Energy goes greener, a little bit private

THE idea that a vast number of Perth households would own and operate their own power-generating units might have seemed extraordinary in 1993.

In that year, the first utility-scale array in the US was installed in California, just 500 kilowatts, at a time when solar power was still far from commercially viable.

Now, more than 450,000 Western Australian households have rooftop solar, according to the Clean Energy Regulator.

That marks a dramatic change in the state’s main power grid, with distributed energy sources sometimes producing more electricity than the largest power stations.

Big commercial renewable projects have also entered construction, starting with Verve and GE’s 10-megawatt Geraldton solar farm in 2011.

But that transition hasn’t come without major challenges and has not been the only big change in WA’s energy markets.

That year, 1993, also introduced the Carnegie Review into the state’s energy systems.

A report from the Energy Board of Review, titled Energy Challenge for the 21st Century, called for big changes to the operation of the state’s power and gas sectors.

That meant breaking down the monopoly of the government’s State Energy Commission of Western Australia and introducing competition.

There’s perhaps a contrast between these two big trends, however.

The move to renewables started slowly but has accelerated, while the move to introduce competition and private investment into energy started strongly yet seemed to run out of steam.

Coal bid

Long before the state had its first utility-scale solar plant, the energy debate in WA was focused on construction of a new coal-fired power station in Collie.

In what might now be considered an ironic twist, it was the Labor government of Carmen Lawrence pushing ahead in 1992 with plans to build a new coal power station in the South West town.

The power station was to be built privately by Switzerland-based ABB with a price tag of $2 billion and capacity of 600MW.

SECWA was to sign a deal to buy the power, in what would have been a very early move to bring private investment into the grid.

But it didn’t go ahead in that form. Instead, Colin Barnett, who was energy minister after the 1993 state election, announced a coal plant half the size, owned by the state and using ABB as contractor.

At the time, Mr Barnett said a 30-year deal to buy the power would have cost $9 billion but would have provided far more power than necessary.

The Collie Power Station facility opened in 1999 and is still operated by SECWA’s successor, Synergy.

Winding the clock forward 30 years, it’s the Labor government of Mark McGowan promising to shut the government’s coal-powered stations.

Going greener

The use of renewables has especially picked up pace in the past 10 to 15 years.

Rooftop solar is one example.

The Barnett government sparked a big lift in solar installations with its feed-in tariff program, which paid 40 cents per kilowatt hour to homeowners supplying solar power into the grid.

That meant WA residents with solar panels on their houses were paid more for their energy than the cost to buy power straight off the grid.

The policy achieved its aim of supporting installation of solar power but cost far more than first expected.

In 2010, the government estimated a cost of $23 million over four years, which rose to $66 million.

The lifetime cost of the program was estimated to be as much as $533 million.

The 2018 Langoulant Special Inquiry into Government Programs and Projects said uptake had exceeded expectations, making the program unaffordable.

Multiple rethinks have been announced since, with the most recent iteration under Energy Minister Bill Johnston.

Mr Johnston’s Distributed Energy Buyback Scheme was announced in 2020, with the intention of sparking investment into home battery storage systems.

The new scheme pays households more for power in times where demand is highest.

The move demonstrates just how much the grid has changed in the past 15 years in particular: and it has developed in a way that defied expectations.

When the Barnett government was in its early days, more energy was needed.

It followed years of summer blackouts in Perth and the state’s energy crisis in 2008, when the Varanus Island gas plant suffered an explosion that crippled supply for weeks.

In response, the government launched a joint venture in 2009 to extend the life of two coal power units at the Muja plant near Collie, a move initially to be funded by the private sector.

The project cost substantially more than expected and was beset by delays, including a boiler explosion.

Over time, the market developed in a very different way than that expected. Renewable investment has surged in the past five years, with a series of wind farms in the Mid West the most notable new assets.

With more and more solar added to Perth’s rooftops, the state’s grid has faced risks from electricity demand being too low, rather than too high.

It means there are times when the state’s coal units need to be scaled back or turned offline because of a lack of demand.

That led the McGowan government to announce the closure of all government-owned coal power stations by 2030, with a claim it would save about $3 billion.

“The reality is our current electricity system is becoming increasingly unsustainable due to the uptake of rooftop solar and growing demand for renewable options for generation,” Mr McGowan said at the time.

“Maintaining the status quo would see average yearly household power bills increase by over $1,200 within eight years.”

But $3.8 billion of new generation and storage capacity will need to be added by the government just to replace those coal units.

That’s in addition to as much as $16 billion of investment already necessary over the next 20 years in the highest demand-growth scenario, according to the government’s Whole of System Plan.

Private providers have lodged projects in response, with Neoen’s four-gigawatt-hour battery in Collie the most notable.

Yet the proposals so far are only a fraction of what will be needed by 2030.

Fighting monopolies

The trend of breaking up energy businesses and seeking private investment started at a cracking pace in the 1990s.

Following the Carnegie report, the government split monopoly SECWA into a gas business: AlintaGas and an electricity company, Western Power.

The state’s main gas transmission line, the Dampier to Bunbury Gas Pipeline, was sold in 1998, with the rest of the Alinta business going public.

The ensuing period may have shaken up supporters of privatisation.

The new owner of the DBGP, Epic Energy, suffered financial troubles and hit the wall in 2004.

Alinta had its own problems, including a battle over gas prices with North West Shelf Venture and the collapse of eventual parent business Babcock and Brown.

But competition later brought big benefits.

Wesfarmers’ Kleenheat was the first to enter the retail gas market in WA, in 2013, taking on Alinta.

Origin Energy and AGL later followed, with all players offering big discounts.

That’s one of the reasons household gas bills have been relatively steady for most of the past decade. Yet for electricity, households can only buy from the government’s Synergy monopoly.

Western Power was split into a network business (Western Power), a generating business (Verve), and a retailer (Synergy) in 2006.

Verve and Synergy were reconnected in 2014.

All remain largely in government hands, despite a brief attempt to sell some generating plants, and then a campaign in 2017 to bring a private partner for Western Power.

The McGowan Labor government had the most success on privatisation, with the Warradarge wind project bought by a consortium including Dutch Infrastructure Fund.

In the absence of retail competition, governments have tried price freezes, bill support and subsidies to keep household electricity costs down.

Business News reported last year that subsidies to Synergy would hit about $1.7 billion over four years.