Martin Ferguson launches Powering Australia Vol 5
Monday, 17 October 2011 14:06
Launching the 2011 Powering Australia yearbook in Melbourne at the end of September, Federal Resources & Energy Minister Martin Ferguson highlighted,among other issues, the importance of gas as the power generation transition fuel to enable a move away from coal-fired supply.
He pointed out that gas-fuelled generation is now forecast to account for more than a third of national electricity supply by the end of this decade, beyond double its standing in the mix today.
Also speaking at the Powering Australia conference, Port Jackson Partners consultant Edwin O’Young noted that current gas costs for baseload generation in the east coast market stand at about $3.50 to $4 per gigajoule, but, because of the influence of the Queensland LNG projects, could rise by up to $4/GJ or possibley more during this decade.
Already, he said, independent power producers in Queensland are finding that they are unable to contract gas for much more than two or three years and that supplier price expectations are substantially above historic levels.
He presented modelling showing that gas prices in Queensland could exceed $8/GJ by 2015 and warned that a $4 rise could add $28 per megawatt hour to the wholesale price for gas-fired power production – and this before the impact of the carbon price is included.
(To see this in context, the average wholesale spot price for electricity in the east coast is $27/MWh.)
This is also a period where black coal prices are expected to rise as present mining contracts with generators start to expire.
O’Young foresees east electricity prices doubling between 2011 and 2017 – after a 35 per cent increase in inflation-adjusted terms over the past four years – as a result of higher wholesale prices, still further rises in network costs, the carbon price, the costs imposed as the Renewable Energy Target moved towards its 2020 goal and higher retail costs and margins.
He told the Powering Australia audience that residential electricity bills which stood at 16 cents per kilowatt hour in 2007 could reach 36.3c/kWh by 2017.
The conference also heard from Cameron O’Reilly, chief executive of the Energy Retailers Association, that one of his members’ biggest concerns is the unwillingness of State and Territory governments, other than in Victoria, to allow the full electricity price signal to reach consumers.
O’Reilly pointed out that South Australia and the ACT had both baulked this year at recommendations from the Australian Energy Market Commission to deregulate power prices. The AEMC is to consider the New South Wales retail market in the new year.
Meanwhile Clare Petre, the NSW Energy & Water Ombudsman, told the conference that, with fuel and power bills now making up 2.6 per cent of residential budgets across Australia, “fuel stress” is increasingly becoming a problem for many households, especially those on limited incomes.
“We need a national debate on this issue and on the most cost-effective way of delivering assistance,” she said.
While this is no more than a snapshot of the wide-ranging presentations and discussions at the conference, it serves to highlight the fact that, beyond the current parliamentary debate on carbon pricing, there are a raft of issues that will continue to keep electricity supply high on the political agenda and in the media spotlight.
While prices are often the most headline-grabbing aspects of the energy market, as Martin Ferguson noted at the conference, they are only part of the supply equation.
There are indeed no easy fixes and the task of getting the balance right between continuity, cost and carbon is getting harder, not easier.