Industry worried by lack of ‘how to’ plan for WA’s big energy vision

A TRICKLE of industry submissions in response to the State Energy Initiative Directions Paper has come into the public forum this week, with one prominent concern – the lack of government consideration for how exactly the 2031 plan will be implemented.

The Chamber of Minerals and Energy of Western Australia (CME) said political tensions between the Office of Energy’s four priorities (competitiveness, security, diversity and sustainability) was a start, but that the biggest challenge would be applying those principles to everyday policy.

“To support the full application of the Energy2031 framework, the final policy must include an implementation plan which identifies a timeline, agency accountabilities for its recommendations, and an industry consultation process,” its submission said.

The Sustainable Energy Association of Australia had similar concerns.

“The directions paper provided no plan underlying the actions, nor did it create clear and coherent targets and goals of how and when many of the suggested actions would be achieved,” SEAA said.

It is concerned at the lack of bipartisan support for the paper and suggested an independent and bipartisan advisory committee should be created in order to monitor the implementation of the final recommendations.

SEAA and the WA Chamber of Commerce and Industry both emphasized the importance of a ‘whole of government’ approach to the strategy.

“Long-term strategic policy goals are all too often created in isolation – or not considered at all,” CCI said.

The timeframes set out in the paper also raised concerns. CME said that without clearly defined timing, pressure would be placed on industry and state development.

“To consign reform in key areas to beyond five years will have real implications for the continued growth of the State and our ability to capture the extraordinary opportunities presented by the strength in global commodity markets,” CME said.

Domgas

For Domgas and the Australian Petroleum Production & Exploration Association, the domestic gas reservation policy was the number one issue resulting from SEI, a topic they remain at loggerheads over.

APPEA strongly disapproves of the mandatory reservation of 15 per cent of any natural gas produced in WA. DomGas is in support of the policy remaining in place as set out in SEI.

“The domestic gas reservation policy is not only unnecessary, it is counterproductive. Imposing a large economic cost on gas producers by requiring one industry to subsidise the input costs of others can only lead to less investment, less supply and higher gas costs in the longer-term,” APPEA’s WA director, Stedman Ellis, said.

DomGas said: “Domestic gas reservation remains, by far, the single most effective policy available to the Government to promote supply and reduce prices.”

CCI also weighed in on the debate in its submission.

“On balance, CCI remains unconvinced over the merits of a blanket reservation policy to secure domestic gas supplies, particularly over the long term,” it said.

Pricing priorities

According to CCI though, achieving cost-reflective pricing is priority number one should the state have any hope of achieving any of the 100-plus actions set out in the SEI paper.

“The final SEI policy should give precedence to achieving the goal of competitive energy, given competition and efficient price signals are a prerequisite for achieving other key objectives such as secure, clean and reliable energy,” CCI’s submission said.

CCI also suggested that to assist in transitioning to cost-reflective pricing, the government should immediately prepare a legislative framework to transfer responsibility for administering, reviewing and setting maximum tariffs for the retail gas market to the Economic Regulation Authority.

“The ERA should be given the objective of setting maximum tariffs, which allow retailers to recover the full, efficient costs of providing gas to customers to ensure that retailers can remain financially viable in the long term,” CCI said.

Market-based policy

According to most industry submissions currently available, creating market-based policy for energy is imperative to many of the actions, including cost-competitive pricing and the development of cost-competitive renewable energy forms.

“Open, stable and competitive markets for energy combined with a transparent and efficient market-based regulatory framework can help to deliver the other objectives of secure, reliable and cleaner energy,” CCI said.

CME made a similar pitch.

“A competitive market delivered through appropriate market design and regulation will facilitate private investment and support job creation and competitive pricing,” CME said.

“Although progress has been made since the disaggregation of the former Western Power, Verve and Synergy continue to be the major participants in the Wholesale Electricity Market (WEM) with market shares of 61 per cent and 80 per cent respectively and further reform is essential.”

CME said potential investment in the WEM continued to be threatened by public policy uncertainty.

“For example, important questions remain about the current and future role of the state government in the WEM, recently demonstrated by the lack of transparency around the change in the vesting arrangements between Verve and Synergy,” CME said.

Important signs

Understanding the elements of state development and economy that are partially reliant on the assurance of future energy infrastructure and supply makes the importance of an energy strategy for WA become all too evident.

CME estimates through its State Growth Outlook that total WA electricity consumption could increase by approximately 70 per cent by 2015 – driven by projects in the minerals and energy industry.

Natural gas demand for WA is expected to increase from an estimated 975 terajoules a day in 2009 to 1600 terajoules a day by 2020 – also driven by the minerals and energy sector demand, which is expected to increase 45 per cent on 2009 levels by 2015.

CME said it supported the long-term vision for infrastructure needs of the state and planning investment, and brought its argument back to the importance of a whole-of-government approach to policy.

“That this work is done at a whole-of-government level is critical given the clear linkages between, for example, the adequacy of the transport network and energy security through the ability for remote mining operations and communities to access diesel supplies,” it said, pointing to the mining sector’s reliance on diesel-fuelled energy.

“The need for such a strategy to ensure business and industry has security and certainty of energy supply has never been more important as the state gears up for another wave of strong economic growth.”