Australia: Australia Electricity
2011/06/06
Australia Electricity
As of 2003, Australia had electric generating capacity equal to 47.1 gigawatts (GW). Approximately 75 percent was produced from coal with around 55 percent being black coal. Overall, Australia generated around 215.8 billion kilowatt-hours (Bkwh) of electricity in 2003. After accounting for the electricity used by the power plants and other losses, 200.7 Bkwh remained for consumption. The Energy Supply Association of Australia (ESAA) has predicted that consumption will grow in coming years, rising to 206 Bkwh by 2008. The majority of that growth will be concentrated in Queensland, NSW and Victoria.
Sector Organization
Prior to 1996, electric utilities were owned by state governments, but 1996 reforms privatized many state-owned utilities. Key to these reforms was the creation of the National Electricity Market (NEM), a wholesale “pool” operated by the National Electricity Market Management Company (NEMMCO). The NEM serves Queensland, New South Wales, Victoria, Southern Australia, and the Australian Capital Territory via an interconnected national electricity grid. Tasmania, Western Australia, and the Northern Territories are not members of the NEM, although Tasmania is expected to join in the next few months via the Basslink interconnector, a high voltage direct current (HVDC) submarine cable. In November 2002, the government of the state of Western Australia adopted its own plans for reforming its electricity sector by unbundling the state’s regulated utility, Western Power and establishing a wholesale power market in 2005.
Electricity prices fell approximately 11% between 1996 and 2000, with the majority of the savings going to large industrial/commercial customers. During 2000 and 2001, the NEM experienced a significant increase in price volatility arising from unusual temperature conditions and supply shortages. Retail competition was introduced to NSW and Victoria in January 2002. Due to overcapacity and strong competition, electricity prices have decreased since the states were combined into a two-state regional market, although prices have recently begun to rise as increasing demand reduces spare capacity. In Southern Australia, reforms have led to higher prices following the introduction of retail competition in January 2003. Queensland has indefinitely postponed introducing retail competition, a decision that could reflect the provincial government's reluctance to abdicate its control over the electric power sector.
Future Expansion
The NEM has been successful in encouraging new investment. Between 2000 and 2002, 3,300 megawatts (MW) of new generating capacity was added. Rapid growth in demand for electricity has nonetheless resulted in shrinking reserve margins in eastern Australia, a problem that could increase without sufficient investment in new generating capacity. The prospects for new foreign investment are questionable, however, as several US and UK companies with stakes in Australia’s generating assets have recently made plans to exit the industry.
Domestic Expansion
Australian Gas Light (AGL), the largest power retailer, has made plans to build a 370-MW power plant in the state of Queensland. The state has a liberalized power market, and AGL wishes to increase its generation capacity there with the new gas-fired plant. NEMMCO has warned that during peak demand times, Queensland may risk a power generation shortage by 2008-2009. AGL has indicated that it will have the plant in operation by 2009. In addition, this past October, AGL acquired Southern Hydro from Meridian Energy Limited. Southern Hyrdo has a total generating capacity of 736 MW and is the largest privately held, renewable energy company in Australia.
In conjunction with AGL’s project in Queensland, another gas-fired electricity plant is being developed by Babcock and Brown with the help of ERM Power. The Braemar project will provide 450 MW to Queensland during the summer season of 2006-2007, but will increase its generation in subsequent years. The Queensland government has required that 13 percent of electricity sold in-state must come from electricity generated by natural gas.
Renewable Energy
As of January 1, 2003, Australia had total installed renewable energy capacity of 1.2 gigawatts (GW). Australia’s Mandatory Renewable Energy Target (MRET) is set at 9.5 Bkwh of total electricity generation. Australia hopes to reach this target of electricity generation from renewable energy sources by 2010. Currently, there are numerous investments being made in the renewable energy sector across Australia. Babcock and Brown Wind Partners, AGL and Pacific Hydro are three of the most prominent companies currently investing in renewable energy in Australia.
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