Securing the energy future of New South Wales

By Keith Orchison
(Written in December 2004)

Electricity is a very political commodity.
Ask the West Australian Government, which is still living on the political edge after the power supply fiasco of the ultra-hot 2003 summer season is repeated.

Ask Peter Beattie in Queensland, for whom summer blackouts and a running saga of consequent controversy (and tragedy) has brought the first real threat to his dominance in office.
Ask the last Liberal governments in Tasmania and South Australia, for whom inability to manage electricity policy helped bring defeat at the polls.

Now the NSW Government is set to produce an energy white paper and this will serve to highlight yet another area of infrastructure management challenge.

Apart from the brawl in the late 1990s with the trade union movement over power privatisation, which he and Treasurer Michael Egan lost hands down, Carr has managed through most of his term in office to keep electricity supply issues out of the media headlines, notwithstanding occasional outbreaks of criticism over localised system failures and the tabloid mutterings over even small increases in charges.

Indeed, by playing the green card as often as possible, he has even turned power issues in to something of a political plus -- attacking the Howard Government over its refusal to embrace the Kyoto Protocol. In a State that actually has less electricity generation capacity now than five years ago, he has even managed to make a virtue out of preventing a power station being built: the Redbank plant extension being rejected because of a high carbon dioxide emissions profile.

But Carr is running a "watermelon" government -- green on the outside and red on the inside from burning coal, and realistically has no cost-effective generation options for a State required to give serious attention to its power supply needs other than recourse to fossil fuels, coal or gas.

It is a characteristic of electricity supply politics that the issue tends to stay off the public's radar until a crisis occurs or looms -- either in terms of supply failures or price shocks. The California experience of 2000-01 and the Great Blackout of 13 August 2003 in North America (which affected 50 million people in the US and Canada as a result of high voltage transmission failure) are strong examples.

The NSW Government is challenged at several levels over power supply:

The biggest bind the Government is in is the tyranny of time. Electricity supply systems have long lives, but also take a long time to be built -- not least because the planning approvals system is very long-winded and quite uncertain.

The last detailed statement on electricity generation before the current policy paper was produced by the Carr Government in 2001. Paraphrased, it stated unambiguously: " Electricity demand in NSW is increasing rapidly. If this continues, the current over-supply of capacity will be diminished faster than expected." The ongoing growth in demand is well-documented, with peak consumption driven by residential and commercial use of air-conditioning and industrial consumption continuing to rise quite strongly.

Economic modelling undertaken for the Government indicated in 2001 that State power consumption in 2010-11 would be 37 percent higher than at the start of the decade.

Data provided by the Government's own advisers and operators also indicates that NSW will require about 17,000 megawatts of generation capacity by 2015. It has barely 12,000 MW today and is relying to an increasing extent on obtaining power supply from Queensland's coal-fired system. A new highly efficient, low greenhouse intensity, coal-fired baseload generator is needed along with gas-fired peaking capacity to deal with the high spikes in demand, which are becoming more frequent and larger every year.

The Government's own 2001 energy review stated that between 1,500 MW and 3,000 MW of new capacity is needed over a decade, with the first new plant in operation from July next year.

This is not a new situation for New South Wales. Failure to build much in the way of plant in the 1970s led to massive investment at Eraring and Bayswater in 1982-84 -- driven in part by anticipation of the "resources boom" that did not eventuate -- and saw a 43 percent increase in the bulk purchase price for Sydney County Council (the forerunner of EnergyAustralia) in a single year when the State was hit by a bout of power plant problems at Liddell.

The Carr Government energy white paper -- reportedly due in April 2005 -- is going to be an interesting document.

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