A WESTERN Australian Government plan to make its agencies put their electricity needs out to tender has boosted the vision of greater competition in WA’s power market.
Instead of having to sell their power to State-owned dominant electricity utility Western Power, independent power producers will now have a customer that needs about 120 megawatts, worth $50 million a year.
The proposal also opens the door for the expansion of the renewable energy market, which has been looking for just such a customer to come along.
The Water Corporation is excluded from the proposal. It has put out a tender for a 25 megawatt load for its desalination plant to be built near Kwinana.
That contract, while about one quarter of the size of the whole of Government contract, has been estimated to be about one eighth of the value, equating to $12.5 million.
Treasury, the agency that will be handling the whole of Government purchase, is not likely to be buying its electricity from one source and Western Power will be tendering too.
Western Power CEO Tony Iannello has confirmed that the utility will be competing for the business.
“Western Power is keen to retain the Government business provided it’s at the right commercial terms,” Mr Iannello said.
“If Western Power loses the account there will be some reduction of profit.”
Such a reduction of profit would also equate to a reduction in the dividend Western Power pays to Government.
In 2003-04 that dividend was worth $121 million. However, it is forecast to decrease due to increased competition from IPPs, capacity constraints on the Dampier to Bunbury Natural Gas Pipe-line and its expenditure on network maintenance.
The utility has budgeted $250 million for network maintenance and upgrades this financial year, the bulk to be spent in the lead up to summer.
Major independent power players Alinta and Perth Energy have also indicated an interest in bidding for the Government’s business.
Alinta is in the process of building its first 140MW cogeneration plant at Alcoa’s Pinjarra refinery and is close to getting the go ahead to start work on a second unit there.
It is also building a 90MW windfarm near Geraldton.
An Alinta spokesman said the bulk of the power from the first unit had been pre-sold.
Perth Energy has environmental approval to build a 120MW gas-fired plant at Kwinana but is better known as a retailer to other IPPs, including the renewable sector.
It has also expressed an interest in the Water Corporation power project.
The Government’s proposal is something Sustainable Energy Industry Association chief Matthew Rosser has been calling on the Government to do for several years.
He said the size of the Government contract could make it easier for a renewable energy project to gain finance.
The Government has committed to buy 5 per cent of its power from renewable sources but Mr Rosser hopes it will buy considerably more.
On the 5 per cent basis that would equate to a total load of 6MW and a value of $2.5 million.
There is already some renewable capacity on the grid. Besides Alinta’s 90MW windfarm, there is the 80MW Stanwell and Griffin windfarm planned for Emu Downs, which has an agreement to sell its electricity to Western Power, and Western Power’s own 21 megawatt Albany windfarm.
Also in the pipeline is the 10 megawatt chicken litter burning Blair Fox project for Muchea.
