24/08/2011 - 09:33

Fuel security tops energy debate

24/08/2011 - 09:33

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Fuel security tops energy debate

SECURING future access to fuels in Western Australia and the success of energy-efficiency measures in industry outside of a carbon tax were two key issues discussed at an energy conference in Perth last week.

Verve Energy general manager Tony Narvaez told the Energy in WA conference that easy access to fuel sources such as gas were “pretty much a thing of the past”.

“Getting into initiatives such as Mondarra gas storage with APA really hold the key for us to ensure we retain some flexibility moving forward,” Mr Narvaez said, referring to the 20-year deal with major gas pipeline operator APA Group that would expand the capacity of WA power producer Verve’s gas-storage facility near Geraldton by five times and inject 11 petajoules of gas into the facility.

Verve Energy managing director Shirley In’t Veld said at the announcement in May Verve would be able to store enough gas in the expanded storage to keep 800MW of its gas-fired generation operating for peak demand periods for up to 30 days and a declining supply for a further 30 days.  

“This will be invaluable support for our coal-fired plant during periods of a gas supply shortfall and high electricity demand,” Ms In’t Veld said.

Brian Innes, state manager of climate change management consultancy firm Energetics, said there was a lack of certainty in future gas supply because of the discrepancy between the levels of supply and demand in WA.

“It is not a big market and that is the problem. We don’t have a domestic demand profile which has lots of players which makes it a real market,” he told WA Business News.

“The buyers have no ability to trust the forward price out to 20 years, which is what they want. The sellers are saying, I am putting a big gamble on WA industry.”

Renewable energy project developer Mid West Energy is focused on the opportunities offered by the resources-driven energy demand in the north-west but managing director Richard Harris said gas supply was an ongoing issue in terms of meeting the energy requirements.

“There are constraints at the moment on gas supply and gas-fire generation, nobody I know is building a gas-fire generator at the moment,” Mr Harris said.

“To source gas in this market, with a 20-year timeframe for the life of projects, and the life of a gas plant, it’s just not available.”

Mr Innes agreed that gas restrictions were putting pressure on forward-planning abilities.

“Anyone who is going to invest in a combined cycle plant wants a long-term price trajectory on their major operational cost, the fuel coming in. They just can’t get that at the moment,” he said.

“At the end of the day you want to find a way for the market to work, otherwise government has to step in.” He was referring to measures such as renewable energy certificates.

The Gillard government’s proposed carbon tax was another common theme among speakers, with questions surrounding the benefits of complementary measures – such as industry efficiency policies – to market-based mechanisms.

Peter Hartley, chair in economics at Rice University (Texas), made a bold prediction that complementary measures would become more of a cornerstone in time.

“There will be continuing measures to subsidise research and development into alternative energy technologies, but also countries will move towards policies that tend to, perhaps, cope with climate change, natural or man-made, rather than trying to restrict CO2,” he said.

Mr Innes took a different view. He said he tended to agree with market purists that a market-based mechanism would iron out the issues.

“We need full-cost reflectivity in our electricity prices, we need a carbon price which the market sets, untethered from distortions, let’s get on with it,” he said.

But he said complimentary measures were vital where market systems failed.

“The greatest failure from our markets from an energy point of view is that we are not tight enough on building regulations,” he said.

Mr Innes insisted that tighter regulations, such as the six-star energy rating regulation for the building industry, played an important role in creating better efficiencies in energy usage, considering energy use had increased by 20 per cent in the average household since 2001.

International Energy Agency senior energy adviser Grayson Heffner said justification for measures that aimed to educate end-energy users on efficiency remained.

“Carbon pricing is important, it is an anchor, a basic pillar in improving energy efficiency in all sectors, but it is not a panacea for everything, it doesn’t solve basic market failures,” he said.

 

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