07/10/2010 - 00:00

Collier focuses on energy security

07/10/2010 - 00:00

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ENERGY Minister Peter Collier will next week underline the government’s plan to shore up the state’s energy security by visiting a major gas storage facility near Dongara with the potential to boost Western Australia’s gas supplies by 15 per cent.

Collier focuses on energy security

ENERGY Minister Peter Collier will next week underline the government’s plan to shore up the state’s energy security by visiting a major gas storage facility near Dongara with the potential to boost Western Australia’s gas supplies by 15 per cent.

Mr Collier is slated to visit APA Group’s Mondarra gas storage facility, where plans are nearing completion for a major upgrade that will ultimately boost the facility’s current storage and supply capacity 10-fold to 150 terajoules per day.

The planned upgrade envisages the depleted natural gas reservoir being connected to both the Parmelia and Dampier-Bunbury gas pipelines from early 2013.

Expanding the facility will provide a substantial safeguard against any repeat of the disruption caused by the Varanus Island explosion in 2008 by enabling major gas customers to build up significant supplies of gas that could be released as required.

Its expansion will effectively increase the latent supply capacity of WA’s gas network by up to 15 per cent.

The planned visit to Mondarra comes after the government’s explanation of its overhaul of state generator Verve Energy heightened industry concerns that state initiatives would actually hinder private sector investment in new energy supplies.

Mr Collier was last week forced to reassure WA’s electricity generators that the revamp would not affect the payment of capacity credits worth hundreds of millions of dollars.

The assurance was required after Mr Collier had previously suggested a reduction in such payments would contribute to the $1.5 billion in savings expected by the government as a result of its rewrite of Verve’s vesting contract.

Capacity credits are paid to generators for having generation capacity available to meet peak demand even if that capacity sits idle most of the time.

The payments typically total hundreds of millions of dollars annually and are considered a major inducement to private sector investment in new generation capacity. The price is set by the Independent Market Operator and paid per megawatt of available capacity.

The bulk of the savings expected from the Verve revamp will actually come by scrapping netback-pricing arrangements, which effectively result in Verve subsidising the operations of energy siblings Synergy and Western Power.

Savings will also come from ending Synergy’s outstanding obligation to put a portion of its base-load supply needs for the next four years out to tender, and guaranteeing they will be supplied by Verve.

To further hose down concerns the new arrangements could discourage new private generation investment, Mr Collier noted the IMO estimated WA would need an extra 1,772 megawatts of new capacity over the next decade, and that Synergy would need to buy additional supplies from 2014.

 

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