Coal snub stuns miners

COLLIE coal players are indicating both surprise and disappointment that they will not be able to compete to provide fuel for the proposed new Cockburn 2 power station.

The State Government last weekend announced that Western Power would work with the private sector to finance and build the $250 million, 240-megawatt, gas-powered station. The station is intended to be in service by December 2005, while Cockburn 1 is due for commissioning in 2003/04.

But the Government’s announcement caught Wesfarmers’ Premier Coal and Griffin Coal by surprise.

Premier Coal’s general manager marketing and business development Barry Kelly said the company was disappointed there was no allowance made for an expansion of capacity at the Collie A coal-fired power station, which was commissioned in 1998.

The Government also announced it would seek tenders for two other power stations. One will be a new base load station, to be either gas or coal-powered, to replace the Muja A and B units. The other will be a 240MW peak capacity, combined-cycle plant.

Energy Minister Eric Ripper said the tender process was designed to give Collie coal companies an even chance to compete with gas-based proposals to provide the base load capacity. Coal was better suited to generating base load power than peak load capacity, according to Mr Ripper.

“Cockburn 2 seems to have been given a nod without giving the coal companies a chance to compete,” Mr Kelly responded.

“Now a combined-cycle gas unit is not a peaking plant, it is a base load installation. So to be building 240MW of base load power without giving the coal companies a chance to look at that is, we believe, not in the best interests of everybody.”

Griffin Energy executive general manager Stephen Keenihan said the coal companies had believed the Government would follow the recommendations of the Electricity Reform Task Force, specifically that Western Power should not be able to source any more capacity under the guise of replacement capacity or new capacity.

“Clearly the Government’s decided against that. That’s the surprising part, that they’ve gone against the recommendations of their own group,” Mr Keenihan said.

“The coal industry certainly has a long way to go before it can say it’s got an assured future in power generation.”

The Government itself is not completely contradicting such a suggestion.

Premier Geoff Gallop said coal would continue to play a role in the future of the State’s power generation industry and it was an important part of the energy system.

“It is a very important resource and you need a balance between gas and coal. The relative balance will depend on price. The coal industry knows that. They have the ability to play an important role if they get the price right,” Dr Gallop said.

But while the coal industry might take some heart from these words, having always contended it is a cheaper option than gas, it is concerned about Western Power’s plan to reduce, from 2006, the amount of coal it will contract to take for power generation.

Western Power already does not take all the coal it is contracted to.

Existing coal production for power generation is about 4.7 million tonnes per annum (Mtpa), but in 2006 that falls to 3.5 Mtpa.

Mr Keenihan said such a significant drop in consumption would have a significant impact on the area and disrupt the mining process.

“It would make it very tight for the industry to sustain itself as it is at the moment, and you’d have to look at it very seriously about the mines, the equipment and the people,” he said.

Mr Kelly said job losses in the coal mining industry were a definite possibility.

“We’re a very volume-sensitive industry, which means we can add extra capacity on reasonably cheaply but if you take capacity off us, we actually don’t save huge amounts of money. We will definitely have to reduce hands if the market shrinks,” he said.

There may yet be another spanner in the works for the coal industry’s hopes for it to win the right to power additional power stations later in the decade.

In April AlintaGas announced it was considering whether to independently build its own power station of up to 300 MW capacity.

AlintaGas general manager business development Chris Indermaur, said the company was interested in using the existing network to sell competitively priced power to consumers, not to Western Power.

If it were to do so, Western Power would simply be a “middle man” between Alinta and its customers.

“Of course, if Western Power needed electricity, Alinta would certainly be willing to sell it to them at the right price,” Mr Indermaur said.

“It is important to remember it is ultimately the system that needs electricity, not Western Power, in a truly independent marketplace.”

He said Alinta was looking very thoroughly at building its own power station.

However, though it has a detailed proposal the company is not yet ready to announce it publicly.

Mr Kelly questioned gas-generated electricity’s reputation as an environmentally friendly fuel compared to coal, saying the gas industry had focused only on the point at which the two fuels were burned.

“Gas does burn cleaner than coal, but what about the production process?” he asked.

“In terms of gas, they produce the stuff a couple of hundred kilometres out to sea, they’ve then got to pipe it to shore, then run it down the coast through compressor stations, and if they have too much methane, I don’t see much difference between coal and gas.”