23/06/2011 - 00:00

Energy policy compromising infrastructure

23/06/2011 - 00:00

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The leaders of WA’s two major political parties are noticeably silent on a crucial issue of state energy security.

LAST week this column highlighted some of the costs taxpayers may face if the Barnett government’s $750 million Perth Waterfront project isn’t completed as promptly as planned.

Completion is dependent upon the private sector promptly buying its planned 11 foreshore sites and then proceeding with the construction of nine high-rise towers and two complexes around a 2.7-hectare, $270 million taxpayer-funded man-made cove.

Just how swiftly such structures rise depends on a range of calculations and market assessments, which all hopefully point to prompt start-ups and completions.

But nothing, especially multi-million dollar commercial property developments, is easy, as the Burke government’s WA Development Corporation discovered in the over-optimistic and over-hasty 1980s.

Is there perhaps better news for taxpayers in another sector?

The one State Scene is presently focused upon is Western Australia’s electricity market, where one would be justified in assuming things are as safe as Fort Knox once was.

After all, aren’t the two major parties – Liberal and Labor – led by men who’ve had the benefit of ‘coal-face experience’, so to speak, since each has been energy minister?

Mr Barnett took over this crucially important responsibility in 1993 and held it until the Court-led coalition was toppled in early 2001.

As he walked out of his office, Labor leader Eric Ripper promptly moved in.

And he remained in this pivotal post until a few days after September 6 2008, when it became clear Nationals leader Brendon Grylls couldn’t convince his colleagues to form the type of coalition Julia Gillard was able to after she’d failed to win the 2010 federal election.

In other words, WA’s two major party leaders have overseen our crucially important energy sector for 16 of the past nearly 20 years.

Those figures mean one is forgiven for assuming all is rosy when it comes to reliable and economical electricity supply now that they’re leading their respective parties.

But is it?

State Scene was quite amazed – stunned is perhaps more appropriate – when reading a brief report of May 4 on evidence Verve’s managing director, Shirley In’t Veld, gave to a Federal Senate Committee of Inquiry.

So shocking were her remarks that I’m still, nearly two months on, stunned that a follow-up press report hasn’t emerged saying Messrs Barnett and Ripper had urgently met to consider possible remedies.

After all they’ve served for a combined 16 years as energy minister.

For those who may not know what Verve means, it’s the new fancy name for the old State Energy Commission’s electricity generating arm – largely, but not solely, from coal-fired units that keep our homes warm and lit-up at night and cool over summer months.

Read the following few disturbing paragraphs and don’t hesitate emailing me (Janus1@Westnet.com.au) if you should fully concur with my reaction to Ms In’t Veld’s stunning revelations.

“The managing director of WA’s biggest electricity generator has claimed the government-owned utility is being forced to trash its coal-fired power plants to accommodate the demands of wind and solar energy,” The West Australian report began.

“Following evidence to a Senate committee on Friday that the federal government’s proposed $20-$25 per tonne carbon [dioxide gas] tax would do nothing to reduce Verve’s emissions while pushing up its costs as much as $200 million a year, Verve managing director, Shirley In’t Veld, said yesterday that wind power was causing Verve’s plant to be run inefficiently.

She claimed Verve’s carbon emissions were actually rising as it sought to accommodate renewable energy projects designed to cut emissions, including big private wind farms that generate most electricity at night, when the state’s power demands were at their lowest.”

This prompted me to get the transcript of Ms In’t Veld’s evidence to the committee.

“That [the $200 million annual production increase] would be an additional 20 per cent in our [Verve’s] cost every year,” she said.

“We [Verve] are still carrying in excess of $1 billion in debt, so it will also mean we will neither be in a position to start paying down the debt nor be in a position to pay the dividend to our owners, the state government.”

And when the 111-turbine Collgar Wind Farm, near Merredin, is operational in April it “will increase our [Verve’s] operating costs by some $26 million to $27 million a year.”

Because Verve’s charter compels it “to make sure the lights stay on” that means “the state government would have to bail us out to keep us running”.  

Since it costs Verve more to operate gas-fired generators coal must continue being used for lower-cost reasons and to diversify energy supply in case an emergency such as the Apache gas explosion on Varanus recurs.

And Verve faces a potential gas shortage after 2015-16, Ms In’t Veld said.

Having to trash its generators, thereby boosting replacement and maintenance costs, and subsidising exorbitantly costly wind and solar-derived electricity means ever-increasing electricity costs to WA consumers.

Yet we’ve not heard a squeak, from either Mr Barnett or Mr Ripper about this imposed wanton destruction of publicly owned capital assets.

What’s going on?

Both gentlemen are handsomely paid with a nice big superannuation package lined-up. Yet nothing has been said or done.

Get real Colin. Get real Eric.

If you both continue sitting on your mitts at least explain why.

Your top electricity generating CEO has told you, and us, of some scandalously grave problems confronting our electricity provision sector.

Think about what Ms In’t Veld said.

Firstly, the coming Gillard-Greens $20-$25 CO2 gas tax is set to add a whopping $200 million annually to Verve’s generating costs, and thus to all consumers.

Even more disturbing the Gillard-Greens dumb new tax “was causing Verve’s plant to be run inefficiently”, which means, “trashing our power stations” and that means “a huge impact on them in terms of the additional maintenance required, the wear and tear and the design life of the plant”.

For those not mechanically minded or experienced, what this means is that maintenance costs, such as having to pull generators out of commission to replace components, will rise; and what’s even worse is that the working life of extremely costly generators is being slashed.

If maintenance and generator replacement is taken into account, that $200 million figure that Ms In’t Veld quoted will surely become much higher.

Perhaps double or even more.

It’s probably still too early to put precise figures on to this permanent Canberra-imposed cost escalation upon Verve and thus electricity consumers.

And another thing that should be kept in mind is that Ms In’t Veld’s calculation is on the expected $20-$25 rate the Gillard-Greens coalition has apparently agreed upon.

That, of course, is just the opening gambit – the Greens’ foot in the door.

Thereafter, like all taxes, it will rise, and rise, until, as they say, ‘the pips begin popping’.

The Greens are unlikely to be happy until it’s around $120.

With the man-made Perth Waterfront project not exactly kosher, and electricity costs set to keep skyrocketing due to capital destructive man-made causes, the best advice one can give is begin saving your shekels.

Even iron ore booms can end suddenly.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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