THE state government has established a working group to review energy infrastructure options in the Mid West after its surprise decision to defer the upgrade of the transmission line to Geraldton.
THE state government has established a working group to review energy infrastructure options in the Mid West after its surprise decision to defer the upgrade of the transmission line to Geraldton.
The decision has created uncertainty about the region's development and opened the possibility that the government may opt for a new power station near Geraldton.
"The most logical one of course is to actually look at power generation stationed in Geraldton," Energy Minister Peter Collier said.
Mr Collier said a cost blowout, from $295 million to nearly $700 million, lay behind the deferral.
"We're simply not abandoning it, we're reassessing the line and having a look at the alternatives," he said.
"If we'd known the cost of the line initially we wouldn't have been faced with this situation where we've had to create even more uncertainty for the people in the Mid West."
The deferral of the power upgrade follows state and federal government funding commitments to the Oakajee port, which is designed to support new mining projects.
The working group will deliver its findings to Mr Collier at the end of June.
Concern over the cost of the upgrade was raised by Griffin Energy in June last year.
In an Economic Regulation Authority submission, Griffin expressed concern that the $295 million cost estimate seemed inadequate for a project of this scale.
"Evidently the original submission was wildly inaccurate and that's a cause for concern, the fact that it has increased 134 per cent is also a cause for concern," Mr Collier said.
The proposed 330kv line from Pinjar to Geraldton is said to be critical for the Mid West, as the current 220kv line cannot meet the long-term needs of new mining and power generation developments in the region.
Aviva Corporation, Eneabba Gas and several wind and solar power projects are being planned for the region, on the premise they could link into an integrated transmission network.
Aviva chief executive Lindsay Reed said while the $1.3 billion Coolimba power project was not dependent on the power line within the next two years, Aviva needed a commitment from the government to proceed.
"We can withstand a delay of two years, but what we do need is a commitment in order for us to get our funding," Mr Reed said.
"We have to have a power purchase agreement, and for us to have a power purchase agreement we have to contract the connection, and without commitment to the powerline it's very difficult to contract the connection."
Other projects which could be affected include Gindalbie Metals' Karara and Asia Iron's Extension Hill magnetite iron ore projects, which require high energy levels to operate their iron ore concentrators.
Gindalbie signed a 15-year power supply deal with Verve Energy in 2007 and since then has been negotiating with Western Power over transmission line upgrades.
Investors reacted by pushing Gindalbie's share price 11 per cent lower in the first two days following the government's announcement, before bouncing back 4 per cent on Tuesday.
Gindalbie chief executive Garret Dixon said in an Open Briefing interview the deferral would have not affect the timing of the Karara project, which is a joint venture with Chinese steel manufacturer Ansteel.
Gindalbie plans to build a 330kv line from Karara to Eneabba, which will enable the project to increase capacity to 30mtpa.
"Our current plans for that 330kv line still remain and we will simply connect into the power grid at Eneabba," Mr Dixon said.
"The existing power grid should be able to provide all the power we need for our 10mtpa start-up, although we may need to look at having some temporary additional generation on site to cater for periods of high demand from the power grid."
