Reuters logo
Australia government eyes fresh power privatization round
December 13, 2011 / 1:15 PM / 6 years ago

Australia government eyes fresh power privatization round

MELBOURNE (Reuters) - Australia’s government will lead a renewed push for the privatization of state electricity assets after warning the country urgently needed energy market reform and huge investment to meet power demand at home and abroad.

Energy Minister Martin Ferguson, unveiling a draft energy paper, said the government would also focus on developing the country’s vast energy resources -- particularly gas -- and speeding clean energy projects after the recent passage of the largest carbon price scheme outside Europe.

“Over the next two decades, Australia will require massive investment in the gas and electricity sectors, around A$240 billion ($242 billion) in generation, transmission and distribution,” Ferguson said on Tuesday.

“The White Paper also focuses on the next round of energy market reform, including further privatization of energy assets and the removal of retail price regulation to increase efficiencies and remove distortions in markets that deter private sector investment.”

To help drive fresh investment to replace Australia’s ageing coal-fired power stations -- many of which date back to the 1960s -- Ferguson also announced the government would no longer apply emissions standards for new coal power stations following the passing of carbon price laws last month.

INVESTMENT NEEDED

Australia is one of the world’s worst per capita polluters, due to its reliance on coal-fired power for 80 percent of its electricity needs. Privatization efforts have stalled in the face of resistance from consumers and state governments.

The conservative government in New South Wales state, which has an economy larger than South Africa and Thailand and is responsible for a third of the country’s GDP, said last month it would proceed with a controversial privatization of power assets expected to reap A$5 billion, but would retain ownership of the transmission network.

Ferguson complained ahead of the white paper that construction of new power stations had plunged, blaming investment uncertainty on threats by resurgent conservative rivals to unravel the carbon scheme if they won 2013 elections.

Bureau of Resources and Energy Economics figures show just two wind projects worth A$488 million have been completed in the past year. In 2009, 17 projects worth almost 10 times that amount were finalized.

Ferguson ruled out domestic development of nuclear power, although he said the debate would continue as long as Australia remained committed to reducing carbon emissions.

“It is not in our current policy mix as a government,” he said.

COMPETITION FOR GAS

Australia’s A$1.3 trillion economy is undergoing rapid transformation driven by soaring resource demand in Asia.

Total resource and energy exports reached a record A$175 billion last financial year and are forecast to jump a further 21 percent to A$215 billion this year.

“We have seen investment in our export energy sector at an unprecedented scale in the last seven years, with over A$140 billion committed to LNG projects alone since 2007,” Ferguson said.

The white paper, now open to industry comment and consultation, hopes to speed that growth, with the government planning to aid development of offshore gas resources by updating retention-lease arrangements.

Australia’s domestic gas production is expected to triple by 2030, but most of that gas will be exported as LNG.

Australia is expected to add more than 80 million tons per annum (mtpa) of LNG production for export before the end of the decade, which would make Australia the world’s top LNG exporter, surpassing Qatar.

At the same time, domestic gas demand is set to grow sharply in the next decades. In 2009-2010, gas-fired power accounted for about 15 percent of electricity generation, but that figure could grow to as much as 44 percent by 2050, the report says.

The tension between rapidly growing domestic gas demand and LNG exports is likely to drive up domestic gas prices, it says.

Although Australia’s heavy emphasis on exports may create challenges for large gas users, the white paper concluded that “policy intervention at the present time to force domestic gas outcomes is unwarranted.”

($1=0.9914 Australian dollars)

Additional reporting and writing by Rob Taylor in Canberra; additional reporting by Rebekah Kebede; Editing by Lincoln Feast and Sanjeev Miglani

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below