Expertise a regional requirement

BUSINESSES operating in regional and remote areas of WA have been advised to contract out their power needs to market experts.

Handing over power delivery and maintenance would free up company capital and the time of senior staff, according to Matt Duxbury, senior market analyst with Wesfarmers Energy’s StateWest Power.

The potential to make large errors in matching technology with the size and life of a project, and in contractual arrangements, would effectively be removed, Mr Duxbury argued.

However, those keen to be the ones supplying power as independent power providers (IPPs) in regional WA needed to be wary.

The competition appeared easier than in the large grids, but pricing supply against the vagaries of specific project needs could be tricky.

The regional independent power provider market was constantly changing, Mr Duxbury said, and gas suppliers, transporters, IPPs and end-users would do well to get together to understand each other’s needs outside any specific project negotiations.

Traditionally, many regional projects used small diesel stations for their initial supply, but pipeline infrastructure existed to support greater provision of gas to projects.

However, gas contracts were complex in set-up and in ongoing management, and regional businesses were unfamiliar with these.

Most purchase contracts required an operation well beyond five years.

However, most junior miners commenced production, for cashflow, as soon as resources were proved for between three and five years, and then proved up further reserves.

CMS Energy business development manager Rudi Petrig said having to commit to high cost gas purchase agreements added to the risk for providers, and the Parmelia pipeline had more than 50 per cent spare capacity, and the Goldfields line more than 40 per cent.

Mr Petrig had other concerns, not restricted to regional areas.

The transportation side of the industry – pipeline ownership and operation – was in crisis, he said.

The pipeline industry had not yet been adequately heard, and development was now driven by lawyers, economic consultants, and bureaucrats, rather than engineers and new industry.

The winners in the current market, Mr Petrig said, were large industrial users and AlintaGas, whose OFFGAR-approved network arrangements were proving barriers to a commercially achievable contestable market.

WA’s Office of Energy and national market reviews could resolve issues, but presently the losers were pipeline owners and shippers, and those wanting to become new users, he said.

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