The Barnett government has moved to defer future payments to providers of reserve electricity in a key first move of its review of the state’s electricity market.
The Barnett government has moved to defer future payments to providers of reserve electricity in a key first move of its review of the state’s electricity market.
Energy Minister Mike Nahan has issued a ministerial directive to delay by a year much of the reserve electricity ‘capacity’ that was due to enter the market in 2016-17.
Mr Nahan said this would ensure the wide-ranging electricity review could proceed without constraints.
The directive is aimed at reducing Western Australia’s current oversupply of potentially available electricity.
This is provided through a market which ensures demand for electricity can be met by paying both power stations and demand side network (DSM) operators to provide energy should it be called on.
The directive has resulted in fresh debate from market participants promoting the cost benefits of their respective DSM and power station capabilities.
Perth Energy managing director Ky Cao was one of several generators, including Bluewaters Power and APA, who welcomed the directive, saying it was an important and practical first step in the state’s electricity review.
Mr Cao said the move targeted DSM providers because the glut of capacity in the system meant no new power stations were being considered, leaving DSM providers more likely to be affected by the planned reduction in payments.
Mr Cao repeated his previous calls for the price paid to power stations to be higher than for DSM participants, which switch off energy to provide electricity capacity to the network.
He said DSM added 10 per cent to the state’s total capacity costs and should only be paid for by retailers who wanted it, rather than being imposed on retailers regardless of market conditions.
However, EnerNOC Australia and New Zealand, whose clients represent 60 per cent of WA’s DSM program, maintained its previous position that DSM deferred the need to build expensive power plants and therefore saved customers millions of dollars.
EnerNOC government affairs director Richard Wilson said DSM was not the culprit of higher electricity costs.
“The vast majority of electricity costs paid by consumers stem from take-or-pay contracts and network expenses, not from capacity pricing,” Mr Wilson said.
“The government’s review must find a way to address these costs otherwise electricity will continue getting more and more expensive.”
Mr Nahan has previously said the review of the state’s electricity market will consider all options to reduce electricity costs, including abolishing the capacity market altogether.
“The commercial interests of market participants will be one of the factors considered in the development of reforms to the Wholesale Electricity Market and addressed in any transitional arrangements necessary to achieve these reforms,” Mr Nahan said in the directive.
