Demand for energy in WA is big and so is the demand for an open, competitive market.
Demand for energy in WA is big and so is the demand for an open, competitive market.
If the words of the big players in Western Australia’s energy market are anything to go by, sustaining a free market with high levels of competition and stable government policy continues to reign supreme on the industry’s wishlist.
These issues were high on Woodside’s agenda when it responded to the state government’s Energy 2031 Strategic Energy Initiative paper last year, it is what energy supplier ATCO sees as a priority if private investment in infrastructure is to be encouraged and it’s the top agenda item for the newly formed Independent Power Association (IPA).
The energy industry has been enjoying a more attractive market for private investment since Western Power was disaggregated into four utilities in 2006. From then to 2010, more than $2 billion was privately invested in energy infrastructure.
But Premier Colin Barnett’s recent talk of re-merging Synergy and Verve has raised industry concern over the future of the current market structure’s stability.
Speaking at the launch of the IPA earlier this week, Mid West Energy managing director and IPA chairman Richard Harris explained that advocating for a competitive market structure was the first item on the association’s agenda.
The IPA got Frontier Economics on board to conduct research into the pros and cons of a re-merger of Verve and Synergy. The final report was released in conjunction with the launch of the association.
“The findings of the report support our association’s message that it is imperative that an open and competitive marketplace is maintained and encouraged by the state government for the benefit of all West Australians,” Mr Harris said.
ATCO Australia chief executive Steven Landry said WA needed certainty and transparency in market processes and structure to encourage private investment.
“When it comes down to it, industry is in the business of investing money into infrastructure for a fair return, be it in the regulatory or non-regulatory environment,” Mr Landry said.
“Providing certainty of an energy infrastructure plan for the market provides industry with the opportunity to play a significant role and invest for the long term.”
Providing a long-term vision was the goal of the state government when it delivered its long-awaited Energy 2031 directions paper last year.
Woodside said in response: “The most effective way to ensure domestic gas supply security is to ensure there is a sound framework to support a healthy and competitive commercial market.
“Neither ‘security’ nor ‘supply’ can occur unless there is sufficient investment in the energy value chain. The government’s role is therefore critical in establishing positive investment conditions through its policies, legislation and approvals processes.”
Mr Landry said ATCO had always believed that there was a role for industry to partner with government in the development of infrastructure.
“The reality is, government cannot fund every project that’s required, particularly in a growing economy like WA’s where developments in infrastructure are required in order to meet the needs of an expanding resources sector,” he said.
The company’s portfolio includes the Horizon Power-commissioned 86-megawatt Karratha Power Station and the former WA Gas Networks, acquired by ATCO last year and now known as ATCO Gas Australia. ATCO gas operates the reticulated gas network that services the southern part of WA.
Mr Landry said the company was looking to the north-west as a key growth opportunity but favoured organic growth in strategically located power generation and distribution.
“As part of that approach, Port Hedland is high on our priority list as we believe we can extend the results of power generation from Hedland as a central hub further down into other key development areas,” he said.
ATCO Gas is also looking to extend its 13,100km network into Yanchep, Ellenbrook and Byford.
ATCO Gas president Brian Hahn said the focus for the company was on getting household penetration of natural gas up to 100 per cent, from current levels close to 85 per cent.
“It is not a huge dollar amount required for us to capture what I would characterise as the infill market but we are going to move forward with capital budgets slightly ahead of what would historically be the case in WA,” he said.
“The big focus for us is really connections and connections.
“On one hand, it is connecting our network up to as many homes, businesses and industries as possible and then within each of those segments, working diligently to create as many connections within them.”
What’s connected
The sharing of responsibility for energy infrastructure investment between private companies and government is evident, with a closer look at the projects coming online or announced in the past 12 months.
The first panels were put in place at Greenough River Solar Farm earlier this month. The project, touted to be the first utility scale solar farm and the largest solar farm in Australia, is a joint venture between Verve Energy and GE Energy Financial Services.
At a cost of $50 million, it will have a capacity of 10 megawatts and is due for completion by mid-year.
The $750 million Collgar Wind Farm turned its first turbine last year, with the first energy produced in June 2011.
The Mungallah Power Station was commissioned by Horizon Power and is under construction in Carnarvon and due for completion in the middle of this year.
The 18-megawatt gas and diesel power station will be located 6.5km from the Carnarvon town centre and less than 1km from the Carnarvon Lateral, which interconnects with the Dampier to Bunbury Natural Gas Pipeline.
BHP Billiton announced late last year it would construct a new power station to replace the power supplied by Newman Power Station.
Completion of the $597 million, 190-megawatt combined cycle gas turbine station is expected to be in late 2014.
The Pilbara Underground Power Project is funded by the state government under the Royalties for Regions scheme and local governments in the region and will replace all overhead power distribution infrastructure in Karratha, South Hedland, Onslow and Roebourne.
The project will upgrade the voltage in Karratha by 11 kilovolts and will cost over $130 million. It is due for completion in 2013.
Rio Tinto is upgrading and expanding its power network in the Pilbara to allow for the increases in its iron ore production targets to 283 million tonnes in 2013.
Two 40-megawatt power stations are being constructed at the company’s West Angelas mine site and an additional 40 megawatts will be added to its Yurralyi Maya power station near Dampier.
The works will cost $520 million.
