Climate for gas in $750m power bid

Australian
Wednesday 28/5/2008 Page: 4

A QUEENSLAND company plans to build and operate NSW's largest gas-fired power station, with fuel for the facility to be delivered along the first gas pipeline linking the states. The plan to build the state's first base-load, or continuously operating, power station in 15 years, at a cost of $750 million, has been sold by Premier Morris Iemma as a vote of confidence by the private sector in his efforts to privatise the state's electricity industry.

It will be built by the Queensland Gas Company in the Hunter Valley, north of Sydney, and will be the state's first gas-fired baseload facility, signalling a shift in the relative cost of electricity produced from coal and gas as Australia moves towards an emissions trading system by 2010.

A group of Hunter-based business figures plans to raise $850 million to build an 820km pipeline from the Hunter Valley to QGC's coal-seam gas fields in the Surat Basin in southern Queensland. QGC managing director Richard Coffee yesterday said the company would conduct a feasibility study for the power station, which would come on line in 2012, with its joint venture partners, ANZ Infrastructure and Toyota Tsusho Corporation.

Company sources said the project was almost certain to proceed, with a final announcement expected this year. Mr lemma said the proposal justified his controversial plan to remove the Government from the electricity industry by leasing out the three state-owned generators and selling off the three state owned retail companies. "This project would also promote the provision of cleaner, greener power, and provide a welcome boost to the state's energy security," he said.

He said the new station was not "the beginning of the end" for coal fired power, but showed that "coal has to get its act together to find ways of burning coal cleaner." Mr lemma's union-led opponents, who comfortably defeated his electricity proposal at Labor's state conference this month, have argued there is no guarantee a sell-off would encourage private investment in the extra capacity needed by the middle of the next decade.

The new power station, with a capacity of up to 600 megawatts, would deliver up to a third of the required extra power, supplying electricity to between 320,000 and 500,000 homes. Mr Cottee confirmed the feasibility of the station relied on the new imperatives of a carbon trading economy and Mr lemma's reform proposal. The fear had been that the Government would favour its own companies over the private sector or produce power for below the cost of supply to preserve jobs.

"A base-load gas-fired power station puts out only 40 per cent of the carbon dioxide of a coalfired station," Mr Cottee said. "The announcement of the Premier on electricity reform indicated that NSW was open for business and for private sector investment in baseload power stations. Before this debate occurred, we were concerned about the stranglehold the government owned corporations had."

He said the station would show "the divine right of king coal to be baseload is not a theological proposition, it's economic." Brad Page, from the Electricity Supply Association of Australia, said the QGC proposal indicated people were "starting to appreciate the role that gas can play in a carbon-constrained market." "It recognises that additional generation capacity will be required in the next decade against the background of climate change and growing energy demand in NSW," he said.

The NSW Government has promised to fast-track development approval for the power station and the pipeline. At the moment, the Moomba Pipeline and the Eastern Gas Pipeline link the Sydney basin to South Australia and Victoria, respectively, but there is no link to Queensland. Queensland Hunter Gas Pipeline chief Garbis Simonian said the QGC station would consume about a third of the capacity of the new pipeline, which would also offer distribution for "emerging coal-seam gas reserves in regional NSW, encouraging exploration and production along its route."