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VOL 5 | N
AVIGATIN
G A
NEW
ELECTRIC
ITY SUPPLY ERA
Cover Photography: Caroline Foldes
NAVIGATING A NEW ELECTRICITY SUPPLY ERA
RRP $29.95
POWERING AUSTRALIA | VOL 5
Policy makers are seeking to launch a step-change in electricity supply
and consumption in Australia. The federal government plans to reduce
coal-fired power stations’ role to meeting 43 per cent of demand by 2020.
This will mark the nation’s first major step toward a decarbonised economy.
PROUDLY ENDORSED BY
APIA • Australian Power Institute • Clean Energy Council
Energy Networks Association • ERAA • NGF • ESAA
n a v i g a t i n g a n e w e l e c t r i c i t y s u p p ly e r a
Contents2
Contents
IntroductIon
Pursuing a softer environmental footPrint
Prepare yourself for a step-change in electricity supply and consumption in Australia.
12 focusing on Policy certainty and a framework for investment
extract from a speech by the federal Minister for Resources and energy Martin Ferguson.
18 a major national infrastructure challenge
By 2020, coal will no longer be the overwhelmingly dominant source of fuel for electricity generation.
36 the need for a national energy Policy
More than $10 billion worth of electricity is traded every year in a market that operates 24 hours a day.
44 towards a national energy Policy
the government’s promise of an energy white paper has whetted the industry’s appetite.
52 nuclear versus Power Poor
How and when is Australia going to decarbonise its electricity supply? Is nuclear power the answer?
PoWeRInG AUstRALIA VoLUMe 5 3
58 fuel Poverty emerges as a real issue
end-user power prices in 2015 are likely to be twice what they were in 2008.
58 conditions may brighten for solar Power
CsIRo believes future advances will enable the sun to meet 30 per cent of our power needs.
64 Premier state’s Prime suPPly challenge
nsW’s population has more than doubled since the mid-1950s and is heading for 7.6 million by the end of the decade.
72 new energy vision for the west
Western Australia lacks a long-term energy plan. Its last comprehensive energy policy was developed in 1979.
80 how big a boon is gas for generation?
once again gas appears ready to play a golden role in electricity production.
84 interstate energy trading on the rise
How a $2 billion surge in investment transformed the future for wind generated energy.
88 the solar flagshiP Program
Preparing to reduce future carbon dioxide emissions from power stations by 10.8 million tonnes.
RoLL oF HonoUR4
RoLL oF HonoURMAjoR
Australian Coal Association
Ge
IBM
siemens Ltd
sMeC Australia
suntech Power Australia Pty Ltd
toshiba International Corporation
transGrid
Key
AGL energy Limited
Ausgrid
eneRGeX Limited
Gentrack
Granite Power Limited
Horizon Power
Institute for Mineral and energy Resources
Vestas
Western Power
Wilson transformer Company Pty Ltd
PoWeRInG AUstRALIA VoLUMe 5 5
tHe FUtURe Is eLeCtRICIty. It Is
UneqUALLed In BeInG ABLe to tRAnsFeR
LARGe AMoUnts oF eneRGy At tHe sPeed
oF LIGHt And MULtIPLe FUeL soURCes
CAn Be Used to GeneRAte It. It WILL
PRoVIde MoRe And MoRe oF yoUR eneRGy
needs In tHe FUtURe. It Is sIMPLy tHe
Most eXCItInG eneRGy seCtoR to Be In.”
tony ConCAnnon, eXeCUtIVe dIReCtoR,
InteRnAtIonAL PoWeR AUstRALIA
IntRodUCtIon6
IntRodUCtIonPURsUInG A soFteR enVIRonMentAL FootPRInt
We are now beginning a decade in which policymakers are seeking to
launch a step-change in electricity supply and consumption in Australia.
the exercise is complicated by the fact that the availability of
electricity over past decades has fostered a great dependency in
modern society, making power the third fundamental need of
communities, along with food and clean water. When the power
supply falters today, countless activities in homes, industry, shops,
offices and hospitals are put at risk – and its growing cost affects
both household and business budgets.
Having come to depend on to a great extent in most parts of
the country on comparatively cheap fossil-fuelled electricity, we are
embarking on a process in which the carbon emissions intensity of
the industry is expected to be significantly improved, the generation
mix to be substantially different, networks to be greatly upgraded and
expanded, smart meters with time-of-use tariffs to be standard for
households and the cost of electricity to be much higher than today.
In the decade ahead, the federal government (as explained in its
energy resource assessment published in the past year) plans to
move Australia on to a power path that, by 2030, will have reduced
the role of coal-fired generation to supplying 43 per cent of demand,
increased the contribution of gas-fired plant to 37 per cent and grown
the renewable generators’ share of consumption to 20 per cent.
Pursuing this path will require a capital outlay of more than $20
million a day on network augmentation, about $6 million a day on
building wind farms and other renewable plants, and about the same
each day on providing gas-fired power stations. In total, it will require
capital expenditure of more than $130 billion over the decade. Looking
out to 2030, it is suggested that overall investment in the industry
could amount to $220 billion.
the role solar power (whether in residential rooftop arrays or
in utility-scale developments) and geothermal energy will play in
the 2030 electricity supply chain depends on both technological
developments and the willingness of governments to provide
subsidies considerably larger than those available today. the same
may be said about the prospects for carbon capture and storage
achieving a commercial breakthrough, which would open new
opportunities for coal-fired generation and impose a new cost
pressure on gas plants.
In tHe deCAde AHeAd, tHe FedeRAL GoVeRnMent PLAns to MoVe
AUstRALIA on to A PoWeR PAtH tHAt, By 2030, WILL HAVe RedUCed
tHe RoLe oF CoAL-FIRed GeneRAtIon to sUPPLyInG 43 PeR Cent
oF deMAnd, InCReAsed tHe ContRIBUtIon oF GAs-FIRed PLAnt to
37 PeR Cent And GRoWn tHe ReneWABLe GeneRAtoRs’ sHARe oF
ConsUMPtIon to 20 PeR Cent.”
KeItH oRCHIson, edItoR
IntRodUCtIon8
Whether political and community sentiment about
any role for nuclear generation in Australia will change
this decade, especially in the wake of the Fukushima
crisis, can only be a matter for speculation.
Whether the world’s governments can find a way to
develop a new decarbonisation plan to succeed the Kyoto
agreement, which expires next year, is equally speculative.
this year’s United nations summit meeting in durban,
south Africa, will need to move far beyond the last two
(Copenhagen and Cancun) to even begin the development
of a new treaty, an issue of major importance to Australia
because success in this endeavour could lead to a
substantial change in the current commitment to drive
down national greenhouse gas emissions to 5 per cent
below 2000 levels by 2020.
this target is now estimated to require annual abatement
by 2020 of 160 million tonnes – equivalent to closing
Hazelwood power station 10 times over. just meeting it will
require the closure of a number of coal-fired power stations
on Australia’s east coast, while pursuit of a higher goal
would once again change the debate about nuclear
energy, drive more coal plant closures (many of them
owned by state governments) and see renewable energy
advocates intensifying their pressure for subsidies for
zero-emission technologies.
the degree of success achieved by the federal
government in introducing a price on carbon emissions in
the 2011–12 financial year will determine how the new
electricity path is pursued. the long debate on the issue
over more than three years has created so much uncertainty
for private sector investors that actual generation
development is now at a low point after the development
of 10,000MW in the previous 10 years.
All states (and both territories) have substantial skin in
this game and none more so than the largest electricity
supply/demand region, new south Wales, where the
emphatic change of government in March 2011 means that
almost every aspect of the local electricity industry is now in
PoWeRInG AUstRALIA VoLUMe 5 9
play. How the new nsW government acts on electricity
policy in the year ahead will be an important factor, both
on the east coast and for the nation, especially in terms of
decarbonisation developments.
Politics has been a factor in electricity supply for at least
the six decades of the modern era and they will be a major
one in the decade ahead. At least three federal elections
and two each in nsW, queensland and Victoria – the areas
containing 80 per cent of national demand and supply
capacity – will take place between now and 2020. Power
prices, electricity reliability and security, plus the
decarbonisation debate, clearly will be major political issues
over the decade. the current investor uncertainty, if allowed
to continue, will be a cancer eating at the ambitions of
policymakers for a new model power sector.
A major step in providing the roadmap, not just for
the decade ahead but also for the years to 2030, will be
production by the federal government of the much-delayed
energy White Paper, now promised for delivery in draft late
this year and in final form in 2012. this paper – and the
resolution of key issues such as placing a price on carbon
and settling the emissions target – is central to success in
ensuring a secure and affordable power system with a softer
environmental footprint at the decade’s end.
Far from being the end of the process, what we achieve
by 2020 will only represent the start of a great shift to a
decarbonised economy.
Keith orchison
editor
CoMPAny PRoFILeCoMPAny PRoFILe10
aGL is one of Australia’s leading renewable energy
companies and is Australia’s largest private owner, operator
and developer of renewable generation assets.
AGL has major investments in hydro and wind, as well as
ongoing developments in key renewable areas, including
solar, geothermal, biomass, bagasse and landfill gas. AGL
also operates retail, merchant energy and upstream gas
businesses and has over three million customer accounts.
As a company that was founded in 1837, AGL
understands the importance of taking a long-term view. At
AGL, sustainability is about recognising that if we want our
business to continue to be successful and respected, we
need to do the right thing by our shareholders, employees,
customers, the broader community and the environment now.
AGL’s sustainability performance has been recognised
internationally by independent experts. It is the only
Australian integrated energy company included on the dow
jones sustainability World Index 2010/11 and is a constituent
of the Ftse4Good Index.
AGL
AGL owns and/or operates more than 3700MW of
generation capacity across base, peaking and intermediate
plants. More than one quarter of this is renewable generation
sourced from hydro, wind, landfill, biomass, bagasse and
solar sources. the remainder of our portfolio is
predominantly gas-fired generation. AGL also owns and/or
operates coal seam gas exploration and production in five
petroleum basins across new south Wales, queensland and
south Australia. AGL’s ownership of 2P coal seam gas
reserves has grown rapidly to 2029Pj.
AGL is committed to leading Australia in minimising the
effects of climate change, investing in sustainable energy
businesses and working on innovative environmentally
friendly projects. AGL’s power generation portfolio includes
more than 1100MW of renewable energy. A further 670MW of
renewable generation is currently under construction.
AGL’s Bogong Hydro Power Project was named Most
outstanding Clean energy Project at the ecogen 2010 Clean
energy Awards.www.agl.com.au | see page 96 for details
PoWeRInG AUstRALIA VoLUMe 5 11
austraLia is a world leader in exporting coal. It’s also
set to be a world leader in reducing greenhouse emissions
from coal.
Carbon capture and storage (CCs) is a necessary part of
the global response to climate change. deployed at scale, CCs
will reduce carbon emissions from coal- and gas-fired power
stations and other industrial processes by up to 90 per cent.
With more than $36 billion in exports in 2009–10, coal
is Australia’s largest export commodity. the coal industry
directly employs some 40,000 Australians and another
100,000 indirectly. Black coal is used to generate more
than half of Australia’s electricity and the royalties from
coal currently underpin state government budgets in nsW
and queensland.
RedUCInG CoAL-BAsed GReenHoUse eMIssIons
the Australian coal industry has already committed more
than $1 billion through the CoAL21 Fund to developing and
trialling carbon capture and storage projects across Australia.
developing low emissions technologies for coal is
important because coal will continue to produce significant
amounts of the world’s energy for decades to come. the
United states and major developing economies like India and
China will continue to burn their own massive coal reserves.
that’s also why japan (Australia’s largest export market
for coal), the United states, the european Union and China are
all investing in the development of CCs technologies.
Around the world there are at least 234 CCs projects at
various stages of development. twelve of them are in
Australia. We are already demonstrating Co2 storage at the
Co2CRC otway Project, and soon the Gorgon LnG Project in
Western Australia will be the largest Co2 storage project in the
world, storing up to 3.5 million tonnes per annum.
Responding to climate change ultimately depends on
developing and using low emission technologies such as
CCs. Australia is leading the world in many aspects of
developing and demonstrating this important technology,
including through the $1.68 billion CCs Flagships Program
and the coal industry’s $1 billion CoAL21 Fund.
. www.australiancoal.com.au | see page 96 for details
CHAPteR 0112
FoCUsInG on PoLICy CeRtAInty And A FRAMeWoRK FoR InVestMent
01
PoWeRInG AUstRALIA VoLUMe 5 13
enerGy is something that is more and more the subject
of public debate. Public discussion is very much focused on
increases in electricity prices and the pressures they place
on household budgets. What is often missing from this
picture, however, is the immense changes we have seen in
electricity usage – both at an industry and household level.
In terms of households, increased energy usage has
been very much a symptom of our changing lifestyle.
Let me illustrate this in the context of my own lifetime.
I was born in 1953. two years later, Australia’s
population was around 9 million and the median house
cost approximately $8000. At this time average household
energy consumption in new south Wales and queensland
was 2 MWh per annum. this was an era when outside
toilets and laundries were still very common, but it
preceded the introduction of clothes dryers and television,
which came in 1956.
By 1970 Australia’s population had grown to around
12.5 million and the average house price had increased to
around $12,000. Average household energy consumption
had doubled to 4 MWh per annum. It was an era where
people were buying more appliances – electric kettles
replaced kettles that were heated on the stove, hair dryers
and hair curlers were common and people were starting
to add a second bathroom to their homes.
jump forward 38 years to 2008 and hair straighteners
had replaced hair rollers, and a living room was not
complete without a six-appliance power board. Multiple
televisions and dVd players were to be found throughout
the house, along with computers, printers, playstations,
mobile phone chargers and a myriad of other electrical
gadgets. In the meantime, air conditioner use had grown
almost exponentially, car use had grown significantly and
air travel had gone from being the domain of the rich to
being accessible to almost everyone.
By this stage, the Australia population had grown
to almost 22 million, median house prices were around
$450,000 and average household energy consumption
had reached 7.9 MWh per annum. People were using
more electricity than ever before.
In teRMs oF HoUseHoLds,
InCReAsed eneRGy UsAGe HAs
Been VeRy MUCH A syMPtoM oF
oUR CHAnGInG LIFestyLe.”
tHe Hon MARtIn FeRGUson,
FedeRAL MInIsteR FoR ResoURCes And eneRGy
CHAPteR 0114
We ARe CURRentLy LIVInG
tHRoUGH An eXtReMeLy
stRonG PICK UP In GLoBAL
deMAnd FoR eneRGy. tHe
sIMPLe FACt Is tHAt tHe eRA oF
CHeAP eneRGy HAs PAssed.”
tHe Hon MARtIn FeRGUson, FedeRAL MInIsteR
FoR ResoURCes And eneRGy
over the period 1998 to 2010, Brisbane saw a 35 per cent
increase in the number of households. At the same time peak
electricity demand increased by 104 per cent, and the
number of households with an air conditioner installed
increased from 23 per cent to 72 per cent, with 34 per cent
of homes running two or more air conditioners.
Clearly, reducing or moderating the increase in peak
demand is an important national objective. one way to limit
it is to introduce time-of-use pricing, so that consumers will
face higher costs in times of higher demand.
yet in an environment where we are at near full
employment and our economy, our population and our
energy exports are all growing, there is no quick fix to
artificially hold electricity prices below where they need to
be to maintain reliability. tempting as it may be, suppressing
prices through regulation or market barriers would create
even more pain in the longer term by delivering inefficient
investment outcomes which, in turn, would either mean
higher bills for consumers or reduced reliability.
We are currently living through an extremely strong pick
up in global demand for energy. the simple fact is that the
era of cheap energy has passed.
In the long run, the most effective way to minimise
price rises will be to make energy markets as efficient as
possible. Reform is key to delivering this efficiency. the
last 20 years have been a period of continuous bipartisan
micro-economic reform in our domestic energy markets.
We have seen the creation of the national electricity market
and over time previously state-owned assets have
been privatised.
today, our electricity market leads the world in terms
of efficiency, reliability and in facilitating competition – a fact
acknowledged by the International energy Agency. yet our
economy relies more than ever on secure, accessible energy.
the future investment challenge is significant. the
Australian energy Market operator last year forecast that
between $72 billion and $82 billion will be needed for new
electricity generation and transmission by 2030. Add to this
PoWeRInG AUstRALIA VoLUMe 5 15
further investment in distribution networks, gas pipelines and
associated infrastructure and overall investment in the sector
to 2030 could exceed $220 billion.
that’s why the government is focused on providing
policy certainty and putting in place the frameworks to
enable investment decisions to go ahead sooner rather
than later. We also want to see this investment directed
towards an energy mix that will help reduce our greenhouse
gas emissions – but this must occur in a way that stacks
up commercially and is determined by market forces.
Government policies, such as the renewable energy
target and a carbon price, fit with this market-based
approach. It means new technologies will be market
tested and only the best and most viable will be
deployed at scale.
the efficiencies the market drives are critical to
managing cost pressures, but the government also has a
role in supporting research and development, addressing
market gaps and bringing on innovation.
Major reform requires proper planning and that is why
my department is continuing work on an energy White Paper,
looking at a range of plausible future energy and greenhouse
gas-related scenarios. I intend to release a draft energy White
Paper by the end of this year before finalisation next year.
While the white paper will help us understand and plan for
the future, it is not about predicting or mandating outcomes.
In my view, an effective energy policy framework should
provide accessible, reliable and competitively priced energy
for all Australians. At the same time it should maximise
opportunities for economic and social growth and
encourage ongoing investment and development, including
in sustainable and clean energy.
the white paper will provide a long-term strategic
framework intended to give investors, consumers and
planners confidence in our energy future.
An edited extract from a speech by the federal Minister for
Resources and Energy Martin Ferguson to CEDA
left Constructing and maintaining distribution network lines will remain one
of the major cost issues in electricity supply this decade.
16 CoMPAny PRoFILe
ausGrid supplies electricity to 1.6 million homes and
businesses via a network that spans more than 22,000
square kilometres, and includes 1.4 million small household
customers and around 200,000 small business and large
industrial customers.
the network comprises 50,000 kilometres of above
and below ground cables, 500,000 power poles, 30,000
distribution substations and 200 zone and sub-transmission
substations. Ausgrid is the only electricity provider in
Australia to run both a transmission and distribution electricity
network. the network supplies one quarter of the customers
in the entire national electricity Market.
AUsGRId eLeCtRICIty netWoRK
www.ausgrid.com.au | see page 96 for details
In addition to serving a diverse customer base – which
includes Australia’s largest and oldest city via transmission
cables that cross sydney Harbour, Botany Bay and White
Bay – the network crosses dense and rugged bushland to
supply the fast growing regions of the Central Coast and
Lower Hunter, through to major coalmines and isolated
rural areas.
When electricity use is at its peak, the Ausgrid network
transports more electricity than tasmania and south
Australia combined.
About half of Ausgrid’s major substations were built
in the 1960s and 1970s. this equipment has performed
well over the years, but the time has come to replace it.
so Ausgrid has commenced one of Australia’s largest
infrastructure programs – the $8 billion replacement and
renewal of its electricity network.
Based on world-leading technology, the network will
include the nation’s first commercial-scale smart grid, after
being chosen to deliver the Australian Government’s Smart
Grid, Smart City program.
Ausgrid is also one of the largest employers of
apprentices in nsW, each of whom will play a vital role in
the realisation of Ausgrid’s essential infrastructure plans.
PoWeRInG AUstRALIA VoLUMe 5 17
eneRGeX
enerGeX provides the electricity for everything that’s
happening in south east queensland. the electricity
distributor supplies power to around 1.3 million homes and
businesses and is one of queensland’s largest and fastest
growing organisations. At the core of the business are
distribution assets worth more than $8.8 billion and 3800
skilled and committed staff working to keep the power
flowing. In addition to electricity, eneRGeX delivers high
levels of network performance and customer service.
However, a dynamically growing distribution area and rising
energy demands are making the task of supplying electricity
more challenging.
safety is a key priority of eneRGeX. Field crew and
support staff are on standby throughout the year to respond
to emergency situations, particularly during severe weather
events. the january 2011 flood event challenged eneRGeX’s
emergency response capability, devastating areas of
eneRGeX’s south east queensland distribution area. some
300,000 homes and businesses lost power as substations
were immersed in water and power poles displaced.
Power restoration is integral to recovery and the process
was driven by eneRGeX’s commitment to its values and a
methodical approach to planning and assessment. As safety
was the number one driver in the flood response, pre-emptive
steps were taken and electrical assets de-energised before
water approached.
Four hundred crews and many support staff worked
tirelessly throughout the preparation and restoration
process, and just three days after flood levels peaked
100,000 homes had power restored.
the future remains bright in south east queensland.
eneRGeX is planning and building the electricity network
via a $5 billion-plus five-year capital expenditure program
to ensure the network will meet the increasing demand for
electricity and provide safe, efficient and reliable power to
all customers.
“Just three days after flood levels peaked 100,000 homes had power restored.”
www.energex.com.au | see page 96 for details
CHAPteR 0218
A MAjoR nAtIonAL InFRAstRUCtURe InVestMent CHALLenGe
02
PoWeRInG AUstRALIA VoLUMe 5 19
Game chanGinG is an overworked expression, but
it is hard not to use it about electricity supply in the new
decade. By 2020 the Australian power industry, on current
indications, will have undergone significant renewal and
will be approaching the point where coal will no longer
be overwhelmingly dominant in fuelling generation.
en route the industry will spend tens of billions of dollars
– on building renewable energy generation, on construction
of peaking and base-load gas generation, on upgrading
and augmenting networks, probably on new transmission
links and probably on rolling out smart meters.
the latest estimates suggest that capital outlays
could exceed $130 billion in 10 years and $220 billion
over 20 years, many times the size of the national
broadband network.
As is now well demonstrated in public debate, what
happens to electricity supply this decade is important to
all Australians. Low-cost electricity has been underpinning
of our lifestyle, economic growth and international
competitiveness since the end of World War II, more than
60 years ago. It is now increasingly accepted that power
bills by mid-decade will be double what they were in 2008.
Change in the industry seldom occurs rapidly. It takes
place over decades, as was the case with the 1990s
reforms to disaggregate the sector and introduce
competition. As consultants Port jackson Partners
point out, two decades after these changes began to
revolutionise the industry, whether they will deliver lasting
benefits in Australia is yet to be determined.
the underlying issue is not the plant and equipment
being introduced at a cost of billions, but the east coast
market in which they and their owners have to operate –
the so-called national electricity Market, which does not
include Western Australia or the northern territory.
to date what has been created is not a single east coast
market, as intended by prime minister Paul Keating and state
premiers like nick Greiner and Wayne Goss. “In many
respects,” say Port jackson Partners, “we have five markets
not one and the current and potential benefits from the 1990s
reforms are therefore much less than they can or should be.”
CHAPteR 0220
this said, the expenditure proposed for even the first
half of this new decade is considerable.
Credit ratings agency Fitch Ratings, in its 2011 review of
Australian power and utilities, has estimated that vertically-
integrated energy businesses will spend up to $25 billion on
low carbon emission and renewable energy generation in
the period to 2016, assuming the introduction of a carbon
price. In the absence of the carbon charge, Fitch says that
generation outlays could be about $7 billion lower.
to this can be added tens of billions of dollars to be
spent on networks. Fitch Ratings points out that, on current
regulatory determinations, capital outlays on distribution
systems will exceed $6 billion in a year for the first time in
2010–11 and pass $7 billion next financial year. It sees
expenditure on distribution being above $6 billion per year
from 2010–11 to 2013–14 and the capital outlays for
transmission exceeding $2 billion annually for all this period.
In addition, Fitch says, consideration must now be
given to capital expenditure by the gas supply industry
to deliver fuel to electricity generators in a decarbonising
environment. It expects that the increased demand for
gas by power stations will require new investment in gas
storage capacity.
even so, the ongoing need for coal supplies by existing
generation will also drive capital investment, with the major
play in the next few years being the new Cobbora mine in
new south Wales, critical to the fuel supply and budget
management of the three state-owned generators,
Macquarie Generation, delta electricity and eraring energy.
Under existing nsW government policy, the mine, estimated
to cost $1.5 billion, will be commissioned in 2015 and will
enter long-term supply contracts at prices intended to be
below the current coal market levels.
While developments such as Cobbora will continue
to excite political and media attention, the major wave of
capital expenditure this decade is still likely to be in the
network sector. some believe it may exceed $90 billion by
2020, more than double the projected outlay on the national
broadband network, although the scale of expenditure is
now under attack from critics of the regulatory regime.
the increased electricity network capex requirement
has three main causes:
1. the continuing need to serve high energy and maximum
demand growth as a result of a rising population and
increases in average household electricity consumption
from energy-intensive consumer products.
Above Australia is burning more than 50 million tonnes of black
coal and over 70 million tonnes of brown coal a year. deciding
which power stations to close this decade is critically import..
PoWeRInG AUstRALIA VoLUMe 5 21
tHe onGoInG need FoR CoAL sUPPLIes By eXIstInG GeneRAtIon WILL
ALso dRIVe CAPItAL InVestMent, WItH tHe MAjoR PLAy In tHe neXt FeW
yeARs BeInG tHe neW CoBBoRA MIne In neW soUtH WALes.”
FItCH RAtInGs CRedIt RAtInGs AGenCy
CHAPteR 0222
2. the need to continuously reinforce and upgrade
transmission capacity to transfer energy from new
generation developments to load centres.
3. the now urgent requirement to replace ageing and
obsolete network assets in an environment where many
of them are 50 to 60 years old.
the issue of aged assets was highlighted in south
Australia on the last day of january this year when, with
temperatures at extreme summer levels, Adelaide’s eastern
suburbs suffered substantial blackouts.
etsA Utilities, the provider of power distribution services
in south Australia, explained the problem thus: “state-wide,
consumption from 820,000 residential and business
customers peaked at 3399MW at 5pm and stayed there
as people returned home to evening temperatures above
39 degrees.
“eighty of the 40,000 transformers in the Adelaide
metropolitan area suffered fuse failure.
“the main contributor to the fuse issue is changes in
localised demand patterns in the past few years as people
have installed new air-conditioning, extended their homes
and bought new electrical equipment. the changes only
become apparent in extreme conditions, requiring load
re-balancing on the transformers.”
electricity demand in Adelaide, mirroring the situation in
other mainland capital cities, is rising at 2.2 per cent a year,
with the increase in some suburbs exceeding 5 per cent
annually. the Australian energy Regulator, although it
denied 28 per cent of etsA Utilities’ bid for capital spending
between 2011 and 2015, has approved a capex outlay of
$1.7 billion (58 per cent more than in the five years to 2010)
for the first half of this decade.
With network charges contributing about 45 per cent
of end-user power bills, the outlays approved for etsA
and other network service providers nationally represent
the spearhead of a politically charged electricity price
environment that is already making headlines in the media
across Australia.
In new south Wales, for example, according to the
AGL energy economics unit, media coverage of the industry
rose 140 per cent in the last two years of the past decade.
While business ownership and the cost of power remain
dominant in the media’s perception of the industry, the
ability of participants to finance their massive outlays is an
important issue and will, according to Fitch Ratings, rise in
prominence early in the new decade.
should a carbon price be introduced, Fitch says,
generators could seek up to $13 billion in new debt this
decade. this will leave the private sector seeking to raise a
similar amount in equity, an onerous task in the current global
economic environment.
there will be an early credit focus on Victorian merchant
generators, which are mostly project-financed and run on
brown coal. they face significant refinancing next year, Fitch
Ratings points out. “Refinancing will be tough should capital
markets conclude that a carbon price will result in stranded,
or economically-impaired, plant.” Fitch estimates that these
generators collectively have $2.4 billion in project finance
bank debt maturing in 2012.
In this situation, as the agency says, federal government
compensation for generators that experience losses from the
introduction of a carbon price will be a key factor.
somewhat lost in the broad view of the industry, but still
important to how it functions this decade, is the queensland
government’s plan, announced late in 2010, to restructure
its state-owned generation sector, creating two businesses
instead of the three that exist today with the aim of improving
operating synergies and the enterprises’ economics.
the state government has transferred some of stanwell
Corporation’s assets to Cs energy and combined the
remainder with the existing tarong energy portfolio, but it
has ruled out following up the restructuring with any further
privatisation of the industry.
As management consultants deloitte have pointed out in
a review of the Australian generation sector, one of the major
factors now influencing generation is the unwillingness of
east coast governments to further invest in power stations,
owing to the budget pressures on them in other areas such
as health and education.
since World War II the industry has been dominated by
the construction of taxpayer-owned power plant such as the
queensland government-commissioned Kogan Creek power
station (2007), but governments expect the private sector to
augment supply capacity in the future.
In turn, as deloitte says, this makes investor confidence
in the national and state policy regimes a critical factor in
decisions on what power plant is built, using what fuel, where
and in what time frame.
Assuming a carbon price, Fitch Ratings has estimated
that wind farm development and construction of combined-
cycle gas turbine (CCGt) plants for use in base-load
generation will dominate the generation capital outlays.
PoWeRInG AUstRALIA VoLUMe 5 23
It sees the federal government’s renewable
energy target, which requires 20 per cent of national
consumption to be provided by renewable power at
the decade’s end, as driving $10.5 billion investment in
wind farms by 2015 while investors will spend $11.4 billion
on CCGt generation.
the balance of expenditure on power plant, according
to Fitch, will be invested in open-cycle gas turbine (oCGt)
plants for meeting peak demands and also to provide
back up for intermittent wind power.
not included in these estimates is the proposed capital
expenditure on large-scale solar generation. the federal
government plans to provide $1.5 billion in support to solar
investors and expects the grants to leverage about another
$3 billion in private sector investment.
the first announcements of the federal government
grants have now been made.
Also not included in forecasts of expenditure is origin
energy’s bold plan to bring electricity to Australia from
offshore for the first time in the nation’s history.
the company, in a joint venture with a business owned
by the Papua new Guinea government, has announced
that it wants to build a 1800MW hydro-electric power
station on the Purani River in PnG and bring the bulk of
the power to northern Australia via a series of transmission
systems – a 100-kilometre onshore line in PnG, two
undersea cables, each equivalent to tasmania’s Basslink,
crossing torres strait, and 800 kilometres of line from near
Weipa to the main transmission grid outside townsville.
to date, origin has only said the Purani River scheme
cost will run to “many billions of dollars”, but analysts have
claimed that an outlay of about $8 billion is in prospect.
the project’s tentative commissioning date is 2018 and,
|if it eventuates, will make a substantial contribution to
the queensland government’s ability to meet its goal
of providing 9000GWh a year of renewable energy
by 2020.
Another aspect outside the radar of current electricity
capital outlays is the proposed Copperstring transmission
link between Mt Isa and townsville.
substantial augmentation of interconnectors between
south Australia, Victoria and nsW may enable the eyre
Peninsula, which has a world-class wind resource, to
become a “green hub” for east coast generation.
these network additions would form important
segments in the $8.3 billion “neMlink” transmission
development mooted by the Australian energy Market
operator in its strategic review for this decade, a series of
projects that would include doubling the Basslink system
between tasmania and Victoria and strengthening the
nsW high voltage assets.
overall, game-changing? Most certainly.
AssUMInG A CARBon PRICe, FItCH
RAtInGs HAs estIMAted tHAt
WInd FARM deVeLoPMent And
ConstRUCtIon oF CoMBIned-
CyCLe GAs tURBIne (CCGt)
PLAnts FoR Use In BAse-LoAd
GeneRAtIon WILL doMInAte
CAPItAL oUtLAys.”
KeItH oRCHIson, edItoR
24 CoMPAny PRoFILe
For most of the last century, our electrical grids stood as an engineering marvel of the modern age and a global symbol of progress. The cheap, abundant power they brought changed the way the world worked – filling homes, streets, businesses, towns and cities with light and power.
But these grids are products of a time when energy was cheap, environmental impact wasn’t measured and consumers weren’t even part of the equation. Back then, the power system could be centralised, closely managed and supplied by a relatively small number of large power plants. It was designed to distribute power in one direction only – not to respond to the global dynamics of energy supply and demand.
In today’s context, the world’s grids are incredibly wasteful. With little or no intelligence to balance loads or monitor power flows, the world loses enough electricity annually to power India, Germany and Canada combined.
Around 80 per cent of energy consumed in Australia is generated from centralised, carbon-intensive power stations, accounting for one third of the nation’s net greenhouse gas emissions.
Fortunately, our energy can be made smart. It can be managed like the complex global system it is.
We can now put sensors into everything from the meter in the home and the turbines in the plants to the network itself. In fact, the intelligent utility system actually looks a lot more like the Internet than like a traditional grid. It can be linked to thousands of power sources – including climate-friendly ones like wind and solar. All of this intelligence generates new data, which advanced analytics can turn into insight, so that better decisions can be made in real time. Decisions by individuals and businesses on how they can consume differently. Decisions by utility companies on how they can better manage loads. Decisions by governments
and societies on how to preserve our environment. The whole system can become more efficient, reliable, adaptive… smart.
IBM® scientists and industry experts are working on smart energy solutions like these around the world. We’re working with utility companies both in Australia and globally to accelerate the adoption of smart grids to help make them more efficient and give customers better usage information. We’re working on seven of the world’s 10 largest automated meter management projects and are also trialling intelligent meters locally. We’re even exploring how to turn millions of future electric vehicles into a distributed storage system, so excess power can be harnessed and returned to the system.
Our electrical grids can be symbols of progress again – if we build the entire system with intelligence. And we can. See how IBM is contributing to this aim at Smart Utilities Australia & New Zealand 2011. It’s the region’s largest conference and exhibition, focusing on the latest in smart metering, smart grids and smart homes, and we’re proud to be part of it.
Come along and see the latest developments in the electricity and water utility industry. Benefit from new insights and lessons learnt globally that can be applied locally, and maximise great networking opportunities with utility industry colleagues from the region and beyond.
Whether you’re representing a retailer or distributor, don’t miss this great opportunity to learn how to build a smarter grid, and contribute toward a smarter planet.
Visit IBM at Smart Utilities 2011 Conference and Exhibition, Sydney Convention Centre, November 8-10th. For more information go to ibm.com/events/au/utilities
© Copyright IBM Australia Limited 2011 ABN 79 000 024 733 © Copyright IBM Corporation 2011 All Rights Reserved.TRADEMARKS: IBM, the IBM logos, ibm.com, Smarter Planet, Let’s build a smarter planet and the planet icon are trademarks of IBM Corp registered in many jurisdictions worldwide. Other company, product and services marks may be trademarks or services marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml IBMNCA0608
Smarter power for a smarter planet.
Conversations for a smarter planet:
IBMNCA0608_Powering_Aus_ad_FIN.indd 1 13/07/11 2:58 PM
PoWeRInG AUstRALIA VoLUMe 5 25
For most of the last century, our electrical grids stood as an engineering marvel of the modern age and a global symbol of progress. The cheap, abundant power they brought changed the way the world worked – filling homes, streets, businesses, towns and cities with light and power.
But these grids are products of a time when energy was cheap, environmental impact wasn’t measured and consumers weren’t even part of the equation. Back then, the power system could be centralised, closely managed and supplied by a relatively small number of large power plants. It was designed to distribute power in one direction only – not to respond to the global dynamics of energy supply and demand.
In today’s context, the world’s grids are incredibly wasteful. With little or no intelligence to balance loads or monitor power flows, the world loses enough electricity annually to power India, Germany and Canada combined.
Around 80 per cent of energy consumed in Australia is generated from centralised, carbon-intensive power stations, accounting for one third of the nation’s net greenhouse gas emissions.
Fortunately, our energy can be made smart. It can be managed like the complex global system it is.
We can now put sensors into everything from the meter in the home and the turbines in the plants to the network itself. In fact, the intelligent utility system actually looks a lot more like the Internet than like a traditional grid. It can be linked to thousands of power sources – including climate-friendly ones like wind and solar. All of this intelligence generates new data, which advanced analytics can turn into insight, so that better decisions can be made in real time. Decisions by individuals and businesses on how they can consume differently. Decisions by utility companies on how they can better manage loads. Decisions by governments
and societies on how to preserve our environment. The whole system can become more efficient, reliable, adaptive… smart.
IBM® scientists and industry experts are working on smart energy solutions like these around the world. We’re working with utility companies both in Australia and globally to accelerate the adoption of smart grids to help make them more efficient and give customers better usage information. We’re working on seven of the world’s 10 largest automated meter management projects and are also trialling intelligent meters locally. We’re even exploring how to turn millions of future electric vehicles into a distributed storage system, so excess power can be harnessed and returned to the system.
Our electrical grids can be symbols of progress again – if we build the entire system with intelligence. And we can. See how IBM is contributing to this aim at Smart Utilities Australia & New Zealand 2011. It’s the region’s largest conference and exhibition, focusing on the latest in smart metering, smart grids and smart homes, and we’re proud to be part of it.
Come along and see the latest developments in the electricity and water utility industry. Benefit from new insights and lessons learnt globally that can be applied locally, and maximise great networking opportunities with utility industry colleagues from the region and beyond.
Whether you’re representing a retailer or distributor, don’t miss this great opportunity to learn how to build a smarter grid, and contribute toward a smarter planet.
Visit IBM at Smart Utilities 2011 Conference and Exhibition, Sydney Convention Centre, November 8-10th. For more information go to ibm.com/events/au/utilities
© Copyright IBM Australia Limited 2011 ABN 79 000 024 733 © Copyright IBM Corporation 2011 All Rights Reserved.TRADEMARKS: IBM, the IBM logos, ibm.com, Smarter Planet, Let’s build a smarter planet and the planet icon are trademarks of IBM Corp registered in many jurisdictions worldwide. Other company, product and services marks may be trademarks or services marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml IBMNCA0608
Smarter power for a smarter planet.
Conversations for a smarter planet:
IBMNCA0608_Powering_Aus_ad_FIN.indd 1 13/07/11 2:58 PM
CHAPteR 0326
tHe need FoR A nAtIonAL eneRGy PoLICy
03
PoWeRInG AUstRALIA VoLUMe 5 27
at the outset, let’s be clear: the neM is not, and never
will be, what it claims to be: a national electricity market.
this is because geography dictates that two large pieces
of Australia – the northern territory and Western Australia
– cannot be part of the market. Leaving this aside, the
neM’s vital statistics are pretty impressive. It supports
power supply of around 220,000GWh a year from 80
generators (with a combined capacity of 42,000MW)
to 19 million Australians living on the east coast, using
40,000 kilometres of transmission lines and cables.
demand in the market is forecast to rise by about
70,000GWh a year this decade, requiring new generation
construction of about 8000MW. this figure, of course,
like so much else, may be affected by a new carbon
price regime.
the neM stretches over 5000 kilometres from far
north queensland to tasmania and west to Port Augusta
in south Australia. just keeping its backbone, the
transmission network, in working order now involves capital
outlays of $2 billion a year — that’s $6 million per day. Up to
$10 billion in projects is committed to proceed,
including around $2 billion in routine works on the system.
More than $10 billion worth of electricity is traded every
year in a market that operates 24 hours a day, seven days a
week, with five-minute despatch intervals and 30-minute
trading intervals.
In addition, say consultants ACIL tasman, it is one of
the most volatile commodity markets in the world, posing
“significant risk” to physical market participants — which
are managed through hedge contracts setting electricity
prices well in advance of demand.
Looking forward, its efficient management is important
not only to the nation’s economic health and our community
lifestyle, but also to the national ambition to decarbonise the
economy in a big way over the next 10, 20 and 30 years.
More than a few of the players in the market now feel
that the time has come to give the neM a thorough
shake-up in order to cope with decarbonisation. Central to
their concern is that the fact the “national electricity objective”,
which drives the legislation which underpins the market,
CHAPteR 0328
focuses on the long-term interests of consumers with respect
to price, quality of supply, reliability, safety and security – but
not environmental issues.
they argue that Australian energy Market Commission,
which oversights the neM, is not able to consider what rule
changes are needed to facilitate the federal renewable
energy target, which requires 20 per cent of supply to be
from zero emission generators by 2020.
this, and much more, is now under consideration by the
AeMC, which has launched a review into strategic priorities
for energy market development. this will be the key guide for
federal, state and territory energy ministers, meeting under
the umbrella of the Council of Australian Governments, when
they come to make a decision on how far and how fast to
change the neM.
It is not going to be an easy job, given the substantial
investment required in new generation capacity on the east
coast over the next 10 to 20 years, the lower appetite of
investors for risk, the uncertainty surrounding carbon policy
and the unprecedented growth of renewable power that is
now mandated.
Change to the market set-up, however, has never been
straightforward. the design of the neM back in the 1990s
was a long, drawn-out affair. It absorbed a large amount of
the time of power supply leaders, the wider business
community, lawyers, economists and a small army of federal,
state and territory bureaucrats over some eight years.
When completed, it had transformed power supply from
the fiefdom of government-owned public monopolies to a
competitive system for supplying wholesale energy and retail
services complemented by a substantial regulatory system
for the monopoly network sector.
the neM was officially launched in 1998, and dr Paul
simshauser, AGL energy’s chief economist and professor of
finance at Griffith University’s Business school, says it has
led to substantial gains in productive, allocative and dynamic
efficiency in the energy sector.
“By any measure,” he says, “the neM has been
extraordinarily successful micro-economic reform.”
this is not just hometown sentiment. As simshauser
points out, the neM is widely and frequently acknowledged
in north America and europe as one of the most successful
micro-economic reforms in the power industry globally.
the national Generators Forum adds that the creation of
the market has ensured that demand is being served by
more efficient use of existing plant than when the separate
state markets held sway and governments over-built capacity.
the efficiency of the neM, says the nGF, rests on the central
dispatch process “which is highly transparent and efficiently
matches supply and demand at the lowest available prices”.
so what is there not to like about the neM? quite
a lot, according to constant critics such as the energy
Users Association of Australia, which has about 100
members, including many of the nation’s largest
industrial energy users.
What the business community feels about the issue is
important because, although most of the media publicity is
about power issues applying to residential users, more than
70 per cent of electricity supplied in Australia is consumed
by the business sector – in industry and commerce.
According to the Australian Industry Group, the nation’s
businesses are now spending $13 billion a year on their
power service – and most of this outlay takes place on the
east coast. Given that there are now many, including the
AIG, predicting that end-user power bills in 2015 will be
double what they were three years ago, driven by rising
network charges and the costs of such features as the
renewable energy target, solar feed-in tariffs and the
proposed carbon price, commerce and industry is facing a
multi-billion dollar increase in its spending on energy and is
pressing constantly for improvements to the playing field.
High on the list of eUAA hobby-horses is a
fundamental feature of the market: the neM is a so-called
“energy only” market, relying on a high price cap to ensure
reliability of supply. In a time of rapidly changing
conditions, with a rising reliance on intermittent renewable
generation to meet carbon abatement ambitions, this
feature needs to be changed, says the eUAA executive
director Roman domanski.
the environmental movement’s concerns about the neM
go deeper than this. dr Hugh saddler, in a paper on national
energy security published under the aegis of the Centre for
Climate economics and Politics at the Australian national
University’s Crawford school of economics and
Government, points out that federal, state and territory
ministers, meeting as the Ministerial Council on energy of
the Council of Australian Governments, decided in 2004 that
the objective of the electricity market, set out in the national
electricity Law, should be to promote efficient investment
and operation of power services with respect to price,
quality, safety, reliability and security – but deliberately
chose not to include environmental issues.
PoWeRInG AUstRALIA VoLUMe 5 29
rIght the national energy strategy needs
to deal with the delivery of power over
networks as well as modes of generation.
CHAPteR tItLe30
the ministers said: “environmental objectives are
more appropriately dealt with in other policy instruments.”
“the consequence,” says saddler, “is that, contrary
to the approach advocated by the International energy
Agency and adopted in Britain (on which our power market
is modelled), climate change mitigation is entirely external
to Australia’s domestic energy policy and divorced from,
rather than integrated with, key energy policy objectives,
including energy security.”
the result, he adds, is that the need respond to climate
change is not only treated in Australia as external to and
separate from energy policy, it is given a lower priority than
preserving the economic benefits of the existing market.
the energy Users Association sums all this up by
arguing that the market needs to change in line with
emerging energy usage patterns and energy policies.
“Under a traditional approach,” it says, “peak demand
growth can be met only through ever-increasing investment
in generation and network capacity. If an alternative is not
adopted, the traditional approach will begin to yield
increasingly inefficient investment and pricing outcomes.”
the energy Retailers Association says that, while it is
comfortable with the market’s ability to manage network
security and stability issues, it is concerned about
transmission congestion because of the rising levels of
renewable generation in the supply mix. “An increase in
the level of congestion has negative implications for the
efficiency of dispatch,” the Association adds, “as it could
result in higher cost generation being dispatched ahead
of lower cost sources.”
the suppliers’ main lobby group, the energy supply
Association of Australia (esAA), acknowledges that whether
the energy-only design is capable of providing the necessary
price signals to sustain existing generation capacity and to
encourage new power station investment is a key question.
“Under an energy-only model,” it says, “the only payment
generators receive for their plant is the price of the electricity
they produce. no payment is made for being available to
produce. Generators are reliant on periods of higher
electricity spot prices (as a result of high demand, outages
and/or transmission constraints) to make a return on capital
and to obtain sufficient revenues to fund new investment.”
esAA argues that the energy-only approach has
worked effectively over the 12-year life of the neM to deliver
new investment (although, it concedes, very little private
sector base-load investment) and to provide incentives for
power stations to be available when there are tight
supply and demand conditions.
“However,” it says, “the inherent volatility associated
with spot market prices is a potential source of concern for
governments and, in practice, they demand a higher level
of reliability than the market is designed to deliver.”
Governments respond to this by putting caps on retail
prices and on the spot market price, leading, according to
esAA, to a situation where they are blunting signals that
are required to reward generators and to indicate that new
investment is needed.
this creates what the industry calls the “missing money”
problem – revenue generators would have earned if not for
government-imposed market constraints.
the national Generators Forum cautions “changing this
successful market would be a high risk venture which could
jeopardise energy security”. Invoking the real or perceived
PoWeRInG AUstRALIA VoLUMe 5 31
successes of different market models in other countries, it
argues, is not sufficient evidence that similar changes here
are bound to be successful. Conditions overseas are usually
very different to what they are here.
After taking a market approach to electricity supply for
more than decade, the issues with which stakeholders
wrestled in the early 1990s, and the solutions they found,
have come under strong scrutiny. Increasingly, critics are
querying how well the neM is coping with a different set of
challenges to those envisaged almost two decades ago.
Paul simshauser notes that, during the first decade of
electricity supply reform, the neM was oversupplied with
generation capacity and delivered reliable, low-priced
energy, enabling the cost of earlier investment to be
“harvested” successfully.
“As a result,” he says, ”the neM has been in the main a
good news story. However, generation and network capacity
stocks have been gradually exhausted. Meeting future
increases in demand will involve material power system
augmentation costs and a cocktail of pressures is now
building up in every facet of the supply chain.” the other
critical aspect for the market is an increasing amount of the
policy activity that affects its function is occurring beyond the
aegis of the neM’s watchdog and operators.
In its submission to the AeMC review, the national
Generators Forum noted: “A market achieves its best
outcomes if it has sound design and is left to run without
intervention. Both state and federal governments have
introduced distortions, which, to date, have been
moderate. “It is important that future policies recognise
the benefits a market can bring and are designed not to
impact on [its] performance.”
Jon Stanford
left Critics wonder how generators like Cs energy’s plant at
Kogan will cope with the rapidly shifting set of challenges faced
by the neM.
A MARKet ACHIeVes Its Best
oUtCoMes IF It HAs soUnd
desIGn And Is LeFt to RUn
WItHoUt InteRVentIon.”
tHe nAtIonAL GeneRAtoRs FoRUM
CoMPAny PRoFILe32
AeroderivAtive gAs turbines
Ge is the leading supplier of aeroderivative gas turbine
generator packages for utility, petroleum, industrial and
marine applications.
this gas turbine product line is derived from the Ge
aircraft engines that propel the world’s safest, cleanest and
most efficient airliners. the letters “LM” stand for ‘Land and
Marine’ applications, the common industry term for Ge’s
aeroderivatives. Ge’s continued investment in research and
development of aircraft engine technology enables our LMs
to maintain their leadership in performance, operational
flexibility and lifecycle value to the customer.
LMs are efficient and ‘manoeuvrable’ machines delivered
in compact modules for rapid deployment to new power
stations. they inherit the reliability, availability and
maintainability of the Ge aircraft engine, and we support
them with our highly experienced field service team based
in Australia.
More operAtionAl flexibility And dependAbility
Ge’s LM product line spans from 18 to 100MW in output,
and operates with a variety of fuels and emission control
technologies. Ge LMs have gained a strong uptake in the
industry, with total operating experience in excess of
92 million hours and over 3300 operational units.
these turbines have been selected for a range of
mission-critical applications in Australia and new Zealand,
including:
u power generation for the world’s leading iron ore and
gold mining operations in the Pilbara
u power and gas compression for LnG facilities on the
north West shelf, darwin and in Gladstone
u base-load and peaking power for utilities in Karratha,
darwin, Perth, Auckland and new Plymouth
u electric power and direct drive propulsion for the navy’s
warships, including Australia’s newest air warfare
destroyers and amphibious ships.
In Australia and new Zealand, there are 120 LMs
in service or on order, most of which are packaged by
Ge energy.
Ge
the Most flexible And efficient gAs turbine
the LMs100 is Ge energy’s latest generation aeroderivative
packaged power plant. delivering over 100MW on a gross
electrical basis and thermal efficiency of 44 per cent in
simple cycle applications, powerful LMs100s like those
pictured on this page at Contact energy’s stratford Power
station in new Zealand, are the most fuel-efficient simple
cycle gas turbines in the world today. the LMs100 is
uniquely suited to handling the varied duties of utility
peaking, mid-merit, and base-load operations. Combined
cycle applications are in service in europe, and the LMs100
will provide power for the 2014 Winter olympics in a
cogeneration application.
PoWeRInG AUstRALIA VoLUMe 5 33
Ge
www.ge-energy.com/lms100 | see page 97 for details
the unique features that underpin the LMs100’s selection
by customers in Australia and new Zealand include:
u Best in Class efficiency – 44 per cent simple cycle
efficiency at full power, and greater than 37 per cent
efficiency at 50 per cent load
u sustained performance – on hot days and at high
elevation enabled by compressor intercooling.
u Fast start and rapid ramp rate – from cold steel to full
load in less than 10 minutes, and load-following at
50MW per minute.
u operational availability of 97%, thanks to the
packaged plant with modular engine maintenance,
like that for airline engines
A ge ecoMAginAtionsM product
the LMs100 is an ecomagination-certified product by Ge,
which means that its innovative attributes deliver both
environmental and operating benefits to customers.
u environmental benefit – over the course of a
2300-hour peaking season, an LMs100™ turbine
system running at full capacity avoids the emission of
31,000 tonnes of Co2 when compared with a simple
cycle frame gas turbine.
u operating benefit – over the same season, an
LMs100™ can reduce natural gas consumption by
566,000 gigajoule (Gj), or $4.53m at $8.00 per Gj,
when compared with a typical 50Hz simple cycle
frame gas turbine system. In addition, the reduced
emissions of Co2 yield a benefit of more than
$713,000 at a Co2 price of $23 per tonne.
34 CoMPAny PRoFILe
Gentrack is a specialist developer of smart billing,
CRM, collections and meter data management solutions for
energy and water utility companies. established over 20
years ago, Gentrack lives by its core values of agility, ability
and attitude – all of which ensure it continues to win business
against larger eRP-based competitors, thanks to its flagship
products Gentrack Velocity and mdAtA21.
Gentrack Velocity is a smart billing and CRM product
designed for electricity, water and gas utilities. It is one of the
few utility software products that offers multi-utility billing and
is considered a leader in its ability to integrate mass market,
time-of-use and network billing processes to create one
complete solution. designed to lower a utility’s cost to serve,
Gentrack Velocity is proven to streamline processes, enable
utilities to transform the customer experience and maximise
benefits of smart grid and smart metering technologies.
Gentrack Velocity is used by over 40 utilities in 10 countries.
mdAtA21 is Gentrack’s specialist meter data
management software for energy and water utilities,
providing the tools they require to handle large volumes of
interval meter data from smart grid technologies. Built using
the proven dnA of Gentrack Velocity, mdAtA21 is designed
to streamline and automate complex data management
activities, enabling utilities to make stronger investment
decisions and to provide more information to customers to
drive sustainable energy practices.
As well as developing its own software, Gentrack is
accountable for end-to-end project delivery, including
implementation, ongoing product support and maintenance.
“Maintaining a direct relationship with our utility and
airport customers is fundamental to our business,” says
Gentrack Ceo james docking. “Where other vendors use
third parties to deploy their software, our customers look to
our own systems and industry experts to ensure project
success. our people are passionate about the solutions they
deliver and we have a history of actually delivering what we
say we are going to deliver.”
GentRACK
“Maintaining a direct relationship with
our utility and airport customers is
fundamental to our business,”
james docking, CEO, GENTRACK
www.gentrack.com | see page 97 for details
PoWeRInG AUstRALIA VoLUMe 5 35
Granite poWer’s vision and business is focused on
low-to-medium temperature, low cost, zero carbon energy
recovery and associated activities including:
u Heat conversion technology development – known as
“GRAneX®” – for application to power generation
opportunities involving the moderate temperature heat
resources from:
• Recovered waste heat (RWH)
• Conventional geothermal (CG)
• engineered geothermal systems (eGs)
• solar-thermal (st) sources
u Zero carbon power station development – as a project
and technology developer, an owner and as the operator
for other owners.
GRAneX®, the company’s primary focus, is heat
conversion technology which offers up to an 80 per cent
improvement in net electricity able to be generated from a
given low-to-medium temperature heat resource (relative to
conventional organic rankine cycle technology). After
adjusting for relative costs and the specifics of each
particular application opportunity, this equates to about a
33-36 per cent reduction in the unit cost of power. this offers
the prospect of net savings from shifting to zero carbon
power generation technology.
GRAneX® provides a compelling case for the
commercial merits of recovery of industrial waste heat
and on-site power generation – a case that is not
associated with alternative, traditional technologies. this
means the opening up a new market for power generation,
the reduction in exposure to mains-supply ‘brown-outs’
for companies and their plants and the reduction of
the requirements for expansion of the existing mains
power grid.
GRAneX® delivers improved economics for geothermal
power generation, with forecast costs being lower than
those for new black-coal fired plant and about the same as
for combined cycle gas turbines (before carbon pricing). It
also provides a significant risk mitigant for geothermal
developments by enabling (for example) drilling to shallower
depths or reduced flow rates for the same net output.
GRAnIte PoWeR
GRAneX® is a modest technological step out from
conventional organic rankine cycle technology. It uses
well-proven components and materials, benign, readily
available working fluids and requires only modest
pressures. straightforward off-site assembly and pre-
commissioning means installation and commissioning are
quick and inexpensive, and involve minimal disruption to
established operations, whose reliability remains
unaffected. operating costs are very low.
Plants are available on a custom design basis, on either
turnkey ePC, Boo or Boot terms, with normal
performance guarantees, warranties and delivery times.
www.granitepwr.com | see page 97 for details
CHAPteR 0436
toWARds A nAtIonAL eneRGy PoLICy
04
PoWeRInG AUstRALIA VoLUMe 5 37
it is now nearly three years since the Minister for
Resources and energy, Martin Ferguson, announced that
the government would publish a White Paper on energy
by the end of 2009.
Particularly motivated by the challenges of
responding to climate change in the energy sector, the
government stated it would “develop an energy policy
to ensure Australia’s long-term energy security to meet
the needs of the economy overall and underpin the
prosperity and wellbeing of all Australians. . . . the
energy White Paper will identify an appropriate mix of
energy policies to deal with the uncertainties, risks and
opportunities to secure cleaner, adequate, reliable and
affordable supplies of energy to support our overall
economic and social advancement.”
the level of ambition for the White Paper, as reflected
in these objectives, was substantial and commendable.
Indeed, if Australia’s energy companies did not know that
they needed a White Paper before the announcement, their
appetite for one was undoubtedly whetted by the Minister’s
statement. the difficulty was that as the interest in the
White Paper grew, so its delivery date was repeatedly
pushed out. Having missed its end-2009 deadline, in
mid-2010 the White Paper was shelved indefinitely.
ostensibly, the reason was the demise of the Carbon
Pollution Reduction scheme (CPRs), but the indecent
haste with which the White Paper was shelved engendered
a strong suspicion that it was proving extremely difficult to
write. After all, while the CPRs may have been postponed,
the government’s commitment to a substantial reduction in
emissions by 2020 remained in place. the rationale for a
White Paper had not suddenly gone away; in fact, with the
target still there but no policy in place to deliver it, the need
was greater than ever.
Following the Prime Minister’s announcement of a
carbon price in March 2011, however, the White Paper is
back on the agenda. yet not only are the difficulties still
there, but in many ways they are greater than they were
last year. the fact that the Minister is now stating that we
can expect the White Paper in the middle of 2012, or
CHAPteR 0438
around four years from the original announcement,
suggests that little substantive progress had been made
up to the time when the White Paper was shelved and that
rather than dusting off the old drafts, the department is
now starting again with a clean sheet of paper.
In evaluating the expectations the electricity sector is
likely to have of the White Paper, the first question to ask
is why do we need an energy White Paper at all? In a
market economy such as Australia, would it not be
reasonable to expect that the private sector would respond
to market signals and invest in new electricity capacity as
appropriate? Why do we need government to tell us where
it thinks we should invest?
there are two major responses to this, focused first
on energy security and secondly on the large number
of substantial imperfections, many of them driven by
government, that currently act to distort the Australian
electricity market. these two factors mean that we cannot
be confident that the private sector will provide the
necessary investment when and where it is required to
guarantee energy security, nor that the investment that
is undertaken will necessarily be efficient.
on the first point, energy security is a major concern
for consumers, and perhaps even greater worry for
members of the industrial and commercial sector than for
households. yet there is no certainty that increased demand
for electricity will be matched by additional supply.
If the market does not value the additional supply at
a level consistent with the costs and risks to investors,
then the required investment in new capacity may not
eventuate. Further, even if the private sector does invest
in the necessary additional supply, it may not choose the
most efficient option from the community’s perspective.
For example, under current market circumstances
with a high level of uncertainty about future carbon prices,
there are strong economic incentives to invest in open
cycle gas turbines (oCGt), which supply power at a
relatively high cost and with a carbon footprint little short
of that of coal generation.
Government has a major interest in ensuring a secure
supply of energy. not only is energy security widely
regarded as being a major element in government’s “duty
of care”, but also, even in circumstances where consumers
may have been let down by the private sector, it is
inevitably government that is blamed for blackouts and
brownouts.
the second issue is that there are a large number
of distortions in Australian energy markets that have a
major influence on investment. Many of these distortions
have been introduced by governments and include:
• ongoingstategovernmentpricecontrolofretail
electricity tariffs
• themandatoryrenewableenergytargetof20percent
by 2020, a classic ‘picking the winners’ benchmark
seemingly plucked out of the air with little
understanding by government of the impact on power
prices and on grid management
• massivesubsidiestohouseholdstoinvestininefficient
generation technologies, such as solar PV, with the
effect of reversing the historical trend of centralised,
large scale, efficient production of electricity
• thenationaltarget,supportedbybothgovernment
and opposition, of reducing Australia’s emissions by
five per cent from 2000 levels by 2020, with no mud
map provided about which sectors of the economy
are going to have to do the heavy lifting and, more
generally, how we are going to get there
• amish-mashofdifferentclimatechangepoliciesin
individual states, such as Victoria’s commitment
(reiterated by the new Baillieu government) to cut
emissions by 20 per cent from 2000 levels by 2020,
with virtually no detail provided as to how this will
be achieved
• varyinggovernmentsubsidiestodifferenttechnologies,
such as a preference for clean coal with carbon capture
and storage and solar technologies
• ablanketbanonnuclearpower,atechnologywhich,
even after the accident at Fukushima daiichi, features
in a significant way in the emissions reduction plans
of many other countries
• therecentannouncementofacarbonpricefrom
mid-2012, but with no detail as yet around the level
of the price, compensation, coverage and what
current programs will be terminated.
the degree of intervention in the market by
Commonwealth and state governments, as demonstrated
by the above examples, implies that government must
inevitably play a major role going forward. In one sense,
Colin Powell’s dictum on government responsibility for
invading Iraq could equally be applied to the Australian
electricity market: “It’s china shop rules: you break it,
you own it.”
PoWeRInG AUstRALIA VoLUMe 5 39
Above the biggest brown coal mining operation in Victoria’s
Latrobe Valley services the twin Loy yang power stations.
CHAPteR 0440
In a situation where substantial investment in new
base-load capacity will be required in the next few years to
meet demand, and where the application of a carbon price
will require the gradual decarbonising of Australia’s
electricity supply, the above market distortions do nothing
to provide certainty to investors. Indeed, given that it is
widely agreed that the next generation of base-load plant
needs to be combined cycle gas turbines (CCGt), it is
ironic that CCGt is one of the few technologies that is not
explicitly encouraged by any of the government measures
included in the list above. Instead the emphasis is generally
on the least competitive options, such as renewables and
carbon capture and storage (CCs).
of course, the introduction of a carbon price should
encourage investment in CCGt, but investors will need to
have some feeling for the likely level of the carbon price,
not just initially but over 10 years and more. there is a clear
need to understand the effect of both the carbon price and
the projected gas price for the full period in which any
investment in CCGt would need to be recovered. At
present there is no guidance to investors over these issues.
this is clearly a gap that the energy White Paper will
need to fill. More broadly, in the absence of clear market
signals to investors, the White Paper needs to propose a
strategy for the generation of electricity going forward.
the strategy would need to address some major issues,
including the following:
Will the government abolish direct action measures,
such as the renewable energy target and subsidies for
solar PV, as soon as a carbon price becomes established?
does the government intend to formulate a direct action
plan, within the carbon tax/ets policy, to ensure a smooth
transition from high emitting generators to low emissions
plant? What share of the electricity market does the
government see for renewables going forward? What role
does the government see for gas in base-load generation
in the future? What is the government’s strategy for bringing
on other low to zero emissions base-load technologies in
the longer term when a high carbon price will make CCGt
uncompetitive? What are the prospects for lifting the ban
on nuclear power in Australia and what would be the role of
government in facilitating the development of a nuclear
industry? does the government intend to subsidise the
demonstration of CCs technologies at a commercial scale?
does the government have a strategy for accelerating the
development of geothermal power?
below Pelican Point power station uses a combined-cycle gas
turbine operation to produce 487MW of electricity – approximately
25 per cent of south Australia’s needs.
PoWeRInG AUstRALIA VoLUMe 5 41
Above A 500kV transGrid transformer being delivered to
Macquarie Generation’s Bayswater Power station in the
Hunter Valley.
In responding to all these questions, ultimately the white
paper will need to provide details of the government’s
overall strategy for decarbonising Australia’s electricity
supplies while ensuring a secure supply of power at a
globally competitive cost. It will need to provide its view of
how the costs and availability of the various low emissions
generation technologies are likely to change over the next
two decades and the level of carbon price the industry can
expect. In this context, the white paper will also need to
provide some guidance on gas prices in the future.
Without some degree of confidence in how all these
variables are likely to develop over time, potential investors
in very costly and long-lived assets, which exhibit a lengthy
pay-back period, could well best serve their shareholders’
interests by merely sitting on their hands.
the government will also need to detail the role it
will play in funding essential R&d and in some cases
providing support for infrastructure investment. For
example, does the government intend to provide
substantial financial support to demonstrate one or
more commercially scaled CCs generators? this does not
come cheap: the UK government has committed £1 billion
to subsidising the construction and ongoing operations
of just one commercially scaled CCs plant in Britain,
with three more scheduled to follow.
Finally, these issues, while difficult, need to be
exposed to the industry and community generally
as soon as possible. It is nearly three years since the
government began working on the white paper. It should
aim at delivering it by end-2011.
42 CoMPAny PRoFILe
today’s enerGy market is undergoing a profound
transformation as Australia moves towards a sustainable
energy future. How this will take shape is a matter for debate.
However, as the only company in the world that provides
complete and integrated solutions across the entire energy
conversion chain, siemens will continue to be a major driving
force behind the efficient and sustainable supply of energy
in Australia and new Zealand.
Last year saw the release of the Siemens Picture the
Future - Energy technology blueprint. Validated by 22
partners, including CsIRo, ABARe, Clean energy Council
and Loy yang Power, the siemens Picture the Future research
project demonstrates the potential of current technology to
shape a sustainable energy future for Australia.
It outlines the progressive technology uptake required
between now and 2020 for Australia to meet the
government’s 2050 targets. It demonstrates how currently
proven technology can be the driver for our sustainable
future, meeting the demands of climate change,
demographic change, urbanisation and globalisation
through, for example, increased efficiency and optimisation.
increAsed efficiency
Increasing energy efficiency can unleash tremendous
savings potential, while also conserving fossil resources
and reducing Co2 emissions. technological improvements
in every stage of the energy conversion chain can
substantially reduce the consumption of fossil fuels and
increase the output from renewable energy sources.
sIeMens – PICtURe tHe FUtURe oF eneRGy to 2020
the most advanced generation of siemens
combined cycle power plants operates at an
efficiency of more than 60 per cent – much greater
than conventional power plants. thanks to lower
fuel consumption, each new power plant of this
generation could reduce the quantity of Co2
emissions per year by an amount equivalent to
that produced by 10,000 cars driven 20,000
kilometres each.
“The most advanced generation of Siemens
combined cycle power plants operates at an
efficiency of more than 60 per cent – much
greater than conventional power plants.”
PoWeRInG AUstRALIA VoLUMe 5 43
sIeMens – PICtURe tHe FUtURe oF eneRGy to 2020
optiMising the entire energy systeM
to be prepared for the future, the world’s power grids must
be expanded and improved. “smart grids” will make it
possible to use electrical energy more efficiently in the future.
Intelligent energy management systems can combine the
output of smaller, decentralised generating units into “virtual
power plants” and route temporary surplus capacities to
intermediate storage centres.
distributed in large numbers around the grid, such
storage centres act as stabilisers in peak demand times. An
intelligent power grid with an extended automation structure,
advanced sensors and a decentralised information and
communications structure will allow all participants to use the
system bi-directionally.
renewAble solutions
By 2020, over 50 per cent of worldwide investments in the
powerplant market will go into developing renewable
resources. Within Australia, developing the electricity
transmission networks of the eastern states and the separate
Western Australian network will be a key enabler for
integrating power from remotely-located wind, solar and
geothermal plants into the electricity sector.
Growth in renewables will be achieved by a mix of
wind and large-scale solar generation, with contributions
from technologies such as geothermal and ocean power.
As an example, a 330km x 330km solar power plant in the
Australian desert could produce enough energy to meet
the world’s demand during daylight hours.
the Picture the Future: energy project forms part of
siemens’ active R&d function, which focuses on bringing
innovative solutions to the market that can also provide
great returns for the customer. Last year, siemens invested
$6 billion in R&d, which contributed to a full spectrum of
cost-effective and innovative technologies for energy
efficiency, low emission power generation and renewable
energy, advanced transmission and distribution as well as
efficient transportation.
Major successes for siemens in the past year reflect this
innovative approach, including:
u growing our wind business in Australia and new Zealand
with the completion of the te Uku Wind Farm (nZ), one
of the world’s most efficient wind farms.
u a project win at BMA for a coal loading conveyor
substation package, which is a medium voltage solution.
u a world-first with the installation of leading reactive power
compensation technology at Kikiwa substation,
enhancing power quality for residents of new Zealand’s
south Island.
u an order for the supply of up to 10 compressor trains to
the Australia Pacific Liquefied natural Gas (APLnG)
project in queensland.
www.siemens.com.au/energy | see page 98 for details
CHAPteR 0544
nUCLeAR VeRsUs PoWeR PooR
05
PoWeRInG AUstRALIA VoLUMe 5 45
the current imbroglio over carbon taxes and
electricity prices is casting rather a large smokescreen
over what remains a challenging long-term problem,
namely how and when Australia is going to decarbonise
its electricity supply.
some particularly difficult issues apply to base-load power,
which constitutes about 80 per cent of Australia’s electricity
supply, because all of the very low emissions technologies
available to replace coal are, in different ways, problematic.
Recent developments, including the nuclear accident at
Fukushima daiichi, potentially significant increases in domestic
gas prices in Australia and cost blowouts in geothermal and
carbon capture and storage (CCs) technologies, make the
conundrum no easier to resolve.
In the short to medium term, the technology choice for
lower emissions base-load duty is a relatively simple one.
natural gas generation, in the form of combined cycle gas
turbines (CCGt), has a carbon footprint around one half that
of black coal and, at least while we enjoy moderate gas
prices on the east coast, the cost of the electricity it
produces is manageable. nevertheless, there is a caveat to
be noted in this context. In the recent past, the objective of
replacing coal with gas for new base-load investment was
not seen as being likely to involve a Co2 price of more than
about $20/tonne. If the price of gas increases as now seems
likely, however, the Co2 price may need to be significantly
higher – a recent report by deloitte suggests $40/tonne. It is
notable that in the previous treasury modelling in 2008, a
$40 Co2 price was not seen in Australia until the late 2020s
when Australia’s emissions were projected to be over 20 per
cent lower than in 2000. Although investment in CCGt
involves relatively low capital costs, the price of fuel
constitutes a high proportion – around 30 per cent currently
– of the cost of electricity. even a moderate rise in the gas
price, therefore, can have a significant effect on the costs of
CCGt generation.
While our chief concern about CCGt revolves around
the gas price, however, the problems afflicting the longer
term base-load options are much more challenging. If we
are serious about tackling climate change, and to some
CHAPteR 0546
extent the jury is still out on this fundamental point, CCGt
can be seen at best as an interim technology. With total
emissions of around 400kg of Co2/MWh, it is unlikely to be
competitive in the longer term as carbon reduction targets
become tighter and the Co2 price continues to rise. When
this occurs, existing coal plant will need to be replaced and
CCGt will not be well positioned to take over.
What then are the serious options for base-load power
in Australia in a very low to zero carbon-constrained world?
there are some people, few of whom are engineers and even
fewer of whom know anything about the electricity industry,
who believe that Australia can decarbonise its power supply
solely by investing in renewables. While ultimately solar
energy may become viable, provided the problems of
storage and the substantial physical footprint of solar thermal
plants can be resolved, at this stage it remains intermittent
and very expensive.
Geothermal was always highly promising and remains so,
but its progress in Australia has proceeded at a glacial pace.
not only are drilling costs, at around $15 million per well,
deterring investors, the hot dry rocks technology still has to
be proven at scale and its costs are now likely to be
considerably higher than the optimistic early estimates
suggested. to produce significant amounts of base-load
power from geothermal sources in Australia would also
require massive new investment in poles and wires.
In the absence of decisive government intervention, few
serious observers now see geothermal providing more than a
small fraction of Australia’s electricity before 2030. In
mid-2011, business confidence in geothermal technologies
has fallen away as is reflected in the share prices of all the
players. In the three years since june 2008, for example,
Geodynamics’ share price has fallen from about $1.80 to less
than 20 cents today.
PoWeRInG AUstRALIA VoLUMe 5 47
In recent years and for quite understandable reasons,
Australian governments have favoured the development of
clean coal technologies with CCs. If anything, however, the
costs of the technology appear to be increasing, while CCs
comes with some safety issues that have yet to be tested
with the general public. A recent report by the Global CCs
Institute states that “recent studies suggest that costs [of
CCs] are 20–30 per cent higher than indicated in similar
studies undertaken only two to three years ago. . . .
Recent estimates suggest that for a ‘reference plant’ in
the United states, the average cost of electricity that would
need to be recovered over all output for the entire economic
life of a generating plant in order to justify the original
investment could be in the range of $Us120–150/MWh.
the associated avoided cost of Co2 ranges from
$Us60–85/tonne of Co2 for coal-based power stations
and exceeds $Us100/tonne for a gas-fired power plant.”
early this year, it seemed safe to say that the other major
option for base-load duty, nuclear power, came with fewer
disadvantages than the other technologies discussed above.
With over 440 plants worldwide, some of which have been
operating without incident for up to half a century, it is a mature
technology and its costs, in Asia at least, are much lower than
those of other low to zero emissions base-load technologies.
there are currently over 60 new nuclear plants under
construction around the world, the majority of them in China.
With other countries taking up the nuclear option and
Australian industry needing to retain its competitiveness in
relation to energy costs, as well as increasing consumer
resistance to rising electricity prices, there was increasing
pressure on the Gillard government to reconsider its
opposition to nuclear power. Indeed, it had been agreed that
the issue would be considered at the ALP national
conference in december 2011.
GeotHeRMAL WAs ALWAys
HIGHLy PRoMIsInG And
ReMAIns so, BUt Its PRoGRess
In AUstRALIA HAs PRoCeeded
At A GLACIAL PACe.”
jon stAnFoRd
left An artist’s impression of the proposed
eRM Power Wellington open-cycle gas power
station in nsW, designed to generate up to
600MW and to meet peak power demands.
CHAPteR 0548
the Australian nuclear science & technology
organisation’s state-of-the-art 20MW research
reactor is our only nuclear installation.
PoWeRInG AUstRALIA VoLUMe 5 49
yet this was all before Fukushima. In 1986, the Chernobyl
meltdown cast such a pall over the global nuclear industry
that new construction of nuclear plants was put on hold for
20 years. Will this happen again following Fukushima? the
logic says no, for several reasons.
First of all, while it is too early to speculate in any detail, it
seems the death toll from Fukushima will be much less than
that from Chernobyl, which in itself is heavily disputed, and
also less than other energy-related deaths, such as in coal
mines in China. nevertheless, it should be acknowledged
that while the nuclear industry always represented Chernobyl
as a one-off, the Fukushima incident was also rated as a
seven, equal to Chernobyl and the highest on the scale. In
mid-2011, new disclosures from the authorities in japan
revealed that the amount of atmospheric contamination
was twice as high as previously suggested. yet while
unacceptably high, the level of pollution was only about
10 per cent of the Chernobyl level.
secondly, some observers suggest that the fact that
the Fukushima reactor, which was over 40 years old, survived
the massive earthquake and was only brought down by
obsolete back-up power sources being swamped by a
tsunami, should increase rather than decrease confidence
in nuclear technology. Paradoxically, it was this view that
brought about a road to damascus moment for the
environmentalist George Monbiot, transforming him overnight
from being a passionate opponent of nuclear power to being
one of its most prominent spruikers.
Finally, and most importantly, the level of concern
about climate change is far greater than it was in 1986
and for many countries nuclear power is now
an essential element in their plans to tackle it.
Few experts around the world believe that the
decarbonisation of electricity is feasible without a
major contribution from nuclear power. Latest projections
from the International Agency (june 2011) still show an
increasing contribution from nuclear power over both
the medium and long terms.
Where does this leave Australia? Clearly, in a worse
position than it was before Fukushima. While there was a
slim chance that the ALP would change its policy on nuclear
power at this year’s conference, that possibility is now that
much slimmer. Rational analysis has played little part in the
nuclear debate in Australia to date and the fact that
Fukushima has provided much more ammunition to the
doomsayers suggests that fear-mongering will continue
to dominate the issue for the foreseeable future.
Without strong leadership, it seems very unlikely that
Australian politicians will now bite the bullet on nuclear
power, at least for several years down the track. this is
unlikely to be to the Australian community’s advantage.
on the one hand, we will be forced into much more
expensive and less satisfactory technologies if we are
to address climate change in any substantial way.
on the other, the majority of those countries overseas
that have committed to nuclear energy will continue to
invest in it. Australia’s energy-intensive industries will
become significantly less competitive as a result.
Jon Stanford
WItHoUt stRonG LeAdeRsHIP, It seeMs VeRy UnLIKeLy tHAt
AUstRALIAn PoLItICIAns WILL noW BIte tHe BULLet on nUCLeAR
PoWeR, At LeAst FoR seVeRAL yeARs doWn tHe tRACK. tHIs Is
UnLIKeLy to Be to tHe AUstRALIAn CoMMUnIty’s AdVAntAGe.”
jon stAnFoRd
50 CoMPAny PRoFILe
horizon poWer is the pre-eminent supplier of energy
solutions to regional and remote Western Australia.
What sets us apart is our passion and ability to deliver
safe, reliable and affordable services in the most
challenging of environments. our service area is vast,
approximately 2.3 million square kilometres.
Horizon Power services the biggest area with the least
amount of customers in the world – for every 53.5 square
kilometres of terrain, we have one customer. our customers
range from people living in remote, isolated communities
with less than 100 people, to residents and small
businesses in busy regional towns, to major mining
companies in the resource-rich Pilbara region.
HoRIZon PoWeR
We maintain two interconnected networks as well as in
excess of 30, and growing, isolated or islanded systems
that power towns and communities throughout regional
and remote Western Australia. the systems are exposed
to intense heat and cyclonic conditions in the north, and
ravaging storms in the south.
It is these challenges that drive the innovation and
commitment of our agile, professional and engaged team
of more than 400 employees.
Although Horizon Power is a relatively new business,
we have the benefit of a long history as part of the
state-owned energy company in its various forms.
Horizon Power is a Government trading enterprise which
operates on a commercial basis. We focus on delivering the
best possible set of economic, environmental and social
outcomes to the communities we serve while applying a
commercial discipline and focus to the way we do it.
www.horizonpower.com.au | see page 97 for details
PoWeRInG AUstRALIA VoLUMe 5 51
smec has a long history in renewable energy, dating back to
its early beginnings in building the snowy Mountains
Hydroelectric scheme. since that time sMeC has expanded
its expertise in energy infrastructure to include geothermal,
solar thermal, solar PV, biomass, biofuels, waste to energy,
wind and micro and mini hydro, including hybrid systems with
gas and diesel.
over the last 40 years, sMeC has undertaken
international and Australian projects varying in scale from
multi megawatt power stations and transmission lines that
cross nations, to electrification of mini grids for small villages
or stand-alone power systems for communication systems.
since 1970, when the company was formed and later
privatised, sMeC has developed as an international,
multidisciplinary engineering company with over 4000 staff
and an established network of more than 40 offices around the
world. smec has delivered projects in over 85 countries with
89 projects being undertaken in the Middle east alone.
the functional sectors of sMeC emerged from skills
developed in the early Hydroelectric scheme, which covered
all elements required to be able to build a large remote energy
system. these disciplines include energy infrastructure, dams
and civil infrastructure, tunnels and roads and water and
environmental services.
Calling on all functional groups of the company, sMeC is
well positioned to design and develop complete power supply
systems, from greenfield power station sites to delivery of
power to an energy-efficient end user. Whatever the renewable
energy conversion system, sMeC can deliver the whole power
system package, including the balance of plant, backup or
hybrid generation and transmission and distribution systems.
sMeC has designed and managed the building of power
stations, including the 11.5MW palm waste biomass plant ‘Kina
Biopower’ in Malaysia, the 2400MW son La Hydro Power Plant
in Vietnam, the 55MW of geothermal plant for Lihir Gold in
Papua new Guinea and the 2MW Lake Cargelligo solar thermal
plant in Australia. sMeC is actively expanding its activities and
diversifying into other areas of renewable energy. sMeC looks
forward to continued growth in this new era of clean energy in
Australia and around the world.
CeLeBRAtInG 40 yeARs oF ReneWABLe eneRGy
www.smec.com | see page 98 for details
CHAPteR 0652
FUeL PoVeRty eMeRGes As A Key IssUe
06
PoWeRInG AUstRALIA VoLUMe 5 53
you WouLd need quite a long sheet of paper to
list all the energy issues that are hotly disputed among
governments, suppliers and community activists today,
but there is one on which they are ad idem: Australians
will not accept a situation where low-income households
are priced out of obtaining the electricity they require.
For some users, this is literally a life or death proposition
and the community will cut suppliers and governments
no slack whatever to ensure that power is there when
they need it.
In a market environment in which it is now widely
agreed that end-user prices in 2015 are likely to be
double what they were in 2008 – under the pressure of
higher network charges and a range of decarbonisation
policies – this issue is to set to rise up the attention agenda
for both lawmakers and energy retailers.
dr Paul simshauser, Chief economist of AGL energy
and Professor of Finance at Griffith University, queensland,
his colleague tim nelson, Head of economic Policy and
sustainability at AGL, and dr thao doan, a strategist in the
energy trading division of stanwell Corporation, have
thrown a spotlight on this issue in a paper they have
called “the Boomerang Paradox”.
“A characteristic of advanced economies,” they
explain,” is continual growth in household incomes
and plunging costs of electrical appliances.
In Australia, increases in household floor space
combined with power prices that are among the lowest
in the world have resulted in rapid growth in peak
electricity demand. the power grid in turn requires
substantial incremental generating and network capacity,
which is used momentarily at best.”
Australia’s long history of very low power prices,
they point out, combined with almost two decades of
economic growth, has led to extraordinary increases in
energy demand driven by the rising use of appliances
to cool and heat homes.
Back in 1970 average household energy requirements
in new south Wales and queensland stood at 4MWh a
year – by 2008, this had doubled to 7.9MWh.
CHAPteR 0654
the rise of peak demand out-runs the trend line for
overall demand. In Brisbane, for example, the number of
households increased 35 per cent in 12 years to 2010, but
peak demand rose 104 per cent as three-quarters of homes
were equipped with air-conditioning, a third of them with
two or more appliances.
the paradox is that the nation’s rising wealth has created
the pre-conditions for large increases in the number of people
who cannot afford to pay their electricity bills. “It is,” they say,
“as if consumers have been provided with a mispriced drug for
long enough to establish a chronic addiction – and then they
are confronted with the price doubling.”
simshauser, nelson and doan envisage scenarios
where household electricity bills, as a consequence of
generation and networks being expanded to meet this
demand, will rise from $130 per megawatt hour in 2008 to
between $250 and $300 in 2015.
“of course,” they say, “the overwhelming majority of
households will readily adjust their budgets to meet these
charges. After all, power prices at these levels are not
unusual by any measure around the world and real income
growth in Australia in this period is expected to be three to
four per cent a year.”
While the political problem is that many of those who
can afford to pay higher bills will object strongly to doing so,
the social issues, as simshauser and his colleagues point
out, is that many thousands of households will not be able
to do so.
How large is this problem? they have modelled a
situation where, by 2015, a third of low-income households
in nsW and queensland, or 6 per cent of the total in the two
states, will experience fuel poverty. this will add some
214,000 account holders in 3.2 million nsW homes and
about 130,000 in two million queensland homes.
Above downtown Brisbane is part of the fastest-growing
electricity market. south-eastern queensland is only 3 per cent of
the state by area, but it accounts for most of the electricity demand.
PoWeRInG AUstRALIA VoLUMe 5 55
extrapolate this situation to the east coast as a whole
and the number in strife could be half a million – and bear
in mind this refers to homes, not people. Assume three or
four adults and children per home, perhaps an underestimate
for low-income families, and you are looking at around
2 million Australians, not a number state or federal politicians
could regard with equanimity.
the situation is not helped by the fact that many
low-income homes use more electricity than the national
average. “one might expect that low-income households
consume less than average amounts of power,” the authors
say. ”But data from the Independent Pricing & Regulatory
tribunal in nsW, looking at homes with gross incomes less
than $31,000 a year, shows that 20 per cent of them use
between 8MWh and 12MWh annually, and 12 per cent use
more than 12MWh.”
evaluation of AGL energy’s customer hardship program
shows that many of these households live in lower-value
homes, most likely with three to four people per house, and
with power consumption patterns skewed towards the medium
to high range. Given that we now have a good idea of where
power bills are heading, simshauser and colleagues argue, it
would be a good idea for governments to ensure they better
understand this issue and have policies in place to deal with it.
of course, state policies are already in place to assist
senior members of the community, to provide emergency
help to households facing the possibility of the lights going
out, to help those on life-support machines and, in
queensland and nsW, to provide advice on reducing
demand. these policies are designed for a much lower
power price environment than the one that lies ahead.
Controversially, simshauser and his colleagues
suggest government could consider hypothecating the
extra funds they will receive from the Gst to contribute
to alleviating fuel poverty.
In nsW and queensland, they say, Gst receipts from
electricity sales to householders totalled about $410 million
in 2008. By 2015 these receipts will be of the order of
$880 million to $1040 million.
one of the issues that needs to be addressed in
coming to terms with higher fuel poverty, they add, is
the “critical failure” of government assistance programs
to deal appropriately with the issue.
For example, the initial emissions trading scheme
proposal would have seen lump-sum payments delivered
to householders receiving compensation. Far better, they
suggest, to deliver the payments to the energy retailer to
ensure that the money is spent where it is intended.
However governments decide to address the “bill
shock” issue that obviously is going to be a feature of this
decade, it is clear from the research by simshauser and
his co-authors that this is not a minor issue in terms of
social responsibility, let alone the political pain likely to
be inflicted by voters upset by the new power regime.
It is a situation not likely to be improved when, as
currently planned, governments give the green light to the
electricity industry to roll out smart meters to all homes
and then shift to “time-of-use” charges aimed at driving
a change in consumption patterns by making it far more
expensive to use electricity at peak periods.
Jon Stanford
one oF tHe IssUes tHAt needs to Be AddRessed In CoMInG to
teRMs WItH HIGHeR FUeL PoVeRty Is tHe ‘CRItICAL FAILURe’ oF
GoVeRnMent AssIstAnCe PRoGRAMs to deAL APPRoPRIAteLy
WItH tHe IssUe.”
jon stAnFoRd
56 CoMPAny PRoFILe
as the world’s sunniest continent, there is significant
potential for Australia to harness its vast solar resource.
While traditional fossil energy continues to play a crucial
role in the supply of energy to our nation, renewable energy
technologies, including solar photovoltaic (solar PV), will
increasingly contribute to meeting Australia’s growing
energy needs. With a policy and consumer shift towards
sustainable energy, an increasing number of companies are
selecting solar PV as part of their energy portfolio.
coMpleMenting existing technology
solar PV is a thoroughly proven and tested technology that
has been demonstrated at utility scale across the world.
europe, United states and Asia have more than 100
commissioned generating plants ranging from 10 to 80MW
and solar farms greater than 300MW are under construction.
With a world-leading solar resource, Australia is in a strong
position to leverage off this extensive overseas experience in
developing a significant market.
sUnteCH
Utility-scale solar PV provides predictable and premium
value peak load, which complements existing power
generation. due to broad solar resource availability, solar PV
plants can be located over a wide range of locations, thus
enabling generation capacity to be sized and positioned
where it is needed.
From construction to operation, solar PV farms boast a
low environmental impact and provide enhanced grid power
quality. In addition, utility-scale solar PV can be co-located
with wind generation to provide greater energy diversity.
these generation benefits position utility-scale solar PV for
significant growth in the next few years.
whAt we do
suntech manufactures and markets quality, high-output,
cost-effective and environmentally friendly solar products for
electric power applications. suntech is the world’s largest
manufacturer of crystalline silicon PV modules, supplying to
residential, commercial and utility-scale solar markets
around the world.
suntech was founded by dr Zhengrong shi, an Australian
citizen who studied PV at the University of new south Wales
(UnsW. Research and development (R&d) is the cornerstone
of suntech’s global success. Utilising technology developed
with UnsW, suntech is at the forefront of the rapid increases in
PV efficiency and price reduction.
through continued investment in technological
advancement, with over 450 R&d professionals globally,
including CsG solar in nsW, suntech drives improvement
in the delivery of high efficiency solar PV technology.
From construction to operation, solar PV farms
boast a low environmental impact, predictable
energy growth and provide enhanced grid
power quality.
PoWeRInG AUstRALIA VoLUMe 5 57
sUnteCH
Solar farms are a natural extension of
Australia’s sustainable approach to
farming. By harvesting the power of
Australia’s solar resource, Suntech
commits to providing renewable energy
to future generations of Australians.
dependAble And bAnkAble technology
suntech works closely with its engineering, procurement and
construction (ePC) partners to deliver utility-scale solar PV
that provide performance certainty at a competitive price.
two significant projects over the past year include:
u thailand: the largest utility-scale solar PV plant in south
east Asia. the 44MW plant is owned by Bangchak
Petroleum Public Pty Ltd, with finance provided by the
Asian development Bank.
u Arizona, United states: suntech, in conjunction with ePC
Zachry Holdings, is developing and constructing a
200MW plant for sempra energy.
our vision
suntech is committed to delivering high quality, low cost
PV solutions worldwide. this vision can be realised through
focusing on technical leadership and applying groundbreaking
R&d. suntech is working daily to realise its vision of global
leadership in providing efficient solar solutions for a green future. www.suntech-power.com | see page 98 for details
CHAPteR 0758
CondItIons MAy BRIGHten FoR soLAR PoWeR
07
PoWeRInG AUstRALIA VoLUMe 5 59
one of the biggest long-term issues for energy in
Australia is whether solar power can become a substantial
part of the electricity supply mix. the CsIRo, for one,
believes that it can and is forecasting that it can meet
30 per cent of national electricity supply – but that it will
take four decades to do so.
the current outlook is not overly optimistic despite
enthusiastic support for the technology from various parts of
the environmental movement. Realisation that the subsidies
granted to those taking up rooftop solar photovoltaics (PVs)
are an additional burden on the balance of household
consumers – to the tune in new south Wales, for example,
of an additional $1.5 billion over six years – has rubbed the
shine off the technology in a number of quarters.
the still larger difficulty facing the PV sector in winning
strategic energy policy approval was summed up by the
secretary of the treasury Martin Parkinson when he was
serving as secretary of the department of Climate Change.
“If all the households in Australia were to install a 1.5kW
PV panel overnight,” he said, “this would save in the order of
13 million tonnes of carbon dioxide in 2020, less than
one-tenth of the 5 per cent target for national abatement.
the upfront cost of this would be astronomical – in the order
of $200 billion. With more plausible implementation over
10 years, we might be able to lower this cost to close to
$100 billion; lower, but still hugely expensive abatement.”
to put this statement in context, the department of
Climate Change estimates that the federal government’s
renewable energy target (Ret) will achieve annual
greenhouse gas cuts of 29 million tonnes by 2020 and the
industry estimates that meeting the Ret through building
wind farms will cost between $20 billion and $25 billion
over the decade.
spending five to 10 times as much to achieve less than
half the emissions cuts is not exactly an advertisement for
solar PVs. In addition, the abatement benefit of universal
household solar, according to Martin Parkinson’s arithmetic,
would be less than can be achieved by simply closing down
Victoria’s Hazelwood power station at about 3–4 per cent of
the cost.
CHAPteR 0760
this does not stop the technology being publicly popular,
however, with the PV capacity in Australia being lifted to
500MW after some in the community rushed the offer by the
since-defeated Keneally government in new south Wales to
provide the country’s highest feed-in tariff, a scheme cut
back severely after 10 months and subsequently mired in
controversy as the o’Farrell government struggles to come
to terms with its less-than-shiny inheritance.
the PV sector, in the meantime, also has its eye on
another part of the market: industry managers point out that
it has made virtually no inroads into the commercial power
market to date – a segment that today accounts for more
than 22 per cent of total national demand. the added
attraction here is that some see the market share of
commercial customers rising towards 30 per cent by 2030.
Meanwhile, the federal government has resisted pressure
to establish a national feed-in tariff for household solar PVs.
existing schemes are all state and territory based.
overseas, however, life is much brighter for the sector.
According to the International energy Agency in its 2011
clean energy progress report, at least 17,000MW of solar
power was added to global capacity last year, 90 per cent of
it being installed in six countries (Germany, spain, japan, the
United states, Italy and Korea).
Back here, the Australian energy resource assessment
published by the federal government in 2010 is both
optimistic and pessimistic about the role of solar. on the
one hand, the assessment predicts that use of solar energy
to make electricity will grow at an annual average rate of
17.4 per cent, reaching 4,000 GWh a year by 2029–30.
However, the solar share of electricity generation by
2030, it forecasts, will be just 1 per cent. By comparison,
wind power then will hold 12 per cent, gas 37 per cent and
coal 43 per cent. Most of the renewable energy balance
will be provided by hydropower.
just how hard the solar industry will have to run to be a
major player in power supply by mid-century, as forecast by
the CsIRo, is only too evident from the energy resource
assessment, which was written by Geoscience Australia and the
Bureau of Agricultural & Resource economics and sciences.
they also note a paradox for the technology. Australia,
the assessment points out, is a world leader in providing
solar technologies, but the uptake domestically is low,
principally because of their high cost.
At present, wind projects are “bankable” with financiers
where end-user prices of around $100 per megawatt hour
are available. the renewable energy target purchase
premiums are supposed to deliver this value, but the Ret
market has actually been operating well below this level over
the past 12 to 18 months. solar PVs, however, today need a
market price more than double that of wind energy.
the well-known Australian tyranny of distance is another
issue for utility-scale developments. “In Australia,” the national
assessment says, “the best solar resources are commonly
distant from the electricity markets, especially the major urban
centres on the eastern seaboard. this poses a challenge for
developing new solar power plants as there needs to be a
balance between maximising the solar radiation and
minimising the costs of connectivity to the electricity grid.”
the large areas of land and optimum resource conditions
required by concentrating solar thermal technologies,
needed for utility-scale generation, it adds, are often only
available long distances from customers needing the energy.
the proponents of large scale solar generation are
expecting 2011 to be the year in which the federal
government gives their plans a strong boost, with
announcement of the initial new funding under its $1.5
billion solar Flagships program, which aims to see up to
four new solar power plants built, with a combined capacity
of up to 1000MW. the program aims to demonstrate solar
technologies at commercial scale and to accelerate the
uptake of solar power.
How far and how fast solar costs can be reduced remains
PoWeRInG AUstRALIA VoLUMe 5 61
a matter of debate. Proponents of the technologies assert
that experience over the past three decades demonstrates
that solar costs fall about 20 per cent every time the industry
doubles production globally. they argue that continuing
improvements in manufacturing efficiency will continue to
drive down the cost of solar photovoltaic panels.
the real light on the hill for the technology, however,
seems more likely to lie in the development of utility-scale,
concentrating solar power (CsP), which the CsIRo says
has “tremendous potential” in Australia.
the agency acknowledges that CsP’s big current
drawback is its capital cost, but sees it as being capable
of becoming a low-cost technology in a carbon-constrained
environment, pointing to its ability to be combined with
fossil fuels and its prospects for being integrated with
thermal storage to provide renewable energy well in to
evening peak demand periods.
there are two basic types of concentrating solar
collectors: those that focus the sun’s energy along a
line and those which focus it at a point. the CsIRo says
it is possible to achieve much higher concentration ratios
with point focus collectors, although the required optical
precision is high. this enables the use of higher
temperatures to improve the efficiency of conversion
of solar thermal energy into electricity.
tHe ReAL LIGHt on tHe HILL FoR
tHe teCHnoLoGy, HoWeVeR,
seeMs MoRe LIKeLy to LIe In
tHe deVeLoPMent oF UtILIty-
sCALe, ConCentRAtInG soLAR
PoWeR (CsP), WHICH tHe
CsIRo sAys HAs ‘tReMendoUs
PotentIAL’ In AUstRALIA.”
KeItH oRCHIson, edItoR
below the solar industry has a lot of work to do if it is to become
a major player in the electricity industry. By 2030, it is expected to
account for just 1 per cent of electricity generation in Australia.
62 CoMPAny PRoFILe
toshiba is a world leader and innovator in pioneering
high technology, a diversified manufacturer and developer of
advanced electronic and electrical products spanning
electronic devices and components through to power
systems and infrastructure. the company was founded in
1875, and today operates a global network of more than 730
companies, with 204,000 employees worldwide and annual
sales surpassing 6.2 trillion yen ($Us75 billion).
toshiba aims to become one of the world’s foremost
eco-companies and is now accelerating its initiatives for
environmental management. toshiba companies around the
globe are establishing ‘toshiba eco style’, which targets the
greening of processes, products and technology and offers
optimal solutions for challenges faced all around the world.
In Australia and new Zealand, toshiba services the power
industry thorough its subsidiary, toshiba International
Corporation. since its inception in Australia in 1978, it has
installed over 15,000MW of generation capacity and over
12,000MVA of transformer capacity. It has established itself as
a market leader in the power sector providing generators,
turbines, transformers and associated power infrastructure for
this industry.
toshiba International Corporation has since added to its
capabilities by providing development, engineering and
service expertise to enable this sector to provide reliable
power to all residents of Australia and new Zealand. A recent
focus has been to develop the ‘green’ capabilities of the
company. Accordingly, toshiba has been significant in
providing hydro and geothermal projects, and has recently
entered the wind generation business through a strategic
alliance with Korea’s Unison.
hydroelectric power
toshiba is a world leader in single-stage pumped turbines,
high head Francis turbines and high speed generators. the
product range includes Francis, Kaplan and small hydro
turbines, generators, control systems, governors and
excitation systems. toshiba has recently commissioned
Bogong Power station, one of the largest recent hydro
developments in Australia.
tosHIBA: LeAdInG InnoVAtIon
“We will contribute to the creation of a
sustainable society through our environmentally
conscious processes, products and
technologies in order to become one of the
world’s foremost eco-companies.”
norio sasaki, Director, President and CEO, Toshiba Corporation
PoWeRInG AUstRALIA VoLUMe 5 63
tosHIBA: LeAdInG InnoVAtIon
trAnsMission & distribution
toshiba’s range of equipment covers all transmission and
distribution applications, up to and exceeding 500kV, and
includes power and distribution transformers, gas insulated
transformers, gas insulated switchgear, static VAr
compensation, HVdC systems and surge arrestors.
toshiba’s capabilities include engineering, manufacturing,
installation, commissioning and service of a range of
power equipment. In the past five years toshiba has
installed over 12,000MVA of transformer capacity for
power utilities and various industries and provided the
majority of the transformers for the new 500kV network
upgrades within nsW.
geotherMAl power
toshiba is one of the world’s largest manufacturers of
generators and turbines used in geothermal power
applications. thanks to toshiba’s 50-plus years of
experience in this sector, these turbines have established
industry benchmarks in output power and performance
and have been awarded for their contribution to the world’s
geothermal developments. In the past year toshiba has
been awarded the contract to provide turbines for teMihi in
new Zealand, one of the largest geothermal developments
in the southern hemisphere.
therMAl power
toshiba is a world leader in high capacity, high efficiency
steam turbine generators for combined cycle & cogeneration
plants, and a world leading supplier of supercritical and
ultrasupercritical steam turbines. toshiba Group is working to
commercialise carbon dioxide capture technology to enable
next generation thermal power facilities to achieve zero-
emission power generation.
construction, engineering And service
toshiba International Corporation has turnkey engineering
and service capabilities based in Australia. In recent years it
has successfully completed numerous turnkey turbine and
generator overhaul and construction projects, as well as
transformer installation and service projects. this has
involved site management, safety and quality management
and provision of supervision and labour resources. the
division is expanding to meet market needs for maintaining
(and increasing) efficiency in existing power plants.
toshiba International Corporation continues to develop
its local engineering capability with the full support of the
engineering groups in toshiba japan. this development
includes building expertise in toshiba mechanical,
electrical and control equipment for all facets of the plant
operation and maintenance. With this growing expertise,
toshiba is offering customers expert engineering and
technical service during operation, maintenance planning
and during unit shutdowns.
www.toshiba.com.au | see page 98 for details
CHAPteR 864
PReMIeR stAte’s PRIMe sUPPLy CHALLenGe
08
PoWeRInG AUstRALIA VoLUMe 5 65
poWerinG new south Wales is not just an issue for
the state’s more than three million residential and business
account holders, the largest block of customers in the
country. due to geography and load, nsW impacts on the
east coast market as a whole and its approach to energy
and decarbonisation policies affects the southern and
eastern seaboard.
As a result of the nsW privatisation debate of the past
two years (which is now the subject of a judicial inquiry
commissioned by the new o’Farrell government) the twin
issues of supply security and power prices are of concern
well beyond the state’s borders.
even the supposedly simple issue of when new
base-load generation needs to be commissioned in the
state is a matter of controversy, let alone the politically
charged question of what fuel should be used.
the owen Inquiry reported in 2007, on the basis of
projections of demand, that new base-load plant should
be commissioned in 2013–14; in other words, it should
already be under construction.
However, the impact of the global financial crisis
and other issues has seen this target date pushed out to
2015–16,or even a little later according to data from the
Australian energy Market operator, which is responsible
for system security on the east coast, and even this is
disputed by the environmental movement.
nonetheless, there are a number of significant facts
about nsW’s electricity environment that are not in dispute.
the state-owned transmission business, transGrid, points
out that a half century of demand growth has been driven
primarily by the rising population and the marked increase
in electricity consumption per person, plus the sharp, and
still-rising, spike in peak power needs.
the nsW population has more than doubled since
the mid-1950s to over 7 million people and is heading for
7.6 million by the decade’s end. According to the Australian
Bureau of statistics, it should be nearly 9 million by 2035.
the increase in population has been accompanied
by a slightly higher rate of growth in the number of
households, thanks to a national decrease in the number
CHAPteR 866
of people per home. today, about a third of nsW power
consumption occurs in houses, and the common residential
requirement for lights, refrigeration, television, cooking,
water heating and space heating and cooling underlies the
demand trend.
As real incomes – that is their value in inflation-adjusted
terms – continue to rise, per capita power demand can be
expected to increase with them, even as less affluent
families struggle to pay their bills.
the trend is dramatically underlined by one set of
statistics: in 1996–97, nsW system energy demands
stood at 58,000 GWh, with a peak demand of 10,500 MW.
By 2008–09, system energy requirements had risen to
75,800GWh and peak demand exceeded 14,500MW.
the industry’s current load forecasts are for system
energy needs to be 86,000GWh annually in 2018-19
and peak demand to be 17,500MW.
How far moves to drive more efficient use of household
electricity supply will actually impact on demand is far more
than a $64 million question. Factors in play this decade will
include persistent increases in power bills, the impact of
more stringent building regulations, requirements for higher
efficiency-rated appliances and campaigns to make the
public more aware of the need for energy conservation.
one of the major changes impacting on networks is
the switch in the state’s peak demand period. Until the
late 1980s summer peaks in nsW were over-shadowed
by maximum supply requirements in winter, spring
and autumn.
two developments have changed this. one was the
introduction of natural gas, fuelled by supply from Bass
strait and the Cooper Basin in south Australia, as an
alternative for household water and space heating, and
for cooking. notoriously, air-conditioning in the past few
years has become the other. the reduction in its cost as
community wealth has risen has led to its use in about
eight homes in 10.
nsW has become a summer peak state, which has
had consequences for the networks. In addition to a sharp
increase in the construction of expensive assets that are
required for only a few weeks, at most, a year, a large
part of the existing system was not designed to be under
maximum pressure in the hottest months of the year.
According to the Australian energy Regulator, the
need to meet peak demand, to service growing overall
consumption and to replace rapidly ageing assets will
cause network capital outlays in nsW to virtually double
during each five-year period from 2000 to 2015, with the
2010–15 outlay reaching almost $15 billion.
Combined with political efforts to suppress the impact
of supply costs on residential consumers in nsW, this trend
has had a “slow tsunami” effect, hardly discernible to the
community and the media through most of the past decade,
but crashing in to their consciousness in the past two to
three years and engendering a political backlash.
the political problem is that, while the impact of the
network charge is now unavoidable, power prices are
increasingly exposed in nsW to the effects of national and
state decarbonisation policy, the expected shift to higher-
priced gas for generation and the expiry by 2017 of the existing
very-low-priced coal contracts for the state-owned generators.
one very public example of the power policy difficulties
posed for politicians has been the Keneally government’s
ill-fated move in 2010 to promote carbon abatement through
the most subsidised rooftop solar power scheme for
householders in Australia. Introduced in january last year,
it was rushed by homeowners to such an extent that the
government moved to slash the feed-in-tariff by two-thirds
in october 2010 and to cap the capacity that could be
taken up. While this reduced the scheme’s flow-on cost
to householders by $2.5 billion between 2010 and 2016,
it still left them with an extra $1.5 billion in charges.
According to dr Paul simshauser, chief economist of
AGL energy and finance professor at the Griffith University
school of Business, this situation should lead to end-user
power bills in nsW (and queensland) virtually doubling
between 2008 and 2015.
the factors impacting on nsW’s power policy
environment are many. two that require close attention
in the current term of government are settling the issues
of ownership of government-owned generation and/or
its energy output, and overseeing development of the
necessary base-load capacity to secure supply until
2020 and beyond.
Following the Keneally government’s privatisation
process of 2009–11, the retail divisions of the trio of
taxpayer-owned distribution businesses have been sold
to origin energy and tRUenergy, along with all the
production from eraring energy and a large part of the
output of delta electricity, a process so controversial that
most of the directors of the two “gencos” resigned rather
than sign off on the “gen-trader” deals.
PoWeRInG AUstRALIA VoLUMe 5 67
Macquarie Generation’s Bayswater power
station is one of the two largest electricity
supply centres in Australia, producing enough
energy each year for two million homes.
CHAPteR tItLe68
the process has left the state still owning all the
delta and eraring assets as well as the power stations and
production of Macquarie Generation in the Hunter Valley.
It has also left the new state government with the
ongoing issue of deciding which form of base-load
generation development it should approve in order to
meet the impending demand/supply gap, a situation
that may be exacerbated if, as consultants have predicted,
the available imports of power from interstate are reduced
in the second half of the decade by the requirements of
Victoria and queensland.
the mix of generating plant in any system needs to
be balanced between base-load and peaking plants,
the former being units with relatively low fuel costs able
to produce power continuously through most days of the
year, and the latter having relatively high fuel costs but able
to be brought in to supply at short, sometimes only a few
minutes’, notice.
As electricity use in nsW has risen over the past
10 years by an average of 1310 GWh annually, state
reliance on net imports of power has increased to 7 per cent
of its total consumption. However, energy available from
queensland over the qnI interconnector has been in
decline for three years, reflecting higher demand in that
state, and the contribution from Victoria might even become
negative later this decade as supply tightens south of the
Murray River.
judging by the proposals now on the table in nsW,
new base-load needs will be met by a combination of
gas developments.
Macquarie Generation and delta electricity have
both put forward proposals – to be fulfilled by the
private sector under existing government policy – for the
development of 2000–2400MW of combined cycle gas
units in 400MW tranches.
the businesses each nominated the construction of two
1000MW high-efficiency conventional coal-fired plants as
their preferred option, but there is widespread belief that,
under the decarbonisation environment, these projects are
neither “bankable” nor likely to win political support.
A competing gas-fired proposal has been put forward
by tRUenergy, which received environmental planning
approval in early 2011 to build a second base-load gas
plant at its tallawarra site on the nsW south coast, a move
the company says will depend significantly on national
decisions about carbon pricing.
While the debate continues over fossil-fuelled
developments, the federal government’s renewable
energy target is seen as driving a number of new wind
farm projects in nsW.
Fitch Ratings, in its 2011 assessment of power
developments in Australia, suggests that 923MW of the
5000MW of wind farms it expect to see built on the east
coast between 2011 and 2015 will be constructed in nsW
as part of the $10 billion worth of generation investment
it forecasts for the state in the next five years if a national
carbon price is introduced.
over-arching all this is the hugely important issue
of ensuring there is adequate generation to cover plant
failures, not a minor factor in a state where an increasingly
large amount of capacity will be more than 40 years old
by mid-decade.
Consultants AeCoM, in undertaking the environmental
assessment for the proposed Bayswater B options put
forward by Macquarie Generation, have pointed out that, if
new base-load capacity is not commissioned in ample time
to cope with rising demand, the existing state-owned plants
will be required to sustain a 17 per cent increase later in the
decade above their 2008–09 levels – roughly production of
an extra 10,000GWh a year.
“Given that the oldest of these plants will be 45 by
then,” says AeCoM, “this has implications for maintaining
supply reliability – which may not be maintained on an
ongoing basis.”
As transGrid puts it, “Internationally, a simply
understood and often accepted minimum generation
reserve standard (which includes generation local to a
system and interconnection capability with adjoining
systems) is 15 per cent.”
What this means is that, if the nsW maximum demand by
the decade’s end is 20,000MW – compared with 14,500MW
today – then 23,000MW of generation needs to be available
within the state or be readily accessible over its borders.
Lying beyond all these issues is another of substantial
magnitude: the impact of national decarbonisation policy
on nsW generation. this poses three big questions:
1. Which state coal-burning units – in total they consume
some 30 million tonnes of black coal a year – may be
required to shut operations when a carbon price
reaches the high levels required to drive national
abatement towards the 2020 target of 160 million
tonnes a year?
PoWeRInG AUstRALIA VoLUMe 5 69
2. How, and at what cost, can the surviving coal-burning
generators be retrofitted for carbon capture and
sequestration, assuming the technology becomes
commercially available, and where would the tens of
millions of tonnes of liquid carbon dioxide captured
be buried?
3. Will even future CCGt plants be allowed to be built
without at least being carbon capture ready and what will
this requirement mean for both their commissioning time
scales and the cost of their supply?
the problem for government in nsW, and in many cases
for the federal government, is that there are no easy answers
to any of these issues. Because they have not been
addressed in the past decade, the policy solutions to
them are becoming more urgent.
Meanwhile, consumer angst about the cost of their
electricity supplies is continuing to reach new heights, not
least because the arrival of really cold winters (like that of
2010) as tariffs rise on 1 july each year means that the price
shock in october in terms of quarter-on-quarter bill rises is
greater each time, attracting ever stronger media attention
and raising the temperature of political debate.
the late 2010 “q-on-q” price difference in nsW, Macquarie
Bank reports, was 30 per cent for many households, leading
politicians campaigning in the March 2011 state election to
describe public anger over power bills as “white hot.”
InteRnAtIonALLy, A sIMPLy UndeRstood And oFten ACCePted
MInIMUM GeneRAtIon ReseRVe stAndARd Is 15 PeR Cent.”
tRAnsGRId
70 CoMPAny PRoFILe
a reLiabLe supply of electricity is essential for the
growth and economic prosperity of Australia.
transGrid owns and manages one of the largest high
voltage transmission networks in the country, connecting
generators, distributors and major end users in nsW
and the ACt.
transGrid’s transmission lines stretch for
12,600 kilometres along the nsW east coast, southern
and western borders. Its high voltage network transports
electricity over hundreds of kilometres safely and
efficiently, interconnecting with the queensland
and Victorian grids.
With over 91 substations and switching stations,
transGrid delivers electricity to more than three million
households and businesses. As the backbone of the
national electricity Market, transGrid’s network facilitates
interstate energy trading transporting over 75,100GWh of
energy annually.
our vision And Mission
As a leading electricity transmission network service
provider, transGrid is committed to safety, the community
and commercial success.
transGrid’s core function is to provide safe, reliable and
efficient transmission services to nsW, the ACt and the
national electricity Market. transGrid is built on a strong
set of core values. Its work environment promotes a culture
which is committed, collaborative, caring and enterprising
– excellence in all we do.
With more than 1000 employees spread across nsW,
transGrid understands the knowledge and experience of
its people play a lead role in maintaining a reliable supply
of electricity for nsW.
building for the future
transGrid has two major services:
u providing a reliable transmission system for customers;
and
u enabling access to the market for generators across
the national electricity Market.
tRAnsGRId
“A reliable supply of electricity is
essential for the growth and economic
prosperity of Australia.”
Between 2010 and 2014 transGrid will undertake more
than 88 projects across nsW as part of a $2.6 billion capital
works program.
this multi-billion dollar capital works program is needed
to ensure the transmission network continues to deliver
secure, reliable and safe supply of electricity. there is a
strong focus on capital efficiency and the growth in
transmission capacity supports electricity sourcing from the
lowest cost generators.
transGrid is also undertaking a major refurbishment
and replacement of ageing assets to ensure efficient supply
to its customers.
since 2008, transGrid has connected two new gas fired
and two new wind powered generation developments and
has facilitated numerous upgrades to existing generators.
negotiations are currently underway to connect up to several
renewable energy sources such as wind and solar.
PoWeRInG AUstRALIA VoLUMe 5 71
tRAnsGRId
leAders in deMAnd MAnAgeMent
transGrid recently implemented a 350MW demand
management solution for the newcastle, sydney and
Wollongong areas during the summer of 2008/09 – the largest
of its type ever delivered in the national electricity Market.
subsequently, more than $14 million was returned to
nsW customers by transGrid on completion of the project.
conserving the environMent
GreenGrid is an award winning 12-year partnership between
transGrid and Greening Australia. the partnership has
rehabilitated an area the size of 2,000 football fields in the
Murrumbidgee and Lachlan catchments of new south Wales.
In 2010 GreenGrid’s Boorowa River Recovery program was
a finalist in the 2010 United nations Association of Australia
World environment Awards and national Landcare awards.
www.transgrid.com.au | see page 98 for details
CHAPteR 972
neW eneRGy VIsIon FoR tHe West
09
PoWeRInG AUstRALIA VoLUMe 5 73
Western austraLia, says the state’s Minister
for energy Peter Collier, is unique in the wealth and
diversity of its energy resources. It is unique in its
distance from other energy networks, too. “From an
energy perspective, it is an island state.”
As a rule-of-thumb, more than 85 per cent of Australia’s
electricity consumption (9 million customers) is on the east
coast, with 10 per cent (1 million customers) in the
southwest corner of WA, thousands of kilometres away.
Unlike the east coast energy market, Collier points
out, primary energy supply, and the way energy is used,
in the West is determined largely by choices state
policymakers and the community alone can make.
despite this, Collier says, Western Australia lacks
a cohesive, long-term energy plan. the state’s last
comprehensive energy policy was developed in 1979.
the discussion paper the coalition government of
Premier Colin Barnett released in december 2009 paints
the scene like this: “over the past 20 years, the WA
energy industry has played a major role in driving state
economic development while contributing to the
community’s high standard of living. energy consumption
has doubled in this time. How we choose to meet our
energy needs over the next 20 years is a critical issue.”
Underpinning the problem is an expected increase in
the state’s population from today’s 2.2 million to around
2.8 million in two decades’ time.
It is now trying to bridge the policy gap by delivering
a strategic roadmap out to the year 2031 and this is not
an exercise that can be accomplished quickly. the
government’s energy 2031 directions paper was
published in March and it will be the end of 2011 before
consultation about its proposed directions is completed.
Collier says the government proposes a series of
strategies structured around six major themes, ranging
from security of supply to provision of efficient
infrastructure, improved efficiency for using energy,
including effective markets and delivering universal
access to energy in a state notable for having the majority
of its population and commerce in the southwest corner
CHAPteR 974
and the bulk of its huge mineral development
sprawled across the north of the world’s second largest
sub-national jurisdictions.
“our vision for the next two decades,” he adds, “paints
a picture of the energy system that will meet strategic goals
of secure energy, reliable energy, competitive energy and
cleaner energy.”
In a national environment where decarbonisation is high
on the agenda, WA is confronted by a situation where fossil
fuels meet 95 per cent of its overall energy requirements
today and are expected, on present trends, to be the source
of 92 per cent in 20 years’ time.
Being far removed from the east coast’s major brown
and black coalfields has meant the state has come to rely
on natural gas to fuel a large part of its power generation.
WA consumes more gas each year than new south Wales,
the ACt and queensland combined.
Gas meets 60 per cent of the state’s electricity output
today and is forecast to provide 68 per cent of projected
increases in capacity. Fortunately, WA is adjacent to one
of the world’s great offshore gas provinces.
Unfortunately, the dominant focus on exporting the gas as
LnG has exposed domestic customers to world parity prices,
substantially higher than for gas consumers over east. Gas cost
is the greatest bone of contention. Unlike the east coast, where
at least the wholesale price of energy is not yet adding to the
end-user price problems created by massive network outlays,
in the West there are rising customer concerns about the impact
of gas costs on power bills and where they may be heading.
oUR VIsIon FoR tHe neXt tWo
deCAdes WILL Meet stRAteGIC
GoALs oF seCURe eneRGy,
ReLIABLe eneRGy, CoMPetItIVe
eneRGy And CLeAneR eneRGy.”
PeteR CoLLIeR, WA eneRGy MInIsteR
PoWeRInG AUstRALIA VoLUMe 5 75
the situation has fuelled an epic verbal duel between
the domGas Alliance, representing large industrial consumers,
and the Australian Petroleum exploration & Production
Association, representing suppliers, over the past five years.
the arguments are lengthy and complex, but basically
evolve around the user group claiming that period of domestic
undersupply leading to the price spikes has been contrived
and that major producers are “warehousing” fields for potential
developments as LnG projects. Meanwhile, the suppliers are
responding that the WA market is “healthy” and “functional”,
arguing that recent price rises have generated a supply
response that, over time, will alleviate pressures by bringing
new supplies to market without regulatory intervention.
the concern, says dr Mike nahan, Chairman of the WA
Legislative Assembly economics and Industry standing
committee, which has been investigating the issue, is that
“high gas prices are seriously undermining the state’s
competitiveness and imposing high and excessive costs
on businesses and households”.
In addition, in a region where extreme summer weather is
a major lifestyle factor, peak demand, which is powering along
on the back of installation of air-conditioning in eight out of
10 homes, is also imposing considerable demand for network
capital outlays for assets little used (10 per cent of the system
is called upon just 50 hours a year), but considered absolutely
essential in old-style “century” heat conditions.
Western Power, the government-owned networks
business, estimates that peak power requirements could
increase 90 per cent over the next 20 years, necessitating
some $7.5 billion in transmission expenditure and $14 billion
in distribution outlays. this would represent expenditure of
$3 million a day every day for two decades.
Residential demand for electricity in the West has risen
sharply since the early 1990s, when it averaged about 4500 kWh
a year. now the southwest household average is about
6250kWh annually and climbing.
Household consumption in the north of the state is higher
still, now averaging 8500kWh annually, driven by high
air-conditioning loads.
left In the West, like eastern states, transmission is as vital to
power supply security as generation.
CHAPteR tItLe76
just to add spice to this witch’s brew of problems,
development of WA’s immense mining resources wealth in
the northwest and mid-west regions, according to the
Chamber of Mines and energy, could require supply by the
end of this decade of as much electricity as is used today
in the southwest interconnected system.
the Independent Market operator believes some
7400 MW of generation capacity will be needed in the
southwest by 2021, requiring commissioning of 2275MW of
new plant, while synergy, the state-owned energy retailer,
sees a requirement for 6000MW in new capacity over 20
years at a cost of $12 billion. the capital outlay will also
need to include a substantial amount for augmenting the
transmission system to connect new generation power.
A complicating factor is who gets to build the new
generation capacity – the private sector or the state-owned
generator, Verve energy. Courtesy of decade-old reforms to
the Western Australian market, Verve is limited to owning
3000MW, 60 per cent of available capacity. It would like to
build an extra 2000MW of plant to meet rising demand.
scattered still further afield in an area the size of
India are 29 little stand-alone power systems serving
communities that live unimaginably remote lifestyles by
east coast standards.
rIght some 7400 megawatts of additional generation capacity
will be needed.in southwest Wastern Australia by 2021.
As We MoVe FoRWARd,
It Is IMPoRtAnt tHAt We
PUt In PLACe tHe PoLICy,
ReGULAtoRy And InCentIVe
MeCHAnIsMs tHAt WILL
ensURe tHe eneRGy MARKet
WILL Be dynAMIC, HIGHLy
CoMPetItIVe And eFFICIent.
PeteR CoLLIeR, WA eneRGy MInIsteR
PoWeRInG AUstRALIA VoLUMe 5 77
since these comments were made, the state
government has approved a further 5 per cent increase in
power prices from mid-2011 and the budget has estimated
that further rises of 34 per cent will be needed by 2014–15.
state treasurer Christian Porter said the government had
to take a difficult and unpopular decision to reverse years
of stable power prices and to move them “at least within
sight of the costs of generation and delivery”.
engineers Australia, when it produced its five-year
assessment of the state’s infrastructure in 2010, warned
that current end-user tariffs still did not provide true
cost-reflective pricing and urged that prices be raised
along a glide path that reflected broad social and
economic considerations.
While recognising recent efforts to expand generation
and the transmission network, engineers Australia urged
reform of the state’s wholesale electricity market and
pointed to the lack of transmission capacity in many urban
and regional areas, the ageing of assets and reliability
concerns in regional areas.
the government also proposes to broaden electricity
reliability standards to recognise peak constraints on the
power system – and it will consider incorporating direct
load control capability in building design standards.
down this path lies more “power pain” and “electric
shocks” – in the jargon of the media in Australia – and the
government speaks plainly about the issue: “the price of
electricity, gas and transport fuels will increase substantially
over coming decades. this increase will flow through to
almost all goods and services, potentially placing financial
pressure on people with low or fixed incomes.”
It says: “While seeking to ensure all consumers can
afford essential energy services, the government also
has to provide energy systems that are safe, secure and
reliable. Revenue needs to be at an adequate level to
operate the supply systems and to support investment in
maintenance, replacement and enhancement as needed.”
In this respect, the West is not isolated from governments
on the east coast at all.
energy Minister Peter Collier sums up the challenge
for his government and all the others like this: “our future
involves larger population and economic growth serviced
by smarter energy systems. As we move forward, it is
important that we put in place the policy, regulatory and
incentive mechanisms that will ensure the energy market
will be dynamic, highly competitive and efficient.”
Looking at the WA situation, the Committee for the economic
development of Australia has commented: “the energy
infrastructure (of the state) has been neglected for far too long.
For decades there was insufficient investment in generation
capacity. As a consequence, the current economic expansion
is challenging WA’s capacity to deliver adequate, reliable energy
throughout the state.
“Furthermore, the move towards better cost-reflective pricing
has resulted in the cost of energy rising by 42.5 per cent in two
years, after tariffs for residential customers had not increased
since 1997–98, during which time the cost of supplying electricity
had increased dramatically.”
78 CoMPAny PRoFILe
the university of Adelaide’s Institute for Mineral and
energy Resources is developing technology and
understanding that will improve the efficient and sustainable
use of the world’s mineral and energy resources for the
benefit of society, industry and the environment. the Institute
is focusing on the link between mineral production and
energy consumption and aims to be the premier research
and educational facility for the mineral and energy resources
sectors in the Asia-Pacific region.
Mineral and energy resources expansion in south
Australia is anticipated to be the single most significant
driver of economic development in this state for at least
the next two generations. these sectors will have to
address many global challenges, including real energy
costs increasing markedly as the world competes for energy
and water constraints and associated cost rises which will
continue to impact on the community. Local and international
communities are also pushing for constraints on carbon
environmental regulation and sustainability issues be
addressed. the increasing scale and complexity of
mineral and energy resource developments are raising
the risk of environmental damage and capital cost overruns.
the Institute for Mineral and energy Resources aims
to address these global challenges through advancing
the science and technology needed to enhance the
prospectivity, discovery and extraction of mineral and energy
resources and to lower the cost and increase the efficiency
of cleaner energy generation, storage, transmission and
utilisation of energy. World-class researchers in the Institute,
working in multidisciplinary approaches spanning
engineering, science, economics, law and social science,
will enhance the delivery of innovative research outcomes
and its impact on society
the major impact of the Institute’s research and
development activities will be to maximise the social,
economic and environmental benefits of the minerals and
energy industries across regions, states, national and
international communities.
InstItUte FoR MIneRAL And eneRGy ResoURCes
Institute for Mineral and Energy Resources
“Mineral and energy resources expansion in
South Australia is anticipated to be the single
most significant driver of economic
development in this State for at least the next
two generations.”
www.adelaide.edu.au/imer/ | see page 99 for details
PoWeRInG AUstRALIA VoLUMe 5 79
Western poWer is a state government owned
corporation that builds, maintains and operates the electricity
network known as the south West Interconnected system
(sWIs). We ensure the sWIs delivers a safe, secure and reliable
electricity supply to almost one million connected customers.
the energy industry is undergoing a revolutionary
change and with that comes challenges and opportunities.
In order to navigate our way through this dynamic
environment, our resource dependent economy needs a
long-term, visionary energy policy. that is why we are keen
supporters of the Western Australian Government’s strategic
energy Initiative: energy2031.
Central to Western Power’s input into the initiative is our
belief in the importance of achieving cost reflectivity in
electricity pricing and long-term infrastructure planning. We
also believe it is crucial that, as a society we become more
efficient in the way we use energy. that is why we have
invested in energy efficiency education, are part of the Future
energy Alliance and are the lead in the federal government’s
Perth solar City program.
WesteRn PoWeR’s sMARteR eneRGy FUtURe
the seI promotes a ‘smarter energy future for
Western Australians’. As the provider of network services
for electricity customers throughout the greater south
west, Western Power is ready to play a key role in helping
achieve this vision.
Western Power believes that it is crucial that we as a
society become more efficient in the way we use energy
and, through our smart grid program, we are exploring
ways to provide consumers with the tools they need to
actively manage their electricity consumption.
details of Western Power’s vision for Western
Australia’s energy future can be found in the ‘About Us’
section of our website.
“The infrastructure Western Power builds
today will serve the community for the
next 50 years.”
www.westernpower.com.au | see page 99 for details
CHAPteR 1080
HoW BIG A Boon Is GAs FoR GeneRAtIon?
10
PoWeRInG AUstRALIA VoLUMe 5 81
is this the golden age for gas supply domestically in
Australia at last? this is the key question tantalising, and
perhaps haunting, the gas industry as the energy business
moves in to a new decade.
origin energy Managing director Grant King summed
up the promise and the problem when he addressed the
50th anniversary conference of the Australian Petroleum
Production & exploration Association in Brisbane. “A
golden age for domestic gas consumption was being
predicted in the late 1990s,” he said, “but by 2002 it was
clear these projections would not be met. the opportunity
for gas had been lost to coal, primarily new coal-fired
generation in queensland.”
At about the same time the federal government was
issuing its national energy resource assessment, the
essential background for an energy white paper that still
has not been published.
In it, the government projected that the rise of gas as
a power supply fuel would average 5 per cent a year from
2007–08 to 2029–30 as coal averaged a decline of
0.6 per cent annually, delivering a situation where
coal-burning plant had fallen back from today’s delivery
of 200,000 gigawatt hours a year to 150,000GWh, while
annual gas-powered electricity production had risen to
a heady 135,000GWh.
this scenario sees the gas sector’s share of
generation rising from 19 per cent today to 37 per cent
and coal’s share falling back to under half.
this situation is mirrored in the number of gas-fired
generation developments currently proposed for
Australia. they represent 60 per cent of the projects at
present either under way, in a detailed planning phase
or being investigated.
the critical issue that will decide whether a “golden
age” for gas domestically is now really emerging will
be energy policy, especially the imposition of a carbon
price and the establishment of a cap on allowable
emissions per unit of production for future power
stations, a measure now being investigated by the
federal government.
CHAPteR 1082
King says a carbon price in the range of $20 to $40 a
tonne will drive substantial fuel substitution for base-load
generation, reducing the emission intensity of the electricity
industry at the lowest possible cost.
one of the major advocates for the dash for gas is
santos Managing director david Knox, who lauds it as “an
immediate, proven way to transform power generation away
from high-carbon coal to low-carbon carbon gas, buying
time for advances in renewable technologies”.
Knox sees gas generation as a “natural partner” to
support the integration of intermittent renewable generation
with the power grid.
In a series of commentaries and speeches on the
issue over two years, he has highlighted three key features
that underwrite the “compelling potential” of the fuel.
It offers low intensity in carbon, water use and land
requirements, with only 15 hectares required to build a
1000MW plant that requires less than a third of the water
needed for cooling by an equivalent capacity coal-burning
unit. It has a large resource base close to demand points,
linked by an extensive and growing pipeline network. Gas
generation is a proven technology across the spectrum
of base-load, intermediate and peaking supply.
Knox argues that power generation abatement is
critical to delivering Australia’s decarbonisation policies.
It accounts for 35 per cent of total national emissions,
he points out, with more than 80 per cent of electricity
generated from coal. “If we are serious about addressing
climate change, we must lower the carbon intensity of
base-load generation.”
PoWeRInG AUstRALIA VoLUMe 5 83
He is dismissive of the role of renewable energy in
meeting base-load power requirements. “We all share the
ambition of zero-emission base-load,” he says, “but it is
simply not available in Australia and it will be many years,
possibly decades, before there is sufficient commercial
confidence about such a technology, its affordability and its
widespread deployment.”
As for the nuclear option, Knox says: “Right now, it is
illegal in this country – and I don’t know anyone who seriously
thinks that this is going to change any time soon or that we are
going to have nuclear power in our energy grid within the next
decade at the very minimum.”
He also rejects the notion that there may not be adequate
reserves of gas to fuel both a major change in power
generation domestically and the huge expansion of LnG
exports now on the drawing boards.
“Australia,” he told one conference, “is blessed with
enormous gas potential, one that will take us well into the
next century and probably beyond that. there is ample
and affordable natural gas in Australia to meet both growing
domestic and export requirements.”
Knox and the industry point to the fact that east Australia’s
known gas reserves have tripled in 10 years, with total reserve
life extended from 2015 to 2060, and this before full evaluation
of the large new south Wales coal seam methane deposits or
the “tight gas” resources in the Cooper, where conventional
reserves have been in a decline for a number of years.
What happens in nsW in the next decade will be important
to the gas sector’s domestic future. At present there are six
gas-fired power stations in the state, with a combined capacity
of 2103MW. there are 14 gas-based projects proposed for
development in the state. the number of them that are
commissioned to deliver base-load will have a big impact
on east coast gas demand.
In nsW and nationally, the inter-relationship between gas
generation and wind power tends to be controversial. some in
the wind sector and in the environmental movement argue that
too much emphasis is placed on the variability of wind power
and that large-scale development of the technology
will overcome a lot of the problem.
APPeA, on the other hand, points to modelling that, says
deputy Chief executive Mark McCallum, shows that every
5000MW of wind capacity will require approximately 2100MW
of gas generation to ensure reliability of supply.
Looking to the long term, McCallum suggests that,
even allowing for a doubling in consumption between
now and 2050, a combination of the renewable energy
target (which requires 20 per cent of demand to be met
from wind and other zero-emission technologies) and
gas generation will meet power needs with emissions
20 per cent below where they are today.
Knox cites south Australia, where gas already
provides half the power supply, as an example of what
can be achieved. “If we replace south Australia’s two
ageing coal-fired power stations in the state’s north with
gas, upgrade the existing gas generation fleet and meet
the state government’s ambition to achieve a 33 per cent
renewable energy target by 2020, south Australia’s
emissions intensity for power generation will halve, dropping
well below 0.4 tonnes of carbon dioxide per megawatt hour.”
this intensity would be half to two-thirds the level of
emissions from conventional power stations fuelled by
black and brown coal.
Knox believes similar reductions can be achieved across
Australia if coal-fired power stations are replaced by gas plants
as they reach the end of the normal working life and a greater
role is provided for renewable generation. seventy per cent
of the coal-burning plants are more than 20 years old.
“of course, it is easier for south Australia than the
coal states in the east,” he says, “but the fact remains that
the transition to a lower-carbon Australia can only take place
with a greater role for gas in the fuel mix.”
Knox argues that timing is vital in resolving policy affecting
electricity production. “We are rapidly approaching the point,”
he argues, “where critical decisions must be made on the
future direction of Australian power generation.”
left delta electricity’s Colongra Power station is a 667MW gas
fired, low emission power station that can be turned on almost
immediately to respond to spikes in electricity demand.
CHAPteR 1184
InteRstAte eneRGy tRAdInG on tHe RIse
11
PoWeRInG AUstRALIA VoLUMe 5 85
Go back eight years and the only wind turbine in south
Australia was a 150KW unit in the outback near Coober
Pedy. today the state has 1000MW of wind capacity
following a $2 billion surge in investment and it has
another 1000MW of projects in various stages of planning.
“If south Australia was a nation state,” boasts its
Premier, Mike Rann, “it would rank second in the world
behind denmark for the amount of wind energy it hosts as
a proportion of its total electricity generation.” note the
careful use of that word “hosts”.
While denmark is famous for the amount of wind capacity
on its soil, and for the manufacturing industry with world reach
that it has built on the back of this investment, most of the power
generated by the turbines is actually sold across its border to
other countries. Meanwhile, the danes’ needs are met by
domestic coal-burning plant and by importing hydro-power and
nuclear energy from other scandinavian states.
the key to the danish experience is the strong
scandinavian transmission system and a coherent
wholesale energy market for the region.
In similar vein, when Premier Rann adopts a target for
large-scale further investment in wind farms in south Australia,
he has his eye on other states as a market for the product.
“south Australia,” says Rann, “has the potential to
contribute 30 per cent of the entire nation’s renewable
energy target for 2020. our state can be a major source
of green power for the other eastern states.”
His state, he adds, has only 8 per cent of Australia’s
population, but it has “done incredibly well” in attracting
nearly 50 per cent of the nation’s grid-connected wind
power, about 30 per cent of its solar power and more
than 90 per cent of investment in “hot rock” geothermal
development, still at the embryonic stage.
According to Fitch Ratings, the state can expect to
attract more than a fifth of east coast wind investment
between now and 2015, representing a need for investors
to raise more than $2 billion in debt and equity.
Central to Rann’s grand plan for wind is one of
the world’s best resources for the technology, the
eyre Peninsula.
CHAPteR 1186
this triangular-shaped area of 45,000 square kilometres,
a similar size to tasmania, is bounded in the east by spencer
Gulf, in the west by the Great Australian Bight and in the north
by the Gawler Ranges.
It has strong and consistent wind speeds – with many
areas recording better than eight metres a second, considered
excellent for wind generation – and extensive areas suitable for
large-scale developments. the region is home to only 55,000
people, most of whom live in Port Augusta, Port Lincoln,
Whyalla and Ceduna.
A study by a consortium of Macquarie Capital Advisers
(a division of Macquarie Bank), engineers WorleyParsons and
law firm Baker & McKenzie has concluded that the area has
the potential for development over time of 10,000MW of wind
capacity, more than the total requirement of the current
renewable energy target for the whole of Australia.
the study has been supported by four wind developers
with interests in the area: Acciona energy, transfield
services, origin energy and Pacific Hydro, who have told
the Australian energy Market Commission, which is
examining a new mechanism to encourage scale-efficient
network extensions on the east coast, that the “green grid”
concept will not be viable under the current market
framework because it does not allow investors with varying
project timelines the effective opportunity to co-ordinate
their activities to build transmission infrastructure of an
efficient size.
the big drawback for the eyre Peninsula for power supply
purposes is that it is situated on the far western fringe of the
“national” electricity market – the east coast grid that delivers
80 per cent of Australia’s power needs – and at present has a
meagre transmission link with even the rest of its own state.
PoWeRInG AUstRALIA VoLUMe 5 87
the “sA Green Grid” consortium wants to start
exploiting the peninsula’s wind potential by obtaining
transmission system upgrades within south Australia and
on the link to Heywood in Victoria, opening the way
for development of 2000Mw of wind capacity. the
second stage would require a link from near Port
Augusta in to new south Wales, with a second 2000MW
of wind projects.
just the first stage, according to the consortium, in theory
would be large enough in times of high wind to meet the
state’s entire average electricity needs – but in practice a
large amount of the energy would flow to Victoria.
the first part of “Green Grid,” the consortium claims,
will “significantly modernise” the southern power market,
increasing network capacity for wind power from the present
900MW towards 4000MW, and enabling the south Australian
plants to drive up their contribution to the renewable energy
target from its existing 5.7 per cent to 30 per cent.
the second phase, it says, will provide large volumes
of renewable energy to the northern part of the national
energy Market, which has less favourable wind conditions,
and will provide considerable assistance to the development
of remote base-load geothermal power.
the jokers in this pack, of course, are cost and the
transmission development rules, which federal and state
governments and the industry are working to recast. the
consortium acknowledges that the first stage proposal is
unlikely to pass the present regulatory test for new transmission
developments – which favours network upgrades for generation
located close to the existing grid and to load centres.
the costs, to quote a well-known economist, are
“non-trivial” – estimated at $5.8 billion for the first stage,
of which about $1.4 billion would be transmission
capital outlays.
Apart from Mike Rann’s “green hub” ambitions, there is
another strong motive for the transmission developments
that would flow from the eyre Peninsula project. the area
is perceived by the mining industry to be a “mini Midwest”,
a reference to the West Australian iron province. this is an
area that in 1990s was seen as unrealistically ambitious in
its push to be a major minerals exporter, but is now a key
new iron ore province. the mining industry believes that
25 million tonnes a year of iron could be being exported
from the eyre Peninsula in the second half of this decade.
two of the big problems are the inadequacy of the
peninsula’s 132kV electricity network and the lack of
access to several hundred megawatts of base-load
power. Another is the lack of a large water supply for
ore processing.
the answer to the third issue is seen to be a
substantial desalination project, another large-scale
user of electricity which elsewhere in Australia is calling
on wind power to meets its needs.
Premier Rann, who contributed to the eyre Peninsula
“green grid” study from his government’s $20 million
renewable energy fund, says there is no doubt the state
has the intellectual capabilities as well as the climatic
conditions to develop alternative energy sources and
energy-saving initiatives, as well as deliver substantial
economic advantages to south Australia.
tHeRe Is no doUBt tHe stAte HAs tHe InteLLeCtUAL CAPABILItIes
As WeLL As tHe CLIMAtIC CondItIons to deVeLoP ALteRnAtIVe
eneRGy soURCes And eneRGy-sAVInG InItIAtIVes, As WeLL As deLIVeR
sUBstAntIAL eConoMIC AdVAntAGes to soUtH AUstRALIA.”
MIKe RAnn, PReMIeR oF soUtH AUstRALIA
CHAPteR 1288
tHe soLAR FLAGsHIP PRoGRAM
12
PoWeRInG AUstRALIA VoLUMe 5 89
after a long gestation period, the federal government’s
“solar Flagship” program has borne fruit: with the choice of
Moree in new south Wales and Chinchilla in queensland
as the sites for large-scale projects to demonstrate
new technology.
In welcoming the decision to support a $923 million
solar photovoltaic development at Moree, the nsW
Resources & energy Minister, Chris Hartcher, pointed out
that the impact is economic as well as environmental.
the project, which is calculated to help avoid emissions
of 10.8 million tonnes of carbon dioxide over three decades,
equal to the annual output of one mid-range coal generator,
is expected to contribute between $100 million and $125
million directly to the local area, including creating 500
indirect jobs around Moree while the construction is under
way over about three years. the nsW government is
contributing $120 million to the development, with another
$306.5 million coming from the federal government.
the project, which is to be constructed by a joint venture
involving BP solar, spain’s Fotowatio Renewable Ventures
and Pacific Hydro, will involve installing 650,000 PV panels
on an area the size of 600 football stadiums with capacity of
150MW, able to produce 400GWh a year. this is enough
electricity to serve 45,000 homes or the residential demand
of darwin.
the Chinchilla development, the 250MW solar dawn
solar thermal and gas hybrid power station in southwest
queensland, will produce enough energy to serve another
70,000 households.
solar dawn is to be located close to a 44MW booster
project for Cs energy’s Kogan Creek power station, the
largest single coal-fired unit in Australia.the Kogan Creek
booster system is also based on Areva’s CLFR technology.
the federal government will contribute $464 million to the
$1.2 billion cost of the Chinchilla project, with the
queensland government tipping in another $75 million.
the plant will be built by a joint venture of Areva solar,
Cs energy and Wind Prospect CWP, using Areva’s
Australian-designed compact linear fresnel reflector
technology to combine solar energy with a gas back-up
90
system. It will use mirrors focussed on water-filled tubes
to create steam and turn turn turbines when the sun is
shining adequately.
the joint venture claims that the Chinchilla plant will
contribute 50,000 tonnes of emissions abatement annually
over its 25 year life.
the project could be described as a kind of home-
coming for Areva solar. the company was founded in
Australia in 2002 as solar Heat & Power, changed its
name to Ausra, when it shifted its focus to California, and
was acquired in 2010 by the French engineering giant.
the solar dawn joint venture also points to the
economic benefits of its development as well as its
environmental contribution: the project is estimated to bring
$570 million in economic activity to the Chinchilla region.
the two projects are among eight the federal
government nominated for consideration under its $1.5
billion “solar Flagships” program, oversee by Resources
& energy Minister Martin Ferguson – their selection leaving
half the subsidies still to be allocated.
tHe joInt VentURe CLAIMs tHAt tHe CHInCHILLA
PLAnt WILL ContRIBUte 50,000 tonnes oF eMIssIons
ABAteMent AnnUALLy oVeR Its 25 yeAR LIFe.
KeItH oRCHIson, edItoR
CHAPteR 12
PoWeRInG AUstRALIA VoLUMe 5 91
Above AReVA solar’s Australian-pioneered
Compact Linear Fresnel Reflector (CLFR)
technology will be used in the solar dawn
project to boost the station’s coal-fired steam
generation system
92 CoMPAny PRoFILe
a WorLd that, if we have our way, will be powered by
far, far more than the 10 per cent of electricity expected to
be generated by wind by 2020.
A world in which wind takes its place alongside oil
and gas thanks to its ever more efficient use for electricity
production, and the efficient and reliable delivery of that
electricity on an industrial and global scale. A world
populated by far more than the 43,000 turbines that
we’ve already raised on behalf of our customers in
66 countries across six continents
A world in which we are relentlessly committed to
focusing our 30 years pioneering, our R&d centre (the largest
in the world), every shred of revelatory data from
our real-time monitoring of thousands of turbines, and the
unmatched diversity of capability and skills residing in our
more than 20,000 people worldwide. All of whom are
focused on one pure goal: generating the greatest and
most sustainable return on wind for our customers.
About vestAs AsiA pAcific
Vestas Asia Pacific is the Asia Pacific business unit of
Vestas, the world leader in wind technology. Its head office
is located in singapore and it has sales and service offices
in Australia, south Korea, India, japan, new Zealand,
Philippines and taiwan.
v112–3.0Mw designed for low cost of energy
designed for low and medium wind speed sites, the
V112-3.0MW turbine delivers energy at a highly competitive
cost. the turbine is very productive thanks to its large swept
area, improved rotor efficiency and superior serviceability
and reliability. thanks to Vestas’ state-of-the-art testing
centre, its reliability is assured.
VestAs
WIND. IT MEANS THE WORLD TO US.
www.vestas.com | see page 99 for details
PoWeRInG AUstRALIA VoLUMe 5 93
WiLson transformer Company is an independent,
Australian-owned transformer manufacturer founded in 1933
by jack Wilson and lead by his son Robert since 1979.
the Company engineers and manufactures power and
distribution transformers, package substations and speciality
transformers for the electric utility, industry, mining, oil and
gas sectors. Wilson transformer employs 650 people across
its Glen Waverley, Wodonga and international sites, and a
further 600 people are employed in joint ventures.
With world-class design and manufacturing capability
and a series of overseas offices and joint ventures, Wilson
transformer services both domestic and overseas markets,
exporting goods and services to the UK, UsA, saudi Arabia,
Malaysia and the regions surrounding these countries.
Pole, pad and ground mounted transformers from 50kVA
to 5000kVA 72kV are manufactured and supplied from the
Wodonga distribution business unit. substation and
generator transformers from 5MVA to 300MVA 400kV, mobile,
rectifier, furnace, loco and trackside transformers all available
with monitoring and controls are manufactured and supplied
from the Glen Waverley power business unit.
through its subsidiary, dynamic Ratings in the UsA,
Wilson transformer provides Australian made monitoring and
control equipment for power transformers and electrical
apparatus, with leading Us utilities choosing to standardise
on dynamic Ratings systems for smart grid applications.
the Company is also entering the fault current limiter
market, taking equity in a new global company, Gridon, to
develop and manufacture these products for world markets.
Fault current limiters are new products that are being
developed to economically limit rising fault levels in electricity
grids.
oil and sF6 testing and analytical services facilitating
condition-based monitoring and fault diagnosis is
undertaken through a joint venture with UsA-based tj|H2b
Analytical services.
Wilson transformer are specialists in transformer life
cycle management, with over 50 staff dedicated to specialist
site works and over $3 million of mobile equipment for
transformer testing, service and repairs.
WILson tRAnsFoRMeR CoMPAny
Wilson transformer Company built its reputation on
quality and reliability and does whatever it takes to protect
this hard-won record. the Company is accredited to As
9001:2000 quality system and As/nZs 4801:2001
occupational Health & safety Management system.
Recently inducted into the Victorian Manufacturing Hall
of Fame, Wilson transformer is a truly innovative company
and a leading Australian design, manufacturing and
service business.
www.wtc.com.au | see page 99 for details
94
tHe PoWeR nUMBeRs GAMe
Residential customer growth
Australia’s east coast market had 6,364,000 residential customers in 1995–96. By 2009–10
(the latest data) this had grown to 7,996,000 — an increase of 25.6 per cent. In the same
period Western Australia’s residential customer base grew by 46.8 per cent.
Residential power demand
Householders on Australia’s east coat consumed 43,413 GWh of electricity in 1995–96.
In 2009-10 residential demand stood at 60,386GWh — an increase of 39 per cent. In the same
period Western Australia’s residential consumption grew by 88.9 per cent.
Business power demand
Australia commercial and industrial customers consumed 99,650GWh of electricity in 1995–96.
By 2009–10 business consumption had risen to 142,620GWh — an increase of 43 per cent.
Burning coal
In 1995–96, coal-fired power stations across Australia burned 41.4 million tonnes of black coal in
three states (new south Wales, queensland and Western Australia) and 52.6 million tonnes of brown
coal in two states (Victoria and south Australia).
By 2009–10 coal consumption had risen to 54.8 million tonnes of black coal and 70.3 million tonnes
of brown coal. nationally, black coal’s share of power generation has fallen from 56.8 per cent to 53
per cent, while brown coal’s share had dropped from 25.9 per cent to 24.3 per cent. the natural gas
share for generation effectively had doubled to 14.2 per cent. Hydroelectric power’s share had fallen
back from 9.5 per cent to 5.6 per cent. Wind farms did not figure in the 1990s generation mix and had
achieved a 2.7 per cent share in 2009–10.
PoWeRInG AUstRALIA VoLUMe 5 95
Building new substations and
replacing those built 40 to
50 years ago are high priorities.
dIReCtoRy96
dIReCtoRyContACt InFoRMAtIon FoR oUR FeAtURed CoMPAnIes
eneRGeX Limited
A: 26 Reddacliff street, newstead qld 4006
P: 07 3664 4000 F: 07 3025 8301
e: custserve@energex.com.au
W: www.energex.com.au
AGL eneRGy LIMIted
A: Level 22, 101 Miller street, north sydney nsW 2060
P: 02 9921 2999 F: 02 9921 2465
e: corporateaffairs@agl.com.au
W: www.agl.com.au
Ausgrid
A: 570 George street, sydney nsW 2000
P: 131 525 F: 02 9269 2830
e: Please go to ‘Contact us’ on our website
W: www.ausgrid.com.au
Australian Coal Association
A: Po Box 9115, deakin ACt 2600
P: 02 6120 0200 F: 02 6120 0222
e: info@australiancoal.com.au
W: www.australiancoal.com.au www.newgencoal.com.au
PoWeRInG AUstRALIA VoLUMe 5 97
gentrack
A: Level 9, 390 st Kilda Road, Melbourne Vic 3004
P: 03 9867 9100 F: 03 9867 9140
e: info@gentrack.com
W: www.gentrack.com
Ge
A: 99 Walker street, north sydney nsW 2060
P: 61 2 9978 8168 F: 61 2 9978 8297
e: stephen.j.graham@ge.com
W: www.ge-energy.com/lms100
Horizon Power
A: stovehill Road, Karratha WA 6714
P: 08 9159 7250 F: 08 9159 7288
e: enquiries@horizonpower-reply.com.au
W: www.horizonpower.com.au
Granite Power Limited
A: Level 6, 9 Barrack st, sydney nsW 2000
P: 02 8252 6100 F: 02 8252 6199
e: info@granitepwr.com
W: www.granitepwr.com
IBM Australia
A: 601 Pacific Highway, st Leonards nsW 2065
P: 02 9397 8814
e: nramirez@au1.ibm.com
W: ibm.com/au/en/
dIReCtoRy98
sMeC Australia
A: 76 Berry street, north sydney nsW 2060
P: 02 9925 5555 F: 02 9925 5564
e: john.wagstaff@smec.com
W: www.smec.com
suntech Power Australia Pty Ltd
A: 82-86 Bay st, Botany nsW 2019
P: 02 9695 8180 F: 02 9316 5270
e: sales@suntech-power.com.au
W: www.suntech-power.com
toshiba International Corporation
A: 2 Morton street, Parramatta nsW 2150
P: 02 9768 6600 F: 02 9890 7542
e: sales@tic.toshiba.com.au
W: www.toshiba.com.au
transGrid
A: Level 9, 201 elizabeth street, sydney nsW 2000
P: 02 9284 3000 or toll free 1800 222 537 F: 02 9284 3456
e: web@transgrid.com.au
W: www.transgrid.com.au
siemens Ltd
A: 885 Mountain Highway, Bayswater Vic 3153
P: 137 222 F: 1300 360 222
e: siemensptd.au@siemens.com
W: www.siemens.com.au/energy
PoWeRInG AUstRALIA VoLUMe 5 99
Vestas Australian Wind technology Pty Ltd
A: Level 4, 312 st Kilda Road, Melbourne Vic 3004
P: 03 8698 7300 F: 03 9645 0111
e: vestas-australia@vestas.com
W: www.vestas.com
western power
A: 363 Wellington street, Perth WA 6000
P: (08) 13 10 87
e: enquiry@westernpower.com.au
W: www.westernpower.com.au
WILson tRAnsFoRMeR CoMPAny Pty Ltd
A: 310 springvale Road, Glen Waverley Vic 3150
P: 03 9560 0411 F: 03 9560 0499
e: sales@wtc.com.au
W: www.wtc.com.au
Institute for Mineral and energy Resources
A: the University of Adelaide, sA 5005
P: 08 8313 1448
e: imer@adelaide.edu.au
W: www.adelaide.edu.au/imer/
Institute for Mineral and Energy Resources
IndeX100
IndeXAABARe, 42Acciona energy, 86ACIL tasman, 27AeCoM, 66aeroderivative gas turbines, 32–33aged assets, 22AGL energy, 22
Bogong Hydro Power Project, 10customer hardship programs, 55
air-conditioning impact on energy consumption, 66, 75APPeA, 83Areva solar, 90Ausgrid, 16Ausra, 90Australia Pacific Liquefied natural Gas (APLnG), 43Australian Bureau of statistics, 65Australian Coal Association, 11Australian energy Market Commission, 86Australian energy Market Commission (AeMC), 28Australian energy Market operator, 15, 23, 65Australian energy Regulator, 22, 66Australian Industry Group (AIG), 28Australian national University, 28Australian Petroleum exploration & Production Association, 75, 81
bBaker & McKenzie, 86Barnett, Colin, 73base-load plants, new, 40Bass strait, 66Bayswater B environmental assessments, 66black coal, 11Bogong Hydro Power Project, 10, 62Boorowa River Recovery program, 71BP solar, 89brown coal projects, 22Bureau of Agricultural & Resource economics and sciences, 60
ccarbon capture storage (CCs), 11, 38
British commercial scale projects, 39pricing, 47
Carbon Pollution Reduction scheme (CPRs), 35carbon price
announcement of, 35impact on base-load generation, 82impact on refinancing projects, 22impact on vertically-integrated businesses, 20
Centre for Climate economics and Politics, 28Chamber of Mines and energy, 76Chernobyl, 49clean coal technology development, 47Clean energy Council, 42CLFR technology, 89, 90Co2CRC otway Project, 11coal power
conventional plants, 66share of electricity generation by 2030, 60
coal seam methane deposits, 83CoAL21 Fund, 11coal-fired power stations, 22, 89Cobbora mine, 20Collier, Peter, 73, 77combined-cycle gas turbine (CCGt) generation, 40
carbon footprint and pricing, 45–46investment in, 23
Committee for the economic development of Australia, 77compact linear fresnel reflector (CLRF) technology, 89, 90concentrating solar power (CsP) collectors, 61Contact energy, 32conventional organic rankine cycle technology, 35Cooper Basin, 66, 83Copperstring transmission link, 23Council of Australian Governments, 28Crawford school of economics and Government, 28Cs energy, 22
Kogan Creek power station, 89CsIRo, 42, 60, 61
ddeloitte, 22delta electricity, 20, 65, 66denmark and wind generation, 85department of Climate Change, 61distribution systems capital expenditures, 20
Western Australia, 75doan, thao, dr, 53, 54docking, james, 34domanski, Roman, 28domestic energy markets
reform, 14domGas Alliance, 75dow jones sustainability World Index 2010/11, 10dynamic Ratings, 93
eeast coast energy market, 19, 65
green hubs, 23residential growth and demand, 94
ecogen 2010 Clean energy Awards, 10electricity supply
impact of politics on, 9end-user power bills, 28, 66energex, 17energy 2031, 73energy markets distortions, 36, 38energy power industry
media coverage, 22, 28political impact on, 36, 66private investment prospects, 36privatisation of, 66–68
energy pricingpoor households priced out, 53–55
energy Retailers Association, 30energy security issues, 36energy supply Association of Australia (esAA), 30–31energy usage
increase in households, 13–14
PoWeRInG AUstRALIA VoLUMe 5 101
energy Users Association of Australia, 28, 30energy White Paper, 9, 15, 35–39, 40engineers Australia, 77eraring energy, 20, 65, 66etsA Utilities, 22eyre Peninsula, 23, 85–86
drawbacks for development, 87
ffault current limiters, 93federal government
energy White Paper, 9, 15greenhouse gas emissions target, 61market-friendly policies for energy mix, 15projected capital expenditure on energy resources, 6, 19renewable energy target (Ret), 60, 61smart Grid, smart City program, 16solar Flagships program, 60, 89solar investment support, 23
Ferguson, Martin, 13–15, 35, 90Fitch Ratings, 20, 22, 66, 85Fotowatio Renewable Ventures, 89Ftse4Good Index, 10fuel poverty, 53–54
alleviating, 55Fukushima daiichi power plant, 36, 49
accident, 8, 45Future energy Alliance, 79
ggas hybrid power stations, 89gas power, 81–83
carbon footprint, 82interrelationship with wind power, 83rise in electricity generation, 81share of electricity generation by 2030, 60
gas reserves, 83gas supply industries capital expenditures, 20Ge, 32–33Gentrack, 34Gentrack Velocity, 34Geoscience Australia, 60geothermal energy, 51
pricing, 46role in 2030 electricity supply chain, 6teMihi project (nZ), 63
Gillard government’s position on nuclear power, 47Global CCs Institute, 47Gorgon LnG Project, 11Goss, Wayne, 19Government trading enterprise, 50GRAneX, 35Granite Power, 35green grid, 87GreenGrid, 71Greening Australia, 71Greiner, nick, 19Gridon, 93
hHartcher, Chris, 89Hazelwood power station, 8, 61Horizon Power, 50households
feed-in tariffs for solar power, 60history of energy usage in, 13–14low-income households and access to electricity, 53–55Western Australian energy consumption, 75
hydro power, 51Bogong Hydro Power Project, 10, 62share of electricity generation by 2030, 60
hydro-electric power stations, 23
IIBM, 25Independent Market operator, 76Independent Pricing & Regulatory tribunal, 55Institute for Mineral and energy Resource, 78intelligent utility systems, 25interim technologies, 46International energy Agency, 15, 30, 49, 60investors and lack of clear market signals, 40
KKeating, Paul, 19Kikiwa substation, 43Kina Biopower, 51King, Grant, 81, 82Knox, david, 82Kogan Creek power station, 22, 89
lLake Cargelligo solar thermal plant, 51Lihir Gold, 51lobby groups, 30low-cost electricity, 19, 53low-income households
electricity usage, 53–54unaffordable electricity pricing, 53
Loy yang Power, 39, 42
MMacquarie Bank, 69, 86Macquarie Capital Advisers, 86Macquarie Generation, 20, 41, 65McCallum, Mark, 83mdAtA21, 34media coverage of energy industry, 22, 28meter data management software, 34Minister for Resources and energy, 13–15, 35Ministerial Council on energy, 28Monbiot, George, 49
IndeX102
nnahan, Mike, dr, 75national decarbonisation policy
impact on state energy generation, 68–69national demand and supply
states with majority, 9national electricity Law, 30national electricity Market, 14–15, 19, 70, 87
infrastructure, 27objectives of, 28, 30reforms within, 28, 31
national Generators Forum, 28, 31national greenhouse gas emissions reduction target, 8natural gas
Western Australian dependence on, 74nelson, tim, 53, 54network sector capital expenditure
main reasons for, 20, 22new south Wales
1970s energy requirements, 53Cobbora mine, 20forms of base-load projects, 65, 68gas-fired power stations, 83impact of national decarbonisation policy, 68–69Keneally government, 60, 66Moree solar photovoltaic development, 89new base-load projects, 65o’Farrell government, 60, 65peak demand period, 66power consumption, 66privatisation of energy industry, 66, 68qnI interconnector, 65state-owned generation businesses, 65state-owned generators, 20subsidised rooftop solar power scheme, 66
new Zealandgeothermal developments, 63wind farm projects, 43
nuclear power accidents, 8, 36, 43, 49nuclear power plants, 47, 49
arguments for, 49global projects under construction, 47
oo’Farrell government, 60open-cycle gas turbine (oCGt) generation, 36
investment in, 23orchison, Keith, 6–9origin energy, 66, 86
offshore joint ventures, 23owen Inquiry, 65
PPacific Hydro, 86, 89Papua new Guinea joint venture projects, 23Parkinson, Martin, 61peak demand, meeting, 66peak demand pricing, 14, 54Port jackson Partners, 19Porter, Christian, 77
power energy industrysmart billing systems, 34
privatisation of energy industry, 66, 68Purani River hydro-electric power station (Papua new Guinea), 23
Qqueensland
1970s energy requirements, 53Chinchilla solar photovoltaic development, 89future renewable energy projects, 23post-flood power restoration process, 17qnI interconnector, 65solar Flagships program, 89state-owned generation sectors, 22
rRann, Mike, 85, 87renewable energy
least competitive options, 40renewable energy growth market, 43, 51
SsA Green Grid, 87saddler, Hugh, dr, 28, 30santos, 82shi, Zhengrong, dr, 56siemens
Picture the Future research, 42–43simshauser, Paul, dr, 28, 31, 53, 54, 55, 66single-staged pumped turbines, 62smart Grid, smart City program, 16smart grids, 43smart meters, 19smart Utilities Australia and new Zealand 2011, 25sMeC, 51snowy Mountains Hydroelectric scheme, 51solar dawn solar thermal power station, 89solar Flagships program, 60, 89solar Heat & Power, 90solar power, 51
challenges for, 60concentrating solar power (CsP), 61federal government schemes, 60feed-in tariffs, 60, 66as interim solution, 46joint ventures, 90Moree solar photovoltaic development, 89photovoltaic development, 56–57role in 2030 electricity supply chain, 6rooftop solar photovoltaics (PVs), 56–57share of electricity generation by 2030, 60subsidised rooftop solar power scheme, 66viability of, 56–57
son La Hydro Power Plant, 51south Australia
mineral and energy resources expansion, 78natural gas supplies, 66, 83power blackouts, 22
PoWeRInG AUstRALIA VoLUMe 5 103
power distribution services, 22sA Green Grid consortium, 86–87wind power generation, 85
south West Interconnected system (sWIs), 79spot market prices, 30–31stanwell Corporation, 22, 53stratford Power station (nZ), 32suntech, 56–57synergy, 76
ttarong energy, 22tasmania
Basslink project, 23te Uku Wind Farm, 43the Boomerang Paradox, 53time-of-use pricing, 14tj|H2b Analytical services, 93toshiba International Corporation, 62–63transfield services, 86transGrid, 65, 68, 70–71transmission network capital expenditure, 27
Western Australia, 75transmission network service providers, 70–71tRUenergy, 66
uUnited Kingdom
commercial scale CCs projects, 39United nations south Africa summit, 8University of Adelaide, 78utility-scale developments, 61
challenges for, 60
vvertically-integrated energy business expenditure on renewable
energy, 20Verve energy, 76Vestas Asia Pacific, 92Victoria
emissions targets, 36merchant generators, 22
wWA Legislative Assembly economics and Industry, 75Western Australia, 73–75
carbon capture storage (CCs) projects, 11peak demand period, 75Perth solar city program, 79regional and remote power supplier, 50regulatory and pricing structures, 77reliance on natural gas, 74state government’s energy 2031 paper, 73, 79
Western Power, 78Wilson, jack, 93Wilson, Robert, 93Wilson transformer Company, 93wind farm development, 66wind farm generation
investment in, 22–23wind power
eyre Peninsula, 85–86interrelationship with gas power, 83reliability of supply, 83share of electricity generation by 2030, 60south Australian investment in, 85
Wind Prospect CWR, 90Worley Parsons, 86
PHoto CRedItsCover istockphoto; pp.2-5 Commstock; p.7 snowy Hydro; pp.8-9 Horizon Power; pp.14-15 eneRGeX; p.19 etsA;
pp.20-21 Loy yang Power; p.23 Verve energy; p.27 Commstock; p.29 transend networks; pp.30-31 Cs energy;
p.37 Commstock; p.39 Loy yang Power; p.40 International Power Australia; p.41 transGrid;
p.45 Ansto www.ansto.gov.au; pp.46-47 eRM Power; p.48 Ansto; pp.53-54 istockphoto; pp.59-61 Horizon Power;
p.65 Ausgrid; p.67 Macquarie Generation; p.69 Ausgrid; p.73 istockphoto; pp.74-75 Western Power;
pp.76-77 Verve energy; p.81 eRM Power; p.82 delta electricity; p.85 origin; p.86 Western Power;
p.89 sMA solar technology courtesy Bill Parker; p.91 AReVA solar; p.95 Hydro tasmania
PoWeRInG AUstRALIA VoLUMe 5104
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ABoUt tHe AUtHoRs
KeItH oRCHIson
Keith orchison was managing director of the electricity supply
Association of Australia from 1991 to 2003 and, before that,
served for 11 years as chief executive of the Australian Petroleum
exploration Association. He served on the federal government’s
Critical Infrastructure Advisory Council from 2003 to 2007 and
chaired its energy committee. Keith was a founding member of
the Australian Industry Greenhouse network, an association of 14
energy, mining and manufacturing organisations in the 1990s and
serviced on its management committee for 11 years. He was
AIGn chairman in 2002. He also served on the CsIRo energy
technology sector advisory committee for six years and chaired it
in 1999-2001. Keith was made a Member of the order of Australia
in 2004 for service to the petroleum and electricity industries
through fostering co-operation between energy producers and
government agencies and for helping to foster the development of
policies to benefit Australia in the long term. He now manages an
energy communications consultancy Coolibah Pty Ltd.
jon stAnFoRd
since taking up a career as a consultant in the mid-1990s, jon
stanford has developed a strong practice in economics and
policy issues related to climate change, energy, the resources
sector, industry development and defence. In this period, jon
was a director of the Allen Consulting Group for over ten years
before leaving to establish a new firm, Insight economics, with
four other consultants. From 2006-09 jon was a partner with
deloitte and helped to establish their new economics practice.
throughout his consulting career, jon has worked closely with
two economic modelling agencies: the Centre of Policy studies
at Monash University and, for energy market modelling,
McLennan Magasanik Associates. Before becoming a
consultant, he had a significant career with the Australian Public
service working in areas that involved economics and public
policy. His final position was head of a division of the Prime
Minister’s department.
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reasonable attempts at factual accuracy and to trace copyright
holders have been made, Focus Publishing accepts no
responsibility for any errors or omissions contained in this book.
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national Library of Australia Cataloguing-in-Publication entry
Author: Keith orchison
title: Powering Australia Volume 5
solutions for a sustainable Future
IsBn: 978-1-921156-64-9
notes: Includes index
VOL 5 | N
AVIGATIN
G A
NEW
ELECTRIC
ITY SUPPLY ERA
Cover Photography: Caroline Foldes
NAVIGATING A NEW ELECTRICITY SUPPLY ERA
RRP $29.95
POWERING AUSTRALIA | VOL 5
Policy makers are seeking to launch a step-change in electricity supply
and consumption in Australia. The federal government plans to reduce
coal-fired power stations’ role to meeting 43 per cent of demand by 2020.
This will mark the nation’s first major step toward a decarbonised economy.
PROUDLY ENDORSED BY
APIA • Australian Power Institute • Clean Energy Council
Energy Networks Association • ERAA • NGF • ESAA