Electricity industry in the dark

Age
Thursday 8/2/2007 Page: 3

THE power industry has welcomed the release of the Prime Minister's issues paper on carbon trading, even though the sector stands to bear the heaviest burden from the introduction of a price on carbon.

The Federal Government's Task Group said the size of Australia's greenhouse gas abatement task was "significant" in large part because the economy was increasingly dependent on electricity-powered technologies, a trend that will double power demand by 2050 on present trends.

Companies in the electricity sector, which counts $110 billion in assets of plants and distribution networks, say they need a clearer signal about the potential risk they face in the form of costs for carbon emissions if new investments are to proceed.

"The sooner we get a comfort about medium to long-term carbon abatement measures, especially for our sector, the more rational investment decisions will become," said Brad Page, chief executive of industry group Energy Supply Association of Australia.

Origin Energy, for instance, is considering whether to invest about $1 billion in a new gasfired power station in Mortlake, in Victoria's west, the first baseload plant not to burn more emissions -intensive coal.

"It's absolutely the sort of investment impacted by this process," said Tony Wood, general manager for public and government affairs at Origin. "Unless we start to put a price on carbon, we're not going to get the investment we need in lower emissions technology." ESAA estimates at least $35 billion of new investment will be needed in electricity by 2030 - even without any new so-called carbon constraint.

The Task Group will be looking at how Australia can make substantive reductions in emissions while maintaining the country's economic comparative advantages, some of which was derived from cheap power.

Ric Brazzale, executive director of the Business Council for Sustainable Energy, says Australia's abundance of low-carbon natural gas, and renewable energy sources such as wind and solar power, means embracing climate change will entrench its advantages. "Show me any other country, developed or otherwise, that's got the clean energy resources that we have," he said, adding that Australia also has 40 per cent of the world's uranium.

The Task Group will consider whether setting up an emissions trading system may be needed as a precursor to establishing a "workable" global scheme. The Task Group will take sub - missions until March 7, and report to Prime Minister John Howard by May 31. It is a timetable Andrew Petersen, climate change services leader at PricewaterhouseCoopers, describes as "aggressive" and one likely to jolt many companies to review their carbon risk.

www.bcse.org.au

Key Points:

• Power companies want some idea of the risks before investing in new equipment.
• At least $35 billion of new investment will be needed in power generation by 2030.