With the future of Western Australia's next power station at the crossroads, Mark Beyer examines some of the alternatives.
Coal cranks up the competition
With the future of Western Australia's next power station at the crossroads, Mark Beyer examines some of the alternatives.
The debate over coal versus gas is a perennial in Western Australia’s energy sector.
But despite the issue being debated many times over the years, the current debate is no less intense or important.
Big dollars, and economic activity in the State’s South West, are at stake.
The naming earlier this month of seven bidders for WA’s next base-load power station, likely to cost up to $500 million, has fuelled the debate.
At a rally in Perth last week, the State’s big coal mining companies – Griffin Group and Wesfarmers Premier Coal – teamed up with representatives of the Collie region to argue the case for coal.
Glyn Yates, president of the Collie chamber of commerce and industry, argued “coal [is] the only reliable and efficient fuel that will ensure WA’s electricity supply for many years to come”.
He also highlighted the protracted financial problems affecting the Dampier to Bunbury natural gas pipeline (DBNGP), which supplies most of Perth’s gas.
“It is difficult to see that gas has any reliability credentials,” Mr Yates said.
Competition between coal and gas will only occur if the capacity of the pipeline is increased.
And that will only occur if Ernst & Young partners Martin Madden and Brian McMaster, appointed by a banking syndicate as receivers and managers to the pipeline, complete a timely sale.
Energy Minister Eric Ripper and Western Power chairman Neil Hamilton weighed into the debate last week, jointly stating it was vital the sale process should proceed without delay.
They said failure to start work on a major capacity expansion in the very near future would represent a major threat to power supply, industry and householders.
“The DBNGP is such a vital backbone of the State’s energy system that we cannot allow it to be held to ransom by corporate financiers who are haggling over lost money,” Mr Ripper said.
“The Government is examining the full range of options at its disposal to secure the pipeline capacity that WA needs.”
Despite the threatening tone of these comments, a spokesman for Mr Ripper was adamant this was not a threat to the receivers or bankers.
The spokesman said Mr Ripper wanted to reaffirm his support for the current sale process.
Mr Hamilton said Western Power was one of the biggest users of the pipeline and a quick, commercially transparent sale had its support.
“We want to see the sale happen quickly, followed shortly after by a commitment to expand by the new owner,” Mr Hamilton told WA Business News.
“A sign of our commitment to the future of the pipeline is the fact Western Power has already initiated engineering preparations for expansion.”
The receiver is understood to be expecting bids for the pipeline by July 31, and the two known bidders are led by Australian Pipeline Trust and Investra.
Mr Hamilton said Western Power had been approached by parties other than the nominated bidders to participate in what had been termed ‘an alternative solution to the pipeline problem’.
“We understand some of the other shippers are considering other proposals,” he said.
“However, Western Power will not consider any other proposals until the sale process is exhausted.”
“We urge all other shippers to devote all the necessary resources to try to conclude a prompt sale in the current process.”
Mr Hamilton said the capacity of the pipeline would need to be boosted by December 2005, so that the two gas-fired power stations due to be completed next year could meet summer demand.
The installation of extra compressor stations would provide a short-term boost to the pipeline’s capacity but a bigger investment would be needed to meet long-term growth.
Against this uncertain backdrop, the coal industry is pressing its case.
It certainly offers security of supply, with Griffin and Premier having extensive deposits that could last another 100 years.
The coal industry is also challenging the perception it is a ‘dirty’ industry.
Griffin Group’s executive general manager power generation, Wayne Trumble, argues that WA coal has similar emissions to gas if they are analysed on a life-cycle basis.
He said a proper assessment would look at the cost of extracting, processing and transporting the two competing fuels.
In contrast, he said the Environmental Protection Authority only looks at emissions at the burner tip.
The coal industry has been encouraged by Prime Minister John Howard’s energy policy, released last week, which provides additional funding for research on low-emission technologies.
“Its great news for coal,” Wesfarmers Premier Coal managing director Stewart Butel said.
“It recognises that coal will be the energy source of the future.”
Mr Trumble claimed coal was price competitive, with a delivered cost to South West power stations of about $1.70 compared with about $3.00 a gigajoule for gas from the North West Shelf.
Another argument put forward by the coal industry is that WA needs to maintain a balance between fuel sources.
With new power stations at Kemerton and Pinjarra being gas fired, and the coal-fired Muja AB due to be retired, they say the next base-load plant should be coal fired.
Coal proponents also highlight the importance of coal to the future of Collie. Premier Coal and Griffin directly employ about 600 people, making them the largest employers in the town.
