Power industry calls for $10b investment

Sydney Morning Herald
Wednesday 27/2/2008 Page: 4

AUSTRALIA'S electricity consumption is rising at double the expected rate, leading the power industry to call for up to $100 billion to be invested in new electricity generation and efforts to cut greenhouse gas emissions. Household energy prices, already rising steeply because of the effects of the drought on water supplies, are expected to spiral higher as a carbon trading scheme starts operating in 2010.

A new report produced for the industry, Powering Australia, warns that if the nation's power stations are forced to employ clean coal technology, the cost of wholesale electricity could rise by half and bills for consumers by a quarter. In NSW, household energy bills are already expected to rise by up to a quarter by 2010 as the state fund established to protect consumers is phased out.

Power retailers across NSW say they cannot afford to offer customers binding contracts because they cannot compete with the lower rate set by the Independent Pricing and Regulatory Tribunal. The number of people committing to contracts is dwindling. An EnergyAustralia spokesman said only "about two people" of the thousands of customers offered energy agreements to take up once their existing agreements expire had done so. "We're saying that if you want to remain a contract customer, here's what we can offer. However, if you want a much better deal you can go on to standard supply rates," the spokesman said.

EnergyAustralia is offering customers electricity at between 18 and 26 cents a kilowatt hour on its energy contracts, because of the volatile wholesale industry price, while standard supply agreements offer electricity at between 12 and 18 cents a kilowatt hour. A spokeswoman for Integral Energy, another major supplier, said the trend was national. "Costs in the industry have nowhere to go but up," said Brad Page, chief executive of the Energy Supply Association of Australia. "But we don't think it has to be all bleak for consumers.

There are opportunities to use energy more wisely." Mr Page, whose organisation represents 40 electricity and gas supply businesses, said some in the industry expected wholesale prices to jump 20 per cent as soon as a national emissions trading scheme is introduced. Powering Australia, produced by the National Generators Forum, says greenhouse gas producing fossil fuels power 93 per cent of the Australian economy, most of it created by burning black and brown coal.

If the demand for power continues at the current rate without clean technology, greenhouse gas emissions from power stations will rise by almost half by 2030, it says. The report poses difficult questions for the federal Minister for Climate Change, Penny Wong, who on Monday released greenhouse gas projections, arguing that Labor's policies would substantially reduce emissions from electricity by 2020.

The new figures rely heavily on power industry players investing in renewable energy because of Labor's target of 20 per cent mandatory renewable energy. The figures also rely on a substantial jump in energy efficiency. Even so, on Senator Wong's figures Australian emissions will rise 20 per cent by 2020. In the new climate negotiations, Europe is asking Australia to cut its emissions 20 per cent by 2020. The National Generators Forum argues that efforts by the Government to cut emissions too quickly could incur major costs including "closure of power stations and rises in power prices."