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New market for energy

WESTERN Power and new Woodside offshoot Metasource have become the founding members of a world’s first renewable energy market, which will allow trade in credits for the use of alternative energy sources.

The pair join 13 of Australia’s leading energy groups in founding the Green Electricity Market (GEM), the world’s first exchange for a mandated environmental certificate – the Renewable Energy Certificate.

The move coincides with recent federal legislation, which requires energy retailers to source at least 2 per cent of their supplies from renewable sources such as wind, biomass, tidal and solar.

Western Power said new laws meant it had to produce about 77 gigawatt hours of extra renewable energy a year from 2002 to 2010.

“We pretty much have to replicate the Albany windfarm every year until 2010,” Western Power spokesman Peter Winner said.

He said the need to find renewable energy sources was a challenge, but the corporatised State authority was keen to be a net provider to the system.

“There are number of projects which might allow us to get a finger into it,” Mr Winner said

“It could be a bit of a business opportunity, it is early days though.”

Metasource managing director Richard Beresford said the market participants com-prised renewable energy suppliers such as Metasource, as well as buyers like Western Power.

The changes come under the Federal Government’s Mandatory Renewable Energy Target, which became effective from April this year.

Mr Beresford said that, while in the short term renewable energy may be more expensive than conventional energy, this was likely to change with greater efficiencies being achieved.

What the target means for retailers such as Western Power is that they may be forced to pay a premium for renewable energy simply to met the mandatory targets set by legislation.

Indications are that it would be a renew-able energy suppliers’ market – something that has not been lost on companies such as Metasource, which has stepped in early to fill the hole.

“We are definitely in it for the money,” Mr Beresford said, dismissing suggestions that Woodside’s foray into renewable energy was simply a public relations exercise.

“GEM creates a number of precedents for Australia and the world. It is Australia’s first industry-owned registry and marketplace,” The Marketplace Company director Ken Chapman, who has spent more than 18 months establishing the project, said.

According to the chair of the GEM governance board, Simon Mathis, the market was established to assist companies manage issues related to compliance, transacting, settling and exchanging the types of emerging environmental instruments, the first being the Commonwealth legislated Renewable Energy Certificate.

“This is a significant milestone for the renewable energy industry and for anyone

who cares about the environment,” Mr Mathis said.

GEM uses an Internet trading system that will handle the creation, exchange, settlement and clearing of at least 300,000 RECs over the next year, with this expected to climb to 9.5 million RECs by 2010.

Mr Chapman said GEM also was a vehicle for the renewable industry to promote the use of market-based mechanisms to address other environmental issues.

These include products such as carbon emissions, carbon sequestration credits, green power certificates and other certificated regulatory regimes.

RECs are created when a renewable generator generates electricity. Under the Renewable Energy (Electricity) 2000 Act, retailers purchase RECs in order to comply with the legislation and avoid penalties.

The sale of RECs creates an extra revenue stream for the renewable generator with the aim of increasing the attractiveness for investment in renewable electricity production.

“An estimated $500 million will be spent buying RECs by 2010 – providing a significant boost to the production of new renewable energy in Australia,” Mr Mathis said.

Meanwhile, the Federal Government has given renewable energy a shot in the arm with the announcement of an $18 million package to the WA remote area power supply program to assist people in outback WA move to renewable energy.

Residents of about 2,000 permanently occupied homes not connected to an electricity grid and more than 250 Aboriginal communities will be eligible to benefit.

Farmers, roadhouses, caravan parks, tourist facilities and mining companies that relied on diesel generators for electricity supply also be would included in the program, which is expected to cut diesel use in WA by more than 3.5 million litres a year.

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