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n av i gat 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





Pursuing a softer environmental footprint

Prepare yourself for a step-change in electricity supply and consumption in Australia.

on policy certainty and 12 Focusing a framework for investment Extract from a speech by the federal Minister for Resources and Energy Martin Ferguson.

major national 18 Ainfrastructure challenge

By 2020, coal will no longer be the overwhelmingly dominant source of fuel for electricity generation.

need for a national 36 The energy policy

More than $10 billion worth of electricity is traded every year in a market that operates 24 hours a day.

a national 44 Towards 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?



poverty emerges 58 Fuel as a real issue End-user power prices in 2015 are likely to be twice what they were in 2008.

may brighten 58 Conditions for solar power CSIRO believes future advances will enable the sun to meet 30 per cent of our power needs.

state’s prime 64 Premier 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.

big a boon is gas 80 How for generation? Once again gas appears ready to play a golden role in electricity production.

energy trading 84 Interstate 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 honour

Roll of honour major 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



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



IntRodUCtIon PURsUInG 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



Whether political and community sentiment about

on Australia’s east coast, while pursuit of a higher goal

any role for nuclear generation in Australia will change

would once again change the debate about nuclear

this decade, especially in the wake of the Fukushima

energy, drive more coal plant closures (many of them

crisis, can only be a matter for speculation.

owned by state governments) and see renewable energy

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,

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

south Africa, will need to move far beyond the last two

the 2011–12 financial year will determine how the new

(Copenhagen and Cancun) to even begin the development

electricity path is pursued. the long debate on the issue

of a new treaty, an issue of major importance to Australia

over more than three years has created so much uncertainty

because success in this endeavour could lead to a

for private sector investors that actual generation

substantial change in the current commitment to drive

development is now at a low point after the development

down national greenhouse gas emissions to 5 per cent

of 10,000MW in the previous 10 years.

below 2000 levels by 2020. this target is now estimated to require annual abatement

All states (and both territories) have substantial skin in this game and none more so than the largest electricity

by 2020 of 160 million tonnes – equivalent to closing

supply/demand region, new south Wales, where the

Hazelwood power station 10 times over. just meeting it will

emphatic change of government in March 2011 means that

require the closure of a number of coal-fired power stations

almost every aspect of the local electricity industry is now in



play. How the new nsW government acts on electricity

this year and in final form in 2012. this paper – and the

policy in the year ahead will be an important factor, both

resolution of key issues such as placing a price on carbon

on the east coast and for the nation, especially in terms of

and settling the emissions target – is central to success in

decarbonisation developments.

ensuring a secure and affordable power system with a softer

Politics has been a factor in electricity supply for at least the six decades of the modern era and they will be a major

environmental footprint at the decade’s end. Far from being the end of the process, what we achieve

one in the decade ahead. At least three federal elections

by 2020 will only represent the start of a great shift to a

and two each in nsW, queensland and Victoria – the areas

decarbonised economy.

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

Keith orchison

energy White Paper, now promised for delivery in draft late





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 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 | see page 96 for details

energy Awards.



RedUCInG CoAL-BAsed GReenHoUse eMIssIons

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.

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. | see page 96 for details







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

enerGy is something that is more and more the subject

had doubled to 4 MWh per annum. It was an era where

of public debate. Public discussion is very much focused on

people were buying more appliances – electric kettles

increases in electricity prices and the pressures they place

replaced kettles that were heated on the stove, hair dryers

on household budgets. What is often missing from this

and hair curlers were common and people were starting

picture, however, is the immense changes we have seen in

to add a second bathroom to their homes.

electricity usage – both at an industry and household level. In terms of households, increased energy usage has

jump forward 38 years to 2008 and hair straighteners had replaced hair rollers, and a living room was not

been very much a symptom of our changing lifestyle.

complete without a six-appliance power board. Multiple

Let me illustrate this in the context of my own lifetime.

televisions and dVd players were to be found throughout

I was born in 1953. two years later, Australia’s

the house, along with computers, printers, playstations,

population was around 9 million and the median house

mobile phone chargers and a myriad of other electrical

cost approximately $8000. At this time average household

gadgets. In the meantime, air conditioner use had grown

energy consumption in new south Wales and queensland

almost exponentially, car use had grown significantly and

was 2 MWh per annum. this was an era when outside

air travel had gone from being the domain of the rich to

toilets and laundries were still very common, but it

being accessible to almost everyone.

preceded the introduction of clothes dryers and television, which came in 1956. By 1970 Australia’s population had grown to around

By this stage, the Australia population had grown to almost 22 million, median house prices were around $450,000 and average household energy consumption

12.5 million and the average house price had increased to

had reached 7.9 MWh per annum. People were using

around $12,000. Average household energy consumption

more electricity than ever before.


CHAPteR 01

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

We are currently living through an extremely strong pick

increase in the number of households. At the same time peak

up in global demand for energy. the simple fact is that the

electricity demand increased by 104 per cent, and the

era of cheap energy has passed.

number of households with an air conditioner installed

In the long run, the most effective way to minimise

increased from 23 per cent to 72 per cent, with 34 per cent

price rises will be to make energy markets as efficient as

of homes running two or more air conditioners.

possible. Reform is key to delivering this efficiency. the

Clearly, reducing or moderating the increase in peak

last 20 years have been a period of continuous bipartisan

demand is an important national objective. one way to limit

micro-economic reform in our domestic energy markets.

it is to introduce time-of-use pricing, so that consumers will

We have seen the creation of the national electricity market

face higher costs in times of higher demand.

and over time previously state-owned assets have

yet in an environment where we are at near full employment and our economy, our population and our

been privatised. today, our electricity market leads the world in terms

energy exports are all growing, there is no quick fix to

of efficiency, reliability and in facilitating competition – a fact

artificially hold electricity prices below where they need to

acknowledged by the International energy Agency. yet our

be to maintain reliability. tempting as it may be, suppressing

economy relies more than ever on secure, accessible energy.

prices through regulation or market barriers would create

the future investment challenge is significant. the

even more pain in the longer term by delivering inefficient

Australian energy Market operator last year forecast that

investment outcomes which, in turn, would either mean

between $72 billion and $82 billion will be needed for new

higher bills for consumers or reduced reliability.

electricity generation and transmission by 2030. Add to this



left Constructing and maintaining distribution network lines will remain one of the major cost issues in electricity supply this decade.

further investment in distribution networks, gas pipelines and

Major reform requires proper planning and that is why

associated infrastructure and overall investment in the sector

my department is continuing work on an energy White Paper,

to 2030 could exceed $220 billion.

looking at a range of plausible future energy and greenhouse

that’s why the government is focused on providing

gas-related scenarios. I intend to release a draft energy White

policy certainty and putting in place the frameworks to

Paper by the end of this year before finalisation next year.

enable investment decisions to go ahead sooner rather

While the white paper will help us understand and plan for

than later. We also want to see this investment directed

the future, it is not about predicting or mandating outcomes.

towards an energy mix that will help reduce our greenhouse

In my view, an effective energy policy framework should

gas emissions – but this must occur in a way that stacks

provide accessible, reliable and competitively priced energy

up commercially and is determined by market forces.

for all Australians. At the same time it should maximise

Government policies, such as the renewable energy

opportunities for economic and social growth and

target and a carbon price, fit with this market-based

encourage ongoing investment and development, including

approach. It means new technologies will be market

in sustainable and clean energy.

tested and only the best and most viable will be deployed at scale. the efficiencies the market drives are critical to

the white paper will provide a long-term strategic framework intended to give investors, consumers and planners confidence in our energy future.

managing cost pressures, but the government also has a role in supporting research and development, addressing

An edited extract from a speech by the federal Minister for

market gaps and bringing on innovation.

Resources and Energy Martin Ferguson to CEDA




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.

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. | see page 96 for details




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.

“Just three days after flood levels peaked 100,000 homes had power restored.”

Power restoration is integral to recovery and the process was driven by eneRGeX’s commitment to its values and a

Four hundred crews and many support staff worked

methodical approach to planning and assessment. As safety

tirelessly throughout the preparation and restoration

was the number one driver in the flood response, pre-emptive

process, and just three days after flood levels peaked

steps were taken and electrical assets de-energised before

100,000 homes had power restored.

water approached.

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. | see page 96 for details



02 A major national infrastructure investment challenge



Game chanGinG is an overworked expression, but

60 years ago. It is now increasingly accepted that power

it is hard not to use it about electricity supply in the new

bills by mid-decade will be double what they were in 2008.

decade. By 2020 the Australian power industry, on current

Change in the industry seldom occurs rapidly. It takes

indications, will have undergone significant renewal and

place over decades, as was the case with the 1990s

will be approaching the point where coal will no longer

reforms to disaggregate the sector and introduce

be overwhelmingly dominant in fuelling generation.

competition. As consultants Port jackson Partners

en route the industry will spend tens of billions of dollars

point out, two decades after these changes began to

– on building renewable energy generation, on construction

revolutionise the industry, whether they will deliver lasting

of peaking and base-load gas generation, on upgrading

benefits in Australia is yet to be determined.

and augmenting networks, probably on new transmission links and probably on rolling out smart meters. the latest estimates suggest that capital outlays

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 –

could exceed $130 billion in 10 years and $220 billion

the so-called national electricity Market, which does not

over 20 years, many times the size of the national

include Western Australia or the northern territory.

broadband network. As is now well demonstrated in public debate, what

to date what has been created is not a single east coast market, as intended by prime minister Paul Keating and state

happens to electricity supply this decade is important to

premiers like nick Greiner and Wayne Goss. “In many

all Australians. Low-cost electricity has been underpinning

respects,” say Port jackson Partners, “we have five markets

of our lifestyle, economic growth and international

not one and the current and potential benefits from the 1990s

competitiveness since the end of World War II, more than

reforms are therefore much less than they can or should be.”


CHAPteR 02

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 verticallyintegrated 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

Above Australia is burning more than 50 million tonnes of black

demand growth as a result of a rising population and

coal and over 70 million tonnes of brown coal a year. deciding

increases in average household electricity consumption

which power stations to close this decade is critically import..

from energy-intensive consumer products.



Fitch Ratings Credit Ratings Agency

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.�


CHAPteR 02

2. the need to continuously reinforce and upgrade

should a carbon price be introduced, Fitch says,

transmission capacity to transfer energy from new

generators could seek up to $13 billion in new debt this

generation developments to load centres.

decade. this will leave the private sector seeking to raise a

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

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

Australia on the last day of january this year when, with

brown coal. they face significant refinancing next year, Fitch

temperatures at extreme summer levels, Adelaide’s eastern

Ratings points out. “Refinancing will be tough should capital

suburbs suffered substantial blackouts.

markets conclude that a carbon price will result in stranded,

etsA Utilities, the provider of power distribution services

or economically-impaired, plant.” Fitch estimates that these

in south Australia, explained the problem thus: “state-wide,

generators collectively have $2.4 billion in project finance

consumption from 820,000 residential and business

bank debt maturing in 2012.

customers peaked at 3399MW at 5pm and stayed there

In this situation, as the agency says, federal government

as people returned home to evening temperatures above

compensation for generators that experience losses from the

39 degrees.

introduction of a carbon price will be a key factor.

“eighty of the 40,000 transformers in the Adelaide metropolitan area suffered fuse failure. “the main contributor to the fuse issue is changes in

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

localised demand patterns in the past few years as people

its state-owned generation sector, creating two businesses

have installed new air-conditioning, extended their homes

instead of the three that exist today with the aim of improving

and bought new electrical equipment. the changes only

operating synergies and the enterprises’ economics.

become apparent in extreme conditions, requiring load re-balancing on the transformers.” electricity demand in Adelaide, mirroring the situation in

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

other mainland capital cities, is rising at 2.2 per cent a year,

has ruled out following up the restructuring with any further

with the increase in some suburbs exceeding 5 per cent

privatisation of the industry.

annually. the Australian energy Regulator, although it

As management consultants deloitte have pointed out in

denied 28 per cent of etsA Utilities’ bid for capital spending

a review of the Australian generation sector, one of the major

between 2011 and 2015, has approved a capex outlay of

factors now influencing generation is the unwillingness of

$1.7 billion (58 per cent more than in the five years to 2010)

east coast governments to further invest in power stations,

for the first half of this decade.

owing to the budget pressures on them in other areas such

With network charges contributing about 45 per cent of end-user power bills, the outlays approved for etsA

as health and education. since World War II the industry has been dominated by

and other network service providers nationally represent

the construction of taxpayer-owned power plant such as the

the spearhead of a politically charged electricity price

queensland government-commissioned Kogan Creek power

environment that is already making headlines in the media

station (2007), but governments expect the private sector to

across Australia.

augment supply capacity in the future.

In new south Wales, for example, according to the

In turn, as deloitte says, this makes investor confidence

AGL energy economics unit, media coverage of the industry

in the national and state policy regimes a critical factor in

rose 140 per cent in the last two years of the past decade.

decisions on what power plant is built, using what fuel, where

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

and in what time frame. Assuming a carbon price, Fitch Ratings has estimated that wind farm development and construction of combined-

important issue and will, according to Fitch Ratings, rise in

cycle gas turbine (CCGt) plants for use in base-load

prominence early in the new decade.

generation will dominate the generation capital outlays.



AssUMInG A CARBon PRICe, FItCH RAtInGs HAs estIMAted tHAt WInd FARM deVeLoPMent And ConstRUCtIon oF CoMBInedCyCLe GAs tURBIne (CCGt) PLAnts FoR Use In BAse-LoAd GeneRAtIon WILL doMInAte CAPItAL oUtLAys.” KeItH oRCHIson, edItoR

It sees the federal government’s renewable

undersea cables, each equivalent to tasmania’s Basslink,

energy target, which requires 20 per cent of national

crossing torres strait, and 800 kilometres of line from near

consumption to be provided by renewable power at

Weipa to the main transmission grid outside townsville.

the decade’s end, as driving $10.5 billion investment in

to date, origin has only said the Purani River scheme

wind farms by 2015 while investors will spend $11.4 billion

cost will run to “many billions of dollars”, but analysts have

on CCGt generation.

claimed that an outlay of about $8 billion is in prospect.

the balance of expenditure on power plant, according

the project’s tentative commissioning date is 2018 and,

to Fitch, will be invested in open-cycle gas turbine (oCGt)

|if it eventuates, will make a substantial contribution to

plants for meeting peak demands and also to provide

the queensland government’s ability to meet its goal

back up for intermittent wind power.

of providing 9000GWh a year of renewable energy

not included in these estimates is the proposed capital expenditure on large-scale solar generation. the federal

by 2020. Another aspect outside the radar of current electricity

government plans to provide $1.5 billion in support to solar

capital outlays is the proposed Copperstring transmission

investors and expects the grants to leverage about another

link between Mt Isa and townsville.

$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

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

by the Papua new Guinea government, has announced

operator in its strategic review for this decade, a series of

that it wants to build a 1800MW hydro-electric power

projects that would include doubling the Basslink system

station on the Purani River in PnG and bring the bulk of

between tasmania and Victoria and strengthening the

the power to northern Australia via a series of transmission

nsW high voltage assets.

systems – a 100-kilometre onshore line in PnG, two

overall, game-changing? Most certainly.



Conversations for a smarter planet:



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© Copyright IBM Australia Limited 2011 ABN 79 000 024 733 © Copyright IBM Corporation 2011 All Rights Reserved.TRADEMARKS: IBM, the IBM logos,, 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 IBMNCA0608



03 The need for a national energy policy



at the outset, let’s be clear: the neM is not, and never

$10 billion in projects is committed to proceed,

will be, what it claims to be: a national electricity market.

including around $2 billion in routine works on the system.

this is because geography dictates that two large pieces

More than $10 billion worth of electricity is traded every

of Australia – the northern territory and Western Australia

year in a market that operates 24 hours a day, seven days a

– cannot be part of the market. Leaving this aside, the

week, with five-minute despatch intervals and 30-minute

neM’s vital statistics are pretty impressive. It supports

trading intervals.

power supply of around 220,000GWh a year from 80

In addition, say consultants ACIL tasman, it is one of

generators (with a combined capacity of 42,000MW)

the most volatile commodity markets in the world, posing

to 19 million Australians living on the east coast, using

“significant risk” to physical market participants — which

40,000 kilometres of transmission lines and cables.

are managed through hedge contracts setting electricity

demand in the market is forecast to rise by about 70,000GWh a year this decade, requiring new generation

prices well in advance of demand. Looking forward, its efficient management is important

construction of about 8000MW. this figure, of course,

not only to the nation’s economic health and our community

like so much else, may be affected by a new carbon

lifestyle, but also to the national ambition to decarbonise the

price regime.

economy in a big way over the next 10, 20 and 30 years.

the neM stretches over 5000 kilometres from far

More than a few of the players in the market now feel

north queensland to tasmania and west to Port Augusta

that the time has come to give the neM a thorough

in south Australia. just keeping its backbone, the

shake-up in order to cope with decarbonisation. Central to

transmission network, in working order now involves capital

their concern is that the fact the “national electricity objective”,

outlays of $2 billion a year — that’s $6 million per day. Up to

which drives the legislation which underpins the market,


CHAPteR 03

focuses on the long-term interests of consumers with respect

state markets held sway and governments over-built capacity.

to price, quality of supply, reliability, safety and security – but

the efficiency of the neM, says the nGF, rests on the central

not environmental issues.

dispatch process “which is highly transparent and efficiently

they argue that Australian energy Market Commission, which oversights the neM, is not able to consider what rule

matches supply and demand at the lowest available prices”. so what is there not to like about the neM? quite

changes are needed to facilitate the federal renewable

a lot, according to constant critics such as the energy

energy target, which requires 20 per cent of supply to be

Users Association of Australia, which has about 100

from zero emission generators by 2020.

members, including many of the nation’s largest

this, and much more, is now under consideration by the AeMC, which has launched a review into strategic priorities

industrial energy users. What the business community feels about the issue is

for energy market development. this will be the key guide for

important because, although most of the media publicity is

federal, state and territory energy ministers, meeting under

about power issues applying to residential users, more than

the umbrella of the Council of Australian Governments, when

70 per cent of electricity supplied in Australia is consumed

they come to make a decision on how far and how fast to

by the business sector – in industry and commerce.

change the neM. It is not going to be an easy job, given the substantial

According to the Australian Industry Group, the nation’s businesses are now spending $13 billion a year on their

investment required in new generation capacity on the east

power service – and most of this outlay takes place on the

coast over the next 10 to 20 years, the lower appetite of

east coast. Given that there are now many, including the

investors for risk, the uncertainty surrounding carbon policy

AIG, predicting that end-user power bills in 2015 will be

and the unprecedented growth of renewable power that is

double what they were three years ago, driven by rising

now mandated.

network charges and the costs of such features as the

Change to the market set-up, however, has never been

renewable energy target, solar feed-in tariffs and the

straightforward. the design of the neM back in the 1990s

proposed carbon price, commerce and industry is facing a

was a long, drawn-out affair. It absorbed a large amount of

multi-billion dollar increase in its spending on energy and is

the time of power supply leaders, the wider business

pressing constantly for improvements to the playing field.

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

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

the fiefdom of government-owned public monopolies to a

reliability of supply. In a time of rapidly changing

competitive system for supplying wholesale energy and retail

conditions, with a rising reliance on intermittent renewable

services complemented by a substantial regulatory system

generation to meet carbon abatement ambitions, this

for the monopoly network sector.

feature needs to be changed, says the eUAA executive

the neM was officially launched in 1998, and dr Paul simshauser, AGL energy’s chief economist and professor of

director Roman domanski. the environmental movement’s concerns about the neM

finance at Griffith University’s Business school, says it has

go deeper than this. dr Hugh saddler, in a paper on national

led to substantial gains in productive, allocative and dynamic

energy security published under the aegis of the Centre for

efficiency in the energy sector.

Climate economics and Politics at the Australian national

“By any measure,” he says, “the neM has been extraordinarily successful micro-economic reform.” this is not just hometown sentiment. As simshauser

University’s Crawford school of economics and Government, points out that federal, state and territory ministers, meeting as the Ministerial Council on energy of

points out, the neM is widely and frequently acknowledged

the Council of Australian Governments, decided in 2004 that

in north America and europe as one of the most successful

the objective of the electricity market, set out in the national

micro-economic reforms in the power industry globally.

electricity Law, should be to promote efficient investment

the national Generators Forum adds that the creation of

and operation of power services with respect to price,

the market has ensured that demand is being served by

quality, safety, reliability and security – but deliberately

more efficient use of existing plant than when the separate

chose not to include environmental issues.


Right  The national energy strategy needs to deal with the delivery of power over networks as well as modes of generation.




the ministers said: “environmental objectives are more appropriately dealt with in other policy instruments.” “the consequence,” says saddler, “is that, contrary

power stations to be available when there are tight supply and demand conditions. “However,” it says, “the inherent volatility associated

to the approach advocated by the International energy

with spot market prices is a potential source of concern for

Agency and adopted in Britain (on which our power market

governments and, in practice, they demand a higher level

is modelled), climate change mitigation is entirely external

of reliability than the market is designed to deliver.”

to Australia’s domestic energy policy and divorced from,

Governments respond to this by putting caps on retail

rather than integrated with, key energy policy objectives,

prices and on the spot market price, leading, according to

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

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

emerging energy usage patterns and energy policies.

successful market would be a high risk venture which could

“Under a traditional approach,” it says, “peak demand

jeopardise energy security”. Invoking the real or perceived

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


successes of different market models in other countries, it

stocks have been gradually exhausted. Meeting future

argues, is not sufficient evidence that similar changes here

increases in demand will involve material power system

are bound to be successful. Conditions overseas are usually

augmentation costs and a cocktail of pressures is now

very different to what they are here.

building up in every facet of the supply chain.” the other

After taking a market approach to electricity supply for


critical aspect for the market is an increasing amount of the

more than decade, the issues with which stakeholders

policy activity that affects its function is occurring beyond the

wrestled in the early 1990s, and the solutions they found,

aegis of the neM’s watchdog and operators.

have come under strong scrutiny. Increasingly, critics are

In its submission to the AeMC review, the national

querying how well the neM is coping with a different set of

Generators Forum noted: “A market achieves its best

challenges to those envisaged almost two decades ago.

outcomes if it has sound design and is left to run without

Paul simshauser notes that, during the first decade of electricity supply reform, the neM was oversupplied with

intervention. Both state and federal governments have introduced distortions, which, to date, have been

generation capacity and delivered reliable, low-priced

moderate. “It is important that future policies recognise

energy, enabling the cost of earlier investment to be

the benefits a market can bring and are designed not to

“harvested” successfully.

impact on [its] performance.”

“As a result,” he says, ”the neM has been in the main a good news story. However, generation and network capacity

Jon Stanford

A MARKet ACHIeVes Its Best oUtCoMes IF It HAs soUnd desIGn And Is LeFt to RUn WItHoUt InteRVentIon.” tHe nAtIonAL GeneRAtoRs FoRUM

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.




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it is now nearly three years since the Minister for

statement. the difficulty was that as the interest in the

Resources and energy, Martin Ferguson, announced that

White Paper grew, so its delivery date was repeatedly

the government would publish a White Paper on energy

pushed out. Having missed its end-2009 deadline, in

by the end of 2009.

mid-2010 the White Paper was shelved indefinitely.

Particularly motivated by the challenges of


ostensibly, the reason was the demise of the Carbon

responding to climate change in the energy sector, the

Pollution Reduction scheme (CPRs), but the indecent

government stated it would “develop an energy policy

haste with which the White Paper was shelved engendered

to ensure Australia’s long-term energy security to meet

a strong suspicion that it was proving extremely difficult to

the needs of the economy overall and underpin the

write. After all, while the CPRs may have been postponed,

prosperity and wellbeing of all Australians. . . . the

the government’s commitment to a substantial reduction in

energy White Paper will identify an appropriate mix of

emissions by 2020 remained in place. the rationale for a

energy policies to deal with the uncertainties, risks and

White Paper had not suddenly gone away; in fact, with the

opportunities to secure cleaner, adequate, reliable and

target still there but no policy in place to deliver it, the need

affordable supplies of energy to support our overall

was greater than ever.

economic and social advancement.” the level of ambition for the White Paper, as reflected

Following the Prime Minister’s announcement of a carbon price in March 2011, however, the White Paper is

in these objectives, was substantial and commendable.

back on the agenda. yet not only are the difficulties still

Indeed, if Australia’s energy companies did not know that

there, but in many ways they are greater than they were

they needed a White Paper before the announcement, their

last year. the fact that the Minister is now stating that we

appetite for one was undoubtedly whetted by the Minister’s

can expect the White Paper in the middle of 2012, or


CHAPteR 04

around four years from the original announcement,

the second issue is that there are a large number

suggests that little substantive progress had been made

of distortions in Australian energy markets that have a

up to the time when the White Paper was shelved and that

major influence on investment. Many of these distortions

rather than dusting off the old drafts, the department is

have been introduced by governments and include:

now starting again with a clean sheet of paper.

• ongoing state government price control of retail

In evaluating the expectations the electricity sector is likely to have of the White Paper, the first question to ask

electricity tariffs • the mandatory renewable energy target of 20 per cent

is why do we need an energy White Paper at all? In a

by 2020, a classic ‘picking the winners’ benchmark

market economy such as Australia, would it not be

seemingly plucked out of the air with little

reasonable to expect that the private sector would respond

understanding by government of the impact on power

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

prices and on grid management • massive subsidies to households to invest in inefficient generation technologies, such as solar PV, with the effect of reversing the historical trend of centralised, large scale, efficient production of electricity • the national target, supported by both government

government, that currently act to distort the Australian

and opposition, of reducing Australia’s emissions by

electricity market. these two factors mean that we cannot

five per cent from 2000 levels by 2020, with no mud

be confident that the private sector will provide the

map provided about which sectors of the economy

necessary investment when and where it is required to

are going to have to do the heavy lifting and, more

guarantee energy security, nor that the investment that is undertaken will necessarily be efficient. on the first point, energy security is a major concern

generally, how we are going to get there • a mish-mash of different climate change policies in individual states, such as Victoria’s commitment

for consumers, and perhaps even greater worry for

(reiterated by the new Baillieu government) to cut

members of the industrial and commercial sector than for

emissions by 20 per cent from 2000 levels by 2020,

households. yet there is no certainty that increased demand

with virtually no detail provided as to how this will

for electricity will be matched by additional supply. If the market does not value the additional supply at

be achieved • varying government subsidies to different technologies,

a level consistent with the costs and risks to investors,

such as a preference for clean coal with carbon capture

then the required investment in new capacity may not

and storage and solar technologies

eventuate. Further, even if the private sector does invest

• a blanket ban on nuclear power, a technology which,

in the necessary additional supply, it may not choose the

even after the accident at Fukushima daiichi, features

most efficient option from the community’s perspective.

in a significant way in the emissions reduction plans

For example, under current market circumstances with a high level of uncertainty about future carbon prices,

of many other countries • the recent announcement of a carbon price from

there are strong economic incentives to invest in open

mid-2012, but with no detail as yet around the level

cycle gas turbines (oCGt), which supply power at a

of the price, compensation, coverage and what

relatively high cost and with a carbon footprint little short

current programs will be terminated.

of that of coal generation. Government has a major interest in ensuring a secure

the degree of intervention in the market by Commonwealth and state governments, as demonstrated

supply of energy. not only is energy security widely

by the above examples, implies that government must

regarded as being a major element in government’s “duty

inevitably play a major role going forward. In one sense,

of care”, but also, even in circumstances where consumers

Colin Powell’s dictum on government responsibility for

may have been let down by the private sector, it is

invading Iraq could equally be applied to the Australian

inevitably government that is blamed for blackouts and

electricity market: “It’s china shop rules: you break it,


you own it.”


Above  The biggest brown coal mining operation in Victoria’s Latrobe Valley services the twin Loy Yang power stations.



CHAPteR 04

below Pelican Point power station uses a combined-cycle gas

In a situation where substantial investment in new

turbine operation to produce 487MW of electricity – approximately

base-load capacity will be required in the next few years to

25 per cent of south Australia’s needs.

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?



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

the government will also need to detail the role it

paper will need to provide details of the government’s

will play in funding essential R&d and in some cases

overall strategy for decarbonising Australia’s electricity

providing support for infrastructure investment. For

supplies while ensuring a secure supply of power at a

example, does the government intend to provide

globally competitive cost. It will need to provide its view of

substantial financial support to demonstrate one or

how the costs and availability of the various low emissions

more commercially scaled CCs generators? this does not

generation technologies are likely to change over the next

come cheap: the UK government has committed £1 billion

two decades and the level of carbon price the industry can

to subsidising the construction and ongoing operations

expect. In this context, the white paper will also need to

of just one commercially scaled CCs plant in Britain,

provide some guidance on gas prices in the future.

with three more scheduled to follow.

Without some degree of confidence in how all these

Finally, these issues, while difficult, need to be

variables are likely to develop over time, potential investors

exposed to the industry and community generally

in very costly and long-lived assets, which exhibit a lengthy

as soon as possible. It is nearly three years since the

pay-back period, could well best serve their shareholders’

government began working on the white paper. It should

interests by merely sitting on their hands.

aim at delivering it by end-2011.



sIeMens – PICtURe tHe FUtURe oF eneRGy to 2020

today’s enerGy market is undergoing a profound

the most advanced generation of siemens

transformation as Australia moves towards a sustainable

combined cycle power plants operates at an

energy future. How this will take shape is a matter for debate.

efficiency of more than 60 per cent – much greater

However, as the only company in the world that provides

than conventional power plants. thanks to lower

complete and integrated solutions across the entire energy

fuel consumption, each new power plant of this

conversion chain, siemens will continue to be a major driving

generation could reduce the quantity of Co2

force behind the efficient and sustainable supply of energy

emissions per year by an amount equivalent to

in Australia and new Zealand.

that produced by 10,000 cars driven 20,000

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.

“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.”

kilometres each.


Growth in renewables will be achieved by a mix of

optiMising the entire energy systeM to be prepared for the future, the world’s power grids must

wind and large-scale solar generation, with contributions

be expanded and improved. “smart grids” will make it

from technologies such as geothermal and ocean power.

possible to use electrical energy more efficiently in the future.

As an example, a 330km x 330km solar power plant in the

Intelligent energy management systems can combine the

Australian desert could produce enough energy to meet

output of smaller, decentralised generating units into “virtual

the world’s demand during daylight hours. the Picture the Future: energy project forms part of

power plants” and route temporary surplus capacities to intermediate storage centres. distributed in large numbers around the grid, such


siemens’ active R&d function, which focuses on bringing innovative solutions to the market that can also provide

storage centres act as stabilisers in peak demand times. An

great returns for the customer. Last year, siemens invested

intelligent power grid with an extended automation structure,

$6 billion in R&d, which contributed to a full spectrum of

advanced sensors and a decentralised information and

cost-effective and innovative technologies for energy

communications structure will allow all participants to use the

efficiency, low emission power generation and renewable

system bi-directionally.

energy, advanced transmission and distribution as well as efficient transportation. Major successes for siemens in the past year reflect this

renewAble solutions By 2020, over 50 per cent of worldwide investments in the

innovative approach, including:

powerplant market will go into developing renewable


growing our wind business in Australia and new Zealand

resources. Within Australia, developing the electricity

with the completion of the te Uku Wind Farm (nZ), one

transmission networks of the eastern states and the separate

of the world’s most efficient wind farms.

Western Australian network will be a key enabler for


integrating power from remotely-located wind, solar and geothermal plants into the electricity sector.

a project win at BMA for a coal loading conveyor substation package, which is a medium voltage solution.


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.


an order for the supply of up to 10 compressor trains to the Australia Pacific Liquefied natural Gas (APLnG) project in queensland. | see page 98 for details






the current imbroglio over carbon taxes and

produces is manageable. nevertheless, there is a caveat to

electricity prices is casting rather a large smokescreen

be noted in this context. In the recent past, the objective of

over what remains a challenging long-term problem,

replacing coal with gas for new base-load investment was

namely how and when Australia is going to decarbonise

not seen as being likely to involve a Co2 price of more than

its electricity supply.

about $20/tonne. If the price of gas increases as now seems

some particularly difficult issues apply to base-load power,

likely, however, the Co2 price may need to be significantly

which constitutes about 80 per cent of Australia’s electricity

higher – a recent report by deloitte suggests $40/tonne. It is

supply, because all of the very low emissions technologies

notable that in the previous treasury modelling in 2008, a

available to replace coal are, in different ways, problematic.

$40 Co2 price was not seen in Australia until the late 2020s

Recent developments, including the nuclear accident at

when Australia’s emissions were projected to be over 20 per

Fukushima daiichi, potentially significant increases in domestic

cent lower than in 2000. Although investment in CCGt

gas prices in Australia and cost blowouts in geothermal and

involves relatively low capital costs, the price of fuel

carbon capture and storage (CCs) technologies, make the

constitutes a high proportion – around 30 per cent currently

conundrum no easier to resolve.

– of the cost of electricity. even a moderate rise in the gas

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

price, therefore, can have a significant effect on the costs of CCGt generation. While our chief concern about CCGt revolves around

turbines (CCGt), has a carbon footprint around one half that

the gas price, however, the problems afflicting the longer

of black coal and, at least while we enjoy moderate gas

term base-load options are much more challenging. If we

prices on the east coast, the cost of the electricity it

are serious about tackling climate change, and to some


CHAPteR 05

extent the jury is still out on this fundamental point, CCGt

Geothermal was always highly promising and remains so,

can be seen at best as an interim technology. With total

but its progress in Australia has proceeded at a glacial pace.

emissions of around 400kg of Co2/MWh, it is unlikely to be

not only are drilling costs, at around $15 million per well,

competitive in the longer term as carbon reduction targets

deterring investors, the hot dry rocks technology still has to

become tighter and the Co2 price continues to rise. When

be proven at scale and its costs are now likely to be

this occurs, existing coal plant will need to be replaced and

considerably higher than the optimistic early estimates

CCGt will not be well positioned to take over.

suggested. to produce significant amounts of base-load

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

power from geothermal sources in Australia would also require massive new investment in poles and wires. In the absence of decisive government intervention, few

fewer of whom know anything about the electricity industry,

serious observers now see geothermal providing more than a

who believe that Australia can decarbonise its power supply

small fraction of Australia’s electricity before 2030. In

solely by investing in renewables. While ultimately solar

mid-2011, business confidence in geothermal technologies

energy may become viable, provided the problems of

has fallen away as is reflected in the share prices of all the

storage and the substantial physical footprint of solar thermal

players. In the three years since june 2008, for example,

plants can be resolved, at this stage it remains intermittent

Geodynamics’ share price has fallen from about $1.80 to less

and very expensive.

than 20 cents today.



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.

In recent years and for quite understandable reasons,

early this year, it seemed safe to say that the other major

Australian governments have favoured the development of

option for base-load duty, nuclear power, came with fewer

clean coal technologies with CCs. If anything, however, the

disadvantages than the other technologies discussed above.

costs of the technology appear to be increasing, while CCs

With over 440 plants worldwide, some of which have been

comes with some safety issues that have yet to be tested

operating without incident for up to half a century, it is a mature

with the general public. A recent report by the Global CCs

technology and its costs, in Asia at least, are much lower than

Institute states that “recent studies suggest that costs [of

those of other low to zero emissions base-load technologies.

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

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

the United states, the average cost of electricity that would

Australian industry needing to retain its competitiveness in

need to be recovered over all output for the entire economic

relation to energy costs, as well as increasing consumer

life of a generating plant in order to justify the original

resistance to rising electricity prices, there was increasing

investment could be in the range of $Us120–150/MWh.

pressure on the Gillard government to reconsider its

the associated avoided cost of Co2 ranges from

opposition to nuclear power. Indeed, it had been agreed that

$Us60–85/tonne of Co 2 for coal-based power stations

the issue would be considered at the ALP national

and exceeds $Us100/tonne for a gas-fired power plant.”

conference in december 2011.



The Australian Nuclear Science & Technology Organisation’s state-of-the-art 20MW research reactor is our only nuclear installation.


yet this was all before Fukushima. In 1986, the Chernobyl meltdown cast such a pall over the global nuclear industry

and for many countries nuclear power is now an essential element in their plans to tackle it.

that new construction of nuclear plants was put on hold for

Few experts around the world believe that the

20 years. Will this happen again following Fukushima? the

decarbonisation of electricity is feasible without a

logic says no, for several reasons.

major contribution from nuclear power. Latest projections

First of all, while it is too early to speculate in any detail, it

from the International Agency (june 2011) still show an

seems the death toll from Fukushima will be much less than

increasing contribution from nuclear power over both

that from Chernobyl, which in itself is heavily disputed, and

the medium and long terms.

also less than other energy-related deaths, such as in coal


Where does this leave Australia? Clearly, in a worse

mines in China. nevertheless, it should be acknowledged

position than it was before Fukushima. While there was a

that while the nuclear industry always represented Chernobyl

slim chance that the ALP would change its policy on nuclear

as a one-off, the Fukushima incident was also rated as a

power at this year’s conference, that possibility is now that

seven, equal to Chernobyl and the highest on the scale. In

much slimmer. Rational analysis has played little part in the

mid-2011, new disclosures from the authorities in japan

nuclear debate in Australia to date and the fact that

revealed that the amount of atmospheric contamination

Fukushima has provided much more ammunition to the

was twice as high as previously suggested. yet while

doomsayers suggests that fear-mongering will continue

unacceptably high, the level of pollution was only about

to dominate the issue for the foreseeable future.

10 per cent of the Chernobyl level. secondly, some observers suggest that the fact that

Without strong leadership, it seems very unlikely that Australian politicians will now bite the bullet on nuclear

the Fukushima reactor, which was over 40 years old, survived

power, at least for several years down the track. this is

the massive earthquake and was only brought down by

unlikely to be to the Australian community’s advantage.

obsolete back-up power sources being swamped by a

on the one hand, we will be forced into much more

tsunami, should increase rather than decrease confidence

expensive and less satisfactory technologies if we are

in nuclear technology. Paradoxically, it was this view that

to address climate change in any substantial way.

brought about a road to damascus moment for the

on the other, the majority of those countries overseas

environmentalist George Monbiot, transforming him overnight

that have committed to nuclear energy will continue to

from being a passionate opponent of nuclear power to being

invest in it. Australia’s energy-intensive industries will

one of its most prominent spruikers.

become significantly less competitive as a result.

Finally, and most importantly, the level of concern about climate change is far greater than it was in 1986

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




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.

We maintain two interconnected networks as well as in

Horizon Power is a Government trading enterprise which

excess of 30, and growing, isolated or islanded systems

operates on a commercial basis. We focus on delivering the

that power towns and communities throughout regional

best possible set of economic, environmental and social

and remote Western Australia. the systems are exposed

outcomes to the communities we serve while applying a

to intense heat and cyclonic conditions in the north, and

commercial discipline and focus to the way we do it.

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. | see page 97 for details



CeLeBRAtInG 40 yeARs oF ReneWABLe eneRGy

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. | see page 98 for details



06 Fuel poverty emerges as a key issue


you WouLd need quite a long sheet of paper to

energy trading division of stanwell Corporation, have

list all the energy issues that are hotly disputed among

thrown a spotlight on this issue in a paper they have

governments, suppliers and community activists today,

called “the Boomerang Paradox”.

but there is one on which they are ad idem: Australians

“A characteristic of advanced economies,” they

will not accept a situation where low-income households

explain,” is continual growth in household incomes

are priced out of obtaining the electricity they require.

and plunging costs of electrical appliances.

For some users, this is literally a life or death proposition

In Australia, increases in household floor space

and the community will cut suppliers and governments

combined with power prices that are among the lowest

no slack whatever to ensure that power is there when

in the world have resulted in rapid growth in peak

they need it.

electricity demand. the power grid in turn requires

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

substantial incremental generating and network capacity, which is used momentarily at best.” Australia’s long history of very low power prices,

higher network charges and a range of decarbonisation

they point out, combined with almost two decades of

policies – this issue is to set to rise up the attention agenda

economic growth, has led to extraordinary increases in

for both lawmakers and energy retailers.

energy demand driven by the rising use of appliances

dr Paul simshauser, Chief economist of AGL energy and Professor of Finance at Griffith University, queensland,


to cool and heat homes. Back in 1970 average household energy requirements

his colleague tim nelson, Head of economic Policy and

in new south Wales and queensland stood at 4MWh a

sustainability at AGL, and dr thao doan, a strategist in the

year – by 2008, this had doubled to 7.9MWh.


CHAPteR 06

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.

the rise of peak demand out-runs the trend line for

“of course,” they say, “the overwhelming majority of

overall demand. In Brisbane, for example, the number of

households will readily adjust their budgets to meet these

households increased 35 per cent in 12 years to 2010, but

charges. After all, power prices at these levels are not

peak demand rose 104 per cent as three-quarters of homes

unusual by any measure around the world and real income

were equipped with air-conditioning, a third of them with

growth in Australia in this period is expected to be three to

two or more appliances.

four per cent a year.”

the paradox is that the nation’s rising wealth has created

While the political problem is that many of those who

the pre-conditions for large increases in the number of people

can afford to pay higher bills will object strongly to doing so,

who cannot afford to pay their electricity bills. “It is,” they say,

the social issues, as simshauser and his colleagues point

“as if consumers have been provided with a mispriced drug for

out, is that many thousands of households will not be able

long enough to establish a chronic addiction – and then they

to do so.

are confronted with the price doubling.” simshauser, nelson and doan envisage scenarios

How large is this problem? they have modelled a situation where, by 2015, a third of low-income households

where household electricity bills, as a consequence of

in nsW and queensland, or 6 per cent of the total in the two

generation and networks being expanded to meet this

states, will experience fuel poverty. this will add some

demand, will rise from $130 per megawatt hour in 2008 to

214,000 account holders in 3.2 million nsW homes and

between $250 and $300 in 2015.

about 130,000 in two million queensland homes.


extrapolate this situation to the east coast as a whole and the number in strife could be half a million – and bear

Controversially, simshauser and his colleagues suggest government could consider hypothecating the

in mind this refers to homes, not people. Assume three or

extra funds they will receive from the Gst to contribute

four adults and children per home, perhaps an underestimate

to alleviating fuel poverty.

for low-income families, and you are looking at around


In nsW and queensland, they say, Gst receipts from

2 million Australians, not a number state or federal politicians

electricity sales to householders totalled about $410 million

could regard with equanimity.

in 2008. By 2015 these receipts will be of the order of

the situation is not helped by the fact that many low-income homes use more electricity than the national

$880 million to $1040 million. one of the issues that needs to be addressed in

average. “one might expect that low-income households

coming to terms with higher fuel poverty, they add, is

consume less than average amounts of power,” the authors

the “critical failure” of government assistance programs

say. ”But data from the Independent Pricing & Regulatory

to deal appropriately with the issue.

tribunal in nsW, looking at homes with gross incomes less

For example, the initial emissions trading scheme

than $31,000 a year, shows that 20 per cent of them use

proposal would have seen lump-sum payments delivered

between 8MWh and 12MWh annually, and 12 per cent use

to householders receiving compensation. Far better, they

more than 12MWh.”

suggest, to deliver the payments to the energy retailer to

evaluation of AGL energy’s customer hardship program shows that many of these households live in lower-value

ensure that the money is spent where it is intended. However governments decide to address the “bill

homes, most likely with three to four people per house, and

shock” issue that obviously is going to be a feature of this

with power consumption patterns skewed towards the medium

decade, it is clear from the research by simshauser and

to high range. Given that we now have a good idea of where

his co-authors that this is not a minor issue in terms of

power bills are heading, simshauser and colleagues argue, it

social responsibility, let alone the political pain likely to

would be a good idea for governments to ensure they better

be inflicted by voters upset by the new power regime.

understand this issue and have policies in place to deal with it. of course, state policies are already in place to assist

It is a situation not likely to be improved when, as currently planned, governments give the green light to the

senior members of the community, to provide emergency

electricity industry to roll out smart meters to all homes

help to households facing the possibility of the lights going

and then shift to “time-of-use” charges aimed at driving

out, to help those on life-support machines and, in

a change in consumption patterns by making it far more

queensland and nsW, to provide advice on reducing

expensive to use electricity at peak periods.

demand. these policies are designed for a much lower power price environment than the one that lies ahead.

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




as the world’s sunniest continent, there is significant

Utility-scale solar PV provides predictable and premium

potential for Australia to harness its vast solar resource.

value peak load, which complements existing power

While traditional fossil energy continues to play a crucial

generation. due to broad solar resource availability, solar PV

role in the supply of energy to our nation, renewable energy

plants can be located over a wide range of locations, thus

technologies, including solar photovoltaic (solar PV), will

enabling generation capacity to be sized and positioned

increasingly contribute to meeting Australia’s growing

where it is needed.

energy needs. With a policy and consumer shift towards

From construction to operation, solar PV farms boast a

sustainable energy, an increasing number of companies are

low environmental impact and provide enhanced grid power

selecting solar PV as part of their energy portfolio.

quality. In addition, utility-scale solar PV can be co-located with wind generation to provide greater energy diversity.

coMpleMenting existing technology

these generation benefits position utility-scale solar PV for

solar PV is a thoroughly proven and tested technology that

significant growth in the next few years.

has been demonstrated at utility scale across the world. europe, United states and Asia have more than 100

whAt we do

commissioned generating plants ranging from 10 to 80MW

suntech manufactures and markets quality, high-output,

and solar farms greater than 300MW are under construction.

cost-effective and environmentally friendly solar products for

With a world-leading solar resource, Australia is in a strong

electric power applications. suntech is the world’s largest

position to leverage off this extensive overseas experience in

manufacturer of crystalline silicon PV modules, supplying to

developing a significant market.

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.


dependAble And bAnkAble technology suntech works closely with its engineering, procurement and construction (ePC) partners to deliver utility-scale solar PV

Solar farms are a natural extension of Australia’s sustainable approach to

that provide performance certainty at a competitive price.

farming. By harvesting the power of

two significant projects over the past year include:

Australia’s solar resource, Suntech


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


commits to providing renewable energy to future generations of Australians.

Asian development Bank.


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. | see page 98 for details



07 Conditions may brighten for solar power



one of the biggest long-term issues for energy in

13 million tonnes of carbon dioxide in 2020, less than

Australia is whether solar power can become a substantial

one-tenth of the 5 per cent target for national abatement.

part of the electricity supply mix. the CsIRo, for one,

the upfront cost of this would be astronomical – in the order

believes that it can and is forecasting that it can meet

of $200 billion. With more plausible implementation over

30 per cent of national electricity supply – but that it will

10 years, we might be able to lower this cost to close to

take four decades to do so.

$100 billion; lower, but still hugely expensive abatement.”

the current outlook is not overly optimistic despite

to put this statement in context, the department of

enthusiastic support for the technology from various parts of

Climate Change estimates that the federal government’s

the environmental movement. Realisation that the subsidies

renewable energy target (Ret) will achieve annual

granted to those taking up rooftop solar photovoltaics (PVs)

greenhouse gas cuts of 29 million tonnes by 2020 and the

are an additional burden on the balance of household

industry estimates that meeting the Ret through building

consumers – to the tune in new south Wales, for example,

wind farms will cost between $20 billion and $25 billion

of an additional $1.5 billion over six years – has rubbed the

over the decade.

shine off the technology in a number of quarters. the still larger difficulty facing the PV sector in winning

spending five to 10 times as much to achieve less than half the emissions cuts is not exactly an advertisement for

strategic energy policy approval was summed up by the

solar PVs. In addition, the abatement benefit of universal

secretary of the treasury Martin Parkinson when he was

household solar, according to Martin Parkinson’s arithmetic,

serving as secretary of the department of Climate Change.

would be less than can be achieved by simply closing down

“If all the households in Australia were to install a 1.5kW

Victoria’s Hazelwood power station at about 3–4 per cent of

PV panel overnight,” he said, “this would save in the order of

the cost.


CHAPteR 07

this does not stop the technology being publicly popular,

are available. the renewable energy target purchase

however, with the PV capacity in Australia being lifted to

premiums are supposed to deliver this value, but the Ret

500MW after some in the community rushed the offer by the

market has actually been operating well below this level over

since-defeated Keneally government in new south Wales to

the past 12 to 18 months. solar PVs, however, today need a

provide the country’s highest feed-in tariff, a scheme cut

market price more than double that of wind energy.

back severely after 10 months and subsequently mired in

the well-known Australian tyranny of distance is another

controversy as the o’Farrell government struggles to come

issue for utility-scale developments. “In Australia,” the national

to terms with its less-than-shiny inheritance.

assessment says, “the best solar resources are commonly

the PV sector, in the meantime, also has its eye on

distant from the electricity markets, especially the major urban

another part of the market: industry managers point out that

centres on the eastern seaboard. this poses a challenge for

it has made virtually no inroads into the commercial power

developing new solar power plants as there needs to be a

market to date – a segment that today accounts for more

balance between maximising the solar radiation and

than 22 per cent of total national demand. the added

minimising the costs of connectivity to the electricity grid.”

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.

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

According to the International energy Agency in its 2011

government gives their plans a strong boost, with

clean energy progress report, at least 17,000MW of solar

announcement of the initial new funding under its $1.5

power was added to global capacity last year, 90 per cent of

billion solar Flagships program, which aims to see up to

it being installed in six countries (Germany, spain, japan, the

four new solar power plants built, with a combined capacity

United states, Italy and Korea).

of up to 1000MW. the program aims to demonstrate solar

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

technologies at commercial scale and to accelerate the uptake of solar power. How far and how fast solar costs can be reduced remains


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


tHe ReAL LIGHt on tHe HILL FoR tHe teCHnoLoGy, HoWeVeR, seeMs MoRe LIKeLy to LIe In tHe deVeLoPMent oF UtILItysCALe, ConCentRAtInG soLAR PoWeR (CsP), WHICH tHe CsIRo sAys HAs ‘tReMendoUs PotentIAL’ In AUstRALIA.”

thermal storage to provide renewable energy well in to evening peak demand periods.

KeItH oRCHIson, edItoR

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

below the solar industry has a lot of work to do if it is to become

precision is high. this enables the use of higher

a major player in the electricity industry. By 2030, it is expected to

temperatures to improve the efficiency of conversion

account for just 1 per cent of electricity generation in Australia.

of solar thermal energy into electricity.



tosHIBA: LeAdInG InnoVAtIon

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.

“We will contribute to the creation of a 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.

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



trAnsMission & distribution

therMAl power

toshiba’s range of equipment covers all transmission and

toshiba is a world leader in high capacity, high efficiency

distribution applications, up to and exceeding 500kV, and

steam turbine generators for combined cycle & cogeneration

includes power and distribution transformers, gas insulated

plants, and a world leading supplier of supercritical and

transformers, gas insulated switchgear, static VAr

ultrasupercritical steam turbines. toshiba Group is working to

compensation, HVdC systems and surge arrestors.

commercialise carbon dioxide capture technology to enable

toshiba’s capabilities include engineering, manufacturing,

next generation thermal power facilities to achieve zero-

installation, commissioning and service of a range of

emission power generation.

power equipment. In the past five years toshiba has installed over 12,000MVA of transformer capacity for

construction, engineering And service

power utilities and various industries and provided the

toshiba International Corporation has turnkey engineering

majority of the transformers for the new 500kV network

and service capabilities based in Australia. In recent years it

upgrades within nsW.

has successfully completed numerous turnkey turbine and generator overhaul and construction projects, as well as

geotherMAl power

transformer installation and service projects. this has

toshiba is one of the world’s largest manufacturers of

involved site management, safety and quality management

generators and turbines used in geothermal power

and provision of supervision and labour resources. the

applications. thanks to toshiba’s 50-plus years of

division is expanding to meet market needs for maintaining

experience in this sector, these turbines have established

(and increasing) efficiency in existing power plants.

industry benchmarks in output power and performance

toshiba International Corporation continues to develop

and have been awarded for their contribution to the world’s

its local engineering capability with the full support of the

geothermal developments. In the past year toshiba has

engineering groups in toshiba japan. this development

been awarded the contract to provide turbines for teMihi in

includes building expertise in toshiba mechanical,

new Zealand, one of the largest geothermal developments

electrical and control equipment for all facets of the plant

in the southern hemisphere.

operation and maintenance. With this growing expertise, toshiba is offering customers expert engineering and technical service during operation, maintenance planning and during unit shutdowns. | see page 98 for details



08 Premier state’s prime supply challenge


poWerinG new south Wales is not just an issue for


However, the impact of the global financial crisis

the state’s more than three million residential and business

and other issues has seen this target date pushed out to

account holders, the largest block of customers in the

2015–16,or even a little later according to data from the

country. due to geography and load, nsW impacts on the

Australian energy Market operator, which is responsible

east coast market as a whole and its approach to energy

for system security on the east coast, and even this is

and decarbonisation policies affects the southern and

disputed by the environmental movement.

eastern seaboard. As a result of the nsW privatisation debate of the past

nonetheless, there are a number of significant facts about nsW’s electricity environment that are not in dispute.

two years (which is now the subject of a judicial inquiry

the state-owned transmission business, transGrid, points

commissioned by the new o’Farrell government) the twin

out that a half century of demand growth has been driven

issues of supply security and power prices are of concern

primarily by the rising population and the marked increase

well beyond the state’s borders.

in electricity consumption per person, plus the sharp, and

even the supposedly simple issue of when new base-load generation needs to be commissioned in the

still-rising, spike in peak power needs. the nsW population has more than doubled since

state is a matter of controversy, let alone the politically

the mid-1950s to over 7 million people and is heading for

charged question of what fuel should be used.

7.6 million by the decade’s end. According to the Australian

the owen Inquiry reported in 2007, on the basis of projections of demand, that new base-load plant should

Bureau of statistics, it should be nearly 9 million by 2035. the increase in population has been accompanied

be commissioned in 2013–14; in other words, it should

by a slightly higher rate of growth in the number of

already be under construction.

households, thanks to a national decrease in the number



of people per home. today, about a third of nsW power

cause network capital outlays in nsW to virtually double

consumption occurs in houses, and the common residential

during each five-year period from 2000 to 2015, with the

requirement for lights, refrigeration, television, cooking,

2010–15 outlay reaching almost $15 billion.

water heating and space heating and cooling underlies the demand trend. As real incomes – that is their value in inflation-adjusted

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

terms – continue to rise, per capita power demand can be

community and the media through most of the past decade,

expected to increase with them, even as less affluent

but crashing in to their consciousness in the past two to

families struggle to pay their bills.

three years and engendering a political backlash.

the trend is dramatically underlined by one set of

the political problem is that, while the impact of the

statistics: in 1996–97, nsW system energy demands

network charge is now unavoidable, power prices are

stood at 58,000 GWh, with a peak demand of 10,500 MW.

increasingly exposed in nsW to the effects of national and

By 2008–09, system energy requirements had risen to

state decarbonisation policy, the expected shift to higher-

75,800GWh and peak demand exceeded 14,500MW.

priced gas for generation and the expiry by 2017 of the existing

the industry’s current load forecasts are for system

very-low-priced coal contracts for the state-owned generators.

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

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

electricity supply will actually impact on demand is far more

the most subsidised rooftop solar power scheme for

than a $64 million question. Factors in play this decade will

householders in Australia. Introduced in january last year,

include persistent increases in power bills, the impact of

it was rushed by homeowners to such an extent that the

more stringent building regulations, requirements for higher

government moved to slash the feed-in-tariff by two-thirds

efficiency-rated appliances and campaigns to make the

in october 2010 and to cap the capacity that could be

public more aware of the need for energy conservation.

taken up. While this reduced the scheme’s flow-on cost

one of the major changes impacting on networks is

to householders by $2.5 billion between 2010 and 2016,

the switch in the state’s peak demand period. Until the late 1980s summer peaks in nsW were over-shadowed

it still left them with an extra $1.5 billion in charges. According to dr Paul simshauser, chief economist of

by maximum supply requirements in winter, spring

AGL energy and finance professor at the Griffith University

and autumn.

school of Business, this situation should lead to end-user

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

power bills in nsW (and queensland) virtually doubling between 2008 and 2015. the factors impacting on nsW’s power policy

alternative for household water and space heating, and

environment are many. two that require close attention

for cooking. notoriously, air-conditioning in the past few

in the current term of government are settling the issues

years has become the other. the reduction in its cost as

of ownership of government-owned generation and/or

community wealth has risen has led to its use in about

its energy output, and overseeing development of the

eight homes in 10.

necessary base-load capacity to secure supply until

nsW has become a summer peak state, which has had consequences for the networks. In addition to a sharp

2020 and beyond. Following the Keneally government’s privatisation

increase in the construction of expensive assets that are

process of 2009–11, the retail divisions of the trio of

required for only a few weeks, at most, a year, a large

taxpayer-owned distribution businesses have been sold

part of the existing system was not designed to be under

to origin energy and tRUenergy, along with all the

maximum pressure in the hottest months of the year. According to the Australian energy Regulator, the

production from eraring energy and a large part of the output of delta electricity, a process so controversial that

need to meet peak demand, to service growing overall

most of the directors of the two “gencos” resigned rather

consumption and to replace rapidly ageing assets will

than sign off on the “gen-trader” deals.


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.




the process has left the state still owning all the

While the debate continues over fossil-fuelled

delta and eraring assets as well as the power stations and

developments, the federal government’s renewable

production of Macquarie Generation in the Hunter Valley.

energy target is seen as driving a number of new wind

It has also left the new state government with the ongoing issue of deciding which form of base-load

farm projects in nsW. Fitch Ratings, in its 2011 assessment of power

generation development it should approve in order to

developments in Australia, suggests that 923MW of the

meet the impending demand/supply gap, a situation

5000MW of wind farms it expect to see built on the east

that may be exacerbated if, as consultants have predicted,

coast between 2011 and 2015 will be constructed in nsW

the available imports of power from interstate are reduced

as part of the $10 billion worth of generation investment

in the second half of the decade by the requirements of

it forecasts for the state in the next five years if a national

Victoria and queensland.

carbon price is introduced.

the mix of generating plant in any system needs to

over-arching all this is the hugely important issue

be balanced between base-load and peaking plants,

of ensuring there is adequate generation to cover plant

the former being units with relatively low fuel costs able

failures, not a minor factor in a state where an increasingly

to produce power continuously through most days of the

large amount of capacity will be more than 40 years old

year, and the latter having relatively high fuel costs but able

by mid-decade.

to be brought in to supply at short, sometimes only a few minutes’, notice. As electricity use in nsW has risen over the past

Consultants AeCoM, in undertaking the environmental assessment for the proposed Bayswater B options put forward by Macquarie Generation, have pointed out that, if

10 years by an average of 1310 GWh annually, state

new base-load capacity is not commissioned in ample time

reliance on net imports of power has increased to 7 per cent

to cope with rising demand, the existing state-owned plants

of its total consumption. However, energy available from

will be required to sustain a 17 per cent increase later in the

queensland over the qnI interconnector has been in

decade above their 2008–09 levels – roughly production of

decline for three years, reflecting higher demand in that

an extra 10,000GWh a year.

state, and the contribution from Victoria might even become

“Given that the oldest of these plants will be 45 by

negative later this decade as supply tightens south of the

then,” says AeCoM, “this has implications for maintaining

Murray River.

supply reliability – which may not be maintained on an

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

ongoing basis.” As transGrid puts it, “Internationally, a simply understood and often accepted minimum generation reserve standard (which includes generation local to a

both put forward proposals – to be fulfilled by the

system and interconnection capability with adjoining

private sector under existing government policy – for the

systems) is 15 per cent.”

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,

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

under the decarbonisation environment, these projects are

magnitude: the impact of national decarbonisation policy

neither “bankable” nor likely to win political support.

on nsW generation. this poses three big questions:

A competing gas-fired proposal has been put forward

1. Which state coal-burning units – in total they consume

by tRUenergy, which received environmental planning

some 30 million tonnes of black coal a year – may be

approval in early 2011 to build a second base-load gas

required to shut operations when a carbon price

plant at its tallawarra site on the nsW south coast, a move

reaches the high levels required to drive national

the company says will depend significantly on national

abatement towards the 2020 target of 160 million

decisions about carbon pricing.

tonnes a year?



InteRnAtIonALLy, A sIMPLy UndeRstood And oFten ACCePted MInIMUM GeneRAtIon ReseRVe stAndARd Is 15 PeR Cent.” tRAnsGRId

2. How, and at what cost, can the surviving coal-burning generators be retrofitted for carbon capture and sequestration, assuming the technology becomes

addressed in the past decade, the policy solutions to them are becoming more urgent. Meanwhile, consumer angst about the cost of their

commercially available, and where would the tens of

electricity supplies is continuing to reach new heights, not

millions of tonnes of liquid carbon dioxide captured

least because the arrival of really cold winters (like that of

be buried?

2010) as tariffs rise on 1 july each year means that the price

3. Will even future CCGt plants be allowed to be built

shock in october in terms of quarter-on-quarter bill rises is

without at least being carbon capture ready and what will

greater each time, attracting ever stronger media attention

this requirement mean for both their commissioning time

and raising the temperature of political debate.

scales and the cost of their supply? the problem for government in nsW, and in many cases

the late 2010 “q-on-q” price difference in nsW, Macquarie Bank reports, was 30 per cent for many households, leading

for the federal government, is that there are no easy answers

politicians campaigning in the March 2011 state election to

to any of these issues. Because they have not been

describe public anger over power bills as “white hot.”




a reLiabLe supply of electricity is essential for the growth and economic prosperity of Australia.

“A reliable supply of electricity is

transGrid owns and manages one of the largest high voltage transmission networks in the country, connecting

essential for the growth and economic

generators, distributors and major end users in nsW and the ACt.

prosperity of Australia.”

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

Between 2010 and 2014 transGrid will undertake more

efficient transmission services to nsW, the ACt and the

than 88 projects across nsW as part of a $2.6 billion capital

national electricity Market. transGrid is built on a strong

works program.

set of core values. Its work environment promotes a culture

this multi-billion dollar capital works program is needed

which is committed, collaborative, caring and enterprising

to ensure the transmission network continues to deliver

– excellence in all we do.

secure, reliable and safe supply of electricity. there is a

With more than 1000 employees spread across nsW,

strong focus on capital efficiency and the growth in

transGrid understands the knowledge and experience of

transmission capacity supports electricity sourcing from the

its people play a lead role in maintaining a reliable supply

lowest cost generators.

of electricity for nsW.

transGrid is also undertaking a major refurbishment and replacement of ageing assets to ensure efficient supply

building for the future transGrid has two major services:

u u

to its customers. since 2008, transGrid has connected two new gas fired

providing a reliable transmission system for customers;

and two new wind powered generation developments and


has facilitated numerous upgrades to existing generators.

enabling access to the market for generators across

negotiations are currently underway to connect up to several

the national electricity Market.

renewable energy sources such as wind and solar.



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.

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. | see page 98 for details



09 New energy vision for the West



Western austraLia, says the state’s Minister

economic development while contributing to the

for energy Peter Collier, is unique in the wealth and

community’s high standard of living. energy consumption

diversity of its energy resources. It is unique in its

has doubled in this time. How we choose to meet our

distance from other energy networks, too. “From an

energy needs over the next 20 years is a critical issue.”

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

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

out, primary energy supply, and the way energy is used,

government’s energy 2031 directions paper was

in the West is determined largely by choices state

published in March and it will be the end of 2011 before

policymakers and the community alone can make.

consultation about its proposed directions is completed.

despite this, Collier says, Western Australia lacks

Collier says the government proposes a series of

a cohesive, long-term energy plan. the state’s last

strategies structured around six major themes, ranging

comprehensive energy policy was developed in 1979.

from security of supply to provision of efficient

the discussion paper the coalition government of

infrastructure, improved efficiency for using energy,

Premier Colin Barnett released in december 2009 paints

including effective markets and delivering universal

the scene like this: “over the past 20 years, the WA

access to energy in a state notable for having the majority

energy industry has played a major role in driving state

of its population and commerce in the southwest corner



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



left In the West, like eastern states, transmission is as vital to power supply security as generation.

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.



rIght some 7400 megawatts of additional generation capacity will be 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

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

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

Chamber of Mines and energy, could require supply by the

generation capacity – the private sector or the state-owned

end of this decade of as much electricity as is used today

generator, Verve energy. Courtesy of decade-old reforms to

in the southwest interconnected system.

the Western Australian market, Verve is limited to owning

the Independent Market operator believes some 7400 MW of generation capacity will be needed in the southwest by 2021, requiring commissioning of 2275MW of

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

new plant, while synergy, the state-owned energy retailer,

India are 29 little stand-alone power systems serving

sees a requirement for 6000MW in new capacity over 20

communities that live unimaginably remote lifestyles by

years at a cost of $12 billion. the capital outlay will also

east coast standards.



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 Looking at the WA situation, the Committee for the economic

reliable. Revenue needs to be at an adequate level to

development of Australia has commented: “the energy

operate the supply systems and to support investment in

infrastructure (of the state) has been neglected for far too long.

maintenance, replacement and enhancement as needed.”

For decades there was insufficient investment in generation

In this respect, the West is not isolated from governments

capacity. As a consequence, the current economic expansion

on the east coast at all.

is challenging WA’s capacity to deliver adequate, reliable energy throughout the state. “Furthermore, the move towards better cost-reflective pricing

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

has resulted in the cost of energy rising by 42.5 per cent in two

by smarter energy systems. As we move forward, it is

years, after tariffs for residential customers had not increased

important that we put in place the policy, regulatory and

since 1997–98, during which time the cost of supplying electricity

incentive mechanisms that will ensure the energy market

had increased dramatically.”

will be dynamic, highly competitive and efficient.”



InstItUte FoR MIneRAL And eneRGy ResoURCes

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

“Mineral and energy resources expansion in

resources and to lower the cost and increase the efficiency

South Australia is anticipated to be the single

of cleaner energy generation, storage, transmission and utilisation of energy. World-class researchers in the Institute,

most significant driver of economic

working in multidisciplinary approaches spanning

development in this State for at least the next

engineering, science, economics, law and social science, will enhance the delivery of innovative research outcomes

two generations.”

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

Institute for Mineral and Energy Resources

international communities. | see page 99 for details



WesteRn PoWeR’s sMARteR eneRGy FUtURe

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

“The infrastructure Western Power builds

also believe it is crucial that, as a society we become more

today will serve the community for the

efficient in the way we use energy. that is why we have invested in energy efficiency education, are part of the Future

next 50 years.”

energy Alliance and are the lead in the federal government’s Perth solar City program. 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. | see page 99 for details



10 How big a boon is gas for generation?



is this the golden age for gas supply domestically in

0.6 per cent annually, delivering a situation where

Australia at last? this is the key question tantalising, and

coal-burning plant had fallen back from today’s delivery

perhaps haunting, the gas industry as the energy business

of 200,000 gigawatt hours a year to 150,000GWh, while

moves in to a new decade.

annual gas-powered electricity production had risen to

origin energy Managing director Grant King summed up the promise and the problem when he addressed the

a heady 135,000GWh. this scenario sees the gas sector’s share of

50th anniversary conference of the Australian Petroleum

generation rising from 19 per cent today to 37 per cent

Production & exploration Association in Brisbane. “A

and coal’s share falling back to under half.

golden age for domestic gas consumption was being

this situation is mirrored in the number of gas-fired

predicted in the late 1990s,” he said, “but by 2002 it was

generation developments currently proposed for

clear these projections would not be met. the opportunity

Australia. they represent 60 per cent of the projects at

for gas had been lost to coal, primarily new coal-fired

present either under way, in a detailed planning phase

generation in queensland.”

or being investigated.

At about the same time the federal government was

the critical issue that will decide whether a “golden

issuing its national energy resource assessment, the

age” for gas domestically is now really emerging will

essential background for an energy white paper that still

be energy policy, especially the imposition of a carbon

has not been published.

price and the establishment of a cap on allowable

In it, the government projected that the rise of gas as

emissions per unit of production for future power

a power supply fuel would average 5 per cent a year from

stations, a measure now being investigated by the

2007–08 to 2029–30 as coal averaged a decline of

federal government.


CHAPteR 10

King says a carbon price in the range of $20 to $40 a

It offers low intensity in carbon, water use and land

tonne will drive substantial fuel substitution for base-load

requirements, with only 15 hectares required to build a

generation, reducing the emission intensity of the electricity

1000MW plant that requires less than a third of the water

industry at the lowest possible cost.

needed for cooling by an equivalent capacity coal-burning

one of the major advocates for the dash for gas is

unit. It has a large resource base close to demand points,

santos Managing director david Knox, who lauds it as “an

linked by an extensive and growing pipeline network. Gas

immediate, proven way to transform power generation away

generation is a proven technology across the spectrum

from high-carbon coal to low-carbon carbon gas, buying

of base-load, intermediate and peaking supply.

time for advances in renewable technologies”. Knox sees gas generation as a “natural partner” to

Knox argues that power generation abatement is critical to delivering Australia’s decarbonisation policies.

support the integration of intermittent renewable generation

It accounts for 35 per cent of total national emissions,

with the power grid.

he points out, with more than 80 per cent of electricity

In a series of commentaries and speeches on the

generated from coal. “If we are serious about addressing

issue over two years, he has highlighted three key features

climate change, we must lower the carbon intensity of

that underwrite the “compelling potential” of the fuel.

base-load 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.

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

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

simply not available in Australia and it will be many years,

deputy Chief executive Mark McCallum, shows that every

possibly decades, before there is sufficient commercial

5000MW of wind capacity will require approximately 2100MW

confidence about such a technology, its affordability and its

of gas generation to ensure reliability of supply.

widespread deployment.”

Looking to the long term, McCallum suggests that,

As for the nuclear option, Knox says: “Right now, it is

even allowing for a doubling in consumption between

illegal in this country – and I don’t know anyone who seriously

now and 2050, a combination of the renewable energy

thinks that this is going to change any time soon or that we are

target (which requires 20 per cent of demand to be met

going to have nuclear power in our energy grid within the next

from wind and other zero-emission technologies) and

decade at the very minimum.”

gas generation will meet power needs with emissions

He also rejects the notion that there may not be adequate reserves of gas to fuel both a major change in power

20 per cent below where they are today. Knox cites south Australia, where gas already

generation domestically and the huge expansion of LnG

provides half the power supply, as an example of what

exports now on the drawing boards.

can be achieved. “If we replace south Australia’s two

“Australia,” he told one conference, “is blessed with

ageing coal-fired power stations in the state’s north with

enormous gas potential, one that will take us well into the

gas, upgrade the existing gas generation fleet and meet

next century and probably beyond that. there is ample

the state government’s ambition to achieve a 33 per cent

and affordable natural gas in Australia to meet both growing

renewable energy target by 2020, south Australia’s

domestic and export requirements.”

emissions intensity for power generation will halve, dropping

Knox and the industry point to the fact that east Australia’s known gas reserves have tripled in 10 years, with total reserve

well below 0.4 tonnes of carbon dioxide per megawatt hour.” this intensity would be half to two-thirds the level of

life extended from 2015 to 2060, and this before full evaluation

emissions from conventional power stations fuelled by

of the large new south Wales coal seam methane deposits or

black and brown coal.

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

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

to the gas sector’s domestic future. At present there are six

role is provided for renewable generation. seventy per cent

gas-fired power stations in the state, with a combined capacity

of the coal-burning plants are more than 20 years old.

of 2103MW. there are 14 gas-based projects proposed for

“of course, it is easier for south Australia than the

development in the state. the number of them that are

coal states in the east,” he says, “but the fact remains that

commissioned to deliver base-load will have a big impact

the transition to a lower-carbon Australia can only take place

on east coast gas demand.

with a greater role for gas in the fuel mix.”

In nsW and nationally, the inter-relationship between gas

Knox argues that timing is vital in resolving policy affecting

generation and wind power tends to be controversial. some in

electricity production. “We are rapidly approaching the point,”

the wind sector and in the environmental movement argue that

he argues, “where critical decisions must be made on the

too much emphasis is placed on the variability of wind power

future direction of Australian power generation.”



11 Interstate energy trading on the rise


Go back eight years and the only wind turbine in south


In similar vein, when Premier Rann adopts a target for

Australia was a 150KW unit in the outback near Coober

large-scale further investment in wind farms in south Australia,

Pedy. today the state has 1000MW of wind capacity

he has his eye on other states as a market for the product.

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

“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

a proportion of its total electricity generation.” note the

population, but it has “done incredibly well” in attracting

careful use of that word “hosts”.

nearly 50 per cent of the nation’s grid-connected wind

While denmark is famous for the amount of wind capacity

power, about 30 per cent of its solar power and more

on its soil, and for the manufacturing industry with world reach

than 90 per cent of investment in “hot rock” geothermal

that it has built on the back of this investment, most of the power

development, still at the embryonic stage.

generated by the turbines is actually sold across its border to

According to Fitch Ratings, the state can expect to

other countries. Meanwhile, the danes’ needs are met by

attract more than a fifth of east coast wind investment

domestic coal-burning plant and by importing hydro-power and

between now and 2015, representing a need for investors

nuclear energy from other scandinavian states.

to raise more than $2 billion in debt and equity.

the key to the danish experience is the strong

Central to Rann’s grand plan for wind is one of

scandinavian transmission system and a coherent

the world’s best resources for the technology, the

wholesale energy market for the region.

eyre Peninsula.


CHAPteR 11

this triangular-shaped area of 45,000 square kilometres,

the study has been supported by four wind developers

a similar size to tasmania, is bounded in the east by spencer

with interests in the area: Acciona energy, transfield

Gulf, in the west by the Great Australian Bight and in the north

services, origin energy and Pacific Hydro, who have told

by the Gawler Ranges.

the Australian energy Market Commission, which is

It has strong and consistent wind speeds – with many

examining a new mechanism to encourage scale-efficient

areas recording better than eight metres a second, considered

network extensions on the east coast, that the “green grid”

excellent for wind generation – and extensive areas suitable for

concept will not be viable under the current market

large-scale developments. the region is home to only 55,000

framework because it does not allow investors with varying

people, most of whom live in Port Augusta, Port Lincoln,

project timelines the effective opportunity to co-ordinate

Whyalla and Ceduna.

their activities to build transmission infrastructure of an

A study by a consortium of Macquarie Capital Advisers (a division of Macquarie Bank), engineers WorleyParsons and

efficient size. the big drawback for the eyre Peninsula for power supply

law firm Baker & McKenzie has concluded that the area has

purposes is that it is situated on the far western fringe of the

the potential for development over time of 10,000MW of wind

“national” electricity market – the east coast grid that delivers

capacity, more than the total requirement of the current

80 per cent of Australia’s power needs – and at present has a

renewable energy target for the whole of Australia.

meagre transmission link with even the rest of its own state.


the “sA Green Grid” consortium wants to start

the costs, to quote a well-known economist, are

exploiting the peninsula’s wind potential by obtaining

“non-trivial” – estimated at $5.8 billion for the first stage,

transmission system upgrades within south Australia and

of which about $1.4 billion would be transmission

on the link to Heywood in Victoria, opening the way

capital outlays.

for development of 2000Mw of wind capacity. the second stage would require a link from near Port


Apart from Mike Rann’s “green hub” ambitions, there is another strong motive for the transmission developments

Augusta in to new south Wales, with a second 2000MW

that would flow from the eyre Peninsula project. the area

of wind projects.

is perceived by the mining industry to be a “mini Midwest”,

just the first stage, according to the consortium, in theory

a reference to the West Australian iron province. this is an

would be large enough in times of high wind to meet the

area that in 1990s was seen as unrealistically ambitious in

state’s entire average electricity needs – but in practice a

its push to be a major minerals exporter, but is now a key

large amount of the energy would flow to Victoria.

new iron ore province. the mining industry believes that

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

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

900MW towards 4000MW, and enabling the south Australian

peninsula’s 132kV electricity network and the lack of

plants to drive up their contribution to the renewable energy

access to several hundred megawatts of base-load

target from its existing 5.7 per cent to 30 per cent.

power. Another is the lack of a large water supply for

the second phase, it says, will provide large volumes of renewable energy to the northern part of the national

ore processing. the answer to the third issue is seen to be a

energy Market, which has less favourable wind conditions,

substantial desalination project, another large-scale

and will provide considerable assistance to the development

user of electricity which elsewhere in Australia is calling

of remote base-load geothermal power.

on wind power to meets its needs.

the jokers in this pack, of course, are cost and the

Premier Rann, who contributed to the eyre Peninsula

transmission development rules, which federal and state

“green grid” study from his government’s $20 million

governments and the industry are working to recast. the

renewable energy fund, says there is no doubt the state

consortium acknowledges that the first stage proposal is

has the intellectual capabilities as well as the climatic

unlikely to pass the present regulatory test for new transmission

conditions to develop alternative energy sources and

developments – which favours network upgrades for generation

energy-saving initiatives, as well as deliver substantial

located close to the existing grid and to load centres.

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



12 The solar flagship program



after a long gestation period, the federal government’s

and Pacific Hydro, will involve installing 650,000 PV panels

“solar Flagship” program has borne fruit: with the choice of

on an area the size of 600 football stadiums with capacity of

Moree in new south Wales and Chinchilla in queensland

150MW, able to produce 400GWh a year. this is enough

as the sites for large-scale projects to demonstrate

electricity to serve 45,000 homes or the residential demand

new technology.

of darwin.

In welcoming the decision to support a $923 million

the Chinchilla development, the 250MW solar dawn

solar photovoltaic development at Moree, the nsW

solar thermal and gas hybrid power station in southwest

Resources & energy Minister, Chris Hartcher, pointed out

queensland, will produce enough energy to serve another

that the impact is economic as well as environmental.

70,000 households.

the project, which is calculated to help avoid emissions

solar dawn is to be located close to a 44MW booster

of 10.8 million tonnes of carbon dioxide over three decades,

project for Cs energy’s Kogan Creek power station, the

equal to the annual output of one mid-range coal generator,

largest single coal-fired unit in Australia.the Kogan Creek

is expected to contribute between $100 million and $125

booster system is also based on Areva’s CLFR technology.

million directly to the local area, including creating 500

the federal government will contribute $464 million to the

indirect jobs around Moree while the construction is under

$1.2 billion cost of the Chinchilla project, with the

way over about three years. the nsW government is

queensland government tipping in another $75 million.

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

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


CHAPteR 12

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 homecoming 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



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





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. | see page 99 for details



WILson tRAnsFoRMeR CoMPAny

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

Wilson transformer Company built its reputation on

market, taking equity in a new global company, Gridon, to

quality and reliability and does whatever it takes to protect

develop and manufacture these products for world markets.

this hard-won record. the Company is accredited to As

Fault current limiters are new products that are being

9001:2000 quality system and As/nZs 4801:2001

developed to economically limit rising fault levels in electricity

occupational Health & safety Management system.

grids. oil and sF6 testing and analytical services facilitating

Recently inducted into the Victorian Manufacturing Hall of Fame, Wilson transformer is a truly innovative company

condition-based monitoring and fault diagnosis is

and a leading Australian design, manufacturing and

undertaken through a joint venture with UsA-based tj|H2b

service business.

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. | see page 99 for details


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.


Building new substations and replacing those built 40 to 50 years ago are high priorities.




dIReCtoRy ContACt InFoRMAtIon FoR oUR FeAtURed CoMPAnIes

Australian Coal Association A: Po Box 9115, deakin ACt 2600 P: 02 6120 0200 F: 02 6120 0222 e: W:

AGL eneRGy LIMIted A: Level 22, 101 Miller street, north sydney nsW 2060 P: 02 9921 2999

F: 02 9921 2465

e: W:

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:

eneRGeX Limited A: 26 Reddacliff street, newstead qld 4006 P: 07 3664 4000

F: 07 3025 8301

e: W:


Ge A: 99 Walker street, north sydney nsW 2060 P: 61 2 9978 8168

F: 61 2 9978 8297

e: W:

gentrack A: Level 9, 390 st Kilda Road, Melbourne Vic 3004 P: 03 9867 9100

F: 03 9867 9140

e: W:

Granite Power Limited A: Level 6, 9 Barrack st, sydney nsW 2000 P: 02 8252 6100 F: 02 8252 6199 e: W:

Horizon Power A: stovehill Road, Karratha WA 6714 P: 08 9159 7250 F: 08 9159 7288 e: W:

IBM Australia A: 601 Pacific Highway, st Leonards nsW 2065 P: 02 9397 8814 e: W:




siemens Ltd A: 885 Mountain Highway, Bayswater Vic 3153 P: 137 222

F: 1300 360 222

e: W:

sMeC Australia A: 76 Berry street, north sydney nsW 2060 P: 02 9925 5555 F: 02 9925 5564 e: W:

suntech Power Australia Pty Ltd A: 82-86 Bay st, Botany nsW 2019 P: 02 9695 8180 F: 02 9316 5270 e: W:

toshiba International Corporation A: 2 Morton street, Parramatta nsW 2150 P: 02 9768 6600 F: 02 9890 7542 e: W:

transGrid A: Level 9, 201 elizabeth street, sydney nsW 2000 P: 02 9284 3000 or toll free 1800 222 537 e: W:

F: 02 9284 3456


Institute for Mineral and energy Resources Institute for Mineral and Energy Resources

A: the University of Adelaide, sA 5005 P: 08 8313 1448 e: W:

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: W:

western power A: 363 Wellington street, Perth WA 6000 P: (08) 13 10 87 e: W:

WILson tRAnsFoRMeR CoMPAny Pty Ltd A: 310 springvale Road, Glen Waverley Vic 3150 P: 03 9560 0411 F: 03 9560 0499 e: W:




index A ABARE, 42 Acciona Energy, 86 ACIL Tasman, 27 AECOM, 66 aeroderivative gas turbines, 32–33 aged assets, 22 AGL Energy, 22 Bogong Hydro Power Project, 10 customer hardship programs, 55 air-conditioning impact on energy consumption, 66, 75 APPEA, 83 Areva Solar, 90 Ausgrid, 16 Ausra, 90 Australia Pacific Liquefied Natural Gas (APLNG), 43 Australian Bureau of Statistics, 65 Australian Coal Association, 11 Australian Energy Market Commission, 86 Australian Energy Market Commission (AEMC), 28 Australian Energy Market Operator, 15, 23, 65 Australian Energy Regulator, 22, 66 Australian Industry Group (AIG), 28 Australian National University, 28 Australian Petroleum Exploration & Production Association, 75, 81

B Baker & McKenzie, 86 Barnett, Colin, 73 base-load plants, new, 40 Bass Strait, 66 Bayswater B environmental assessments, 66 black coal, 11 Bogong Hydro Power Project, 10, 62 Boorowa River Recovery program, 71 BP Solar, 89 brown coal projects, 22 Bureau of Agricultural & Resource Economics and Sciences, 60

C carbon capture storage (CCS), 11, 38 British commercial scale projects, 39 pricing, 47 Carbon Pollution Reduction Scheme (CPRS), 35 carbon price announcement of, 35 impact on base-load generation, 82 impact on refinancing projects, 22 impact on vertically-integrated businesses, 20 Centre for Climate Economics and Politics, 28 Chamber of Mines and Energy, 76 Chernobyl, 49 clean coal technology development, 47 Clean Energy Council, 42 CLFR technology, 89, 90 CO2CRC Otway Project, 11 coal power conventional plants, 66 share of electricity generation by 2030, 60

coal seam methane deposits, 83 COAL21 Fund, 11 coal-fired power stations, 22, 89 Cobbora mine, 20 Collier, Peter, 73, 77 combined-cycle gas turbine (CCGT) generation, 40 carbon footprint and pricing, 45–46 investment in, 23 Committee for the Economic Development of Australia, 77 compact linear fresnel reflector (CLRF) technology, 89, 90 concentrating solar power (CSP) collectors, 61 Contact Energy, 32 conventional organic rankine cycle technology, 35 Cooper Basin, 66, 83 CopperString transmission link, 23 Council of Australian Governments, 28 Crawford School of Economics and Government, 28 CS Energy, 22 Kogan Creek power station, 89 CSIRO, 42, 60, 61

D Deloitte, 22 Delta Electricity, 20, 65, 66 Denmark and wind generation, 85 Department of Climate Change, 61 distribution systems capital expenditures, 20 Western Australia, 75 Doan, Thao, Dr, 53, 54 Docking, James, 34 Domanski, Roman, 28 domestic energy markets reform, 14 DomGas Alliance, 75 Dow Jones Sustainability World Index 2010/11, 10 Dynamic Ratings, 93

E east coast energy market, 19, 65 green hubs, 23 residential growth and demand, 94 Ecogen 2010 Clean Energy Awards, 10 electricity supply impact of politics on, 9 end-user power bills, 28, 66 Energex, 17 Energy 2031, 73 energy markets distortions, 36, 38 energy power industry media coverage, 22, 28 political impact on, 36, 66 private investment prospects, 36 privatisation of, 66–68 energy pricing poor households priced out, 53–55 Energy Retailers Association, 30 energy security issues, 36 Energy Supply Association of Australia (ESAA), 30–31 energy usage increase in households, 13–14


Energy Users Association of Australia, 28, 30 Energy White Paper, 9, 15, 35–39, 40 Engineers Australia, 77 Eraring Energy, 20, 65, 66 ETSA Utilities, 22 Eyre Peninsula, 23, 85–86 drawbacks for development, 87

F fault current limiters, 93 federal government Energy White Paper, 9, 15 greenhouse gas emissions target, 61 market-friendly policies for energy mix, 15 projected capital expenditure on energy resources, 6, 19 renewable energy target (RET), 60, 61 Smart Grid, Smart City program, 16 Solar Flagships program, 60, 89 solar investment support, 23 Ferguson, Martin, 13–15, 35, 90 Fitch Ratings, 20, 22, 66, 85 Fotowatio Renewable Ventures, 89 FTSE4Good Index, 10 fuel poverty, 53–54 alleviating, 55 Fukushima Daiichi power plant, 36, 49 accident, 8, 45 Future Energy Alliance, 79

G gas hybrid power stations, 89 gas power, 81–83 carbon footprint, 82 interrelationship with wind power, 83 rise in electricity generation, 81 share of electricity generation by 2030, 60 gas reserves, 83 gas supply industries capital expenditures, 20 GE, 32–33 Gentrack, 34 Gentrack Velocity, 34 Geoscience Australia, 60 geothermal energy, 51 pricing, 46 role in 2030 electricity supply chain, 6 TeMihi project (NZ), 63 Gillard government’s position on nuclear power, 47 Global CCS Institute, 47 Gorgon LNG Project, 11 Goss, Wayne, 19 Government Trading Enterprise, 50 GRANEX, 35 Granite Power, 35 green grid, 87 GreenGrid, 71 Greening Australia, 71 Greiner, Nick, 19 GridON, 93

H Hartcher, Chris, 89 Hazelwood power station, 8, 61 Horizon Power, 50 households feed-in tariffs for solar power, 60 history of energy usage in, 13–14 low-income households and access to electricity, 53–55 Western Australian energy consumption, 75 hydro power, 51 Bogong Hydro Power Project, 10, 62 share of electricity generation by 2030, 60 hydro-electric power stations, 23

I IBM, 25 Independent Market Operator, 76 Independent Pricing & Regulatory Tribunal, 55 Institute for Mineral and Energy Resource, 78 intelligent utility systems, 25 interim technologies, 46 International Energy Agency, 15, 30, 49, 60 investors and lack of clear market signals, 40

K Keating, Paul, 19 Kikiwa substation, 43 Kina Biopower, 51 King, Grant, 81, 82 Knox, David, 82 Kogan Creek power station, 22, 89

L Lake Cargelligo solar thermal plant, 51 Lihir Gold, 51 lobby groups, 30 low-cost electricity, 19, 53 low-income households electricity usage, 53–54 unaffordable electricity pricing, 53 Loy Yang Power, 39, 42

M Macquarie Bank, 69, 86 Macquarie Capital Advisers, 86 Macquarie Generation, 20, 41, 65 McCallum, Mark, 83 mDATA21, 34 media coverage of energy industry, 22, 28 meter data management software, 34 Minister for Resources and Energy, 13–15, 35 Ministerial Council on Energy, 28 Monbiot, George, 49




N Nahan, Mike, Dr, 75 national decarbonisation policy impact on state energy generation, 68–69 national demand and supply states with majority, 9 National Electricity Law, 30 National Electricity Market, 14–15, 19, 70, 87 infrastructure, 27 objectives of, 28, 30 reforms within, 28, 31 National Generators Forum, 28, 31 national greenhouse gas emissions reduction target, 8 natural gas Western Australian dependence on, 74 Nelson, Tim, 53, 54 network sector capital expenditure main reasons for, 20, 22 New South Wales 1970s energy requirements, 53 Cobbora mine, 20 forms of base-load projects, 65, 68 gas-fired power stations, 83 impact of national decarbonisation policy, 68–69 Keneally government, 60, 66 Moree solar photovoltaic development, 89 new base-load projects, 65 O’Farrell government, 60, 65 peak demand period, 66 power consumption, 66 privatisation of energy industry, 66, 68 QNI interconnector, 65 state-owned generation businesses, 65 state-owned generators, 20 subsidised rooftop solar power scheme, 66 New Zealand geothermal developments, 63 wind farm projects, 43 nuclear power accidents, 8, 36, 43, 49 nuclear power plants, 47, 49 arguments for, 49 global projects under construction, 47

O O’Farrell government, 60 open-cycle gas turbine (OCGT) generation, 36 investment in, 23 Orchison, Keith, 6–9 Origin Energy, 66, 86 offshore joint ventures, 23 Owen Inquiry, 65

P Pacific Hydro, 86, 89 Papua New Guinea joint venture projects, 23 Parkinson, Martin, 61 peak demand, meeting, 66 peak demand pricing, 14, 54 Port Jackson Partners, 19 Porter, Christian, 77

power energy industry smart billing systems, 34 privatisation of energy industry, 66, 68 Purani River hydro-electric power station (Papua New Guinea), 23

Q Queensland 1970s energy requirements, 53 Chinchilla solar photovoltaic development, 89 future renewable energy projects, 23 post-flood power restoration process, 17 QNI interconnector, 65 Solar Flagships program, 89 state-owned generation sectors, 22

R Rann, Mike, 85, 87 renewable energy least competitive options, 40 renewable energy growth market, 43, 51

S SA Green Grid, 87 Saddler, Hugh, Dr, 28, 30 Santos, 82 Shi, Zhengrong, Dr, 56 Siemens Picture the Future research, 42–43 Simshauser, Paul, Dr, 28, 31, 53, 54, 55, 66 single-staged pumped turbines, 62 Smart Grid, Smart City program, 16 smart grids, 43 smart meters, 19 Smart Utilities Australia and New Zealand 2011, 25 SMEC, 51 Snowy Mountains Hydroelectric Scheme, 51 Solar Dawn solar thermal power station, 89 Solar Flagships program, 60, 89 Solar Heat & Power, 90 solar power, 51 challenges for, 60 concentrating solar power (CSP), 61 federal government schemes, 60 feed-in tariffs, 60, 66 as interim solution, 46 joint ventures, 90 Moree solar photovoltaic development, 89 photovoltaic development, 56–57 role in 2030 electricity supply chain, 6 rooftop solar photovoltaics (PVs), 56–57 share of electricity generation by 2030, 60 subsidised rooftop solar power scheme, 66 viability of, 56–57 Son La Hydro Power Plant, 51 South Australia mineral and energy resources expansion, 78 natural gas supplies, 66, 83 power blackouts, 22


power distribution services, 22 SA Green Grid consortium, 86–87 wind power generation, 85 South West Interconnected System (SWIS), 79 spot market prices, 30–31 Stanwell Corporation, 22, 53 Stratford Power Station (NZ), 32 Suntech, 56–57 Synergy, 76

T Tarong Energy, 22 Tasmania Basslink project, 23 Te Uku Wind Farm, 43 The Boomerang Paradox, 53 time-of-use pricing, 14 TJ|H2b Analytical Services, 93 Toshiba International Corporation, 62–63 Transfield Services, 86 TransGrid, 65, 68, 70–71 transmission network capital expenditure, 27 Western Australia, 75 transmission network service providers, 70–71 TRUenergy, 66

U United Kingdom commercial scale CCS projects, 39 United Nations South Africa summit, 8 University of Adelaide, 78 utility-scale developments, 61 challenges for, 60


V vertically-integrated energy business expenditure on renewable energy, 20 Verve Energy, 76 Vestas Asia Pacific, 92 Victoria emissions targets, 36 merchant generators, 22

W WA Legislative Assembly Economics and Industry, 75 Western Australia, 73–75 carbon capture storage (CCS) projects, 11 peak demand period, 75 Perth Solar city program, 79 regional and remote power supplier, 50 regulatory and pricing structures, 77 reliance on natural gas, 74 state government’s Energy 2031 paper, 73, 79 Western Power, 78 Wilson, Jack, 93 Wilson, Robert, 93 Wilson Transformer Company, 93 wind farm development, 66 wind farm generation investment in, 22–23 wind power Eyre Peninsula, 85–86 interrelationship with gas power, 83 reliability of supply, 83 share of electricity generation by 2030, 60 South Australian investment in, 85 Wind Prospect CWR, 90 Worley Parsons, 86

photo credits Cover 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; 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



ABoUt tHe AUtHoRs KeItH oRCHIson Keith orchison was managing director of the electricity supply Association of Australia from 1991 to 2003 and, before that,

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notes: Includes index

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.



APIA • Australian Power Institute • Clean Energy Council Energy Networks Association • ERAA • NGF • ESAA Cover Photography: Caroline Foldes

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Powering Australia: Navigating a new electricity supply era  
Powering Australia: Navigating a new electricity supply era  

Policy makers are seeking to launch a step-change in electricity supply and consumption in Australia. The federal government plans to reduce...