TiP

How statistical reports are read depends to a great extent, if not entirely, on the readers’ perceptions.

The appearance of the new report of the Bureau of Resources & Energy Economics on electricity generation projects has been so greeted.

The media-attracting point is that just two projects, both wind farms, were commissioned in the 12 months to October this year at a cost of $488 million.

Cue headlines about “falling energy investment” – although one report rather bizarrely begins “BREE has revealed that energy producers have already begun moving towards renewable energy sources.” Say again?

Politically, the “falling” line has enabled the federal government and the Coalition to engage in another small joust, altogether overshadowed by the Obama visit.

Resources & Energy Minister Martin Ferguson claims the opposition’s threat to repeal the carbon price legislation is causing investor uncertainty and his rival, Ian Macfarlane, argues that introduction of the measure is the problem.

For me, the most interesting piece of data is the calculation of annual electricity consumption – BREE having taken over the energy review task from the Bureau of Agricultural & Resource Economics & Sciences.

According to BREE, the figure for power demand (this is all consumption) in 2009-10 is 242,000 gigawatt hours. The ABARES number for 2008-09 was 260,965 GWh.

On the surface, this is a seven per cent fall in one year, an unprecedented number for modern Australian electricity supply.

What the heck’s going on? Well, mostly it seems a different approach to calculating demand coinciding with the switch-over between bureaucracies — aided and abetted by the impact of the GFC.

As BREE explains in another paper, energy consumption is now being calculated using data sourced from the national greenhouse and energy reporting information supplemented by a whole raft of other sources. It gives a somewhat different result.

What I found interesting when I went digging in to the spreadsheets provided by BREE is that the fall in demand is still there – it’s just been shifted a year by the new approach.

The spreadsheets show that electricity demand peaked in 2007-08 at 257,998GWh, slid markedly down to 244,414 GWh in 2008-09 and dipped a little further to 241,586 GWh in 2009-10.

That’s a 6.3 per cent fall spread over three years – thank you, global financial crisis, with a little help more recently from what BREE describes as “unseasonable weather patterns, which may have temporarily reduced demand.”

Stopping to think about all the goings on, you could come to the conclusion that the recent drought in generation investment can be attributed to (1) yes, the political uncertainty of the past two years allied with increasing power prices, (2) the fact that negotiating fuel contracts for new gas plants and getting the lenders to part with money for any form of generation has not been easy in the past 18 months, (3) reaction to the weaker demand signals coming out of the market and (4) the stuff-up in the renewable energy target market because of the flood of certificates created by the subsidy schemes for solar power.

Reading the BREE report in detail, you find that there is a considerable amount of generation development waiting in the wings. When it gets on stage depends on all the above factors.

Projects that BREE describes as “advanced” number 19, with a total capacity of 2,668MW and a projected capital cost of $4.8 billion.

A few are moving towards completion.

Origin Energy’s Mortlake power station in western Victoria is one.

Verve’s $263 million refurbishment of its Kwinana gas is another.

The Collgar wind farm in WA (206MW at a cost of $750 million) is almost ready to generate.

The Macarthur wind farm AGL Energy and Meridian Energy are building in Victoria (420MW capacity and a $1 billion bill) is expected to be commissioned in 2013 as is stage two of TrustPower’s Snowtown wind farm (250MW and $550 million).

AL’s chief executive, Michael Fraser, has made the point that it could be 2014-15 before the REC surplus washes out of the market, opening the way for more wind farms to go ahead.

Looking out beyond the near future, BREE’s report throws up some interesting information.

In the category where projects are still undergoing feasibility studies or where developers are still thinking about a feasibility study or where decisions have not been made yet after a study, the bureau finds that most of the investment is focused on wind and gas.

Here there are 42 gas projects with a capacity of 19,330MW, including the pair of TRUenergy developments recently announced for Queensland – to which can be added substantial ERM Power and Origin Energy plants for the same region.

There are also 92 wind farms with a total capacity of 17,698MW.

There are no surprises in where the investors want to build either.

They go where the demand is and where the resources are.

So 17 of the proposed gas plants and 28 wind farms are intended for New South Wales.

Thirteen gas plants are proposed for Queensland but just seven wind farms.

Six gas plants and 29 wind farms are proposed for Victoria – and one gas plant and 19 wind farms for South Australia.

The isolated WA system has five gas plants (and three black coal developments) in train along with six wind farms.

It all adds up to 167 development projects across Australia in this “less-advanced” category but how many will actually get commissioned and in what time frame is anyone’s guess.

Perhaps the biggest question mark hangs over the NSW Bayswater B development site, still in the hands of State-owned Macquarie Generation.

There is 2,000MW of capacity (or more) that could be coal-fired or gas-fired proposed for this site. What actually happens rests on so many factors, including whether or not MacGen will be sold by the O’Farrell government.

Bottom line?

With local demand still in a small slump, the international economic scene in a funk, borrowing not easy, question marks over gas availability and price, the ongoing hassles over regulatory approvals, the continuing dogfight at the federal level over carbon policy, a big election coming up in Queensland and big decisions needed in NSW, the outlook is for power developments to remain sparse for some time – but at least we know that the wings are well populated with plans and planners.

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