delivers improved economics for geothermal

power generation, with forecast costs being lower than

those for new black-coal fired plant and about the same as

for combined cycle gas turbines (before carbon pricing). It

also provides a significant risk mitigant for geothermal

developments by enabling (for example) drilling to shallower

depths or reduced flow rates for the same net output.

GRAnIte PoWeR

GRAneX® is a modest technological step out from

conventional organic rankine cycle technology. It uses

well-proven components and materials, benign, readily

available working fluids and requires only modest

pressures. straightforward off-site assembly and pre-

commissioning means installation and commissioning are

quick and inexpensive, and involve minimal disruption to

established operations, whose reliability remains

unaffected. operating costs are very low.

Plants are available on a custom design basis, on either

turnkey ePC, Boo or Boot terms, with normal

performance guarantees, warranties and delivery times.

www.granitepwr.com | see page 97 for details

CHAPteR 0436

toWARds A nAtIonAL eneRGy PoLICy

04


it is now nearly three years since the Minister for

Resources and energy, Martin Ferguson, announced that

the government would publish a White Paper on energy

by the end of 2009.

Particularly motivated by the challenges of

responding to climate change in the energy sector, the

government stated it would “develop an energy policy

to ensure Australia’s long-term energy security to meet

the needs of the economy overall and underpin the

prosperity and wellbeing of all Australians. . . . the

energy White Paper will identify an appropriate mix of

energy policies to deal with the uncertainties, risks and

opportunities to secure cleaner, adequate, reliable and

affordable supplies of energy to support our overall

economic and social advancement.”

the level of ambition for the White Paper, as reflected

in these objectives, was substantial and commendable.

Indeed, if Australia’s energy companies did not know that

they needed a White Paper before the announcement, their

appetite for one was undoubtedly whetted by the Minister’s

statement. the difficulty was that as the interest in the

White Paper grew, so its delivery date was repeatedly

pushed out. Having missed its end-2009 deadline, in

mid-2010 the White Paper was shelved indefinitely.

ostensibly, the reason was the demise of the Carbon

Pollution Reduction scheme (CPRs), but the indecent

haste with which the White Paper was shelved engendered

a strong suspicion that it was proving extremely difficult to

write. After all, while the CPRs may have been postponed,

the government’s commitment to a substantial reduction in

emissions by 2020 remained in place. the rationale for a

White Paper had not suddenly gone away; in fact, with the

target still there but no policy in place to deliver it, the need

was greater than ever.

Following the Prime Minister’s announcement of a

carbon price in March 2011, however, the White Paper is

back on the agenda. yet not only are the difficulties still

there, but in many ways they are greater than they were

last year. the fact that the Minister is now stating that we

can expect the White Paper in the middle of 2012, or

CHAPteR 0438

around four years from the original announcement,

suggests that little substantive progress had been made

up to the time when the White Paper was shelved and that

rather than dusting off the old drafts, the department is

now starting again with a clean sheet of paper.

In evaluating the expectations the electricity sector is

likely to have of the White Paper, the first question to ask

is why do we need an energy White Paper at all? In a

market economy such as Australia, would it not be

reasonable to expect that the private sector would respond

to market signals and invest in new electricity capacity as

appropriate? Why do we need government to tell us where

it thinks we should invest?

there are two major responses to this, focused first

on energy security and secondly on the large number

of substantial imperfections, many of them driven by

government, that currently act to distort the Australian

electricity market. these two factors mean that we cannot

be confident that the private sector will provide the

necessary investment when and where it is required to

guarantee energy security, nor that the investment that

is undertaken will necessarily be efficient.

on the first point, energy security is a major concern

for consumers, and perhaps even greater worry for

members of the industrial and commercial sector than for

households. yet there is no certainty that increased demand

for electricity will be matched by additional supply.

If the market does not value the additional supply at

a level consistent with the costs and risks to investors,

then the required investment in new capacity may not

eventuate. Further, even if the private sector does invest

in the necessary additional supply, it may not choose the

most efficient option from the community’s perspective.

For example, under current market circumstances

with a high level of uncertainty about future carbon prices,

there are strong economic incentives to invest in open

cycle gas turbines (oCGt), which supply power at a

relatively high cost and with a carbon footprint little short

of that of coal generation.

Government has a major interest in ensuring a secure

supply of energy. not only is energy security widely

regarded as being a major element in government’s “duty

of care”, but also, even in circumstances where consumers

may have been let down by the private sector, it is

inevitably government that is blamed for blackouts and

brownouts.

the second issue is that there are a large number

of distortions in Australian energy markets that have a

major influence on investment. Many of these distortions

have been introduced by governments and include:

• ongoingstategovernmentpricecontrolofretail

electricity tariffs

• themandatoryrenewableenergytargetof20percent

by 2020, a classic ‘picking the winners’ benchmark

seemingly plucked out of the air with little

understanding by government of the impact on power

prices and on grid management

• massivesubsidiestohouseholdstoinvestininefficient

generation technologies, such as solar PV, with the

effect of reversing the historical trend of centralised,

large scale, efficient production of electricity

• thenationaltarget,supportedbybothgovernment

and opposition, of reducing Australia’s emissions by

five per cent from 2000 levels by 2020, with no mud

map provided about which sectors of the economy

are going to have to do the heavy lifting and, more

generally, how we are going to get there

• amish-mashofdifferentclimatechangepoliciesin

individual states, such as Victoria’s commitment

(reiterated by the new Baillieu government) to cut

emissions by 20 per cent from 2000 levels by 2020,

with virtually no detail provided as to how this will

be achieved

• varyinggovernmentsubsidiestodifferenttechnologies,

such as a preference for clean coal with carbon capture

and storage and solar technologies

• ablanketbanonnuclearpower,atechnologywhich,

even after the accident at Fukushima daiichi, features

in a significant way in the emissions reduction plans

of many other countries

• therecentannouncementofacarbonpricefrom

mid-2012, but with no detail as yet around the level

of the price, compensation, coverage and what

current programs will be terminated.

the degree of intervention in the market by

Commonwealth and state governments, as demonstrated

by the above examples, implies that government must

inevitably play a major role going forward. In one sense,

Colin Powell’s dictum on government responsibility for

invading Iraq could equally be applied to the Australian

electricity market: “It’s china shop rules: you break it,

you own it.”


Above the biggest brown coal mining operation in Victoria’s

Latrobe Valley services the twin Loy yang power stations.

CHAPteR 0440

In a situation where substantial investment in new

base-load capacity will be required in the next few years to

meet demand, and where the application of a carbon price

will require the gradual decarbonising of Australia’s

electricity supply, the above market distortions do nothing

to provide certainty to investors. Indeed, given that it is

widely agreed that the next generation of base-load plant

needs to be combined cycle gas turbines (CCGt), it is

ironic that CCGt is one of the few technologies that is not

explicitly encouraged by any of the government measures

included in the list above. Instead the emphasis is generally

on the least competitive options, such as renewables and

carbon capture and storage (CCs).

of course, the introduction of a carbon price should

encourage investment in CCGt, but investors will need to

have some feeling for the likely level of the carbon price,

not just initially but over 10 years and more. there is a clear

need to understand the effect of both the carbon price and

the projected gas price for the full period in which any

investment in CCGt would need to be recovered. At

present there is no guidance to investors over these issues.

this is clearly a gap that the energy White Paper will

need to fill. More broadly, in the absence of clear market

signals to investors, the White Paper needs to propose a

strategy for the generation of electricity going forward.

the strategy would need to address some major issues,

including the following:

Will the government abolish direct action measures,

such as the renewable energy target and subsidies for

solar PV, as soon as a carbon price becomes established?

does the government intend to formulate a direct action

plan, within the carbon tax/ets policy, to ensure a smooth

transition from high emitting generators to low emissions

plant? What share of the electricity market does the

government see for renewables going forward? What role

does the government see for gas in base-load generation

in the future? What is the government’s strategy for bringing

on other low to zero emissions base-load technologies in

the longer term when a high carbon price will make CCGt

uncompetitive? What are the prospects for lifting the ban

on nuclear power in Australia and what would be the role of

government in facilitating the development of a nuclear

industry? does the government intend to subsidise the

demonstration of CCs technologies at a commercial scale?

does the government have a strategy for accelerating the

development of geothermal power?

below Pelican Point power station uses a combined-cycle gas

turbine operation to produce 487MW of electricity – approximately

25 per cent of south Australia’s needs.


Above A 500kV transGrid transformer being delivered to

Macquarie Generation’s Bayswater Power station in the

Hunter Valley.

In responding to all these questions, ultimately the white

paper will need to provide details of the government’s

overall strategy for decarbonising Australia’s electricity

supplies while ensuring a secure supply of power at a

globally competitive cost. It will need to provide its view of

how the costs and availability of the various low emissions

generation technologies are likely to change over the next

two decades and the level of carbon price the industry can

expect. In this context, the white paper will also need to

provide some guidance on gas prices in the future.

Without some degree of confidence in how all these

variables are likely to develop over time, potential investors

in very costly and long-lived assets, which exhibit a lengthy

pay-back period, could well best serve their shareholders’

interests by merely sitting on their hands.

the government will also need to detail the role it

will play in funding essential R&d and in some cases

providing support for infrastructure investment. For

example, does the government intend to provide

substantial financial support to demonstrate one or

more commercially scaled CCs generators? this does not

come cheap: the UK government has committed £1 billion

to subsidising the construction and ongoing operations

of just one commercially scaled CCs plant in Britain,

with three more scheduled to follow.

Finally, these issues, while difficult, need to be

exposed to the industry and community generally

as soon as possible. It is nearly three years since the

government began working on the white paper. It should

aim at delivering it by end-2011.

42 CoMPAny PRoFILe

today’s enerGy market is undergoing a profound

transformation as Australia moves towards a sustainable

energy future. How this will take shape is a matter for debate.

However, as the only company in the world that provides

complete and integrated solutions across the entire energy

conversion chain, siemens will continue to be a major driving

force behind the efficient and sustainable supply of energy

in Australia and new Zealand.

Last year saw the release of the Siemens Picture the

Future - Energy technology blueprint. Validated by 22

partners, including CsIRo, ABARe, Clean energy Council

and Loy yang Power, the siemens Picture the Future research

project demonstrates the potential of current technology to

shape a sustainable energy future for Australia.

It outlines the progressive technology uptake required

between now and 2020 for Australia to meet the

government’s 2050 targets. It demonstrates how currently

proven technology can be the driver for our sustainable

future, meeting the demands of climate change,

demographic change, urbanisation and globalisation

through, for example, increased efficiency and optimisation.

increAsed efficiency

Increasing energy efficiency can unleash tremendous

savings potential, while also conserving fossil resources

and reducing Co2 emissions. technological improvements

in every stage of the energy conversion chain can

substantially reduce the consumption of fossil fuels and

increase the output from renewable energy sources.

sIeMens – PICtURe tHe FUtURe oF eneRGy to 2020

the most advanced generation of siemens

combined cycle power plants operates at an

efficiency of more than 60 per cent – much greater

than conventional power plants. thanks to lower

fuel consumption, each new power plant of this

generation could reduce the quantity of Co2

emissions per year by an amount equivalent to

that produced by 10,000 cars driven 20,000

kilometres each.

“The most advanced generation of Siemens

combined cycle power plants operates at an

efficiency of more than 60 per cent – much

greater than conventional power plants.”


sIeMens – PICtURe tHe FUtURe oF eneRGy to 2020

optiMising the entire energy systeM

to be prepared for the future, the world’s power grids must

be expanded and improved. “smart grids” will make it

possible to use electrical energy more efficiently in the future.

Intelligent energy management systems can combine the

output of smaller, decentralised generating units into “virtual

power plants” and route temporary surplus capacities to

intermediate storage centres.

distributed in large numbers around the grid, such

storage centres act as stabilisers in peak demand times. An

intelligent power grid with an extended automation structure,

advanced sensors and a decentralised information and

communications structure will allow all participants to use the

system bi-directionally.

renewAble solutions

By 2020, over 50 per cent of worldwide investments in the

powerplant market will go into developing renewable

resources. Within Australia, developing the electricity

transmission networks of the eastern states and the separate

Western Australian network will be a key enabler for

integrating power from remotely-located wind, solar and

geothermal plants into the electricity sector.

Growth in renewables will be achieved by a mix of

wind and large-scale solar generation, with contributions

from technologies such as geothermal and ocean power.

As an example, a 330km x 330km solar power plant in the

Australian desert could produce enough energy to meet

the world’s demand during daylight hours.

the Picture the Future: energy project forms part of

siemens’ active R&d function, which focuses on bringing

innovative solutions to the market that can also provide

great returns for the customer. Last year, siemens invested

$6 billion in R&d, which contributed to a full spectrum of

cost-effective and innovative technologies for energy

efficiency, low emission power generation and renewable

energy, advanced transmission and distribution as well as

efficient transportation.

Major successes for siemens in the past year reflect this

innovative approach, including:

u growing our wind business in Australia and new Zealand

with the completion of the te Uku Wind Farm (nZ), one

of the world’s most efficient wind farms.

u a project win at BMA for a coal loading conveyor

substation package, which is a medium voltage solution.

u a world-first with the installation of leading reactive power

compensation technology at Kikiwa substation,

enhancing power quality for residents of new Zealand’s

south Island.

u an order for the supply of up to 10 compressor trains to

the Australia Pacific Liquefied natural Gas (APLnG)

project in queensland.

www.siemens.com.au/energy | see page 98 for details

CHAPteR 0544

nUCLeAR VeRsUs PoWeR PooR

05


the current imbroglio over carbon taxes and

electricity prices is casting rather a large smokescreen

over what remains a challenging long-term problem,

namely how and when Australia is going to decarbonise

its electricity supply.

some particularly difficult issues apply to base-load power,

which constitutes about 80 per cent of Australia’s electricity

supply, because all of the very low emissions technologies

available to replace coal are, in different ways, problematic.

Recent developments, including the nuclear accident at

Fukushima daiichi, potentially significant increases in domestic

gas prices in Australia and cost blowouts in geothermal and

carbon capture and storage (CCs) technologies, make the

conundrum no easier to resolve.

In the short to medium term, the technology choice for

lower emissions base-load duty is a relatively simple one.

natural gas generation, in the form of combined cycle gas

turbines (CCGt), has a carbon footprint around one half that

of black coal and, at least while we enjoy moderate gas

prices on the east coast, the cost of the electricity it

produces is manageable. nevertheless, there is a caveat to

be noted in this context. In the recent past, the objective of

replacing coal with gas for new base-load investment was

not seen as being likely to involve a Co2 price of more than

about $20/tonne. If the price of gas increases as now seems

likely, however, the Co2 price may need to be significantly

higher – a recent report by deloitte suggests $40/tonne. It is

notable that in the previous treasury modelling in 2008, a

$40 Co2 price was not seen in Australia until the late 2020s

when Australia’s emissions were projected to be over 20 per

cent lower than in 2000. Although investment in CCGt

involves relatively low capital costs, the price of fuel

constitutes a high proportion – around 30 per cent currently

– of the cost of electricity. even a moderate rise in the gas

price, therefore, can have a significant effect on the costs of

CCGt generation.

While our chief concern about CCGt revolves around

the gas price, however, the problems afflicting the longer

term base-load options are much more challenging. If we

are serious about tackling climate change, and to some

CHAPteR 0546

extent the jury is still out on this fundamental point, CCGt

can be seen at best as an interim technology. With total

emissions of around 400kg of Co2/MWh, it is unlikely to be

competitive in the longer term as carbon reduction targets

become tighter and the Co2 price continues to rise. When

this occurs, existing coal plant will need to be replaced and

CCGt will not be well positioned to take over.

What then are the serious options for base-load power

in Australia in a very low to zero carbon-constrained world?

there are some people, few of whom are engineers and even

fewer of whom know anything about the electricity industry,

who believe that Australia can decarbonise its power supply

solely by investing in renewables. While ultimately solar

energy may become viable, provided the problems of

storage and the substantial physical footprint of solar thermal

plants can be resolved, at this stage it remains intermittent

and very expensive.

Geothermal was always highly promising and remains so,

but its progress in Australia has proceeded at a glacial pace.

not only are drilling costs, at around $15 million per well,

deterring investors, the hot dry rocks technology still has to

be proven at scale and its costs are now likely to be

considerably higher than the optimistic early estimates

suggested. to produce significant amounts of base-load

power from geothermal sources in Australia would also

require massive new investment in poles and wires.

In the absence of decisive government intervention, few

serious observers now see geothermal providing more than a

small fraction of Australia’s electricity before 2030. In

mid-2011, business confidence in geothermal technologies

has fallen away as is reflected in the share prices of all the

players. In the three years since june 2008, for example,

Geodynamics’ share price has fallen from about $1.80 to less

than 20 cents today.


In recent years and for quite understandable reasons,

Australian governments have favoured the development of

clean coal technologies with CCs. If anything, however, the

costs of the technology appear to be increasing, while CCs

comes with some safety issues that have yet to be tested

with the general public. A recent report by the Global CCs

Institute states that “recent studies suggest that costs [of

CCs] are 20–30 per cent higher than indicated in similar

studies undertaken only two to three years ago. . . .

Recent estimates suggest that for a ‘reference plant’ in

the United states, the average cost of electricity that would

need to be recovered over all output for the entire economic

life of a generating plant in order to justify the original

investment could be in the range of $Us120–150/MWh.

the associated avoided cost of Co2 ranges from

$Us60–85/tonne of Co2 for coal-based power stations

and exceeds $Us100/tonne for a gas-fired power plant.”

early this year, it seemed safe to say that the other major

option for base-load duty, nuclear power, came with fewer

disadvantages than the other technologies discussed above.

With over 440 plants worldwide, some of which have been

operating without incident for up to half a century, it is a mature

technology and its costs, in Asia at least, are much lower than

those of other low to zero emissions base-load technologies.

there are currently over 60 new nuclear plants under

construction around the world, the majority of them in China.

With other countries taking up the nuclear option and

Australian industry needing to retain its competitiveness in

relation to energy costs, as well as increasing consumer

resistance to rising electricity prices, there was increasing

pressure on the Gillard government to reconsider its

opposition to nuclear power. Indeed, it had been agreed that

the issue would be considered at the ALP national

conference in december 2011.

GeotHeRMAL WAs ALWAys

HIGHLy PRoMIsInG And

ReMAIns so, BUt Its PRoGRess

In AUstRALIA HAs PRoCeeded

At A GLACIAL PACe.”

jon stAnFoRd

left An artist’s impression of the proposed

eRM Power Wellington open-cycle gas power

station in nsW, designed to generate up to

600MW and to meet peak power demands.

CHAPteR 0548

the Australian nuclear science & technology

organisation’s state-of-the-art 20MW research

reactor is our only nuclear installation.


yet this was all before Fukushima. In 1986, the Chernobyl

meltdown cast such a pall over the global nuclear industry

that new construction of nuclear plants was put on hold for

20 years. Will this happen again following Fukushima? the

logic says no, for several reasons.

First of all, while it is too early to speculate in any detail, it

seems the death toll from Fukushima will be much less than

that from Chernobyl, which in itself is heavily disputed, and

also less than other energy-related deaths, such as in coal

mines in China. nevertheless, it should be acknowledged

that while the nuclear industry always represented Chernobyl

as a one-off, the Fukushima incident was also rated as a

seven, equal to Chernobyl and the highest on the scale. In

mid-2011, new disclosures from the authorities in japan

revealed that the amount of atmospheric contamination

was twice as high as previously suggested. yet while

unacceptably high, the level of pollution was only about

10 per cent of the Chernobyl level.

secondly, some observers suggest that the fact that

the Fukushima reactor, which was over 40 years old, survived

the massive earthquake and was only brought down by

obsolete back-up power sources being swamped by a

tsunami, should increase rather than decrease confidence

in nuclear technology. Paradoxically, it was this view that

brought about a road to damascus moment for the

environmentalist George Monbiot, transforming him overnight

from being a passionate opponent of nuclear power to being

one of its most prominent spruikers.

Finally, and most importantly, the level of concern

about climate change is far greater than it was in 1986

and for many countries nuclear power is now

an essential element in their plans to tackle it.

Few experts around the world believe that the

decarbonisation of electricity is feasible without a

major contribution from nuclear power. Latest projections

from the International Agency (june 2011) still show an

increasing contribution from nuclear power over both

the medium and long terms.

Where does this leave Australia? Clearly, in a worse

position than it was before Fukushima. While there was a

slim chance that the ALP would change its policy on nuclear

power at this year’s conference, that possibility is now that

much slimmer. Rational analysis has played little part in the

nuclear debate in Australia to date and the fact that

Fukushima has provided much more ammunition to the

doomsayers suggests that fear-mongering will continue

to dominate the issue for the foreseeable future.

Without strong leadership, it seems very unlikely that

Australian politicians will now bite the bullet on nuclear

power, at least for several years down the track. this is

unlikely to be to the Australian community’s advantage.

on the one hand, we will be forced into much more

expensive and less satisfactory technologies if we are

to address climate change in any substantial way.

on the other, the majority of those countries overseas

that have committed to nuclear energy will continue to

invest in it. Australia’s energy-intensive industries will

become significantly less competitive as a result.

Jon Stanford

WItHoUt stRonG LeAdeRsHIP, It seeMs VeRy UnLIKeLy tHAt

AUstRALIAn PoLItICIAns WILL noW BIte tHe BULLet on nUCLeAR

PoWeR, At LeAst FoR seVeRAL yeARs doWn tHe tRACK. tHIs Is

UnLIKeLy to Be to tHe AUstRALIAn CoMMUnIty’s AdVAntAGe.”

jon stAnFoRd

50 CoMPAny PRoFILe

horizon poWer is the pre-eminent supplier of energy

solutions to regional and remote Western Australia.

What sets us apart is our passion and ability to deliver

safe, reliable and affordable services in the most

challenging of environments. our service area is vast,

approximately 2.3 million square kilometres.

Horizon Power services the biggest area with the least

amount of customers in the world – for every 53.5 square

kilometres of terrain, we have one customer. our customers

range from people living in remote, isolated communities

with less than 100 people, to residents and small

businesses in busy regional towns, to major mining

companies in the resource-rich Pilbara region.

HoRIZon PoWeR

We maintain two interconnected networks as well as in

excess of 30, and growing, isolated or islanded systems

that power towns and communities throughout regional

and remote Western Australia. the systems are exposed

to intense heat and cyclonic conditions in the north, and

ravaging storms in the south.

It is these challenges that drive the innovation and

commitment of our agile, professional and engaged team

of more than 400 employees.

Although Horizon Power is a relatively new business,

we have the benefit of a long history as part of the

state-owned energy company in its various forms.

Horizon Power is a Government trading enterprise which

operates on a commercial basis. We focus on delivering the

best possible set of economic, environmental and social

outcomes to the communities we serve while applying a

commercial discipline and focus to the way we do it.

www.horizonpower.com.au | see page 97 for details


smec has a long history in renewable energy, dating back to

its early beginnings in building the snowy Mountains

Hydroelectric scheme. since that time sMeC has expanded

its expertise in energy infrastructure to include geothermal,

solar thermal, solar PV, biomass, biofuels, waste to energy,

wind and micro and mini hydro, including hybrid systems with

gas and diesel.

over the last 40 years, sMeC has undertaken

international and Australian projects varying in scale from

multi megawatt power stations and transmission lines that

cross nations, to electrification of mini grids for small villages

or stand-alone power systems for communication systems.

since 1970, when the company was formed and later

privatised, sMeC has developed as an international,

multidisciplinary engineering company with over 4000 staff

and an established network of more than 40 offices around the

world. smec has delivered projects in over 85 countries with

89 projects being undertaken in the Middle east alone.

the functional sectors of sMeC emerged from skills

developed in the early Hydroelectric scheme, which covered

all elements required to be able to build a large remote energy

system. these disciplines include energy infrastructure, dams

and civil infrastructure, tunnels and roads and water and

environmental services.

Calling on all functional groups of the company, sMeC is

well positioned to design and develop complete power supply

systems, from greenfield power station sites to delivery of

power to an energy-efficient end user. Whatever the renewable

energy conversion system, sMeC can deliver the whole power

system package, including the balance of plant, backup or

hybrid generation and transmission and distribution systems.

sMeC has designed and managed the building of power

stations, including the 11.5MW palm waste biomass plant ‘Kina

Biopower’ in Malaysia, the 2400MW son La Hydro Power Plant

in Vietnam, the 55MW of geothermal plant for Lihir Gold in

Papua new Guinea and the 2MW Lake Cargelligo solar thermal

plant in Australia. sMeC is actively expanding its activities and

diversifying into other areas of renewable energy. sMeC looks

forward to continued growth in this new era of clean energy in

Australia and around the world.

CeLeBRAtInG 40 yeARs oF ReneWABLe eneRGy

www.smec.com | see page 98 for details

CHAPteR 0652

FUeL PoVeRty eMeRGes As A Key IssUe

06


you WouLd need quite a long sheet of paper to

list all the energy issues that are hotly disputed among

governments, suppliers and community activists today,

but there is one on which they are ad idem: Australians

will not accept a situation where low-income households

are priced out of obtaining the electricity they require.

For some users, this is literally a life or death proposition

and the community will cut suppliers and governments

no slack whatever to ensure that power is there when

they need it.

In a market environment in which it is now widely

agreed that end-user prices in 2015 are likely to be

double what they were in 2008 – under the pressure of

higher network charges and a range of decarbonisation

policies – this issue is to set to rise up the attention agenda

for both lawmakers and energy retailers.

dr Paul simshauser, Chief economist of AGL energy

and Professor of Finance at Griffith University, queensland,

his colleague tim nelson, Head of economic Policy and

sustainability at AGL, and dr thao doan, a strategist in the

energy trading division of stanwell Corporation, have

thrown a spotlight on this issue in a paper they have

called “the Boomerang Paradox”.

“A characteristic of advanced economies,” they

explain,” is continual growth in household incomes

and plunging costs of electrical appliances.

In Australia, increases in household floor space

combined with power prices that are among the lowest

in the world have resulted in rapid growth in peak

electricity demand. the power grid in turn requires

substantial incremental generating and network capacity,

which is used momentarily at best.”

Australia’s long history of very low power prices,

they point out, combined with almost two decades of

economic growth, has led to extraordinary increases in

energy demand driven by the rising use of appliances

to cool and heat homes.

Back in 1970 average household energy requirements

in new south Wales and queensland stood at 4MWh a

year – by 2008, this had doubled to 7.9MWh.

CHAPteR 0654

the rise of peak demand out-runs the trend line for

overall demand. In Brisbane, for example, the number of

households increased 35 per cent in 12 years to 2010, but

peak demand rose 104 per cent as three-quarters of homes

were equipped with air-conditioning, a third of them with

two or more appliances.

the paradox is that the nation’s rising wealth has created

the pre-conditions for large increases in the number of people

who cannot afford to pay their electricity bills. “It is,” they say,

“as if consumers have been provided with a mispriced drug for

long enough to establish a chronic addiction – and then they

are confronted with the price doubling.”

simshauser, nelson and doan envisage scenarios

where household electricity bills, as a consequence of

generation and networks being expanded to meet this

demand, will rise from $130 per megawatt hour in 2008 to

between $250 and $300 in 2015.

“of course,” they say, “the overwhelming majority of

households will readily adjust their budgets to meet these

charges. After all, power prices at these levels are not

unusual by any measure around the world and real income

growth in Australia in this period is expected to be three to

four per cent a year.”

While the political problem is that many of those who

can afford to pay higher bills will object strongly to doing so,

the social issues, as simshauser and his colleagues point

out, is that many thousands of households will not be able

to do so.

How large is this problem? they have modelled a

situation where, by 2015, a third of low-income households

in nsW and queensland, or 6 per cent of the total in the two

states, will experience fuel poverty. this will add some

214,000 account holders in 3.2 million nsW homes and

about 130,000 in two million queensland homes.

Above downtown Brisbane is part of the fastest-growing

electricity market. south-eastern queensland is only 3 per cent of

the state by area, but it accounts for most of the electricity demand.


extrapolate this situation to the east coast as a whole

and the number in strife could be half a million – and bear

in mind this refers to homes, not people. Assume three or

four adults and children per home, perhaps an underestimate

for low-income families, and you are looking at around

2 million Australians, not a number state or federal politicians

could regard with equanimity.

the situation is not helped by the fact that many

low-income homes use more electricity than the national

average. “one might expect that low-income households

consume less than average amounts of power,” the authors

say. ”But data from the Independent Pricing & Regulatory

tribunal in nsW, looking at homes with gross incomes less

than $31,000 a year, shows that 20 per cent of them use

between 8MWh and 12MWh annually, and 12 per cent use

more than 12MWh.”

evaluation of AGL energy’s customer hardship program

shows that many of these households live in lower-value

homes, most likely with three to four people per house, and

with power consumption patterns skewed towards the medium

to high range. Given that we now have a good idea of where

power bills are heading, simshauser and colleagues argue, it

would be a good idea for governments to ensure they better

understand this issue and have policies in place to deal with it.

of course, state policies are already in place to assist

senior members of the community, to provide emergency

help to households facing the possibility of the lights going

out, to help those on life-support machines and, in

queensland and nsW, to provide advice on reducing

demand. these policies are designed for a much lower

power price environment than the one that lies ahead.

Controversially, simshauser and his colleagues

suggest government could consider hypothecating the

extra funds they will receive from the Gst to contribute

to alleviating fuel poverty.

In nsW and queensland, they say, Gst receipts from

electricity sales to householders totalled about $410 million

in 2008. By 2015 these receipts will be of the order of

$880 million to $1040 million.

one of the issues that needs to be addressed in

coming to terms with higher fuel poverty, they add, is

the “critical failure” of government assistance programs

to deal appropriately with the issue.

For example, the initial emissions trading scheme

proposal would have seen lump-sum payments delivered

to householders receiving compensation. Far better, they

suggest, to deliver the payments to the energy retailer to

ensure that the money is spent where it is intended.

However governments decide to address the “bill

shock” issue that obviously is going to be a feature of this

decade, it is clear from the research by simshauser and

his co-authors that this is not a minor issue in terms of

social responsibility, let alone the political pain likely to

be inflicted by voters upset by the new power regime.

It is a situation not likely to be improved when, as

currently planned, governments give the green light to the

electricity industry to roll out smart meters to all homes

and then shift to “time-of-use” charges aimed at driving

a change in consumption patterns by making it far more

expensive to use electricity at peak periods.

Jon Stanford

one oF tHe IssUes tHAt needs to Be AddRessed In CoMInG to

teRMs WItH HIGHeR FUeL PoVeRty Is tHe ‘CRItICAL FAILURe’ oF

GoVeRnMent AssIstAnCe PRoGRAMs to deAL APPRoPRIAteLy

WItH tHe IssUe.”

jon stAnFoRd

56 CoMPAny PRoFILe

as the world’s sunniest continent, there is significant

potential for Australia to harness its vast solar resource.

While traditional fossil energy continues to play a crucial

role in the supply of energy to our nation, renewable energy

technologies, including solar photovoltaic (solar PV), will

increasingly contribute to meeting Australia’s growing

energy needs. With a policy and consumer shift towards

sustainable energy, an increasing number of companies are

selecting solar PV as part of their energy portfolio.

coMpleMenting existing technology

solar PV is a thoroughly proven and tested technology that

has been demonstrated at utility scale across the world.

europe, United states and Asia have more than 100

commissioned generating plants ranging from 10 to 80MW

and solar farms greater than 300MW are under construction.

With a world-leading solar resource, Australia is in a strong

position to leverage off this extensive overseas experience in

developing a significant market.

sUnteCH

Utility-scale solar PV provides predictable and premium

value peak load, which complements existing power

generation. due to broad solar resource availability, solar PV

plants can be located over a wide range of locations, thus

enabling generation capacity to be sized and positioned

where it is needed.

From construction to operation, solar PV farms boast a

low environmental impact and provide enhanced grid power

quality. In addition, utility-scale solar PV can be co-located

with wind generation to provide greater energy diversity.

these generation benefits position utility-scale solar PV for

significant growth in the next few years.

whAt we do

suntech manufactures and markets quality, high-output,

cost-effective and environmentally friendly solar products for

electric power applications. suntech is the world’s largest

manufacturer of crystalline silicon PV modules, supplying to

residential, commercial and utility-scale solar markets

around the world.

suntech was founded by dr Zhengrong shi, an Australian

citizen who studied PV at the University of new south Wales

(UnsW. Research and development (R&d) is the cornerstone

of suntech’s global success. Utilising technology developed

with UnsW, suntech is at the forefront of the rapid increases in

PV efficiency and price reduction.

through continued investment in technological

advancement, with over 450 R&d professionals globally,

including CsG solar in nsW, suntech drives improvement

in the delivery of high efficiency solar PV technology.

From construction to operation, solar PV farms

boast a low environmental impact, predictable

energy growth and provide enhanced grid

power quality.


sUnteCH

Solar farms are a natural extension of

Australia’s sustainable approach to

farming. By harvesting the power of

Australia’s solar resource, Suntech

commits to providing renewable energy

to future generations of Australians.

dependAble And bAnkAble technology

suntech works closely with its engineering, procurement and

construction (ePC) partners to deliver utility-scale solar PV

that provide performance certainty at a competitive price.

two significant projects over the past year include:

u thailand: the largest utility-scale solar PV plant in south

east Asia. the 44MW plant is owned by Bangchak

Petroleum Public Pty Ltd, with finance provided by the

Asian development Bank.

u Arizona, United states: suntech, in conjunction with ePC

Zachry Holdings, is developing and constructing a

200MW plant for sempra energy.

our vision

suntech is committed to delivering high quality, low cost

PV solutions worldwide. this vision can be realised through

focusing on technical leadership and applying groundbreaking

R&d. suntech is working daily to realise its vision of global

leadership in providing efficient solar solutions for a green future. www.suntech-power.com | see page 98 for details

CHAPteR 0758

CondItIons MAy BRIGHten FoR soLAR PoWeR

07


one of the biggest long-term issues for energy in

Australia is whether solar power can become a substantial

part of the electricity supply mix. the CsIRo, for one,

believes that it can and is forecasting that it can meet

30 per cent of national electricity supply – but that it will

take four decades to do so.

the current outlook is not overly optimistic despite

enthusiastic support for the technology from various parts of

the environmental movement. Realisation that the subsidies

granted to those taking up rooftop solar photovoltaics (PVs)

are an additional burden on the balance of household

consumers – to the tune in new south Wales, for example,

of an additional $1.5 billion over six years – has rubbed the

shine off the technology in a number of quarters.

the still larger difficulty facing the PV sector in winning

strategic energy policy approval was summed up by the

secretary of the treasury Martin Parkinson when he was

serving as secretary of the department of Climate Change.

“If all the households in Australia were to install a 1.5kW

PV panel overnight,” he said, “this would save in the order of

13 million tonnes of carbon dioxide in 2020, less than

one-tenth of the 5 per cent target for national abatement.

the upfront cost of this would be astronomical – in the order

of $200 billion. With more plausible implementation over

10 years, we might be able to lower this cost to close to

$100 billion; lower, but still hugely expensive abatement.”

to put this statement in context, the department of

Climate Change estimates that the federal government’s

renewable energy target (Ret) will achieve annual

greenhouse gas cuts of 29 million tonnes by 2020 and the

industry estimates that meeting the Ret through building

wind farms will cost between $20 billion and $25 billion

over the decade.

spending five to 10 times as much to achieve less than

half the emissions cuts is not exactly an advertisement for

solar PVs. In addition, the abatement benefit of universal

household solar, according to Martin Parkinson’s arithmetic,

would be less than can be achieved by simply closing down

Victoria’s Hazelwood power station at about 3–4 per cent of

the cost.

CHAPteR 0760

this does not stop the technology being publicly popular,

however, with the PV capacity in Australia being lifted to

500MW after some in the community rushed the offer by the

since-defeated Keneally government in new south Wales to

provide the country’s highest feed-in tariff, a scheme cut

back severely after 10 months and subsequently mired in

controversy as the o’Farrell government struggles to come

to terms with its less-than-shiny inheritance.

the PV sector, in the meantime, also has its eye on

another part of the market: industry managers point out that

it has made virtually no inroads into the commercial power

market to date – a segment that today accounts for more

than 22 per cent of total national demand. the added

attraction here is that some see the market share of

commercial customers rising towards 30 per cent by 2030.

Meanwhile, the federal government has resisted pressure

to establish a national feed-in tariff for household solar PVs.

existing schemes are all state and territory based.

overseas, however, life is much brighter for the sector.

According to the International energy Agency in its 2011

clean energy progress report, at least 17,000MW of solar

power was added to global capacity last year, 90 per cent of

it being installed in six countries (Germany, spain, japan, the

United states, Italy and Korea).

Back here, the Australian energy resource assessment

published by the federal government in 2010 is both

optimistic and pessimistic about the role of solar. on the

one hand, the assessment predicts that use of solar energy

to make electricity will grow at an annual average rate of

17.4 per cent, reaching 4,000 GWh a year by 2029–30.

However, the solar share of electricity generation by

2030, it forecasts, will be just 1 per cent. By comparison,

wind power then will hold 12 per cent, gas 37 per cent and

coal 43 per cent. Most of the renewable energy balance

will be provided by hydropower.

just how hard the solar industry will have to run to be a

major player in power supply by mid-century, as forecast by

the CsIRo, is only too evident from the energy resource

assessment, which was written by Geoscience Australia and the

Bureau of Agricultural & Resource economics and sciences.

they also note a paradox for the technology. Australia,

the assessment points out, is a world leader in providing

solar technologies, but the uptake domestically is low,

principally because of their high cost.

At present, wind projects are “bankable” with financiers

where end-user prices of around $100 per megawatt hour

are available. the renewable energy target purchase

premiums are supposed to deliver this value, but the Ret

market has actually been operating well below this level over

the past 12 to 18 months. solar PVs, however, today need a

market price more than double that of wind energy.

the well-known Australian tyranny of distance is another

issue for utility-scale developments. “In Australia,” the national

assessment says, “the best solar resources are commonly

distant from the electricity markets, especially the major urban

centres on the eastern seaboard. this poses a challenge for

developing new solar power plants as there needs to be a

balance between maximising the solar radiation and

minimising the costs of connectivity to the electricity grid.”

the large areas of land and optimum resource conditions

required by concentrating solar thermal technologies,

needed for utility-scale generation, it adds, are often only

available long distances from customers needing the energy.

the proponents of large scale solar generation are

expecting 2011 to be the year in which the federal

government gives their plans a strong boost, with

announcement of the initial new funding under its $1.5

billion solar Flagships program, which aims to see up to

four new solar power plants built, with a combined capacity

of up to 1000MW. the program aims to demonstrate solar

technologies at commercial scale and to accelerate the

uptake of solar power.

How far and how fast solar costs can be reduced remains


a matter of debate. Proponents of the technologies assert

that experience over the past three decades demonstrates

that solar costs fall about 20 per cent every time the industry

doubles production globally. they argue that continuing

improvements in manufacturing efficiency will continue to

drive down the cost of solar photovoltaic panels.

the real light on the hill for the technology, however,

seems more likely to lie in the development of utility-scale,

concentrating solar power (CsP), which the CsIRo says

has “tremendous potential” in Australia.

the agency acknowledges that CsP’s big current

drawback is its capital cost, but sees it as being capable

of becoming a low-cost technology in a carbon-constrained

environment, pointing to its ability to be combined with

fossil fuels and its prospects for being integrated with

thermal storage to provide renewable energy well in to

evening peak demand periods.

there are two basic types of concentrating solar

collectors: those that focus the sun’s energy along a

line and those which focus it at a point. the CsIRo says

it is possible to achieve much higher concentration ratios

with point focus collectors, although the required optical

precision is high. this enables the use of higher

temperatures to improve the efficiency of conversion

of solar thermal energy into electricity.

tHe ReAL LIGHt on tHe HILL FoR

tHe teCHnoLoGy, HoWeVeR,

seeMs MoRe LIKeLy to LIe In

tHe deVeLoPMent oF UtILIty-

sCALe, ConCentRAtInG soLAR

PoWeR (CsP), WHICH tHe

CsIRo sAys HAs ‘tReMendoUs

PotentIAL’ In AUstRALIA.”


below the solar industry has a lot of work to do if it is to become

a major player in the electricity industry. By 2030, it is expected to

account for just 1 per cent of electricity generation in Australia.

62 CoMPAny PRoFILe

toshiba is a world leader and innovator in pioneering

high technology, a diversified manufacturer and developer of

advanced electronic and electrical products spanning

electronic devices and components through to power

systems and infrastructure. the company was founded in

1875, and today operates a global network of more than 730

companies, with 204,000 employees worldwide and annual

sales surpassing 6.2 trillion yen ($Us75 billion).

toshiba aims to become one of the world’s foremost

eco-companies and is now accelerating its initiatives for

environmental management. toshiba companies around the

globe are establishing ‘toshiba eco style’, which targets the

greening of processes, products and technology and offers

optimal solutions for challenges faced all around the world.

In Australia and new Zealand, toshiba services the power

industry thorough its subsidiary, toshiba International

Corporation. since its inception in Australia in 1978, it has

installed over 15,000MW of generation capacity and over

12,000MVA of transformer capacity. It has established itself as

a market leader in the power sector providing generators,

turbines, transformers and associated power infrastructure for

this industry.

toshiba International Corporation has since added to its

capabilities by providing development, engineering and

service expertise to enable this sector to provide reliable

power to all residents of Australia and new Zealand. A recent

focus has been to develop the ‘green’ capabilities of the

company. Accordingly, toshiba has been significant in

providing hydro and geothermal projects, and has recently

entered the wind generation business through a strategic

alliance with Korea’s Unison.

hydroelectric power

toshiba is a world leader in single-stage pumped turbines,

high head Francis turbines and high speed generators. the

product range includes Francis, Kaplan and small hydro

turbines, generators, control systems, governors and

excitation systems. toshiba has recently commissioned

Bogong Power station, one of the largest recent hydro

developments in Australia.

tosHIBA: LeAdInG InnoVAtIon

“We will contribute to the creation of a

sustainable society through our environmentally

conscious processes, products and

technologies in order to become one of the

world’s foremost eco-companies.”

norio sasaki, Director, President and CEO, Toshiba Corporation


tosHIBA: LeAdInG InnoVAtIon

trAnsMission & distribution

toshiba’s range of equipment covers all transmission and

distribution applications, up to and exceeding 500kV, and

includes power and distribution transformers, gas insulated

transformers, gas insulated switchgear, static VAr

compensation, HVdC systems and surge arrestors.

toshiba’s capabilities include engineering, manufacturing,

installation, commissioning and service of a range of

power equipment. In the past five years toshiba has

installed over 12,000MVA of transformer capacity for

power utilities and various industries and provided the

majority of the transformers for the new 500kV network

upgrades within nsW.

geotherMAl power

toshiba is one of the world’s largest manufacturers of

generators and turbines used in geothermal power

applications. thanks to toshiba’s 50-plus years of

experience in this sector, these turbines have established

industry benchmarks in output power and performance

and have been awarded for their contribution to the world’s

geothermal developments. In the past year toshiba has

been awarded the contract to provide turbines for teMihi in

new Zealand, one of the largest geothermal developments

in the southern hemisphere.

therMAl power

toshiba is a world leader in high capacity, high efficiency

steam turbine generators for combined cycle & cogeneration

plants, and a world leading supplier of supercritical and

ultrasupercritical steam turbines. toshiba Group is working to

commercialise carbon dioxide capture technology to enable

next generation thermal power facilities to achieve zero-

emission power generation.

construction, engineering And service

toshiba International Corporation has turnkey engineering

and service capabilities based in Australia. In recent years it

has successfully completed numerous turnkey turbine and

generator overhaul and construction projects, as well as

transformer installation and service projects. this has

involved site management, safety and quality management

and provision of supervision and labour resources. the

division is expanding to meet market needs for maintaining

(and increasing) efficiency in existing power plants.

toshiba International Corporation continues to develop

its local engineering capability with the full support of the

engineering groups in toshiba japan. this development

includes building expertise in toshiba mechanical,

electrical and control equipment for all facets of the plant

operation and maintenance. With this growing expertise,

toshiba is offering customers expert engineering and

technical service during operation, maintenance planning

and during unit shutdowns.

www.toshiba.com.au | see page 98 for details

CHAPteR 864

PReMIeR stAte’s PRIMe sUPPLy CHALLenGe

08


poWerinG new south Wales is not just an issue for

the state’s more than three million residential and business

account holders, the largest block of customers in the

country. due to geography and load, nsW impacts on the

east coast market as a whole and its approach to energy

and decarbonisation policies affects the southern and

eastern seaboard.

As a result of the nsW privatisation debate of the past

two years (which is now the subject of a judicial inquiry

commissioned by the new o’Farrell government) the twin

issues of supply security and power prices are of concern

well beyond the state’s borders.

even the supposedly simple issue of when new

base-load generation needs to be commissioned in the

state is a matter of controversy, let alone the politically

charged question of what fuel should be used.

the owen Inquiry reported in 2007, on the basis of

projections of demand, that new base-load plant should

be commissioned in 2013–14; in other words, it should

already be under construction.

However, the impact of the global financial crisis

and other issues has seen this target date pushed out to

2015–16,or even a little later according to data from the

Australian energy Market operator, which is responsible

for system security on the east coast, and even this is

disputed by the environmental movement.

nonetheless, there are a number of significant facts

about nsW’s electricity environment that are not in dispute.

the state-owned transmission business, transGrid, points

out that a half century of demand growth has been driven

primarily by the rising population and the marked increase

in electricity consumption per person, plus the sharp, and

still-rising, spike in peak power needs.

the nsW population has more than doubled since

the mid-1950s to over 7 million people and is heading for

7.6 million by the decade’s end. According to the Australian

Bureau of statistics, it should be nearly 9 million by 2035.

the increase in population has been accompanied

by a slightly higher rate of growth in the number of

households, thanks to a national decrease in the number

CHAPteR 866

of people per home. today, about a third of nsW power

consumption occurs in houses, and the common residential

requirement for lights, refrigeration, television, cooking,

water heating and space heating and cooling underlies the

demand trend.

As real incomes – that is their value in inflation-adjusted

terms – continue to rise, per capita power demand can be

expected to increase with them, even as less affluent

families struggle to pay their bills.

the trend is dramatically underlined by one set of

statistics: in 1996–97, nsW system energy demands

stood at 58,000 GWh, with a peak demand of 10,500 MW.

By 2008–09, system energy requirements had risen to

75,800GWh and peak demand exceeded 14,500MW.

the industry’s current load forecasts are for system

energy needs to be 86,000GWh annually in 2018-19

and peak demand to be 17,500MW.

How far moves to drive more efficient use of household

electricity supply will actually impact on demand is far more

than a $64 million question. Factors in play this decade will

include persistent increases in power bills, the impact of

more stringent building regulations, requirements for higher

efficiency-rated appliances and campaigns to make the

public more aware of the need for energy conservation.

one of the major changes impacting on networks is

the switch in the state’s peak demand period. Until the

late 1980s summer peaks in nsW were over-shadowed

by maximum supply requirements in winter, spring

and autumn.

two developments have changed this. one was the

introduction of natural gas, fuelled by supply from Bass

strait and the Cooper Basin in south Australia, as an

alternative for household water and space heating, and

for cooking. notoriously, air-conditioning in the past few

years has become the other. the reduction in its cost as

community wealth has risen has led to its use in about

eight homes in 10.

nsW has become a summer peak state, which has

had consequences for the networks. In addition to a sharp

increase in the construction of expensive assets that are

required for only a few weeks, at most, a year, a large

part of the existing system was not designed to be under

maximum pressure in the hottest months of the year.

According to the Australian energy Regulator, the

need to meet peak demand, to service growing overall

consumption and to replace rapidly ageing assets will

cause network capital outlays in nsW to virtually double

during each five-year period from 2000 to 2015, with the

2010–15 outlay reaching almost $15 billion.

Combined with political efforts to suppress the impact

of supply costs on residential consumers in nsW, this trend

has had a “slow tsunami” effect, hardly discernible to the

community and the media through most of the past decade,

but crashing in to their consciousness in the past two to

three years and engendering a political backlash.

the political problem is that, while the impact of the

network charge is now unavoidable, power prices are

increasingly exposed in nsW to the effects of national and

state decarbonisation policy, the expected shift to higher-

priced gas for generation and the expiry by 2017 of the existing

very-low-priced coal contracts for the state-owned generators.

one very public example of the power policy difficulties

posed for politicians has been the Keneally government’s

ill-fated move in 2010 to promote carbon abatement through

the most subsidised rooftop solar power scheme for

householders in Australia. Introduced in january last year,

it was rushed by homeowners to such an extent that the

government moved to slash the feed-in-tariff by two-thirds

in october 2010 and to cap the capacity that could be

taken up. While this reduced the scheme’s flow-on cost

to householders by $2.5 billion between 2010 and 2016,

it still left them with an extra $1.5 billion in charges.

According to dr Paul simshauser, chief economist of

AGL energy and finance professor at the Griffith University

school of Business, this situation should lead to end-user

power bills in nsW (and queensland) virtually doubling

between 2008 and 2015.

the factors impacting on nsW’s power policy

environment are many. two that require close attention

in the current term of government are settling the issues

of ownership of government-owned generation and/or

its energy output, and overseeing development of the

necessary base-load capacity to secure supply until

2020 and beyond.

Following the Keneally government’s privatisation

process of 2009–11, the retail divisions of the trio of

taxpayer-owned distribution businesses have been sold

to origin energy and tRUenergy, along with all the

production from eraring energy and a large part of the

output of delta electricity, a process so controversial that

most of the directors of the two “gencos” resigned rather

than sign off on the “gen-trader” deals.


Macquarie Generation’s Bayswater power

station is one of the two largest electricity

supply centres in Australia, producing enough

energy each year for two million homes.

CHAPteR tItLe68

the process has left the state still owning all the

delta and eraring assets as well as the power stations and

production of Macquarie Generation in the Hunter Valley.

It has also left the new state government with the

ongoing issue of deciding which form of base-load

generation development it should approve in order to

meet the impending demand/supply gap, a situation

that may be exacerbated if, as consultants have predicted,

the available imports of power from interstate are reduced

in the second half of the decade by the requirements of

Victoria and queensland.

the mix of generating plant in any system needs to

be balanced between base-load and peaking plants,

the former being units with relatively low fuel costs able

to produce power continuously through most days of the

year, and the latter having relatively high fuel costs but able

to be brought in to supply at short, sometimes only a few

minutes’, notice.

As electricity use in nsW has risen over the past

10 years by an average of 1310 GWh annually, state

reliance on net imports of power has increased to 7 per cent

of its total consumption. However, energy available from

queensland over the qnI interconnector has been in

decline for three years, reflecting higher demand in that

state, and the contribution from Victoria might even become

negative later this decade as supply tightens south of the

Murray River.

judging by the proposals now on the table in nsW,

new base-load needs will be met by a combination of

gas developments.

Macquarie Generation and delta electricity have

both put forward proposals – to be fulfilled by the

private sector under existing government policy – for the

development of 2000–2400MW of combined cycle gas

units in 400MW tranches.

the businesses each nominated the construction of two

1000MW high-efficiency conventional coal-fired plants as

their preferred option, but there is widespread belief that,

under the decarbonisation environment, these projects are

neither “bankable” nor likely to win political support.

A competing gas-fired proposal has been put forward

by tRUenergy, which received environmental planning

approval in early 2011 to build a second base-load gas

plant at its tallawarra site on the nsW south coast, a move

the company says will depend significantly on national

decisions about carbon pricing.

While the debate continues over fossil-fuelled

developments, the federal government’s renewable

energy target is seen as driving a number of new wind

farm projects in nsW.

Fitch Ratings, in its 2011 assessment of power

developments in Australia, suggests that 923MW of the

5000MW of wind farms it expect to see built on the east

coast between 2011 and 2015 will be constructed in nsW

as part of the $10 billion worth of generation investment

it forecasts for the state in the next five years if a national

carbon price is introduced.

over-arching all this is the hugely important issue

of ensuring there is adequate generation to cover plant

failures, not a minor factor in a state where an increasingly

large amount of capacity will be more than 40 years old

by mid-decade.

Consultants AeCoM, in undertaking the environmental

assessment for the proposed Bayswater B options put

forward by Macquarie Generation, have pointed out that, if

new base-load capacity is not commissioned in ample time

to cope with rising demand, the existing state-owned plants

will be required to sustain a 17 per cent increase later in the

decade above their 2008–09 levels – roughly production of

an extra 10,000GWh a year.

“Given that the oldest of these plants will be 45 by

then,” says AeCoM, “this has implications for maintaining

supply reliability – which may not be maintained on an

ongoing basis.”

As transGrid puts it, “Internationally, a simply

understood and often accepted minimum generation

reserve standard (which includes generation local to a

system and interconnection capability with adjoining

systems) is 15 per cent.”

What this means is that, if the nsW maximum demand by

the decade’s end is 20,000MW – compared with 14,500MW

today – then 23,000MW of generation needs to be available

within the state or be readily accessible over its borders.

Lying beyond all these issues is another of substantial

magnitude: the impact of national decarbonisation policy

on nsW generation. this poses three big questions:

1. Which state coal-burning units – in total they consume

some 30 million tonnes of black coal a year – may be

required to shut operations when a carbon price

reaches the high levels required to drive national

abatement towards the 2020 target of 160 million

tonnes a year?


2. How, and at what cost, can the surviving coal-burning

generators be retrofitted for carbon capture and

sequestration, assuming the technology becomes

commercially available, and where would the tens of

millions of tonnes of liquid carbon dioxide captured

be buried?

3. Will even future CCGt plants be allowed to be built

without at least being carbon capture ready and what will

this requirement mean for both their commissioning time

scales and the cost of their supply?

the problem for government in nsW, and in many cases

for the federal government, is that there are no easy answers

to any of these issues. Because they have not been

addressed in the past decade, the policy solutions to

them are becoming more urgent.

Meanwhile, consumer angst about the cost of their

electricity supplies is continuing to reach new heights, not

least because the arrival of really cold winters (like that of

2010) as tariffs rise on 1 july each year means that the price

shock in october in terms of quarter-on-quarter bill rises is

greater each time, attracting ever stronger media attention

and raising the temperature of political debate.

the late 2010 “q-on-q” price difference in nsW, Macquarie

Bank reports, was 30 per cent for many households, leading

politicians campaigning in the March 2011 state election to

describe public anger over power bills as “white hot.”

InteRnAtIonALLy, A sIMPLy UndeRstood And oFten ACCePted

MInIMUM GeneRAtIon ReseRVe stAndARd Is 15 PeR Cent.”

tRAnsGRId

70 CoMPAny PRoFILe

a reLiabLe supply of electricity is essential for the

growth and economic prosperity of Australia.

transGrid owns and manages one of the largest high

voltage transmission networks in the country, connecting

generators, distributors and major end users in nsW

and the ACt.

transGrid’s transmission lines stretch for

12,600 kilometres along the nsW east coast, southern

and western borders. Its high voltage network transports

electricity over hundreds of kilometres safely and

efficiently, interconnecting with the queensland

and Victorian grids.

With over 91 substations and switching stations,

transGrid delivers electricity to more than three million

households and businesses. As the backbone of the

national electricity Market, transGrid’s network facilitates

interstate energy trading transporting over 75,100GWh of

energy annually.

our vision And Mission

As a leading electricity transmission network service

provider, transGrid is committed to safety, the community

and commercial success.

transGrid’s core function is to provide safe, reliable and

efficient transmission services to nsW, the ACt and the

national electricity Market. transGrid is built on a strong

set of core values. Its work environment promotes a culture

which is committed, collaborative, caring and enterprising

– excellence in all we do.

With more than 1000 employees spread across nsW,

transGrid understands the knowledge and experience of

its people play a lead role in maintaining a reliable supply

of electricity for nsW.

building for the future

transGrid has two major services:

u providing a reliable transmission system for customers;

and

u enabling access to the market for generators across

the national electricity Market.

tRAnsGRId

“A reliable supply of electricity is

essential for the growth and economic

prosperity of Australia.”

Between 2010 and 2014 transGrid will undertake more

than 88 projects across nsW as part of a $2.6 billion capital

works program.

this multi-billion dollar capital works program is needed

to ensure the transmission network continues to deliver

secure, reliable and safe supply of electricity. there is a

strong focus on capital efficiency and the growth in

transmission capacity supports electricity sourcing from the

lowest cost generators.

transGrid is also undertaking a major refurbishment

and replacement of ageing assets to ensure efficient supply

to its customers.

since 2008, transGrid has connected two new gas fired

and two new wind powered generation developments and

has facilitated numerous upgrades to existing generators.

negotiations are currently underway to connect up to several

renewable energy sources such as wind and solar.


tRAnsGRId

leAders in deMAnd MAnAgeMent

transGrid recently implemented a 350MW demand

management solution for the newcastle, sydney and

Wollongong areas during the summer of 2008/09 – the largest

of its type ever delivered in the national electricity Market.

subsequently, more than $14 million was returned to

nsW customers by transGrid on completion of the project.

conserving the environMent

GreenGrid is an award winning 12-year partnership between

transGrid and Greening Australia. the partnership has

rehabilitated an area the size of 2,000 football fields in the

Murrumbidgee and Lachlan catchments of new south Wales.

In 2010 GreenGrid’s Boorowa River Recovery program was

a finalist in the 2010 United nations Association of Australia

World environment Awards and national Landcare awards.

www.transgrid.com.au | see page 98 for details

CHAPteR 972

neW eneRGy VIsIon FoR tHe West

09


Western austraLia, says the state’s Minister

for energy Peter Collier, is unique in the wealth and

diversity of its energy resources. It is unique in its

distance from other energy networks, too. “From an

energy perspective, it is an island state.”

As a rule-of-thumb, more than 85 per cent of Australia’s

electricity consumption (9 million customers) is on the east

coast, with 10 per cent (1 million customers) in the

southwest corner of WA, thousands of kilometres away.

Unlike the east coast energy market, Collier points

out, primary energy supply, and the way energy is used,

in the West is determined largely by choices state

policymakers and the community alone can make.

despite this, Collier says, Western Australia lacks

a cohesive, long-term energy plan. the state’s last

comprehensive energy policy was developed in 1979.

the discussion paper the coalition government of

Premier Colin Barnett released in december 2009 paints

the scene like this: “over the past 20 years, the WA

energy industry has played a major role in driving state

economic development while contributing to the

community’s high standard of living. energy consumption

has doubled in this time. How we choose to meet our

energy needs over the next 20 years is a critical issue.”

Underpinning the problem is an expected increase in

the state’s population from today’s 2.2 million to around

2.8 million in two decades’ time.

It is now trying to bridge the policy gap by delivering

a strategic roadmap out to the year 2031 and this is not

an exercise that can be accomplished quickly. the

government’s energy 2031 directions paper was

published in March and it will be the end of 2011 before

consultation about its proposed directions is completed.

Collier says the government proposes a series of

strategies structured around six major themes, ranging

from security of supply to provision of efficient

infrastructure, improved efficiency for using energy,

including effective markets and delivering universal

access to energy in a state notable for having the majority

of its population and commerce in the southwest corner

CHAPteR 974

and the bulk of its huge mineral development

sprawled across the north of the world’s second largest

sub-national jurisdictions.

“our vision for the next two decades,” he adds, “paints

a picture of the energy system that will meet strategic goals

of secure energy, reliable energy, competitive energy and

cleaner energy.”

In a national environment where decarbonisation is high

on the agenda, WA is confronted by a situation where fossil

fuels meet 95 per cent of its overall energy requirements

today and are expected, on present trends, to be the source

of 92 per cent in 20 years’ time.

Being far removed from the east coast’s major brown

and black coalfields has meant the state has come to rely

on natural gas to fuel a large part of its power generation.

WA consumes more gas each year than new south Wales,

the ACt and queensland combined.

Gas meets 60 per cent of the state’s electricity output

today and is forecast to provide 68 per cent of projected

increases in capacity. Fortunately, WA is adjacent to one

of the world’s great offshore gas provinces.

Unfortunately, the dominant focus on exporting the gas as

LnG has exposed domestic customers to world parity prices,

substantially higher than for gas consumers over east. Gas cost

is the greatest bone of contention. Unlike the east coast, where

at least the wholesale price of energy is not yet adding to the

end-user price problems created by massive network outlays,

in the West there are rising customer concerns about the impact

of gas costs on power bills and where they may be heading.

oUR VIsIon FoR tHe neXt tWo

deCAdes WILL Meet stRAteGIC

GoALs oF seCURe eneRGy,

ReLIABLe eneRGy, CoMPetItIVe

eneRGy And CLeAneR eneRGy.”

PeteR CoLLIeR, WA eneRGy MInIsteR


the situation has fuelled an epic verbal duel between

the domGas Alliance, representing large industrial consumers,

and the Australian Petroleum exploration & Production

Association, representing suppliers, over the past five years.

the arguments are lengthy and complex, but basically

evolve around the user group claiming that period of domestic

undersupply leading to the price spikes has been contrived

and that major producers are “warehousing” fields for potential

developments as LnG projects. Meanwhile, the suppliers are

responding that the WA market is “healthy” and “functional”,

arguing that recent price rises have generated a supply

response that, over time, will alleviate pressures by bringing

new supplies to market without regulatory intervention.

the concern, says dr Mike nahan, Chairman of the WA

Legislative Assembly economics and Industry standing

committee, which has been investigating the issue, is that

“high gas prices are seriously undermining the state’s

competitiveness and imposing high and excessive costs

on businesses and households”.

In addition, in a region where extreme summer weather is

a major lifestyle factor, peak demand, which is powering along

on the back of installation of air-conditioning in eight out of

10 homes, is also imposing considerable demand for network

capital outlays for assets little used (10 per cent of the system

is called upon just 50 hours a year), but considered absolutely

essential in old-style “century” heat conditions.

Western Power, the government-owned networks

business, estimates that peak power requirements could

increase 90 per cent over the next 20 years, necessitating

some $7.5 billion in transmission expenditure and $14 billion

in distribution outlays. this would represent expenditure of

$3 million a day every day for two decades.

Residential demand for electricity in the West has risen

sharply since the early 1990s, when it averaged about 4500 kWh

a year. now the southwest household average is about

6250kWh annually and climbing.

Household consumption in the north of the state is higher

still, now averaging 8500kWh annually, driven by high

air-conditioning loads.

left In the West, like eastern states, transmission is as vital to

power supply security as generation.

CHAPteR tItLe76

just to add spice to this witch’s brew of problems,

development of WA’s immense mining resources wealth in

the northwest and mid-west regions, according to the

Chamber of Mines and energy, could require supply by the

end of this decade of as much electricity as is used today

in the southwest interconnected system.

the Independent Market operator believes some

7400 MW of generation capacity will be needed in the

southwest by 2021, requiring commissioning of 2275MW of

new plant, while synergy, the state-owned energy retailer,

sees a requirement for 6000MW in new capacity over 20

years at a cost of $12 billion. the capital outlay will also

need to include a substantial amount for augmenting the

transmission system to connect new generation power.

A complicating factor is who gets to build the new

generation capacity – the private sector or the state-owned

generator, Verve energy. Courtesy of decade-old reforms to

the Western Australian market, Verve is limited to owning

3000MW, 60 per cent of available capacity. It would like to

build an extra 2000MW of plant to meet rising demand.

scattered still further afield in an area the size of

India are 29 little stand-alone power systems serving

communities that live unimaginably remote lifestyles by

east coast standards.

rIght some 7400 megawatts of additional generation capacity

will be needed.in southwest Wastern Australia by 2021.

As We MoVe FoRWARd,

It Is IMPoRtAnt tHAt We

PUt In PLACe tHe PoLICy,

ReGULAtoRy And InCentIVe

MeCHAnIsMs tHAt WILL

ensURe tHe eneRGy MARKet

WILL Be dynAMIC, HIGHLy

CoMPetItIVe And eFFICIent.

PeteR CoLLIeR, WA eneRGy MInIsteR


since these comments were made, the state

government has approved a further 5 per cent increase in

power prices from mid-2011 and the budget has estimated

that further rises of 34 per cent will be needed by 2014–15.

state treasurer Christian Porter said the government had

to take a difficult and unpopular decision to reverse years

of stable power prices and to move them “at least within

sight of the costs of generation and delivery”.

engineers Australia, when it produced its five-year

assessment of the state’s infrastructure in 2010, warned

that current end-user tariffs still did not provide true

cost-reflective pricing and urged that prices be raised

along a glide path that reflected broad social and

economic considerations.

While recognising recent efforts to expand generation

and the transmission network, engineers Australia urged

reform of the state’s wholesale electricity market and

pointed to the lack of transmission capacity in many urban

and regional areas, the ageing of assets and reliability

concerns in regional areas.

the government also proposes to broaden electricity

reliability standards to recognise peak constraints on the

power system – and it will consider incorporating direct

load control capability in building design standards.

down this path lies more “power pain” and “electric

shocks” – in the jargon of the media in Australia – and the

government speaks plainly about the issue: “the price of

electricity, gas and transport fuels will increase substantially

over coming decades. this increase will flow through to

almost all goods and services, potentially placing financial

pressure on people with low or fixed incomes.”

It says: “While seeking to ensure all consumers can

afford essential energy services, the government also

has to provide energy systems that are safe, secure and

reliable. Revenue needs to be at an adequate level to

operate the supply systems and to support investment in

maintenance, replacement and enhancement as needed.”

In this respect, the West is not isolated from governments

on the east coast at all.

energy Minister Peter Collier sums up the challenge

for his government and all the others like this: “our future

involves larger population and economic growth serviced

by smarter energy systems. As we move forward, it is

important that we put in place the policy, regulatory and

incentive mechanisms that will ensure the energy market

will be dynamic, highly competitive and efficient.”

Looking at the WA situation, the Committee for the economic

development of Australia has commented: “the energy

infrastructure (of the state) has been neglected for far too long.

For decades there was insufficient investment in generation

capacity. As a consequence, the current economic expansion

is challenging WA’s capacity to deliver adequate, reliable energy

throughout the state.

“Furthermore, the move towards better cost-reflective pricing

has resulted in the cost of energy rising by 42.5 per cent in two

years, after tariffs for residential customers had not increased

since 1997–98, during which time the cost of supplying electricity

had increased dramatically.”

78 CoMPAny PRoFILe

the university of Adelaide’s Institute for Mineral and

energy Resources is developing technology and

understanding that will improve the efficient and sustainable

use of the world’s mineral and energy resources for the

benefit of society, industry and the environment. the Institute

is focusing on the link between mineral production and

energy consumption and aims to be the premier research

and educational facility for the mineral and energy resources

sectors in the Asia-Pacific region.

Mineral and energy resources expansion in south

Australia is anticipated to be the single most significant

driver of economic development in this state for at least

the next two generations. these sectors will have to

address many global challenges, including real energy

costs increasing markedly as the world competes for energy

and water constraints and associated cost rises which will

continue to impact on the community. Local and international

communities are also pushing for constraints on carbon

environmental regulation and sustainability issues be

addressed. the increasing scale and complexity of

mineral and energy resource developments are raising

the risk of environmental damage and capital cost overruns.

the Institute for Mineral and energy Resources aims

to address these global challenges through advancing

the science and technology needed to enhance the

prospectivity, discovery and extraction of mineral and energy

resources and to lower the cost and increase the efficiency

of cleaner energy generation, storage, transmission and

utilisation of energy. World-class researchers in the Institute,

working in multidisciplinary approaches spanning

engineering, science, economics, law and social science,

will enhance the delivery of innovative research outcomes

and its impact on society

the major impact of the Institute’s research and

development activities will be to maximise the social,

economic and environmental benefits of the minerals and

energy industries across regions, states, national and

international communities.

InstItUte FoR MIneRAL And eneRGy ResoURCes

Institute for Mineral and Energy Resources

“Mineral and energy resources expansion in

South Australia is anticipated to be the single

most significant driver of economic

development in this State for at least the next

two generations.”

www.adelaide.edu.au/imer/ | see page 99 for details


Western poWer is a state government owned

corporation that builds, maintains and operates the electricity

network known as the south West Interconnected system

(sWIs). We ensure the sWIs delivers a safe, secure and reliable

electricity supply to almost one million connected customers.

the energy industry is undergoing a revolutionary

change and with that comes challenges and opportunities.

In order to navigate our way through this dynamic

environment, our resource dependent economy needs a

long-term, visionary energy policy. that is why we are keen

supporters of the Western Australian Government’s strategic

energy Initiative: energy2031.

Central to Western Power’s input into the initiative is our

belief in the importance of achieving cost reflectivity in

electricity pricing and long-term infrastructure planning. We

also believe it is crucial that, as a society we become more

efficient in the way we use energy. that is why we have

invested in energy efficiency education, are part of the Future

energy Alliance and are the lead in the federal government’s

Perth solar City program.

WesteRn PoWeR’s sMARteR eneRGy FUtURe

the seI promotes a ‘smarter energy future for

Western Australians’. As the provider of network services

for electricity customers throughout the greater south

west, Western Power is ready to play a key role in helping

achieve this vision.

Western Power believes that it is crucial that we as a

society become more efficient in the way we use energy

and, through our smart grid program, we are exploring

ways to provide consumers with the tools they need to

actively manage their electricity consumption.

details of Western Power’s vision for Western

Australia’s energy future can be found in the ‘About Us’

section of our website.

“The infrastructure Western Power builds

today will serve the community for the

next 50 years.”

www.westernpower.com.au | see page 99 for details

CHAPteR 1080

HoW BIG A Boon Is GAs FoR GeneRAtIon?

10


is this the golden age for gas supply domestically in

Australia at last? this is the key question tantalising, and

perhaps haunting, the gas industry as the energy business

moves in to a new decade.

origin energy Managing director Grant King summed

up the promise and the problem when he addressed the

50th anniversary conference of the Australian Petroleum

Production & exploration Association in Brisbane. “A

golden age for domestic gas consumption was being

predicted in the late 1990s,” he said, “but by 2002 it was

clear these projections would not be met. the opportunity

for gas had been lost to coal, primarily new coal-fired

generation in queensland.”

At about the same time the federal government was

issuing its national energy resource assessment, the

essential background for an energy white paper that still

has not been published.

In it, the government projected that the rise of gas as

a power supply fuel would average 5 per cent a year from

2007–08 to 2029–30 as coal averaged a decline of

0.6 per cent annually, delivering a situation where

coal-burning plant had fallen back from today’s delivery

of 200,000 gigawatt hours a year to 150,000GWh, while

annual gas-powered electricity production had risen to

a heady 135,000GWh.

this scenario sees the gas sector’s share of

generation rising from 19 per cent today to 37 per cent

and coal’s share falling back to under half.

this situation is mirrored in the number of gas-fired

generation developments currently proposed for

Australia. they represent 60 per cent of the projects at

present either under way, in a detailed planning phase

or being investigated.

the critical issue that will decide whether a “golden

age” for gas domestically is now really emerging will

be energy policy, especially the imposition of a carbon

price and the establishment of a cap on allowable

emissions per unit of production for future power

stations, a measure now being investigated by the

federal government.

CHAPteR 1082

King says a carbon price in the range of $20 to $40 a

tonne will drive substantial fuel substitution for base-load

generation, reducing the emission intensity of the electricity

industry at the lowest possible cost.

one of the major advocates for the dash for gas is

santos Managing director david Knox, who lauds it as “an

immediate, proven way to transform power generation away

from high-carbon coal to low-carbon carbon gas, buying

time for advances in renewable technologies”.

Knox sees gas generation as a “natural partner” to

support the integration of intermittent renewable generation

with the power grid.

In a series of commentaries and speeches on the

issue over two years, he has highlighted three key features

that underwrite the “compelling potential” of the fuel.

It offers low intensity in carbon, water use and land

requirements, with only 15 hectares required to build a

1000MW plant that requires less than a third of the water

needed for cooling by an equivalent capacity coal-burning

unit. It has a large resource base close to demand points,

linked by an extensive and growing pipeline network. Gas

generation is a proven technology across the spectrum

of base-load, intermediate and peaking supply.

Knox argues that power generation abatement is

critical to delivering Australia’s decarbonisation policies.

It accounts for 35 per cent of total national emissions,

he points out, with more than 80 per cent of electricity

generated from coal. “If we are serious about addressing

climate change, we must lower the carbon intensity of

base-load generation.”


He is dismissive of the role of renewable energy in

meeting base-load power requirements. “We all share the

ambition of zero-emission base-load,” he says, “but it is

simply not available in Australia and it will be many years,

possibly decades, before there is sufficient commercial

confidence about such a technology, its affordability and its

widespread deployment.”

As for the nuclear option, Knox says: “Right now, it is

illegal in this country – and I don’t know anyone who seriously

thinks that this is going to change any time soon or that we are

going to have nuclear power in our energy grid within the next

decade at the very minimum.”

He also rejects the notion that there may not be adequate

reserves of gas to fuel both a major change in power

generation domestically and the huge expansion of LnG

exports now on the drawing boards.

“Australia,” he told one conference, “is blessed with

enormous gas potential, one that will take us well into the

next century and probably beyond that. there is ample

and affordable natural gas in Australia to meet both growing

domestic and export requirements.”

Knox and the industry point to the fact that east Australia’s

known gas reserves have tripled in 10 years, with total reserve

life extended from 2015 to 2060, and this before full evaluation

of the large new south Wales coal seam methane deposits or

the “tight gas” resources in the Cooper, where conventional

reserves have been in a decline for a number of years.

What happens in nsW in the next decade will be important

to the gas sector’s domestic future. At present there are six

gas-fired power stations in the state, with a combined capacity

of 2103MW. there are 14 gas-based projects proposed for

development in the state. the number of them that are

commissioned to deliver base-load will have a big impact

on east coast gas demand.

In nsW and nationally, the inter-relationship between gas

generation and wind power tends to be controversial. some in

the wind sector and in the environmental movement argue that

too much emphasis is placed on the variability of wind power

and that large-scale development of the technology

will overcome a lot of the problem.

APPeA, on the other hand, points to modelling that, says

deputy Chief executive Mark McCallum, shows that every

5000MW of wind capacity will require approximately 2100MW

of gas generation to ensure reliability of supply.

Looking to the long term, McCallum suggests that,

even allowing for a doubling in consumption between

now and 2050, a combination of the renewable energy

target (which requires 20 per cent of demand to be met

from wind and other zero-emission technologies) and

gas generation will meet power needs with emissions

20 per cent below where they are today.

Knox cites south Australia, where gas already

provides half the power supply, as an example of what

can be achieved. “If we replace south Australia’s two

ageing coal-fired power stations in the state’s north with

gas, upgrade the existing gas generation fleet and meet

the state government’s ambition to achieve a 33 per cent

renewable energy target by 2020, south Australia’s

emissions intensity for power generation will halve, dropping

well below 0.4 tonnes of carbon dioxide per megawatt hour.”

this intensity would be half to two-thirds the level of

emissions from conventional power stations fuelled by

black and brown coal.

Knox believes similar reductions can be achieved across

Australia if coal-fired power stations are replaced by gas plants

as they reach the end of the normal working life and a greater

role is provided for renewable generation. seventy per cent

of the coal-burning plants are more than 20 years old.

“of course, it is easier for south Australia than the

coal states in the east,” he says, “but the fact remains that

the transition to a lower-carbon Australia can only take place

with a greater role for gas in the fuel mix.”

Knox argues that timing is vital in resolving policy affecting

electricity production. “We are rapidly approaching the point,”

he argues, “where critical decisions must be made on the

future direction of Australian power generation.”

left delta electricity’s Colongra Power station is a 667MW gas

fired, low emission power station that can be turned on almost

immediately to respond to spikes in electricity demand.

CHAPteR 1184

InteRstAte eneRGy tRAdInG on tHe RIse

11


Go back eight years and the only wind turbine in south

Australia was a 150KW unit in the outback near Coober

Pedy. today the state has 1000MW of wind capacity

following a $2 billion surge in investment and it has

another 1000MW of projects in various stages of planning.

“If south Australia was a nation state,” boasts its

Premier, Mike Rann, “it would rank second in the world

behind denmark for the amount of wind energy it hosts as

a proportion of its total electricity generation.” note the

careful use of that word “hosts”.

While denmark is famous for the amount of wind capacity

on its soil, and for the manufacturing industry with world reach

that it has built on the back of this investment, most of the power

generated by the turbines is actually sold across its border to

other countries. Meanwhile, the danes’ needs are met by

domestic coal-burning plant and by importing hydro-power and

nuclear energy from other scandinavian states.

the key to the danish experience is the strong

scandinavian transmission system and a coherent

wholesale energy market for the region.

In similar vein, when Premier Rann adopts a target for

large-scale further investment in wind farms in south Australia,

he has his eye on other states as a market for the product.

“south Australia,” says Rann, “has the potential to

contribute 30 per cent of the entire nation’s renewable

energy target for 2020. our state can be a major source

of green power for the other eastern states.”

His state, he adds, has only 8 per cent of Australia’s

population, but it has “done incredibly well” in attracting

nearly 50 per cent of the nation’s grid-connected wind

power, about 30 per cent of its solar power and more

than 90 per cent of investment in “hot rock” geothermal

development, still at the embryonic stage.

According to Fitch Ratings, the state can expect to

attract more than a fifth of east coast wind investment

between now and 2015, representing a need for investors

to raise more than $2 billion in debt and equity.

Central to Rann’s grand plan for wind is one of

the world’s best resources for the technology, the

eyre Peninsula.

CHAPteR 1186

this triangular-shaped area of 45,000 square kilometres,

a similar size to tasmania, is bounded in the east by spencer

Gulf, in the west by the Great Australian Bight and in the north

by the Gawler Ranges.

It has strong and consistent wind speeds – with many

areas recording better than eight metres a second, considered

excellent for wind generation – and extensive areas suitable for

large-scale developments. the region is home to only 55,000

people, most of whom live in Port Augusta, Port Lincoln,

Whyalla and Ceduna.

A study by a consortium of Macquarie Capital Advisers

(a division of Macquarie Bank), engineers WorleyParsons and

law firm Baker & McKenzie has concluded that the area has

the potential for development over time of 10,000MW of wind

capacity, more than the total requirement of the current

renewable energy target for the whole of Australia.

the study has been supported by four wind developers

with interests in the area: Acciona energy, transfield

services, origin energy and Pacific Hydro, who have told

the Australian energy Market Commission, which is

examining a new mechanism to encourage scale-efficient

network extensions on the east coast, that the “green grid”

concept will not be viable under the current market

framework because it does not allow investors with varying

project timelines the effective opportunity to co-ordinate

their activities to build transmission infrastructure of an

efficient size.

the big drawback for the eyre Peninsula for power supply

purposes is that it is situated on the far western fringe of the

“national” electricity market – the east coast grid that delivers

80 per cent of Australia’s power needs – and at present has a

meagre transmission link with even the rest of its own state.


the “sA Green Grid” consortium wants to start

exploiting the peninsula’s wind potential by obtaining

transmission system upgrades within south Australia and

on the link to Heywood in Victoria, opening the way

for development of 2000Mw of wind capacity. the

second stage would require a link from near Port

Augusta in to new south Wales, with a second 2000MW

of wind projects.

just the first stage, according to the consortium, in theory

would be large enough in times of high wind to meet the

state’s entire average electricity needs – but in practice a

large amount of the energy would flow to Victoria.

the first part of “Green Grid,” the consortium claims,

will “significantly modernise” the southern power market,

increasing network capacity for wind power from the present

900MW towards 4000MW, and enabling the south Australian

plants to drive up their contribution to the renewable energy

target from its existing 5.7 per cent to 30 per cent.

the second phase, it says, will provide large volumes

of renewable energy to the northern part of the national

energy Market, which has less favourable wind conditions,

and will provide considerable assistance to the development

of remote base-load geothermal power.

the jokers in this pack, of course, are cost and the

transmission development rules, which federal and state

governments and the industry are working to recast. the

consortium acknowledges that the first stage proposal is

unlikely to pass the present regulatory test for new transmission

developments – which favours network upgrades for generation

located close to the existing grid and to load centres.

the costs, to quote a well-known economist, are

“non-trivial” – estimated at $5.8 billion for the first stage,

of which about $1.4 billion would be transmission

capital outlays.

Apart from Mike Rann’s “green hub” ambitions, there is

another strong motive for the transmission developments

that would flow from the eyre Peninsula project. the area

is perceived by the mining industry to be a “mini Midwest”,

a reference to the West Australian iron province. this is an

area that in 1990s was seen as unrealistically ambitious in

its push to be a major minerals exporter, but is now a key

new iron ore province. the mining industry believes that

25 million tonnes a year of iron could be being exported

from the eyre Peninsula in the second half of this decade.

two of the big problems are the inadequacy of the

peninsula’s 132kV electricity network and the lack of

access to several hundred megawatts of base-load

power. Another is the lack of a large water supply for

ore processing.

the answer to the third issue is seen to be a

substantial desalination project, another large-scale

user of electricity which elsewhere in Australia is calling

on wind power to meets its needs.

Premier Rann, who contributed to the eyre Peninsula

“green grid” study from his government’s $20 million

renewable energy fund, says there is no doubt the state

has the intellectual capabilities as well as the climatic

conditions to develop alternative energy sources and

energy-saving initiatives, as well as deliver substantial

economic advantages to south Australia.

tHeRe Is no doUBt tHe stAte HAs tHe InteLLeCtUAL CAPABILItIes

As WeLL As tHe CLIMAtIC CondItIons to deVeLoP ALteRnAtIVe

eneRGy soURCes And eneRGy-sAVInG InItIAtIVes, As WeLL As deLIVeR

sUBstAntIAL eConoMIC AdVAntAGes to soUtH AUstRALIA.”

MIKe RAnn, PReMIeR oF soUtH AUstRALIA

CHAPteR 1288

tHe soLAR FLAGsHIP PRoGRAM

12


after a long gestation period, the federal government’s

“solar Flagship” program has borne fruit: with the choice of

Moree in new south Wales and Chinchilla in queensland

as the sites for large-scale projects to demonstrate

new technology.

In welcoming the decision to support a $923 million

solar photovoltaic development at Moree, the nsW

Resources & energy Minister, Chris Hartcher, pointed out

that the impact is economic as well as environmental.

the project, which is calculated to help avoid emissions

of 10.8 million tonnes of carbon dioxide over three decades,

equal to the annual output of one mid-range coal generator,

is expected to contribute between $100 million and $125

million directly to the local area, including creating 500

indirect jobs around Moree while the construction is under

way over about three years. the nsW government is

contributing $120 million to the development, with another

$306.5 million coming from the federal government.

the project, which is to be constructed by a joint venture

involving BP solar, spain’s Fotowatio Renewable Ventures

and Pacific Hydro, will involve installing 650,000 PV panels

on an area the size of 600 football stadiums with capacity of

150MW, able to produce 400GWh a year. this is enough

electricity to serve 45,000 homes or the residential demand

of darwin.

the Chinchilla development, the 250MW solar dawn

solar thermal and gas hybrid power station in southwest

queensland, will produce enough energy to serve another

70,000 households.

solar dawn is to be located close to a 44MW booster

project for Cs energy’s Kogan Creek power station, the

largest single coal-fired unit in Australia.the Kogan Creek

booster system is also based on Areva’s CLFR technology.

the federal government will contribute $464 million to the

$1.2 billion cost of the Chinchilla project, with the

queensland government tipping in another $75 million.

the plant will be built by a joint venture of Areva solar,

Cs energy and Wind Prospect CWP, using Areva’s

Australian-designed compact linear fresnel reflector

technology to combine solar energy with a gas back-up

90

system. It will use mirrors focussed on water-filled tubes

to create steam and turn turn turbines when the sun is

shining adequately.

the joint venture claims that the Chinchilla plant will

contribute 50,000 tonnes of emissions abatement annually

over its 25 year life.

the project could be described as a kind of home-

coming for Areva solar. the company was founded in

Australia in 2002 as solar Heat & Power, changed its

name to Ausra, when it shifted its focus to California, and

was acquired in 2010 by the French engineering giant.

the solar dawn joint venture also points to the

economic benefits of its development as well as its

environmental contribution: the project is estimated to bring

$570 million in economic activity to the Chinchilla region.

the two projects are among eight the federal

government nominated for consideration under its $1.5

billion “solar Flagships” program, oversee by Resources

& energy Minister Martin Ferguson – their selection leaving

half the subsidies still to be allocated.

tHe joInt VentURe CLAIMs tHAt tHe CHInCHILLA

PLAnt WILL ContRIBUte 50,000 tonnes oF eMIssIons

ABAteMent AnnUALLy oVeR Its 25 yeAR LIFe.


CHAPteR 12


Above AReVA solar’s Australian-pioneered

Compact Linear Fresnel Reflector (CLFR)

technology will be used in the solar dawn

project to boost the station’s coal-fired steam

generation system

92 CoMPAny PRoFILe

a WorLd that, if we have our way, will be powered by

far, far more than the 10 per cent of electricity expected to

be generated by wind by 2020.

A world in which wind takes its place alongside oil

and gas thanks to its ever more efficient use for electricity

production, and the efficient and reliable delivery of that

electricity on an industrial and global scale. A world

populated by far more than the 43,000 turbines that

we’ve already raised on behalf of our customers in

66 countries across six continents

A world in which we are relentlessly committed to

focusing our 30 years pioneering, our R&d centre (the largest

in the world), every shred of revelatory data from

our real-time monitoring of thousands of turbines, and the

unmatched diversity of capability and skills residing in our

more than 20,000 people worldwide. All of whom are

focused on one pure goal: generating the greatest and

most sustainable return on wind for our customers.

About vestAs AsiA pAcific

Vestas Asia Pacific is the Asia Pacific business unit of

Vestas, the world leader in wind technology. Its head office

is located in singapore and it has sales and service offices

in Australia, south Korea, India, japan, new Zealand,

Philippines and taiwan.

v112–3.0Mw designed for low cost of energy

designed for low and medium wind speed sites, the

V112-3.0MW turbine delivers energy at a highly competitive

cost. the turbine is very productive thanks to its large swept

area, improved rotor efficiency and superior serviceability

and reliability. thanks to Vestas’ state-of-the-art testing

centre, its reliability is assured.

VestAs

WIND. IT MEANS THE WORLD TO US.

www.vestas.com | see page 99 for details


WiLson transformer Company is an independent,

Australian-owned transformer manufacturer founded in 1933

by jack Wilson and lead by his son Robert since 1979.

the Company engineers and manufactures power and

distribution transformers, package substations and speciality

transformers for the electric utility, industry, mining, oil and

gas sectors. Wilson transformer employs 650 people across

its Glen Waverley, Wodonga and international sites, and a

further 600 people are employed in joint ventures.

With world-class design and manufacturing capability

and a series of overseas offices and joint ventures, Wilson

transformer services both domestic and overseas markets,

exporting goods and services to the UK, UsA, saudi Arabia,

Malaysia and the regions surrounding these countries.

Pole, pad and ground mounted transformers from 50kVA

to 5000kVA 72kV are manufactured and supplied from the

Wodonga distribution business unit. substation and

generator transformers from 5MVA to 300MVA 400kV, mobile,

rectifier, furnace, loco and trackside transformers all available

with monitoring and controls are manufactured and supplied

from the Glen Waverley power business unit.

through its subsidiary, dynamic Ratings in the UsA,

Wilson transformer provides Australian made monitoring and

control equipment for power transformers and electrical

apparatus, with leading Us utilities choosing to standardise

on dynamic Ratings systems for smart grid applications.

the Company is also entering the fault current limiter

market, taking equity in a new global company, Gridon, to

develop and manufacture these products for world markets.

Fault current limiters are new products that are being

developed to economically limit rising fault levels in electricity

grids.

oil and sF6 testing and analytical services facilitating

condition-based monitoring and fault diagnosis is

undertaken through a joint venture with UsA-based tj|H2b

Analytical services.

Wilson transformer are specialists in transformer life

cycle management, with over 50 staff dedicated to specialist

site works and over $3 million of mobile equipment for

transformer testing, service and repairs.

WILson tRAnsFoRMeR CoMPAny

Wilson transformer Company built its reputation on

quality and reliability and does whatever it takes to protect

this hard-won record. the Company is accredited to As

9001:2000 quality system and As/nZs 4801:2001

occupational Health & safety Management system.

Recently inducted into the Victorian Manufacturing Hall

of Fame, Wilson transformer is a truly innovative company

and a leading Australian design, manufacturing and

service business.

www.wtc.com.au | see page 99 for details

94

tHe PoWeR nUMBeRs GAMe

Residential customer growth

Australia’s east coast market had 6,364,000 residential customers in 1995–96. By 2009–10

(the latest data) this had grown to 7,996,000 — an increase of 25.6 per cent. In the same

period Western Australia’s residential customer base grew by 46.8 per cent.

Residential power demand

Householders on Australia’s east coat consumed 43,413 GWh of electricity in 1995–96.

In 2009-10 residential demand stood at 60,386GWh — an increase of 39 per cent. In the same

period Western Australia’s residential consumption grew by 88.9 per cent.

Business power demand

Australia commercial and industrial customers consumed 99,650GWh of electricity in 1995–96.

By 2009–10 business consumption had risen to 142,620GWh — an increase of 43 per cent.

Burning coal

In 1995–96, coal-fired power stations across Australia burned 41.4 million tonnes of black coal in

three states (new south Wales, queensland and Western Australia) and 52.6 million tonnes of brown

coal in two states (Victoria and south Australia).

By 2009–10 coal consumption had risen to 54.8 million tonnes of black coal and 70.3 million tonnes

of brown coal. nationally, black coal’s share of power generation has fallen from 56.8 per cent to 53

per cent, while brown coal’s share had dropped from 25.9 per cent to 24.3 per cent. the natural gas

share for generation effectively had doubled to 14.2 per cent. Hydroelectric power’s share had fallen

back from 9.5 per cent to 5.6 per cent. Wind farms did not figure in the 1990s generation mix and had

achieved a 2.7 per cent share in 2009–10.


Building new substations and

replacing those built 40 to

50 years ago are high priorities.

dIReCtoRy96

dIReCtoRyContACt InFoRMAtIon FoR oUR FeAtURed CoMPAnIes

eneRGeX Limited

A: 26 Reddacliff street, newstead qld 4006

P: 07 3664 4000 F: 07 3025 8301

e: [email protected]

W: www.energex.com.au

AGL eneRGy LIMIted

A: Level 22, 101 Miller street, north sydney nsW 2060

P: 02 9921 2999 F: 02 9921 2465


W: www.agl.com.au

Ausgrid

A: 570 George street, sydney nsW 2000

P: 131 525 F: 02 9269 2830

e: Please go to ‘Contact us’ on our website

W: www.ausgrid.com.au

Australian Coal Association

A: Po Box 9115, deakin ACt 2600

P: 02 6120 0200 F: 02 6120 0222


W: www.australiancoal.com.au www.newgencoal.com.au


gentrack

A: Level 9, 390 st Kilda Road, Melbourne Vic 3004

P: 03 9867 9100 F: 03 9867 9140


W: www.gentrack.com

Ge

A: 99 Walker street, north sydney nsW 2060

P: 61 2 9978 8168 F: 61 2 9978 8297


W: www.ge-energy.com/lms100

Horizon Power

A: stovehill Road, Karratha WA 6714

P: 08 9159 7250 F: 08 9159 7288


W: www.horizonpower.com.au

Granite Power Limited

A: Level 6, 9 Barrack st, sydney nsW 2000

P: 02 8252 6100 F: 02 8252 6199


W: www.granitepwr.com

IBM Australia

A: 601 Pacific Highway, st Leonards nsW 2065

P: 02 9397 8814


W: ibm.com/au/en/

dIReCtoRy98

sMeC Australia

A: 76 Berry street, north sydney nsW 2060

P: 02 9925 5555 F: 02 9925 5564


W: www.smec.com

suntech Power Australia Pty Ltd

A: 82-86 Bay st, Botany nsW 2019

P: 02 9695 8180 F: 02 9316 5270


W: www.suntech-power.com

toshiba International Corporation

A: 2 Morton street, Parramatta nsW 2150

P: 02 9768 6600 F: 02 9890 7542


W: www.toshiba.com.au

transGrid

A: Level 9, 201 elizabeth street, sydney nsW 2000

P: 02 9284 3000 or toll free 1800 222 537 F: 02 9284 3456


W: www.transgrid.com.au

siemens Ltd

A: 885 Mountain Highway, Bayswater Vic 3153

P: 137 222 F: 1300 360 222


W: www.siemens.com.au/energy


Vestas Australian Wind technology Pty Ltd

A: Level 4, 312 st Kilda Road, Melbourne Vic 3004

P: 03 8698 7300 F: 03 9645 0111


W: www.vestas.com

western power

A: 363 Wellington street, Perth WA 6000

P: (08) 13 10 87


W: www.westernpower.com.au

WILson tRAnsFoRMeR CoMPAny Pty Ltd

A: 310 springvale Road, Glen Waverley Vic 3150

P: 03 9560 0411 F: 03 9560 0499


W: www.wtc.com.au

Institute for Mineral and energy Resources

A: the University of Adelaide, sA 5005

P: 08 8313 1448


W: www.adelaide.edu.au/imer/

Institute for Mineral and Energy Resources

IndeX100

IndeXAABARe, 42Acciona energy, 86ACIL tasman, 27AeCoM, 66aeroderivative gas turbines, 32–33aged assets, 22AGL energy, 22

Bogong Hydro Power Project, 10customer hardship programs, 55

air-conditioning impact on energy consumption, 66, 75APPeA, 83Areva solar, 90Ausgrid, 16Ausra, 90Australia Pacific Liquefied natural Gas (APLnG), 43Australian Bureau of statistics, 65Australian Coal Association, 11Australian energy Market Commission, 86Australian energy Market Commission (AeMC), 28Australian energy Market operator, 15, 23, 65Australian energy Regulator, 22, 66Australian Industry Group (AIG), 28Australian national University, 28Australian Petroleum exploration & Production Association, 75, 81

bBaker & McKenzie, 86Barnett, Colin, 73base-load plants, new, 40Bass strait, 66Bayswater B environmental assessments, 66black coal, 11Bogong Hydro Power Project, 10, 62Boorowa River Recovery program, 71BP solar, 89brown coal projects, 22Bureau of Agricultural & Resource economics and sciences, 60

ccarbon capture storage (CCs), 11, 38

British commercial scale projects, 39pricing, 47

Carbon Pollution Reduction scheme (CPRs), 35carbon price

announcement of, 35impact on base-load generation, 82impact on refinancing projects, 22impact on vertically-integrated businesses, 20

Centre for Climate economics and Politics, 28Chamber of Mines and energy, 76Chernobyl, 49clean coal technology development, 47Clean energy Council, 42CLFR technology, 89, 90Co2CRC otway Project, 11coal power

conventional plants, 66share of electricity generation by 2030, 60

coal seam methane deposits, 83CoAL21 Fund, 11coal-fired power stations, 22, 89Cobbora mine, 20Collier, Peter, 73, 77combined-cycle gas turbine (CCGt) generation, 40

carbon footprint and pricing, 45–46investment in, 23

Committee for the economic development of Australia, 77compact linear fresnel reflector (CLRF) technology, 89, 90concentrating solar power (CsP) collectors, 61Contact energy, 32conventional organic rankine cycle technology, 35Cooper Basin, 66, 83Copperstring transmission link, 23Council of Australian Governments, 28Crawford school of economics and Government, 28Cs energy, 22

Kogan Creek power station, 89CsIRo, 42, 60, 61

ddeloitte, 22delta electricity, 20, 65, 66denmark and wind generation, 85department of Climate Change, 61distribution systems capital expenditures, 20

Western Australia, 75doan, thao, dr, 53, 54docking, james, 34domanski, Roman, 28domestic energy markets

reform, 14domGas Alliance, 75dow jones sustainability World Index 2010/11, 10dynamic Ratings, 93

eeast coast energy market, 19, 65

green hubs, 23residential growth and demand, 94

ecogen 2010 Clean energy Awards, 10electricity supply

impact of politics on, 9end-user power bills, 28, 66energex, 17energy 2031, 73energy markets distortions, 36, 38energy power industry

media coverage, 22, 28political impact on, 36, 66private investment prospects, 36privatisation of, 66–68

energy pricingpoor households priced out, 53–55

energy Retailers Association, 30energy security issues, 36energy supply Association of Australia (esAA), 30–31energy usage

increase in households, 13–14


energy Users Association of Australia, 28, 30energy White Paper, 9, 15, 35–39, 40engineers Australia, 77eraring energy, 20, 65, 66etsA Utilities, 22eyre Peninsula, 23, 85–86

drawbacks for development, 87

ffault current limiters, 93federal government

energy White Paper, 9, 15greenhouse gas emissions target, 61market-friendly policies for energy mix, 15projected capital expenditure on energy resources, 6, 19renewable energy target (Ret), 60, 61smart Grid, smart City program, 16solar Flagships program, 60, 89solar investment support, 23

Ferguson, Martin, 13–15, 35, 90Fitch Ratings, 20, 22, 66, 85Fotowatio Renewable Ventures, 89Ftse4Good Index, 10fuel poverty, 53–54

alleviating, 55Fukushima daiichi power plant, 36, 49

accident, 8, 45Future energy Alliance, 79

ggas hybrid power stations, 89gas power, 81–83

carbon footprint, 82interrelationship with wind power, 83rise in electricity generation, 81share of electricity generation by 2030, 60

gas reserves, 83gas supply industries capital expenditures, 20Ge, 32–33Gentrack, 34Gentrack Velocity, 34Geoscience Australia, 60geothermal energy, 51

pricing, 46role in 2030 electricity supply chain, 6teMihi project (nZ), 63

Gillard government’s position on nuclear power, 47Global CCs Institute, 47Gorgon LnG Project, 11Goss, Wayne, 19Government trading enterprise, 50GRAneX, 35Granite Power, 35green grid, 87GreenGrid, 71Greening Australia, 71Greiner, nick, 19Gridon, 93

hHartcher, Chris, 89Hazelwood power station, 8, 61Horizon Power, 50households

feed-in tariffs for solar power, 60history of energy usage in, 13–14low-income households and access to electricity, 53–55Western Australian energy consumption, 75

hydro power, 51Bogong Hydro Power Project, 10, 62share of electricity generation by 2030, 60

hydro-electric power stations, 23

IIBM, 25Independent Market operator, 76Independent Pricing & Regulatory tribunal, 55Institute for Mineral and energy Resource, 78intelligent utility systems, 25interim technologies, 46International energy Agency, 15, 30, 49, 60investors and lack of clear market signals, 40

KKeating, Paul, 19Kikiwa substation, 43Kina Biopower, 51King, Grant, 81, 82Knox, david, 82Kogan Creek power station, 22, 89

lLake Cargelligo solar thermal plant, 51Lihir Gold, 51lobby groups, 30low-cost electricity, 19, 53low-income households

electricity usage, 53–54unaffordable electricity pricing, 53

Loy yang Power, 39, 42

MMacquarie Bank, 69, 86Macquarie Capital Advisers, 86Macquarie Generation, 20, 41, 65McCallum, Mark, 83mdAtA21, 34media coverage of energy industry, 22, 28meter data management software, 34Minister for Resources and energy, 13–15, 35Ministerial Council on energy, 28Monbiot, George, 49

IndeX102

nnahan, Mike, dr, 75national decarbonisation policy

impact on state energy generation, 68–69national demand and supply

states with majority, 9national electricity Law, 30national electricity Market, 14–15, 19, 70, 87

infrastructure, 27objectives of, 28, 30reforms within, 28, 31

national Generators Forum, 28, 31national greenhouse gas emissions reduction target, 8natural gas

Western Australian dependence on, 74nelson, tim, 53, 54network sector capital expenditure

main reasons for, 20, 22new south Wales

1970s energy requirements, 53Cobbora mine, 20forms of base-load projects, 65, 68gas-fired power stations, 83impact of national decarbonisation policy, 68–69Keneally government, 60, 66Moree solar photovoltaic development, 89new base-load projects, 65o’Farrell government, 60, 65peak demand period, 66power consumption, 66privatisation of energy industry, 66, 68qnI interconnector, 65state-owned generation businesses, 65state-owned generators, 20subsidised rooftop solar power scheme, 66

new Zealandgeothermal developments, 63wind farm projects, 43

nuclear power accidents, 8, 36, 43, 49nuclear power plants, 47, 49

arguments for, 49global projects under construction, 47

oo’Farrell government, 60open-cycle gas turbine (oCGt) generation, 36

investment in, 23orchison, Keith, 6–9origin energy, 66, 86

offshore joint ventures, 23owen Inquiry, 65

PPacific Hydro, 86, 89Papua new Guinea joint venture projects, 23Parkinson, Martin, 61peak demand, meeting, 66peak demand pricing, 14, 54Port jackson Partners, 19Porter, Christian, 77

power energy industrysmart billing systems, 34

privatisation of energy industry, 66, 68Purani River hydro-electric power station (Papua new Guinea), 23

Qqueensland

1970s energy requirements, 53Chinchilla solar photovoltaic development, 89future renewable energy projects, 23post-flood power restoration process, 17qnI interconnector, 65solar Flagships program, 89state-owned generation sectors, 22

rRann, Mike, 85, 87renewable energy

least competitive options, 40renewable energy growth market, 43, 51

SsA Green Grid, 87saddler, Hugh, dr, 28, 30santos, 82shi, Zhengrong, dr, 56siemens

Picture the Future research, 42–43simshauser, Paul, dr, 28, 31, 53, 54, 55, 66single-staged pumped turbines, 62smart Grid, smart City program, 16smart grids, 43smart meters, 19smart Utilities Australia and new Zealand 2011, 25sMeC, 51snowy Mountains Hydroelectric scheme, 51solar dawn solar thermal power station, 89solar Flagships program, 60, 89solar Heat & Power, 90solar power, 51

challenges for, 60concentrating solar power (CsP), 61federal government schemes, 60feed-in tariffs, 60, 66as interim solution, 46joint ventures, 90Moree solar photovoltaic development, 89photovoltaic development, 56–57role in 2030 electricity supply chain, 6rooftop solar photovoltaics (PVs), 56–57share of electricity generation by 2030, 60subsidised rooftop solar power scheme, 66viability of, 56–57

son La Hydro Power Plant, 51south Australia

mineral and energy resources expansion, 78natural gas supplies, 66, 83power blackouts, 22


power distribution services, 22sA Green Grid consortium, 86–87wind power generation, 85

south West Interconnected system (sWIs), 79spot market prices, 30–31stanwell Corporation, 22, 53stratford Power station (nZ), 32suntech, 56–57synergy, 76

ttarong energy, 22tasmania

Basslink project, 23te Uku Wind Farm, 43the Boomerang Paradox, 53time-of-use pricing, 14tj|H2b Analytical services, 93toshiba International Corporation, 62–63transfield services, 86transGrid, 65, 68, 70–71transmission network capital expenditure, 27

Western Australia, 75transmission network service providers, 70–71tRUenergy, 66

uUnited Kingdom

commercial scale CCs projects, 39United nations south Africa summit, 8University of Adelaide, 78utility-scale developments, 61

challenges for, 60

vvertically-integrated energy business expenditure on renewable

energy, 20Verve energy, 76Vestas Asia Pacific, 92Victoria

emissions targets, 36merchant generators, 22

wWA Legislative Assembly economics and Industry, 75Western Australia, 73–75

carbon capture storage (CCs) projects, 11peak demand period, 75Perth solar city program, 79regional and remote power supplier, 50regulatory and pricing structures, 77reliance on natural gas, 74state government’s energy 2031 paper, 73, 79

Western Power, 78Wilson, jack, 93Wilson, Robert, 93Wilson transformer Company, 93wind farm development, 66wind farm generation

investment in, 22–23wind power

eyre Peninsula, 85–86interrelationship with gas power, 83reliability of supply, 83share of electricity generation by 2030, 60south Australian investment in, 85

Wind Prospect CWR, 90Worley Parsons, 86

PHoto CRedItsCover istockphoto; pp.2-5 Commstock; p.7 snowy Hydro; pp.8-9 Horizon Power; pp.14-15 eneRGeX; p.19 etsA;

pp.20-21 Loy yang Power; p.23 Verve energy; p.27 Commstock; p.29 transend networks; pp.30-31 Cs energy;

p.37 Commstock; p.39 Loy yang Power; p.40 International Power Australia; p.41 transGrid;

p.45 Ansto www.ansto.gov.au; pp.46-47 eRM Power; p.48 Ansto; pp.53-54 istockphoto; pp.59-61 Horizon Power;

p.65 Ausgrid; p.67 Macquarie Generation; p.69 Ausgrid; p.73 istockphoto; pp.74-75 Western Power;

pp.76-77 Verve energy; p.81 eRM Power; p.82 delta electricity; p.85 origin; p.86 Western Power;

p.89 sMA solar technology courtesy Bill Parker; p.91 AReVA solar; p.95 Hydro tasmania

PoWeRInG AUstRALIA VoLUMe 5104

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ABoUt tHe AUtHoRs

KeItH oRCHIson

Keith orchison was managing director of the electricity supply

Association of Australia from 1991 to 2003 and, before that,

served for 11 years as chief executive of the Australian Petroleum

exploration Association. He served on the federal government’s

Critical Infrastructure Advisory Council from 2003 to 2007 and

chaired its energy committee. Keith was a founding member of

the Australian Industry Greenhouse network, an association of 14

energy, mining and manufacturing organisations in the 1990s and

serviced on its management committee for 11 years. He was

AIGn chairman in 2002. He also served on the CsIRo energy

technology sector advisory committee for six years and chaired it

in 1999-2001. Keith was made a Member of the order of Australia

in 2004 for service to the petroleum and electricity industries

through fostering co-operation between energy producers and

government agencies and for helping to foster the development of

policies to benefit Australia in the long term. He now manages an

energy communications consultancy Coolibah Pty Ltd.

jon stAnFoRd

since taking up a career as a consultant in the mid-1990s, jon

stanford has developed a strong practice in economics and

policy issues related to climate change, energy, the resources

sector, industry development and defence. In this period, jon

was a director of the Allen Consulting Group for over ten years

before leaving to establish a new firm, Insight economics, with

four other consultants. From 2006-09 jon was a partner with

deloitte and helped to establish their new economics practice.

throughout his consulting career, jon has worked closely with

two economic modelling agencies: the Centre of Policy studies

at Monash University and, for energy market modelling,

McLennan Magasanik Associates. Before becoming a

consultant, he had a significant career with the Australian Public

service working in areas that involved economics and public

policy. His final position was head of a division of the Prime

Minister’s department.

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national Library of Australia Cataloguing-in-Publication entry

Author: Keith orchison

title: Powering Australia Volume 5

solutions for a sustainable Future

IsBn: 978-1-921156-64-9

notes: Includes index

VOL 5 | N

AVIGATIN

G A

NEW

ELECTRIC

ITY SUPPLY ERA

Cover Photography: Caroline Foldes

NAVIGATING A NEW ELECTRICITY SUPPLY ERA

RRP $29.95

POWERING AUSTRALIA | VOL 5

Policy makers are seeking to launch a step-change in electricity supply

and consumption in Australia. The federal government plans to reduce

coal-fired power stations’ role to meeting 43 per cent of demand by 2020.

This will mark the nation’s first major step toward a decarbonised economy.

PROUDLY ENDORSED BY

APIA • Australian Power Institute • Clean Energy Council

Energy Networks Association • ERAA • NGF • ESAA

Documents

Powering Australia: Navigating a new electricity supply era