Growth spurs new power generation

Western Australia’s strong economic growth has spurred the development of new power generating capacity, with five power stations collectively worth $1.4 billion currently under construction in the South West.

The construction of new power stations and industrial projects has also underpinned the expansion of the Dampier-to-Bunbury natural gas pipeline, at a cost of $1.1 billion.

In addition, at least five companies are considering the development of new power generation projects, fuelled by everything from timber residue to coal and gas.

As well as the big power projects in the South West, several smaller power stations are being developed in remote locations.

The largest of these is Energy Developments’ $210 million West Kimberley power project, which involves the construction of five power stations in the Kimberley with a combined capacity of 61 megawatts.

Burns & Roe Worley is building a 9MW power plant in Exmouth costing $31 million and Wesfarmers Energy is planning to build a 15MW power station at Carnarvon.

The five power stations currently under construction in the South West will add just over 900MW of generating capacity.

That will add substantially to the 3,600MW of generation capacity currently in place.

Development of the new power stations will allow the state-owned Verve Energy (formerly part of Western Power) to retire some of its old and inefficient generating capacity.

It is expected to close the Muja AB power station at Collie during 2007 and the Kwinana A power station the following year.

Closing its old power stations will give Verve scope to consider building new power stations in future, in competition with private sector generators.

The biggest private sector player in the market is Alinta, which is building a series of highly efficient co-generation power stations at Alcoa’s alumina refineries.

Its first 140MW co-gen unit at Pinjarra was completed in late 2005, about six months late and over budget, illustrating that power projects are not immune from the cost blow-outs besetting WA.

Alinta has taken a more active role in the project management of its second co-gen plant to avoid the delays experienced first time around.

The second 140MW unit, also at Pinjarra, is due for completion later this year.

For the third co-generation project, it adopted a new contracting method (engineering, procurement and construction management) and appointed a new contractor (Sinclair Knight Merz) to try and get a better outcome.

Construction of the third co-gen power station at Alcoa’s Wagerup alumina refinery commenced recently.

The two gas turbines at Wagerup, each with a peak capacity of 175MW, will initially provide reserve capacity to the new wholesale electricity market.

Under the reserve capacity scheme, Alinta will be paid capacity credits even if the plant never operates.

Another new entrant to the WA market is Collie coal producer The Griffin Group.

It has partnered with Queensland’s Stanwell Corporation to build a 90MW wind farm near Cervantes, and more significantly this year commenced construction of its Bluewaters 208MW coal-fired power station at Collie.

Griffin recently won a tender to supply about 150MW of power to the Boddington gold mine, which will account for most of the output from Bluewaters.

Boddington will provide a significant boost to the state’s electricity demand, increasing consumption by about 6 per cent, according to the market supervisor, the Independent Market Operator.

Griffin is currently seeking environmental approval for a second 200MW unit at Bluewaters and ultimately hopes to have four units.

A third new player in WA’s electricity generation sector is New Gen Power, jointly owned by Queensland company ERM Group and investment bank Babcock & Brown.

NewGen won a government tender to build a 320MW base-load power station at Kwinana.

Construction of the gas-fired plant commenced recently and it is due to be producing power by the second half of 2008.

Dampier Bunbury Pipeline, the entity that manages its namesake pipeline, is proceeding with a staged expansion of capacity.

The 1,600-kilometre pipeline, which was previously owned by Epic Energy and was bought in 2004 by a consortium that includes Alinta and Alcoa, currently has a capacity of 635 terajoules per day.

The $430 million, stage 4 expansion currently under way will add 100TJ of extra capacity and is about 90 per cent complete.

DBP announced earlier this month that it would proceed with a further $700 million, stage 5A expansion, adding another 100TJ to the pipeline’s capacity.

DBP executive chairman Stuart Hohnen said the combined expansions would cost about $1.1 billion.

“This is nearly three times the size of the financial commitment we gave to the state government and the ACCC when we purchased the pipeline,” he said.

The staged expansion plan marks a significant shift from DBP’s earlier plan to proceed with a $1.5 billion expansion.

It pulled back from that plan after prospective customers did not meet project feasibility studies within the required deadline.

The staged approach means that expansions only occur when the additional capacity is fully contracted to new and existing customers under long-term arrangements.

Mr Hohnen said these commercial arrangements sat outside the regulatory regime governing the pipeline.

The stage 5A expansion, which is expected to begin early next year, comprises the laying of additional pipe alongside the existing pipeline in a process known as looping.

Stage 5A comprises 10 loops totalling more than 570km.

The stage 4 expansion comprised 217km of looping and the installation of eight new compressors.

The company said the timing of its stage 5B and stage 5C expansions would depend on a range of issues, including the price and availability of gas to support new resource processing and power generation developments.