WA govt to sell the farm: solar, wind, peaking plants …and street lights

Western Australia is set to offload a number of “unexpected” power assets – ranging from solar and wind farms to street lights – as part of a second tranche of asset sales the government hopes will generate between $3 billion and $5 billion to go towards paying off the state’s ballooning debt.

The state Coalition government on Friday delivered Western Australia’s first budget deficit in 15 years, which it is forecasting will blow out to $2.7 billion next financial year, and $1.1 billion the following year, before returning to surplus in 2017-18.

To help close this fiscal hole, the Barnett government will hold a second round of asset sales, flagged earlier this week, which the Premier has since confirmed will include some “unexpected” items, such as renewable and fossil power plants from electricity generator and retailer Synergy.

WA Treasurer Mike Nahan, who is also the state’s energy minister, says the sale will include the 55MW Mumbida wind farm and the 10MW Greenough solar farm, both owned by Synergy; and possibly Synergy’s Muja AB coal-fired power station, near Collie.

Greenough River solar farm, in Walkaway, holds some significance as Australia’s first utility-scale PV plant, a title earned when it began feeding electricity to the grid in October, 2012.

The First Solar-built PV plant reportedly cost around $50 million to develop, with $20 million of that contributed by the state government.

It was commissioned, along with the Mumbida wind farm, to supplement the electricity needs of the Western Australia Water Corporation’s Southern Seawater Desalination Plant.

The $200 million, 55MW Mumbida wind farm, located 40km southeast of Geraldton, became fully operational in late 2013, when it was heralded as one of the nation’s most advanced examples.

It comprises of 22 GE wind turbines, each with a capacity of 2.5MW and generates enough electricity to power around 40,000 average WA households.

Nathan has suggested the two renewable energy plants could fetch up to $100 million, particularly given their power is contracted long-term to the Water Corporation.

Regional WA electricity provider, Horizon Power, is also likely to be targeted in the new sales process, with a peaking power plant it owns in Karratha to be sold.

Professor of Resource Economics at University of WA John Hartley told ABC Online that if the government planned to sell off its power stations, it would have to ensure it created a genuinely competitive power generation market.

“The best thing for ensuring efficient operation of enterprises so they minimise costs and they deliver value to the consumer is to ensure the market’s competitive,” he said.

“And my advice to them would be to sell each generating station as a separate company.”

As we have noted on RE a number of times before, the West Australian energy market is a basket case.

Last year, it required more than than $620 million to bridge the difference between the cost of generation and delivery of its ageing coal and gas infrastructure, and the price it charges to consumers.

This has largely been brought about by an absurd subsidy to fossil fuel generators – the so called “capacity payments” – that has seen many gas and diesel plants built at public expense and never even switched on. This financial year it is expected to total $448 million, even after a 4.5 per cent rise in consumer prices.

Declining electricity generation revenue – caused by falling demand – has been another fiscal thorn in the side of the Barnett government, with upwards of 175,000 households having installed rooftop solar.

To recoup some of this lost revenue, the government had been pushing to overhaul electricity tariffs so that households – and particularly those with rooftop solar – paid significantly more in fixed charges.

This was shelved last week, perhaps in consideration of the 4.5 per cent increase in residential electricity tariffs already implemented under the Barnett government.

Back to the asset sale, however, and perhaps the most surprising item on the auction block: some of the “non-core” assets owned by electricity distributor Western Power, including its street lights.

According to reports, Western Power owns hundreds of thousands of street lights across the state’s south west, which could yield more than $100 million if sold to a private investor.