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WA wind, solar industry in turmoil as green fund cements govt monopoly

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powerlines behind fence copyThe West Australian renewable energy industry – victim of a government-led investment strike over the last few years – is now in turmoil after the new Labor government agreed to allow the state-owned Synergy to set up a new “green fund” to manage its investments in wind and solar.

Independent developers say they are likely to be crowded out by the move, which simply locks in Synergy’s own portfolio of projects, will cement its near monopoly powers, and put up to $1 billion of wind and solar developments at risk.

The WA Independent Power Association has protested loudly against the WA Cabinet decision to create a new green fund – partnering with the likes of the Dutch Infrastructure Fund – that would develop certain projects in Synergy’s portfolio and contract the output to Synergy.

The move by the WA Labor government contrasts sharply with those of South Australia and Queensland, which are moving to tincrease competition in the market, mostly by bringing in new wind and solar projects that they say will help reduce costs.

Richard Harris, the chairman of the WA Independent Power Association, says the WA government has not thought through the long-term consequences to the market.

“This fund is a large step in the wrong direction away from a liquid and competitive wholesale market,” Harris says. “Its implementation will see Synergy’s problematic domination of the wholesale market increase and private participants will be crowded out.”

Harris says that by allowing Synergy to extend their dominance of the electricity market the government is locking in higher electricity prices for all Western Australians. It’s the opposite of what the SA and Queensland governments are trying to do.

Harris says there are more than $1 billion of renewable energy projects put together by private companies, many of which are shovel ready and would be delivered more quickly and at lower cost than those in the Synergy portfolio.

“It is very hard for the private sector to understand how the government can effectively write a contract worth over $500 million with itself without an open and transparent process which ensures that the best value for money is being obtained by taxpayers.”

Harris predicted that renewable energy developers were now highly likely to leave the state to focus on creating jobs and infrastructure in other jurisdictions such as Victoria and Queensland, “where there is an open market and investment friendly policies which encourage private sector renewable development.”

This is despite predictions by the likes of professor Ross Garnaut that WA could well “go it alone” and create a low-carbon economy that could be a centre of renewable energy production and low-carbon manufacturing.

Garnaut said the opportunity was there to seize, particularly as the WA grid was not connected to main market in Australia, and the National Energy Guarantee would not apply in WA.

But that requires a policy vision from the government, and the new Labor government appears to be concerned with little more than ticking boxes to meet the national renewable energy target.

That, at least, is more than the previous Coalition government wanted. Its hostility to wind and solar projects was so profound it urged wind and solar be built in other states, and for three years just 2.5MW of large-scale capacity was contracted there.

That began to change in 2017, with notice that the Byford solar farm, the Greenough River solar extension, the Carnegie Clean Energy solar farm in Northam and other projects were also coming to fruition, but Harris says this revival could be stopped in its tracks by the Synergy move.

Harris said the only way to address the problem was to limit the size of some of the projects in the green fund, and to create an open tender for the supply of large-scale renewable energy certificates from the private sector.

His suggestions include limiting the capacity of the Warradarge wind farm to no more than 180MW; ensuring that Synergy’s excess wholesale energy be made readily available to private retailers to avoid a complete monopoly in electricity supply to WA customers; and requiring that any future renewable energy projects which are supported by the fund are procured through an open and transparent process.  

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  • Robert Comerford

    Would it not be best if power projects be put out to reverse auction?
    Transparent!
    I would have thought the government’s place would only be to provide short term backup supply that is not viable for the private sector to provide at a sensible price.

  • Ken

    Something rotten already developing in the state of WA under this new Labour Govt.
    They are demonstrating how out of step and inept they are with the decision making when it comes to energy matters.

    It has been identified that Synergy is a protected monopoly player and uncompetitive beast in the market. They dominate generation, and have a ring fenced exclusive retail market share for commercial and domestic customers, with no deregulation of these markets in sight.

    Ultimately it is the state government that is accountable for this anti competition arrangement, probably due to a vested interest in propping up a loss making enterprise.
    As with any government owned entity that loses money, the shortfall has be be made up from taxpayers money.

    The opportunity for lower power prices in WA will not be achieved till this organisation is opened up to real market competition.

  • Ian

    Do you actually have the detail of how this whole scheme works or are you guessing and making assumptions? It’s not like privatisation “competition” has brought power prices down in the NEM yet. WA has always done things their way. I’d like to see how it is implemented before condemning this move.

    • Mecheng

      Agreed, when has privatisation and deregulation ever resulted in efficiency, security or lower cost? Power generation and other utilities used to be seen as natural monopolies, where governments have a place to hold ownership and enforce tight regulation. As a tax payer, would you rather subsidise a government owned utility or be gouged by a small number of large, purely profit driven, corporations?

      Vested interests have long suggested that the WA government should not reserve part of their natural gas output for local consumption, however in doing so there is no gas crisis in the West. The East cost gas and energy markets are perfect examples of failed markets, directly resulting from privatisation with deregulation.

      I’m interested in waiting for the detail of this arrangement.

      • Alastair Leith

        Chevron, apparently, had to be strong armed into the domgas contract with Synergy by government, now they’re laughing all the way to the bank with lower than expected international gas price. Chevron pay no price for the millions of tonnes of CO2 and fugitive methane that their LNG plants vent. Wheatstone will be 10 MT of CO2 alone — and god knows how much methane because there’s no obligation to measure it and tell us. This is a huge subsidy to fossil fuels that puts the modest RET subsidy and even more modest VRET subsidy into perspective.

    • Alastair Leith

      This is mostly about Synergy maintaining it’s dominance in the market as it gets opened up to “full contestability”. There’s a few potential issues coming out of that.
      1: price, without the government testing the market with reverse auctions for PPAs like ACT, VIC, SA and QLD have all done or are in process of doing (in different ways) how do we no they’re getting good value, will it drive down wholesale prices, will savings be passed on at retail?
      2.with less generation in non-gentailer hands, it’s going to be harder for other retailers to compete with Synergy if it is opened up to full contestability in retail (including small users).
      3 for me the biggest issue, Synergy owns almost all the coal generation on the SWIS except for Bluewaters at Kwinana. Anything that cements Synergy’s market position potentially increases the resistance from Synergy to closing coal (and reducing gas allowing for more renewables and storage penetration increases). Sweatheart deals to cover the RET (which will soon be fully subscribed for the end target of 33,000 GWh) are a way of avoiding forming and annunciating policy direction.

      To act on climate in a way that even gives a toss of a coin’s chance (50%) of not peaking over 2.0 ºC we need coal closed ASAP and to move to as close as 100% RE by 2030 as is economically prudent (SEN modelling 85-90% is the sweat spot delivering most cost saving at a high rate of carbon abatement). We in rich and high historically emitting nations need to be looking at full decarbonisation by 2035 for the world to get to zero emission by 2050 in a equitable way. (Not that small nations drowning or becoming drought stricken most years is equitable).