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Australia

Australia

Wholesale market delay adds to chaos

Australia's $12 billion electricity industry is going through a chaotic period. It started in February with a three day program of rolling blackouts in the northern state of Queensland, was followed by a decision to delay introduction of the national wholesale market from March 29 to May 24, and continued with an announcement by the governments of South Australian and Tasmanian that they will privatise their state electricity assets.

Wholesale market delay adds to chaos

Australia's $12 billion electricity industry is going through a chaotic period. It started in February with a three day program of rolling blackouts in the northern state of Queensland, was followed by a decision to delay introduction of the national wholesale market from March 29 to May 24, and continued with an announcement by the governments of South Australian and Tasmanian that they will privatise their state electricity assets.

The Queensland blackouts came after four of the state's biggest coal fired generation units failed during a period of hot, humid weather. Coincidentally, the city of Auckland in New Zealand was being blacked out by failed transmission cables at the same time. In Queensland, the blackouts affected all of the state's 2.5 million consumers, with the exception of the central business district in the capital of Brisbane.

Energy minister Tom Gilmour is trying to play down the events. The unlikely combination of four generators failing was "like winning Lotto and we managed to do that," he says in defence of the power industry. Nonetheless, Queensland's premier, Rob Borbidge, was eventually forced to apologise for the outages and subsequently announced a 5% reduction of electricity charges for commercial and business customers. Ironically, many of the businesses to receive the reductions are in the Brisbane business centre. Meantime, customers affected by the blackout are threatening to sue the government for compensation.

The power blackouts prompted environmental groups to criticise the state government for disbanding the state's successful Office of Energy Management and cancelling many of Queensland's energy information programs. The events of past weeks have also resurrected calls for speedy connection of the Queensland grid into the National Grid via a $400 million high-voltage transmission line.

Meanwhile in South Australia, the Conservative government broke an election promise by deciding to privatise the state's electricity assets. The sale is expected to reap AUS$5 billion from sale of the retailer, the Electricity Trust of South Australia (ETSA), and generator Optima, in a process which will take up to two years.

South Australia premier John Olsen says there are a number of sale options including a long term lease or a trade sale. Defending his decision, Olsen says: "It has always been my stated intention to retain ETSA and Optima, however, over the past few months the ramifications of the National Electricity Market to state government owners of power assets have become evident as the NEM becomes imminent." Olsen says if the assets are not sold, the risk to South Australian taxpayers could be in the order of between AUS$1-2 billion. The government says it can protect the rights of electricity users through the appointment of an industry regulator.

Privatisation rejected

South Australia has beaten the state of New South Wales to the privatisation punch after NSW's plan to sell off its AUS$20 billion of assets was rejected by trade unions. The state's treasurer, Michael Egad, says he will continue to push for the privatisation, though it seems the Queensland blackouts are galvanising the public against privatisation in NSW, which will force the government to wait until after the next election before trying again.

In the state of Tasmania, the government has decided to de-segregate the electricity authority, the Hydro Electric Corporation, into three separate businesses of generation, high-voltage transmission, and distribution/retail. The latter two businesses, which together generate revenues of about AUS$300 million a year, will then be sold. The manner of sale, whether by public flotation or by competitive bid, has not been decided.

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