NSW power price warning
THE Iemma Government has been given a warning by its own electric generation businesses that, without the availability of new baseload plant within seven years, power prices in NSW will begin to rise significantly.
With the state election out of the way and the inquiry into the state’s electricity supply by Professor Tony Owen providing an avenue for straight talk, government-owned corporations Delta Electricity and Macquarie Generation have been blunt in their advice.
Delta has told the Owen inquiry that national electricity demand trends indicate a new baseload plant is required in NSW by 2013-14.
It asserts that significant risks and costs’’ associated with a high reliance on power imports from other states mean that further transmission development is not an adequate substitute’’ for constructing new power plant within NSW. The losses associated with the transfer of electricity over long distances can offset any potentially cheaper fuel costs and contribute to higher overall greenhouse gas emissions,’’ Delta claims.
At present power generated in other states, and transported via the Snowy Mountains and QNI interconnectors, provides more than 10 per cent of NSW electricity needs annually, rising to a third of supply during high peak periods. The commissioning of the link to Queensland has given NSW customers access to more than 1000 MW of new supply since 2000 and enabled the government to avoid a major row with the Green movement over building more coal-fired power stations in the state.
Delta also warns that the Government should not attempt to get round the need to build baseload plant by relying on peaking and intermediate load generators. Spot electricity prices for NSW in April and May this year, it says, averaged $45 per megawatt hour more than in the same period of 2006 as a result of the drought’s impact on water supplies to NEM plants.
If a delay in having new baseload plant available and consequent reliance on peaking power led to a similar rise in annual wholesale prices, Delta says, it would push up costs to residential customers by about 30 per cent, an addition of $250 a year to the average bill.
The generator also points to prob-
‘‘ lems that could occur if existing fossilfuelled power stations are required to operate at a substantially higher production levels because new baseload generation is not available around 2013-14. NSW plant, it says, currently operates at a capacity factor of 70 per cent. To meet projected demand this would need to rise to 83 per cent in the absence of new baseload generation. This is very unlikely to be reliable.’’ Macquarie Generation, which is NSW’s largest power producer, supplying 40 per cent of state needs from its Bayswater/Liddell complex in the Hunter Valley, also warns that overreliance on additional high voltage interconnection to meet rising demand is unwise.’’
With new baseload plant needed before 2015, it adds, and given the timeframes involved in planning and construction, the window for decision-making is relatively narrow’’.
While in favour of boosting existing coal-fuelled baseload production by co-firing using coal seam gas, Macquarie has told the Owen inquiry that there is not sufficient natural gas or
‘‘ pipeline access to interstate supplies to sustain additional gas-fired baseload generation. Nuclear power is not in any way practical’’ in the timeframes required. Wind and solar power are not feasible’’ for baseload generation. Nor is it feasible, Macquarie says, to delay planning for the next baseload plant in the hope that a technology solution with negligible greenhouse gas emissions will emerge in the short term, able to deliver electricity at the same cost and reliability levels of today’s coal-fired power stations. It estimates six to eight years will be needed to initiate and finalise the stages needed to finish a major project.
Any decision or action which delays the planning for major new projects could reduce supply reliability and increase prices as shortages emerge in the future,’’ it warns. If the new investment is not completed on time, NSW will be increasingly reliant on inter-state supplies, increased output from older and inherently less reliable, higher cost plant and on gasfired peaking generation. Business and households would end up paying more
‘‘ for a less reliable supply.’’
Both the government-owned corporations want to build large coal-fired additions to baseload generation, although Delta also offers three gasfired options.
Macquarie Generation proposes construction of what would be the largest generation units in the country — two 900 MWturbines at Bayswater. The largest current unit is the 750 MW plant being built at Kogan Creek by Queensland government-owned CS Energy. This power station is scheduled to begin operation in September. The new Macquarie plants would emit less carbon dioxide than conventional coal power and would use less than 10 per cent of the water required by existing stations.
Delta Electricity proposes adding two coal-fired units on its Mt Piper site, near Lithgow, each of 750 MW. It also offers refurbishment of its Munmorah power station (a 600 MW generator fed by Hunter Valley coal nearing the end of its life). A third option it suggests is development of three combined-cycle gas-fired plants.
Unlike Macquarie Generation, Delta believes continuing rapid expansion of the coal seam gas industry, especially in Queensland, will meet the gas requirements of extra power generation in the medium term’’. It notes that construction of a 780 km gas pipeline from south-east Queensland to Newcastle is currently under consideration by private investors.
While the proposals are based on current projections of demand growth from business and residential customers, Delta points out that they do not allow for any development of large, new industrial loads such as an aluminium smelter.
Both corporations pitch for reliance on government-owned development of the next tranche of baseload generation. Delta says the prognosis for private investment in baseload generation (in NSW) is uncertain, with the risk that the investment will not be timely.’’
However, it also puts forward the concept of the Iemma Government allowing its generators to embark on joint ventures with the private sector.
Kogan Creek: Additonal power comes online in Queensland in a few weeks