NewGen Power and Rick Stowe's Griffin Energy have signed long-term electricity supply contracts with state-owned retailer Synergy, paving the way for major new gas and coal-fired power stations to proceed.
NewGen Power and Rick Stowe's Griffin Energy have signed long-term electricity supply contracts with state-owned retailer Synergy, paving the way for major new gas and coal-fired power stations to proceed.
NewGen, a joint venture between Queensland company ERM Power and investment group Babcock & Brown, is planning to build a 330 megawatt gas-fired plant at Neerabup north of Wanneroo once it obtains environmental and other approvals.
This follows its construction, currently underway, of a 320MW gas-fired plant at Kwinana.
Griffin will use its new 15-year contract to underwrite the construction of its 200MW Bluewaters 2 coal-fired power station at Collie.
It was chosen after a competitive tender process. Synergy had originally sought 400MW of supply, but has rolled over 200MW to next year.The agreement with Griffin will replace 200MW of state-owned generator Verve's vesting contract.
Synergy said the 20-year NewGen contract was secured separate from its tender.
"We will soon be going back to the market seeking more expressions of interest for additional supplies of renewable energy, as well as conventional energy," Synergy chief executive Jim Mitchell said.
Griffin is well placed to win future supply contracts, with its abundant supply of coal, and has already commenced planning for a third 200MW unit at its Bluewaters power station.
In contrast, the gas market has been squeezed over the past two years, with prices tripling and long-term contracts nearly impossible to secure, which means gas-fired plants will in future struggle to be competitive.
NewGen was an exception because it secured long-term gas supplies more than two years ago, before the market tightened.
Griffin Energy Executive General Manager Power Generation, Wayne Trumble, said construction of Bluewaters Phase 1 was well advanced, and was due to come online in 2008 to power the massive new Boddington Gold Mine.
Construction of Bluewaters Phase 2 began earlier this year, after all required approvals were received.
The Bluewaters Project will achieve a number of environmental benchmarks during construction and operation, including the development of a Greenhouse Abatement Plan and joining the Federal Government Greenhouse Challenge, Griffin said in a statement.
Energy minister Francis Logan said energy supplies under the new contracts were expected to come online in 2009.
"Increasing competition and diversity in the electricity market is a key outcome of the State Government's electricity reforms, underpinned by the disaggregation of the former Western Power Corporation," he said.
The Bluewaters 2 plant gained environmental approval in January 2006 and the Neerabup plant is currently undergoing environmental assessment.
Mr Logan said the contract to purchase energy from the Bluewaters 2 plant demonstrated that coal was still part of WA's energy mix.
"There are two fundamental requirements driving our energy supply," he said.
"The first is to keep the lights on. We must make sure there is enough electricity in the market to meet demand.
"The second is to make sure the future cost of energy is sustainable, balancing the interests of the environment, the economy and consumers.
"While coal will continue to play a role in helping us achieve these two objectives, the Carpenter government is committed to increasing renewable energy generation in WA.
"Renewable energy generation on the main electricity network has increased from one to five percent since 2005, and we have committed to increase this to 15 percent by 2020.
"We have companies exploring the commercialisation of wave power, we've opened-up areas of the state for geothermal energy exploration, we've invested in exciting technology using mallee trees to produce electricity, and new-technology solar-diesel plants are under consideration for remote areas of the state."
Mr Logan said he was pleased at how the electricity sector had met the challenges of electricity reform and increased private sector participation in the market.
He said the next major challenge for the electricity sector in WA would be responding to new climate change initiatives flowing from the election of the federal Rudd labor government and the ratifying of the Kyoto Protocol.
"The electricity sector will need to quickly come to terms with substantial renewable energy targets and emissions trading," he said.
"We are at a transition point. I expect that all future power station developments brought to Government for approval will need to deal with the realities of an emissions trading scheme."
The minister said tackling climate change would also mean changes for electricity consumers, as higher costs of low emissions electricity would ultimately be passed on to customers.
He said the Carpenter government would work closely with the federal government to usher in a new nation-wide approach to clean energy.
A total of 12 new power stations have been committed to be built since Labor came to power in Western Australia in 200. Seven of the 12 are already in operation.
"Of the 12 plants committed since 2001, 11 are privately owned. In terms of energy source, seven of the 12 are powered by gas or gas-and-oil, two by wind, two by coal, and one by biomass (forest waste products).
"In total, they will add 2390MW of power to WA's electricity grid, offset by the retirement of the 240MW coal-fired Muja A&B plant at Collie. The new Bluewaters 2 plant will emit about 30 per cent less greenhouse gases than Muja A&B."
The 240MW Kwinana B gas-and-oil plant is due to be retired in 2008 and the 240MW Kwinana A coal/gas/oil plant in 2010.
