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Electricity Generation
Major development projects – October 2008 listing
spacer As at the end of October 2008, there were 29 major electricity generation projects at an advanced stage of planning and development with a total generating capacity of 6285 megawatts and value of around $8.3 billion.

spacer There were a further 92 projects at a less advanced stage of planning.
ABARE’s list of major electricity generation development projects
ABARE has been compiling its biannual list of major minerals and energy projects for more than a decade. October 2008 is the first release of ABARE’s list of major electricity generation projects, which will be compiled every six months. Information contained in the list includes electricity generation projects based on coal, oil, natural gas, coal seam methane and renewable energy sources (solar, wind, hydro, biomass and wave). The information draws predominantly on publicly available sources but, in some cases, is supplemented by information provided directly by companies. The projects list will be released around May and November each year.

ABARE’s list provides details of each announced project where total capacity is expected to exceed 30 megawatts. In general, projects included are at relatively advanced stages of planning. ‘Stage of planning’ categories for new projects range from ‘planning approval underway’ through to ‘under construction’.

The projects list contains information on 121 projects, providing the following details:
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spacer capital cost of the project
spacer proponent company or joint venture
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spacer additional output capacity
spacer additional employment at the construction and operating stages where available

With a focus on projects which are planned to commence generation over the next few years, projects at more advanced stages of planning and development — that is, those identified as ‘committed’ or ‘under construction’ — are grouped together and listed first within each principal energy source. These projects appear in the blue shaded areas of the table. Projects at less advanced planning stages (for example, those at the feasibility study stage) follow within each energy source and appear in the yellow shaded areas. The listing includes new greenfield projects as well as expansion of existing projects.
Electricity market in Australia
The electricity supply chain begins with electricity generators, which are normally located near fuel sources such as natural gas pipelines, coal mines and hydroelectric water reservoirs. There is typically a long distance between electricity generators and consumers, which requires a transmission and distribution network to transport power. The supply chain is completed by retailers who purchase wholesale electricity and package it with transmission and distribution services for sale to customers (figure a).

Increased investment in generation capacity is required to meet future growth in electricity demand in Australia and to maintain security of supply. This can include the construction of new power stations or upgrades and expansions at existing power stations.
Market structure
The current structure of the Australian electricity market was shaped by industry reforms in the early 1990s. Vertically integrated state-owned utilities were disaggregated into separate generation, transmission, distribution and retail supply components, where the electricity businesses were either corporatised or privatised.

A key element of these reforms was the establishment of the ‘national electricity market’ in 1998, linking the Australian Capital Territory, New South Wales, Queensland, South Australia and Victoria (Tasmania joined in 2005), allowing for power to flow across state and territory borders to meet customer demand in other jurisdictions.

The market is comprised of a wholesale sector and a competitive retail sector, which promotes competition and efficiency in the production and provision of electricity and allows for choice of supplier. Most electricity retailers purchase electricity from generators on a contract basis. Additional electricity can be purchased through the spot market.

The management of the electricity spot market and the central coordination of the dispatch of electricity from generators (figure b) is the responsibility of the National Electricity Market Management Company (NEMMCO). In April 2007, the Council of Australian Governments (COAG) agreed to establish an industry funded National Energy Market Operator for wholesale electricity and gas by mid-2009 that would replace NEMMCO.

The regulation of transmission and generation is the responsibility of the Australian Energy Regulator (AER). By 2010 it is anticipated AER’s responsibilities will extend to electricity and gas markets, gas transmission in eastern and southern Australia and electricity distribution in the Northern Territory. This will allow for a consistent near-national approach to regulation in the market. Western Australia will retain state-based regulation of its electricity and gas sectors.

Western Australia is not connected to the national electricity market primarily because of its geographic distance from the rest of the national market. Electricity infrastructure is organised in several distinct systems including the South West Interconnected System (SWIS); the North West Interconnected System (NWIS); and 29 regional, non-interconnected power systems. SWIS is the largest network and serves Perth and the other major population centres in the south-west.

The SWIS became a wholesale market (where generators sell directly to retailers) in 2006. Because of the small scale of the other systems it is impractical to introduce a wholesale market. Instead, they operate as retail markets where consumers purchase from competing retailers.

The wholesale market for electricity in Western Australia was deregulated in 2006; the Independent Market Operator (IMO) is responsible for the administration and operation of this market. The retail market is regulated by the Economic Regulation Authority of Western Australia.

In the Northern Territory, market reforms were undertaken from 2000 to phase in competition of electricity supply and reduce the Power and Water Corporation’s natural monopoly. New entrants into the Northern Territory electricity market are permitted to use existing infrastructure (transmission and distribution) after signing an access agreement and paying a network charge. The Utilities Commission of the Northern Territory is responsible for the regulation of the market.
FIGURE B – Structure of the national electricity market
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box 1

Generic project approval process

1. The company must describe the proposal, including its duration, infrastructure required, the proposed program of community consultation and the significance and proposed methods to manage any identified environmental impacts.

2. The appropriate government authority will determine whether an environmental impact assessment is necessary, and if so, the level of assessment and the issues to be addressed. The level of assessment will differ according to the environmental significance and complexity of the proposed project. When further assessment is required for a project which only has a local/regional impact, a public environmental report (or similar document) is generated and is usually available for public comment for four to six weeks. For issues of a wider interest, an environmental impact statement, which is more comprehensive and detailed, is usually available for public comment for eight to 12 weeks. A public inquiry may be used for exceptionally complex or controversial projects.

3. After this process, if the project is considered to have an acceptable effect on the environment, the government authority or appropriate minister will issue the project with an environmental approval.

4. Planning approval must then be granted.

5. If the project is wind powered, the project will also require approval from the Civil Aviation Safety Authority (CASA). This is because wind turbines are tall structures which do not have a fixed tip, and as such, obstacle lights cannot be attached. CASA will not approve turbines deemed to be too hazardous to aviation.
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Consumption and generation
Australia’s electricity generation sector faces a number of challenges over the medium to longer term, including increasing domestic consumption, the need for investment in new assets and policy measures aimed at reducing greenhouse gas emissions.

In 2006-07, Australian consumption of electricity was 261 799 gigawatt hours. New South Wales, Victoria and Queensland account for more than three-quarters of total electricity consumption because of the large population base in these states (figure c). Electricity consumption in Western Australia has increased over the past few years, largely reflecting increased use of electricity in the mining industry.

Australian electricity consumption is projected to increase at an average annual rate of around 2 per cent to 2030 under a reference case scenario which does not take into account the potential impacts of a carbon pollution reduction scheme (CPRS).

The majority of Australia’s electricity is produced using coal, accounting for 83 per cent of total generation in 2006-07. This is because coal is a relatively low cost energy source in Australia. It also reflects the abundance of coal reserves along the eastern seaboard, where the majority of electricity is generated and consumed.

The approval process for electricity generation projects is within the jurisdiction of state governments and is broadly consistent across all states and territories. Key common features are provided in box 1.

A company’s decision to invest in a particular type of technology will be influenced by a number of factors and shaped by existing policies and expectations of future policies. These policies exist at both the Australian and state government level. Existing policies generally encourage lower greenhouse gas emissions and clean, renewable energy technologies. As such, increased investment in these technologies is expected in the medium to longer term.
Completed projects
A number of electricity generation projects have recently been completed. These include Macquarie Generation’s Liddell Stage 2 (100 megawatts using black coal) in New South Wales; Trust Power’s Snowtown stage 1 (99 megawatts using wind) in South Australia; and Loy Yang Power’s Loy Yang A upgrade - unit 4 (80 megawatts using brown coal) in Victoria.
Advanced projects
At the end of October 2008, there were 29 projects at advanced stages of development included in ABARE’s project list. These projects are either committed or under construction. Total capacity of the 29 advanced projects at the end of October 2008 was 6285 megawatts. This is equivalent to 12 per cent of Australia’s total generating capacity as at June 2007. The location of projects is widespread, with at least one advanced project in every state and in the Northern Territory (figure e).
Non-renewable electricity generation projects
As at October 2008, non-renewable electricity generation projects accounted for 18 of the 29 advanced projects on ABARE’s list and around 86 per cent (or 5386 megawatts ) of planned additional capacity (figure f, table 1). Natural gas-fired projects account for 67 per cent of the announced capacity of advanced non-renewable electricity projects.

In terms of capacity, Delta Electricity’s Colongra project in New South Wales is the largest committed project in Australia’s electricity generation sector. The project has an announced capacity of 660 megawatts and is scheduled to be completed in late 2009 at a cost of $500 million.

Origin Energy’s Uranquinty project in New South Wales has an announced capacity of 640 megawatts (four units at 160 megawatts each). The $700 million natural gas-fired project is expected to contribute to meet peak electricity demand from 2009.

Origin Energy is advancing two other natural gas-fired projects with a combined capacity of 670 megawatts. Mortlake stage 1 in Victoria is scheduled to be completed in 2010. The project will have a capacity of 550 megawatts, with a capital cost of $640 million. The expansion at the Quarantine facility in Adelaide will increase capacity by 120 megawatts. The project is scheduled to be completed in late 2008 at a cost of $86 million.

Eight other natural gas-fired projects account for a further 1654 megawatts of committed additions to capacity. The largest of these is Aurora Energy’s Tamar Valley project in Tasmania. The Tasmanian government purchased the project from Babcock and Brown Power in September 2008 to ensure its development. The project has an announced capacity of 375 megawatts and is scheduled to be completed in early 2009.

Three coal seam methane powered projects account for 1220 megawatts of committed additions to capacity. The largest of these projects is Origin Energy’s Darling Downs project in Queensland. The project has an announced capacity of 630 megawatts and is scheduled to be completed in late 2009. The project is expected to have a capital cost of $951 million, which includes the cost of constructing a pipeline to access coal seam methane reserves in the area around Roma and Chinchilla.

In relation to black coal fired power generation, stages 1 and 2 of Griffin Energy’s Bluewaters project have an announced capacity of 208 megawatts each. The stages are expected to be completed in late 2008 and 2009 respectively, at a capital cost of $800 million.
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1 Advanced projects, October 2008 - number, capacity and estimated capital cost by state
 
non-renewable electricity projects
renewable energy projects
total
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no.
capacity
cost
no.
capacity
cost
no.
capacity
cost
MW
 $m
MW
 $m
MW
$m
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New South Wales
3
1700
1550
4
222
520
7
1922
2070
Victoria
1
550
640
5
606
1202
6
1156
1842
Queensland
4
1346
1759
0
0
0
4
1346
1759
Western Australia
6
1233
1835
0
0
0
6
1233
1835
South Australia
1
120
86
2
71
159
3
191
245
Tasmania
1
375
464
0
0
0
1
375
464
Northern Territory
2
62
80
0
0
0
2
62
80
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Australia
18
5386
6414
11
899
1881
29
6285
8295
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Renewable energy projects
At the end of October 2008, there were 11 renewable energy projects at an advanced stage of development. Seven of these projects are wind powered and comprise more than three-quarters of the committed additions to renewable energy capacity.

The largest of these projects is Acciona Energy’s Waubra wind farm in Victoria with an announced capacity of 192 megawatts. The project is scheduled to be completed in 2009 at a capital cost of $400 million.

Pacific Hydro is developing three wind powered electricity generation projects based in Victoria with a combined capacity of 274 megawatts. The projects are scheduled to be completed over the remainder of 2008 and into 2009. The largest of these is the Crowlands wind farm with a capacity of 172 megawatts.

Delta electricity is developing two projects using biomass (landfill and sewerage gas) as a fuel in New South Wales. The projects have a combined capacity of 60 megawatts at a capital cost of $210 million. Both projects are scheduled to be completed in late 2008.

At the end of October 2008, the average capacity for projects using natural gas and coal seam methane was around 300 megawatts and 400 megawatts, respectively (figure g). Given that a large proportion of advanced and less advanced projects will be using natural gas and coal seam methane as a fuel, these energy sources will account for an increasing proportion of baseload power generation. The average capacity of wind powered projects at an advanced stage was around 100 megawatts.

Electricity generation projects in Australia using solar as an energy source do not feature prominently in ABARE’s listing, largely because these tend to be below the 30 megawatt threshold.
MAP 1 – Advanced electricity generation projects CLICK FOR A BIG MAP!
FIGURE G – Average capacity of advanced projects by energy source, October 2008
Less advanced projects
Projects in the less advanced category are either still undergoing a feasibility study (in some cases, pre-feasibility study), or are not subject to a definite decision on development following the completion of a feasibility study. Some of these projects may not proceed for several years. Rescheduling may be necessary in some cases because of changes in economic or competitive conditions or targeting of the same emerging market opportunities. In addition, securing finance for project development, even for high quality projects with a high probability of success, is not guaranteed.

Despite the uncertainty inherent to projects at these earlier stages of consideration, the significant number of large scale projects at less advanced planning stages under active consideration for development is expected to provide a firm platform for future growth in Australian electricity generation in the medium term and beyond.

Of the 121 projects in ABARE’s October 2008 projects list, 76 per cent (92 projects) are less advanced. Table 2 contains a summary of the numbers and fuel distribution by state of the 92 less advanced projects, together with their announced capacity.
Non-renewable electricity generation projects
At the end of October 2008, there were 43 non-renewable electricity generation projects at a less advanced stage. Natural gas-fired and coal seam methane-fired plants account for around 52 per cent (or 10 193 megawatts) of the planned additions to capacity.

Among the more notable large scale projects in ABARE’s October 2008 list still undergoing feasibility studies are 36 coal seam methane and natural gas-fired projects which could add around 10 193 megawatts of electricity generation capacity in the medium to longer term (compared with gas-fired capacity, including coal seam methane, of 10 863 megawatts in 2007).

Santos’ Shaw River gas-fired project in Victoria is expected to be completed in two stages. Stage 1 has an announced capacity of 500 megawatts and is scheduled to be completed in 2012. The second stage will involve the construction of another two units with a capacity of 500 megawatts each. Gas will be supplied from Santos gas fields using a new pipeline from Port Campbell. The first phase is expected to have a capital cost of $800 million, which includes the construction of the pipeline.

Origin Energy’s Spring Gully project in Queensland will be completed in two stages of 500 megawatts each. Stage 1 is scheduled to be completed in 2010.The project will use coal seam methane from the adjacent Spring Gully coal seam gas plant.

Bluescope steel’s Port Kembla Steelworks co-generation plant will use surplus process gas from iron and steel production to produce electricity in an effort to reduce greenhouse gas emissions. The plant will have 120 megawatts baseload capacity, and can provide up to 220 megawatts to meet peak demand. The project is scheduled to be completed by 2012.
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2 Number of less advanced projects, October 2008
NSW
Vic
Qld
WA
SA
Tas
NT
Aust
potential
capacity MW
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Fossil-fuel based
Brown coal
0
0
0
0
2
0
0
2
840
Black coal
1
0
2
1
0
0
0
4
1160
Coal Seam Methane
5
0
3
0
0
0
0
8
1880
Gas
15
4
6
1
1
0
1
28
8313
Oil
1
0
0
0
0
0
0
1
150
Sub-total
22
4
11
2
3
0
1
43
12343
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Renewable energy
Wind
8
16
2
2
13
1
0
42
6407
Wave
0
1
0
0
0
1
1
3
390
Biomass
0
0
0
1
0
1
0
2
240
Solar
0
1
0
0
0
0
0
1
154
Geothermal
0
0
0
0
1
0
0
1
50
Sub-total
8
18
2
3
14
3
1
49
7241
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Total
30
22
13
5
17
3
2
92
19584
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Renewable energy projects
At the end of October 2008, there were 49 less advanced renewable energy projects. These projects include 42 wind farms, accounting for around 88 per cent of the planned addition to renewable energy capacity.

The largest wind energy project is the Silverton Wind Farm in New South Wales with a planned capacity of 1000 megawatts. If developed, the wind farm will be the largest in the southern hemisphere and one of the largest in the world. The project is scheduled to be completed in 2010 at a capital cost of $2.2 billion.

Investec Bank and Windlab Systems’ Cooper’s Gap wind project in Queensland has an announced maximum capacity of 500 megawatts. The site will have up to 250 wind turbines and is scheduled to start operating in 2011. The project is expected to cost around $1.2 billion.