Removal of the fuel oil excise tax exemption in Australia is set to dramatically increase the cost of generating electricity in remote areas of the vast country -- opening up the way for cheaper renewables. The cost of other sources could increase by as much as 40%.

Regional power authorities in Western Australia are now considering wind power "everywhere," according to Western Power which operates both a diesel grid and the country's only wind farm at Esperance. Here the cost of diesel power is set to rise from A$0.085/kWh to over A$0.14/kWh. The cost of power from the 2 MW Ten Mile Lagoon wind farm, however, is currently A$0.11/kWh. This will drop, too, because wind power costs are calculated against displaced diesel fuel savings, according to the utility.

Western Power's Michael Carr says the removal of the fuel tax exemption has meant wind is more economically attractive at 19 of Western Australia's 28 remote power grids. The key to integrating wind at these sites and extending its penetration, however, is not to focus on capacity but to maximise the energy into the system while finding a balance between real and reactive power. "The deciding factor is the minimum loading on diesel engines," he says, adding that wind penetration at the Esperance grid has recently been increased to 40% -- a figure he still terms "conservative." Carr also emphasises Western Power's aim "not to just stick another wind turbine somewhere," but to optimise remote systems where wind turbines are an integral part and "not just a second class citizen for the diesel."

The Ten Mile wind farm is supplying about 10% of the town's electricity and has saved over two million litres of fuel oil in the thirteen months of operation. Capacity factors have ranged from 24% to over 40% in high wind months.

Removal of the fuel oil subsidy has changed the face of the industry, says Western Power, though people have been slow to realise it. "We will be installing wind power at all remote grids with suitable sites," states the utility.

Western Power is also planning to install a new wind turbine in the Denham area in the south of the state as part of a wind/diesel system with battery storage. The system is being designed to hold the spinning reserve in the battery to increase wind penetration to 60% and perhaps to as high as 100%. Western Power hopes to do this by installing about three minutes of battery storage to allow additional diesel engines to start if electricity from wind is insufficient. Smart controllers would accurately predict wind power and electricity loads.