Pacific Energy has shelved plans for a $100 million biomass project at Wanneroo, saying the move was a result of the disconnected structure of the state’s electricity sector and a reluctance of government to consider the project’s broader benefits.
The same criticisms were made by the Economic Regulation Authority last week in its annual review of the wholesale electricity market.
“The design of the wholesale electricity market was influenced by the characteristics of the Western Australian energy market and the legacy of the industry’s structure prior to energy market commencement (in 2006),” the report said.
Pacific Energy, an Australian Securities Exchange-listed power station owner and renewable energy generation company, has spent five years developing the 25-megawatt Perth Bioenergy Project.
The company had been at the pointy end of discussions with the state government and energy retailer Synergy for the sale of the renewable energy to be generated by the project.
But, according to managing director Adam Boyd, the fate of the project was tainted by the autonomous pillars of WA’s energy sector (Western Power, retailer Synergy and system manager and energy producer Verve), a structure that resulted from the 2006 disaggregation of Western Power.
“The legislated autonomy teamed with the remit to increase renewable energy sources through the federal government’s Renewable Energy Target scheme, has led to the three energy companies acting in isolation when considering renewable energy procurement,” Mr Boyd said.
He said the system was set up to support the development of intermittent wind and solar farms because they superficially appeared to be the cheapest renewable option to develop.
“However, intermittency requires the support of fossil-fuelled power stations, energy balancing and transmission system reinforcement, the costs of which are the responsibility of different energy companies within the market,” he said.
He added that base load renewable energy solutions like biomass do not have these requirements.
Mr Boyd said the sector lacked the overall direction of an umbrella body that had the responsibility of impartially aggregating the cost of intermittent wind and solar generation to each of the government-owned pillars of the state’s electricity market.
It was doubtful any base load renewable energy projects would be developed because of the structure and the state would continue to invest in intermittent sources that would not deliver aggregate lowest-cost solutions.
He said moves were afoot to address the issue, however, they lacked the acknowledgement the Western Australian market was dominated by government-owned players and it was too late for the biomass project.
The ERA report was damning of the state of renewables in WA and said renewable investment incentive schemes would be a major driver of higher electricity prices and imposed significant additional costs on consumers.
“The authority is concerned that unless there is pressure on retailers to procure ‘green’ electricity at the lowest cost, then inefficient costs will be passed on to consumers,” the report said.
“Evidence shows the current federal and state renewable energy incentive schemes are an expensive, economically inefficient means to achieve the policy objective of greenhouse gas abatement.”
The report also offered detailed criticism of the sector’s leaning towards intermittent renewable energy sources and said capacity credits provided to companies under programs put in place to lessen peak-period demand (demand side management and reserve capacity management) acted as an incentive for wind and solar development.
“One identified issue was the potential over-allocation of capacity credits to intermittent generation, which seldom operates at full capacity during times of peak demand,” the report said.
The report said the costs of wind and solar would be distorted because of exemptions for intermittent renewable sources to normal costs associated with energy generation and other disproportionately small cost allowances.
While Mr Boyd said the situation was frustrating, Pacific Energy was focused on the development of other remote projects and was further advancing contracts for power supply to mining companies.
Pacific Energy is also embarking on projects to retrofit some of its remote diesel-fuelled power stations with fuel-saving and carbon emission reduction technology KPS Waste Heat Recovery.
Regis Resources is one of the first clients to adopt this technology at its Garden Well and Moolart Well gold mines.
