All fired up

THE energy debate is finally starting to get fired up in the public arena – long after the behind-the-scenes lobbying started.

There is a fascinating chess game taking place, which would be wonderful sport if it wasn’t so important to WA.

For those who have just joined us, the two key sub plots are the structure of the generation, distribution and retail side of the industry, and control of the fuels that power our grid.

In the former, Western Power is apparently fighting tooth and nail to resist forces determined to break it up. In this regard, you’d have to think the corporation was losing the battle.

While Western Power is a big boy in terms of corporate scale and importance within the bureaucracy, it has somehow managed to align the voices of business and a Labor government against it.

Those supporting a call for at least a delay in its break up are an equally rare combination – the conservative Opposition and a white-collar union.

Western Power’s argument is that it provides more to the State in one piece than split up from its current vertical integration.

The power company also believes that a single entity is best placed to deal with growing demand efficiently, avoiding some of the disasters we have seen in other jurisdictions interstate and overseas. Business and the government argue that it has too much power, so to speak.

They want to see competition, particularly at the generation and retail ends of the business, allowing for the potential of downward pressure on prices as new players find opportunities in the market. They are also concerned that a dominant player might hinder efforts to develop alternative power sources, such as renewables.

Somehow it is easier to see the government-backed forces prevailing on this one.

Further down the value chain is the fuel. Here there is huge competition between Collie’s coal miners and the gas derived from the North West.

Both are jockeying for position to supply new generators as they come on stream to meet growing State energy demand.

Both gas and coal have had decades of high-priced take or pay contracts (or similar hybrids) to underwrite their industries.

In the case of gas it was to develop the resource. For coal, it has been to gently restructure itself from labour-intensive underground mining to open cut.

But gas is in the box seat.

It is quicker to build gas-powered stations. They can also be smaller and therefore are suited to meeting smaller, incremental steps in demand.

Gas has also been operating in a deregulated market and can supply retail customers directly as a fuel, providing a base load of its own, so to speak.

On top of that, gas is seen as environmentally cleaner.

These are hard arguments for coal to beat. But the coal miners reckon they are now cost effective and, increasingly, environmentally friendly.

They say new technology is making coal competitive with gas on this front, particularly when you look at energy efficiency of the fuels from the mine or wellhead, and they have other environmentally friendly ideas.

But perhaps coal’s best card is its geography. Following the dramas of ending logging in the South West, the last thing the Government wants is another tale of woe from a town like Collie.

The workforce, too, will have some union voice in the matter – so one could safely conclude that coal, as the Premier has stated, has a future.

The question is whether it’s a big future or a marginal one.

And that future may also depend on the final shape of the electricity market.

Few complaints

SPEAKING of politics, I had a long interview with Geoffrey Gallop late last week, which will be published next week.

He covered a lot of ground and very much marked out the territory where he was prepared to be business friendly.

I must say, outside of industrial relations, there are very few areas of obvious weakness at this stage – at least from a business perspective.

After last year’s election I imagined a Labor government giving a newspaper like WA Business News a lot of ammunition.

Apart from IR and the dreaded premium property tax, that has not been realised.

Take a look at the article next week and if you feel there’s something missing, Dr Gallop will be talking to a WA Business News function on June 26, where he is prepared to take your questions.

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