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ENERGY – a state of flux

Getting in tough for renewables

IF last week’s WA energy conference was anything to go by, there is a degree of dissatisfaction within the State’s downstream energy sector, both within the current market and under proposed changes.

The conference theme, ‘Seizing new opportunities in a reformed market’, was sometimes lost, as a succession of presenters highlighted what they saw as barriers to opportunities, some firing broadsides at regulators, governments, and perceived power heavyweights.

Most of this dissatisfaction was among those with coal, renewables, pipe-lines or regional interests.

Metasource commercial–investment manager Tim Hanlin told the conference the renewable power industry was dominated by large players with large projects and deep pockets.

Most players were government owned or former government owned, he said, with a distinct system advantage.

Those next in line, with the most chance of success in such a market, were the small co-generators with a load next to their source.

“With a few exceptions, the renewable-sustainable industry in Australia is still essentially a cottage industry with many players who have little or no experience of the power industry,” Mr Hanlin said.

For small-cap players with a customer and large ambition, securing project finance and power purchase agreements were often prohibitive.

Investment management costs swamped returns for most entrants or hopefuls, with transaction costs too high for the scale of potential return, he said.

And as in real estate booms, many of those eager to enter an energy market under transformation often focused on project risks, without an adequate understanding of market and technology risks.

However, Metasource believed providing equity to small-cap players, and assisting them to develop good business plans, would afford them a real chance to ‘box above their weight’.

Some discord was apparent among those already in the renewable sector.

Western Australian Sustainable Energy Association chairman Matthew Rosser said the WA market had always taken some form of a monopoly, beginning with coal-fired power in the 1980s.

However, both the coal and gas industries had enjoyed substantial government support, in terms of large-scale infrastructure and contracts, when entering the local energy market.

The frustration now experienced by those in the coal industry wanting to take on a substantial role in a new reformed market, was probably minor, Mr Rosser suggested, compared with that felt by private enterprise wanting to add renewable energy into the mix.

A Renewable Energy Access Working Group set up in March 2000, to be abandoned by September that year, has recently held its 36th meeting, Mr Rosser said.

This group comprised members from industry, Western Power and the Government, but the renewable access regime now adopted by Western Power did not have the full approval of the industry members of the REAWG. Spill, top-up and balancing arrangements were not conducive to private renewable energy projects, he said.

Pacific Hydro managing director Jeff Harding said the Federal Government’s Mandatory Renewable Energy Target was not working, as one large scale hydro electricity venture could account for 75 per cent of the first three years’ MRET, with no new investment or any reduction in greenhouse gases.

Next year’s review of the MRET would also be an opportunity to address regulatory problems, Mr Harding said.

The WA Sustainable Energy Association is lobbying for a 30 per cent renewable energy

supply component, 15 times the 2 per cent MRET, while Mr Harding recommended a ramp up

target of between 5 per cent and 10 per cent by 2010.

Hydro Tasmania commercial manager, business development, Anton Rohner argued the MRET was delivering its objectives, with last year’s target met from a variety of sources.

Mr Rohner, managing the commercial operations of 27 hydro, one thermal, two diesel power stations, and a wind farm, also called for an upgrade of future targets.

Hydro Tasmania is developing several wind energy projects in three Australian States.

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