Electricity Infrastructure August 07

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To obtain information about the content of this report, please contact:

Karen RedshawSenior Manager, Energy and Utilities TeamInvest Australia GPO Box 9839, Canberra ACT 2601Tel. +61 2 6213 6178Email: [email protected] www.investaustralia.gov.au

Electricity InfrastructureMarket Intelligence Report

a customised briefing bythe Energy and Utilities team

August 2007


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Invest Australia has prepared this work in the belief that it will be of assistance to the reader. This documentcovers a wide range of issues and it is not intended to be a detailed nor exhaustive reference.

Accordingly, before relying on the material, readers should independently verify its accuracy, currency,completeness and relevance for their purposes and should obtain appropriate professional advice.

Any reference to companies or investment activities is for illustrative purposes only and does not

constitute an endorsement of those companies or investment activities. The Commonwealth doesnot accept any liability in relation to the contents of this work.


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Table of Contents

Overview ....................................................................................................................... 1

Australian Electricity Markets........................................................................................2

Electricity Generation....................................................................................................4

Electricity Transmission ................................................................................................ 8

Electricity Distribution..................................................................................................13

Electricity Retail...........................................................................................................15

Australian Government policy and programs..............................................................17

State & Territory Government Policies and Programs ................................................ 21

Attachment A: Ownership of Australias major energy companies ............................. 23

Attachment B: Major Electricity Generation Businesses.............................................25

Attachment C: Proposed Electricity Generation Projects, as at April 2007.................26

Attachment D: Owen Inquiry - Key Points and Recommendations.............................28


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OverviewInvestment in Australias electricity market is driven by economic growth (loadgrowth) and location, access to transmission sites, fuel availability and cost,technology development, and government policy.

Since the mid 1990s there has been increased private investment in Australianelectricity infrastructure. While this infrastructure has in the past been primarily aState and Territory Government responsibility, reforms are underway to create acoordinated national approach to energy supply and to increase competition. Thecreation of a National Electricity Market (NEM) and the dis-aggregation of energysupply businesses and liberalisation of ownership have created opportunities forprivate sector investment. There are a growing number of private players inAustralian electricity infrastructure.

Of Australias 42 major electricity generation, transmission and distributioncompanies, 17 (or over 40%) are primarily owned by a foreign entity. Key investors to

date include: China Huaneng Group; Cheung Kong Infrastructure; InternationalPower; Mitsui; Tokyo Electric Power Company; NRG Energy; ATCO Group; Intergen;Singapore Power International; Hydro-Quebec; and CLP Power Asia. A table listingthe 42 companies, location, and primary owner(s), share of ownership and country oforigin is provided at Attachment A.

The Australian Bureau of Agricultural and Resource Economics (ABARE) hasestimated that Australias primary energy consumption will grow by 2% per year from5593 petajoules (PJ) in 2004-05 to 6311PJ in 2010-11. Around 45% of the primaryfuels consumed in Australia are used to generate electricity. Gross electricitygeneration in Australia is expected to rise from 907PJ (252TWh) in 2004-05 to1468PJ (408TWh) in 2029-30, an increase of 62% over the period.

Figure 1: Projected Electricity Demand for Australia1

0

200

400

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1200

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1600

2004-05 2009-10 2014-15 2019-20 2019-30

Year

PJ

Aging Infrastructure and Meeting Peak DemandMuch of Australia's current electricity infrastructure in the areas of transmission andgeneration is ageing and investment is needed in both new plant and the upgrading

1 Australian Bureau of Agriculture and Resource Economics (ABARE) Energy in Australia 2006

Electricity Infrastructure Market Intelligence Report 1


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of existing plant. ABARE has estimated that A$72 billion of new investment inAustralias electricity industry will be required by 2020. This includes investment inbase load and peak electricity generation, distribution and transmission systems, gaspipelines and renewable plant. ABARE estimates that electricity generation alone willrequire A$11 billion of new investment. Give the scale of investment required; newopportunities for private sector participation are likely.

FuelsCoal and gas are the major fuel sources for electricity generation. Demand for gas inthe primary energy market (including electricity generation) is expected to grow from1102PJ in 2004-2005 to 2029PJ in 2029-2030, (up 84% over the period). There hasbeen steady investment in renewable energy generation.

Figure 2: Australias Projected Energy Mix2

Natural gas is playing an increasingly significant role in Australias energy market.Natural gas consumption is expected to almost double from 168PJ in 2009 to 333PJ

in 2029-30. As well as supplying the domestic retail market, gas powered electricityplants are increasingly supplying Australias remote mining and minerals processingindustries. A key market driver is governments and industry recognition of gas as aclean, cost effective alternative to other fossil fuels.

Australian Electricity Markets

National Electricity Market

The National Electricity Market (NEM) links the Australian Capital Territory, SouthAustralia, New South Wales, Victoria, Queensland and Tasmania to a competitivewholesale electricity market for the supply and purchase of electricity. Forty-eightcompanies bid their electricity generation output to the National Electricity MarketManagement Company (NEMMCO), for sale to electricity retailers and majorindustrial end users.

Up to A$7 billion in electricity is traded annually through NEMMCO, to supply almost8 million customers. The NEM comprises generators, customers (retailers or end-users) and network service providers (transmission and distribution entities) andtraders. To supply into the NEM, threshold generator capacity is 30MW. Applicationsare made to NEMMCO.3 High-voltage transmission line (inter-connectors) transportpower between the six electricity regions.

2Australian Bureau of Agriculture and Resource Economics (ABARE) Energy in Australia 20063An explanation of the process to connect a new generator to the National Electricity Market, including:enquiry, agreement and construction phases; performance, technical and access standards; and a complianceprogram is outlined at www.nemmco.com.au/registration/110-0543.pdf

http://www.nemmco.com.au/registration/110-0543.pdfhttp://www.nemmco.com.au/registration/110-0543.pdf


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Figure 3: Structure of the National Electricity Market

Australia has among the lowest electricity costs in the developed world.Figure 4: Electricity spot market prices in Australias eastern states (NEMMCOaverage wholesale prices)4

Western Australia

Western Australias electricity market is thousands of kilometres from the NEM.There is neither a physical interconnection nor governance linkages between theWestern Australia market and NEM. Western Australias electricity infrastructureconsists of: the North West Interconnected System (NWIS); and the South WestInterconnected System (SWIS); and 29 regional, non-interconnected power systems.

Energy trading is facilitated through a system of bilateral contracts, a day-aheadshort term energy market and balancing. It is regulated by the Independent MarketOperator, which has no commercial interest in the market.

The NWIS serves some towns and resource industry loads in the North-west of thestate. It has a generation capacity of 400MWs. Due to the small scale of the system itis unlikely that the NWIS will introduce a wholesale energy market. The SWIS is thelargest network serving Perth and other major population centres in the south west.The network comprises 4200MW of installed generation capacity and, as previouslymentioned, introduced a wholesale electricity market in September 2006.

4 Australian Bureau of Agriculture and Resource Economics (ABARE) Energy in Australia 2006



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Northern Territory

The Northern Territorys electricity industry supplies about 200,000 people and small,but growing industry base. In 2005-06 the Territory consumed 1660GWh of electricityacross 3 small regulated systems. The Territory uses a bilateral contracting system inwhich generators dispatch the appropriate amount of power into the system to meet

their customers' needs. The Northern Territory government has scheduled theintroduction of full retail contestability for 2010.

Electricity Generation

There are 15 major electricity generation companies across Australia (thosegenerating over 5000GWh), being: Macquarie Generation, Delta Electricity, TaurusEnergy, AGL, Eraring Energy, TRUEnergy, Loy Yang Power, Hazelwood Power,Stanwell Corporation, CS Energy, Tarong Energy, Verve Energy, Comalco/NRG,Snowy Hydro and Hydro Tasmania. A table showing major electricity generationbusinesses, market share, and revenue is provided at Attachment B.

As at April 2007, there were 57 electricity generation projects scheduled forcommissioning from 2008. The largest project developers (by generation capacity)include: Delta Electricity (3552MW); AGL (2099MW); Origin Energy (2070MW);Stanwell Corporation (1281MW); CS Energy (750MW); and Wandoan Energy(700MW). A table listing the 57 projects is provided at Attachment C.

New South Wales is Australias largest electricity producing state (32% of totaloutput), followed by Queensland (26%) and Victoria (24%). In total, the eastern-Australia states generate about 80% of Australia's electricity. Western Australiaproduces about 6%, Tasmania (5%), South Australia (5%) and the Northern Territory(less than 4%) of national electricity generation.

Figure 5: Electricity Generation by State, 2005-065

0

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Victoria Queensland SouthAustralia

Tasmania WesternAustralia

NorthernTerritory

States

Gig

awatthours(GWh)

Investment Opportunities

Coal and gas will continue to be the predominant electricity fuel source in Australia.Investment opportunities in gas and coal fired powered plants are strongest; in

particular those plants incorporating lower emissions technologies and improved5 Australian Bureau of Agriculture and Resource Economics (ABARE) Energy in Australia 2006



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water consumption measures. ABARE suggests that between 2003 and 2020 anadditional 8,410MW of gas and coal fired electricity generation plant will be required.6

Gas fired power will account for approximately A$5 billion of a total estimatedA$11 billion investment. Most gas fired power plant is predicted to be built inQueensland, Western Australia, Victoria and South Australia. Required investmentin coal fired generation is an estimated A$6 billion, of which an estimatedA$3.3 billion will be invested in Queensland (assuming the completion of the Aldogaaluminium smelter) and A$2.2 billion, to fund a 1200MW brown coal fired station inVictoria. A list of proposed generation projects is at Attachment C.

While some States have to a large extent privatised their electricity supply operations(Victoria and South Australia) others have sought increased private involvement incertain areas of power generation and distribution, through Public PrivatePartnerships. For example, in 2005, the New South Wales Government indicatedthat three new power stations were to be built either privately or in partnership withthe State. There are also growing opportunities for private investment in embedded

and remote power generation projects to service Australias mining and mineralsprocessing industries.

New South Wales

New South Wales needs future investment in an estimated 327MW of electricitygeneration capacity to meet summer peak demand in 2010-11 and about a further300 400MW per annum thereafter.7 In response, both TRUenergy and DeltaElectricity are constructing gas-fired peaking power stations. Further NSW isintroducing NSW Renewable Energy Targets of 10% of electricity consumed by theState to come from renewable sources by 2010 increasing to 15% by 2020. Alreadyplanning consent has been granted for a 132MW $132M wind farm in the StatesSouthern Highlands The New South Wales Government recently commissioned an

Inquiry undertaken by Anthony Owen, Professor of Energy Economics at CurtinUniversity of Technology, on the future security of electricity supply in the State. Asummary of the report, which recommended the privatisation of energy generationand retail assets in New South Wales, is at Attachment D.

Figure 6: NSW Power Generation Outlook

6 Australian Bureau of Agriculture and Resource Economics (ABARE) Energy in Australia 20067 National Energy Market Management Company (NEMMCO) (2006) Statement of Opportunities

http://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/ProfessorTonyOwen.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/ProfessorTonyOwen.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/ProfessorTonyOwen.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/ProfessorTonyOwen.htm


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Queensland

Queensland will require an estimated 244MW of additional electricity generationcapacity by 2009-10, to meet summer peak demand.8 The Queensland Governmenthas committed to reduce the States greenhouse gas emissions to 60% below 2000levels by 2050. As a result, whilst coal-fired generation will remain a major part of

Queenslands generation mix; new coal-fired power stations will be required todeploy clean coal technologies, which provide for carbon capture and storage, andefficient water practices.

Figure 7: Queensland Generation Outlook

Victoria & South Australia

It is worth pointing out that Victoria has privatised its energy industry - electricity andgas - and a number of international companies already own energy assets in Victoria.An additional 136MW of allocated installed capacity is required to meet the minimumreserve for the combined Victoria and South Australian network.9 Victorias energydemands are projected to increase significantly. NEMMCO projections indicate thatbetween 2006 and 2016 base load electricity demands will increase at about 1% peryear and summer peak electricity demands at about 2% per year. Gas demand(including gas used in electricity production) is forecast to increase at about 0.8% peryear between 2007 and 2011.

South Australia, which has also privatised or leased out its energy assets, will requirea forecast additional 186MW of electricity generation capacity by 2008-09 to meet itslocal minimum reserve level. South Australias electricity demand profile is very

peaky. Renewable energy generation, specifically wind farms, is contributing tomeeting peak demands by supplementing fossil fuelled power stations. In the yearJune 2004 to 2005, South Australias wind farm electricity capacity increased from34.5MW to 318MW, with another 150MW of capacity approved for development.Even with this capacity increase there is some concern that that new investment inelectricity supply will not be sufficient to keep pace with consumer demand.

8 National Energy Market Management Company (NEMMCO) (2006) Statement of Opportunities9 ibid



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Figure 8: Victoria and South Australia Generation Outlook

Western Australia

New investment will be required for the Wholesale Electricity Market to increasesystem capacity to 4322MW in 2008-09 and to 4463MW in 2009-10. 10 Demand in theSouth West Interconnected System (SWIS) is expected to increase by 2.2% eachyear from 2005-06 to 2015-16. The maximum demand for the summer peak seasonis expected to increase at 3.2% per year (or around 120MW). Figure 9 indicatespotential opportunities for investment in the SWIS. Demand is expected to exceedexisting system capacity in 2009-10 (taking into account plant closures andcommitted projects over the next two years).

Figure 9: Wholesale Energy Market Generation Outlook11

10 Western Australia Government, Independent Market Operator, No.27: Statement of Opportunities 200711 ibid



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Electricity Transmission

National Electricity Market (NEM)

Major investment in transmission and distribution will be required. ABARE hasestimated that an additional A$62 billion (real 2003-04 dollars) in network investment

will be required by 2019-2020 to service additional generation capacity, meetdemand growth and maintain network reliability.

The National Electricity Market Management Company (NEMMCO) has prioritisedpotential transmission augmentation across the Victoria to Snowy; Snowy to Victoriaand between Queensland and New South Wales transmission flow paths. Figure 10summarises the scope of the works, modelled timing and indicative costs of theseaugmentations.

Figure 10: Transmission augmentation priorities in the NEM12

Third party access arrangements and economic regulation have been established forall transmission and distribution networks within the NEM. Connection of generatorsto the transmission and distribution network is by negotiation and arbitration. Partiesnegotiate commercial arrangements for access to services. If agreement cannot be

12 National Electricity Market Management Company, Statement of Opportunities 2006



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reached, the regulatory framework provides for arbitration by reference to principlesfor determining an administered price for that service. In June 2007, the AustralianEnergy Regulator (AER) released an issues paper on the development of a newincentive scheme to reward transmission companies for reducing the number andduration of outages with a market impact, and for providing more advanced notice ofoutages.

Key Players

Table 1: Transmission companies and their primary owners

Company Name Primary Owner(s)VictoriaVENCorp Victoria GovernmentSP AusNet Public company, 51% owned by Singapore International Pte LtdMurraylink Private partnership, including: Murraylink HQI Australia Pty Ltd,

SNC-Lavalin Investment Australia Pty LtdBasslink CitySpring Infrastructure Management (Singapore)South Australia

ElectraNet Private corporation; major shareholders include: Harold StreetHoldings (a subsidiary of Powerlink Queensland), YTL PowerInvestments, Hastings Funds Management, MacquarieSpecialised Management Limited

Murraylink Private partnership; including: Murraylink HQI Australia Pty Ltd,SNC-Lavalin Investment Australia Pty Ltd

TasmaniaTransend Networks Ltd Tasmania GovernmentBasslink CitySpring Infrastructure Management (Singapore)New South WalesTransGrid (includes ACT) NSW GovernmentEnergy Australia NSW Government

QueenslandPowerlink QLD Queensland GovernmentWestern AustraliaWestern Power WA GovernmentNorthern TerritoryPower Water Corporation NT Government

Basslink

The Basslink cable connects Tasmania to the National Electricity Market. BassLinkmay seek status as a regulated asset from the Australian Energy Regulator13.Present arrangements involve Tasmania's main power generator, Hydro Tasmania,paying BassLink's owner, the Singapore based CitySpring Infrastructure

Management, a fee for use of the link to the National Electricity Market. If BassLinkgained regulated status, some of that cost could be shifted to Tasmanian andVictorian power consumers via higher power charges.

ElectraNet

ElectraNets network comprises over 5,600km of transmission lines with76 substations and switching stations. The network operates at 275kV, 132kV and66kV and is characterised by long distances, a low energy density and a relativelysmall customer base.

13 IBIS World Report May 2007


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EnergyAustralia

EnergyAustralia is predominantly a distribution and retail business. EnergyAustraliaalso owns and operates a part of the New South Wales transmission network. Itsnetwork spans 1,040km of lines and 19 substations, extending from the south ofSydney to north of Newcastle and into the Hunter Valley.

Murraylink

Murraylink operates as a regulated DC inter-connector, capable of delivering220MW, between the Red Cliffs substation in Victoria and the Monash substation inSouth Australia. Murraylink has 180km of transmission lines with a converter terminalstation at either end.

Powerlink

Powerlink owns, develops, operates and maintains Queenslands high voltageelectricity transmission network which spans more than 1,700km from Cairns to theNew South Wales border. Its network includes 12,013km of transmission lines and

cables, as well as 98 substations. It is the most decentralised network in the NEMand operates at 330kV, 275kV, 132kV and 110kV.

SP AusNet

SP AusNet owns, operates and maintains over 6,500km of electricity transmissionlines as well as 44 switching and transformation facilities throughout Victoria. Thenetwork is built around a 500kV backbone running from the major generating sourcein the Latrobe Valley, through Melbourne and across the southern part of the state toHeywood near the South Australian border.

Transend

Transend owns and operates the electricity transmission system in Tasmania;including over 3,500km of transmission lines, 46 substations and 9 switching stationsoperating at voltages of 220kV and 110kV.

TransGrid

TransGrid is responsible for the management of the high voltage electricitytransmission network in New South Wales and the Australian Capital Territory. Thenetwork comprises 82 substations and switching stations, and 12,480km oftransmission lines and underground cables operating at voltages of 500kV, 330kV,220kV, 132kV and 66kV. TransGrid has received regulatory approval and isembarking on a major infrastructure spending program to relieve major network

constraints affecting supply to the Sydney/Newcastle/Wollongong area by convertingand upgrading existing power lines.

VENCorp

VENCorp is Victorias peak energy sector planning organisation and a networkservice provider. It does not own network assets. Victorias network assets arepredominantly owned and operated by SP AusNet. In 2005 Vencorp published 2030:a 25 year outlook for additional transmission infrastructure investment in Victoria,which outlines a need for up to A$2 billion of investment in new transmission pipes,poles, wires and other network infrastructure over the period. Potential Augmentationto Victoria's energy transmission infrastructure can be described by regions: theEastern corridor; South-Western corridor; Northern corridor; and Metropolitan.14

14 VenCorp (2005) Vision 2030: Victorias Energy Transmission Networks


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Investment Opportunities

In addition to the priority NEM transmission augmentations identified by NEMMCO(refer Figure 10) the Victoria, South Australia and Western Australia governmentshave identified the following additional augmentation requirements.

Victoria

Table 2: Forecast electricity transmission augmentation projects in Victoria

Corridor and Project(s) Cost (A$m)Eastern

Additional 600MVA 500/200kV transformer in the Latrobe Valley Line termination and switchgear upgrade works to remove existing

constraints Additional (fourth) 500kV line between Hazelwood and Loy Yang

43.0

Northern Additional 250MVA 330/220kV transformer at Dederang Uprate Bendigo-Fosterville-Shepparton 220kV line

16.0

Metropolitan Three 1000MVA 500/220kV transformers Uprate Rowville-Springvale, Springvale-Heatherton, Rowville-Malvern

220kV lines Reconductor Keilor-West Melbourne, West Melbourne-Fishermans Bend,

Rowville-Spingvale and Rowville-Richmond 220kV lines

365.0

Regional network Uprate Ballarat-Moorabool, Ballarat-Bendigo, Shepparton-Bendigo,

Kerang-Red Cliffs, Bendigo-Kerang, Dederang-Shepparton 220KV lines Third Moorabool-Ballarat 220kV line Additional 1000MVAr reactive support

230.0

Total 654.0

Table 3: Forecast gas transmission augmentation projects in Victoria

Corridor and Project(s) Cost (A$m)Eastern Duplication of the Longford-Pakenham pipeline between Tyers and

Bunyip80.0

South-West South West pipeline extension Lara to Hopkins Rd Iona to Stonehaven pipeline duplication New compressor stations at Stonehaven

130.0

Metropolitan New Wollert to Hopkins Road pipeline New Hopkins Road to Brooklyn pipeline

65.0

Regional network New Ballan to Mount Franklin pipeline New Hopkins Road to Ballan pipeline Wollert to Wandong pipeline duplication

55.0

Total 330.0

South Australia

Network planning is the responsibility of the individual network owners, ElectraNetand ETSA Utilities. The South Australia Electricity Supply Industry Planning Councilanalyses the capability of States transmission networks to transport forecast peakpower demand under a range of dispatch conditions and with outages applied tovarious critical items of plant. The Council has forecast a number of network


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constraints, to be considered and addressed by ElectraNet, ETSA Utilities and otherindividual network owners (see Table 4).

Table 4: Projected network limitations in South Australia15

Short term (imminent) limitations1. Lower Eyre Peninsula 132 kV system voltages are low in the absence of local support. An

increased rating is required for several Eyre Peninsula 132 kV line segments: Playford-Whyalla #1 and #2; Cultana-Whyalla; Whyalla-Middleback; Middleback-Yadnarie; andYadnarie-Pt Lincoln.

2. Performance standards indicate that connection point transformers at Waterloo requirere-sizing.

3. Barossa 132 kV voltages may be low under some contingencies4. Templers-Dorrien 132 kV lines need to be uprated to meet performance requirements.5. Hummocks-Kadina East 132 kV line needs to be uprated to meet performance

requirements.6. Eastern Hills 132 kV voltages may be low under some contingencies.7. The Blanche-Mt Gambier 132 kV line needs to be uprated to meet performance

requirements.

8. Several Riverland 132 kV lines need to be uprated to meet performance requirements:Robertstown-North West Bend #1 and #2 lines; and North West Bend-Monash #2 line.9. Several Eastern Hills 132 kV lines need to be uprated to meet performance requirements:

Para-Angas Creek; Angas Ck-MAP3; MAP3-MAP2; MAP2-Mannum; Mannum-Mobilong;and Tailem Bend-Mobilong.

10. Several connection point transformers need to be re-sized to meet customer demands atPara, Magill, and Happy Valley, Morphett Vale East, Mt Barker, Ardrossan West, KadinaEast, and Playford.

Limitations likely to arise over the medium to long term1. Lower and Upper Yorke Peninsula 132 kV system voltages will be low.2. The Para-Magill line will need to be uprated to meet performance requirements.3. Transmission system tie transformers will need to be re-sized to accommodate system

meshing transfers at: Para, Cultana, Robertstown, and Tailem Bend.

4. Connection point transformers will need to be re-sized to meet customer demands at:Parafield Gardens West, Angas Creek, Tailem Bend, Keith, and Kincraig.

5. Several major 275 kV lines will need to be uprated meet performance requirements:TIPS-Cherry Gardens, Para-Magill, TIPS-Magill, Magill-Happy Valley, TIPS-Kilburn, TIPS-Northfield, and Happy Valley-Cherry Gardens.

6. Transmission system reactive support will need to be increased at: Davenport, Para,Monash, and South East.

Capacity limitations are also expected to emerge in many areas of the sub-transmission network by 2016-17, particularly across the greater Adelaidemetropolitan area. The Planning Council has also indicates that additional capacitywill be developed to serve the outer southern suburbs and the Fleurieu Peninsula

and the eastern hills area. The transmission system also faces potential challengeswith load growth in the far north and on Eyre Peninsula and these will be addressedas the customer demand becomes clear.

Western Australia

Western Power and the Independent Market Operator have identified the need forsignificant network augmentation of the SWIS to support committed and proposedadditional generation capacity (in particular the South-West region, where 555MW ofnew generation capacity is committed for 2008-09)16:

Construction of 330kV transmission lines in the south west region of the Perthmetropolitan area;

15 SA Electricity Supply Industry Planning Council (2007) Annual Planning Report16 Independent Market Operator (2007) Report No. 27 Statement of Opportunities


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Network Location

LineLength(km)

CustomerNumbers

RAB18

(A$m) Regulator Owner(49%)

SP Ausnet Vic 29,397 573,766 1,363 ESCSingapore PowerInternational (51%)

United Energy SA 12,308 609,585 1,229 ESC Alinta (34%); DUET(66%)21

ETSA Utilities NSW 80,644 781,881 2,468 ESCOSA22CKI/ HEH (51%); SparInfrastructure (49%)

EnergyAustralia NSW 47,144 1,539,030 4,116 IPART23 NSW GovtIntegral Energy NSW 33,863 822,446 2,283 IPART NSW Govt

Country Energy NSW182,02

3 734,071 2,375 IPART NSW Govt

ActewAGL ACT 4,623 146,556 528 ICRC24

ACTEW DistributionLimited (50%) (ACTGovt); Alinta (50%)

ENERGEX Qld 48,115 1,217,193 5,023 QCA25 Qld Govt

Ergon Energy Qld142,79

3 736,710 4,690 QCA Qld GovtAurora Energy Tas 24,400 259,600 687 OTTER26 Tas GovtNon-NEM RegionsWestern Power WA 69,083 1,595 ERA27 WA GovtPower & Water NT 1,869 440 UC28 NT Govt

South Australia

South Australias single distribution company (ETSA Utilities) is leased (from 2000-2200) to the Cheung Kong Infrastructure (CKI) group. In 2005, CKI floated 49% of itsequity as Spark Infrastructure to hold a 49% interest in ETSA Utilities; and shares inPowercor and CitiPower, in Victoria. CKI and Hong Kong Electric Holdings (HEH)

retain a 51% share in Spark Infrastructure. Spark Infrastructure is jointly managed byCKI and RREEF Infrastructure, the global infrastructure investment business ofDeutsche Asset Management.

Victoria

CitiPower, Solaris and United Energy mainly serve metropolitan Melbourne. EasternEnergy and Powercor serve the rest of Victoria. Solaris Power, the smallest of theelectricity distribution companies in Victoria, was sold in 1995 for A$950 million to theAustralian Gas Light Company Ltd and US-based utility GPU Inc (equal partners inthe initial purchase). In 1995, AGL bought out GPU.29

The CKI and HEH purchased the distributor and retailer functions of Powercor in mid2001 for A$2.3 billion. The retail operations were sold to Origin Energy. CKI and HEHacquired Citipower's distribution arm for A$1.42 billion in August 2002, selling theretail business to Origin Energy.

21 Alinta and DUET (which is managed by AMP Henderson and Macquarie Bank) acquired the United Energynetwork in 2003. Alinta operates and manages the network.22 ESCOSA is the Essential Services Commission of South Australia23 IPART is the Independent Pricing and Regulatory Tribunal for the New South Wales Government24 ICRC is the Independent Competition and Regulatory Commission for the Australian Capital Territorygovernment.25 QCA is the Queensland Competition Authority for the state government26 OTTER is the Office of the Tasmanian Energy Regulator for the state government27 ERA is the Energy Regulation Authority of Western Australia for the state government28 UC is the Northern Territory Utilities Commission for the territory government29 IbisWorld (2007) Electricity Distribution in Australia


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Alinta and DUET, which is managed by AMP Henderson and Macquarie Bank,acquired the United Energy network in 2003. United Energy is 34% owned by Alinta,which operates and manages the network.

Electricity Retail

All states in Australia are implementing or considering implementing full retailcontestability under the national Energy Market Reform program. Full retailcontestability gives electricity customers the right to choose their retail supplieraccording to their individual needs.

Table 6: Licensed Retailers of Electricity and Gas in Australia30

Licensed Retailers NSW Vic. Qld SA WA Tas. NT ACTActewAGL RetailAGLAlintaAurora Energy

CitiPowerCountryEnergyCS EnergyDelta ElectricityEA IPR Retail PartnershipEnergex Retail.Energy OneEnergy AustraliaEraring EnergyErgon EnergyGriffin EnergyIntegral Energy

International PowerJackgreen (International)Landfill Gas and PowerMomentum EnergyNRG FlindersOption OneOrigin EnergyPerth EnergyPower and Water CorporationPowercor AustraliaPowerdirectRed EnergyStanwell CorporationTarong Energy CorporationTransAlta EnergyTRUenergyVictoria ElectricityHorizon PowerSynergyWorsley Alumina

Retail Pricing

Between 1990-91 and 2005-06, there was a 4% rise in the cost of electricity;however the cost of electricity to business customers has decreased by 23%. This

has been attributed to the removal of government subsidies and that full retail30Energy Supply Association of Australia (2007) Electricity Gas Australia 2006


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contestability for business customers has been phased in earlier than for residentialconsumers.

Figure 11: Change in the real price of electricity from 1990-91 to 2005-0631

Note: The household index is based on the consumer price index (CPI) for household electricity, deflated bythe CPI series for all groups. The business index is based on the producer price index for electricity supply inthe Materials used in Manufacturing Industries, deflated by the CPI series for all groups.

Full retail contestability

Table 7: Timetable for full retail contestability implementation

New South Wales 1 January 2002Victoria 13 January 2002

South Australia 1 January 2003Australian Capital Territory 1 July 2003Queensland 1 July 2007Tasmania Retail contestability is being phased in over a four year period with

large consumers of electricity of over 4 GWh/yr currentlycontestable. All residential and small business users arescheduled to have full retail contestability from July 2010, subjectto an assessment of the associated costs and benefits.

Western Australia Western Australia allows retail contestability for customers usingat least 50MWh each year. The WA Government is now assessingthe whether to implement full retail contestability; and will report itsfindings in January 2008.

Northern Territory Planned from April 2010.Whilst New South Wales, Victoria, South Australia and the Australian CapitalTerritory have introduced full retail contestability, each government continues toregulate various aspects of the market, to protect residential consumers. Theseregulatory measures include:

price caps for small customers;

setting minimum terms and conditions in default service offers;

information disclosure and complaints handling requirements; and

community service obligations for retailers.

31 National Electricity Market Management Company, State of the Energy, Market 2007, using data from theAustralian Bureau of Statistics, Cat. No. 6401.0 and 6427.0; and the Australian Energy Regulator



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In the Australian Energy Market Agreement 2004 (amended 2006) State andTerritory Governments agreed to transfer some regulatory functions to a nationalframework, to be administered by the Australian Electricity Market Commission(AEMC) and the Australian Electricity Regulatory (AER) from July 2008.

Australian Government policy and programsThe Australian Government's energy policy is underpinned by three core objectives:

to ensure the provision of competitively priced energy;

to ensure security of supply and efficient use of energy; and

to reduce the environmental impacts of energy production.

To achieve these policy objectives, the Australian Government, in partnership withstate and territory governments and industry has developed and is implementing asuite of Energy Market Reforms. This includes reforms to disaggregate state ownedenterprises and increase competition; Energy Efficiency measures; and Greenhouse

Gas Abatement measures such as establishing an emissions trading scheme,mandating renewable energy supplies and supporting the development anddemonstration of a wide range of cleaner fossil fuels and alternative energygeneration technologies.

The following pages provide an introduction to key energy policies and programs ofthe Australian and State and Territory Governments.

Energy Market Reforms

The Australian Governments energy policy Securing Australias Energy Futurewasreleased in 2004. The report projects domestic electricity demand will grow by at

least 50% from 2000 to 2020, requiring ongoing large scale investment in new andreplacement energy supply infrastructure and improved energy strategies32.

To facilitate new investment and secure future energy supplies, Australiangovernments are increasingly opening energy markets and providing a framework inwhich investment in energy supply, use and infrastructure will be made. Furtherelectricity and gas industry reforms are scheduled, with a view to facilitating full retailcontestability, rationalising pricing regulations and monitoring, and further openingaccess to transmission and distribution networks.

Electricity Reform is being progressed by the Council of Australian Governments(CoAG) through the Ministerial Council on Energy, which provides a national forum

for electricity and other energy issues.

Energy Reform targets in 2007-08 include:

Passage of the National Electricity Law and accompanying Rules;

Transfer of distribution and retail economic and non-economic regulatoryfunctions to the national framework and institutional arrangements (AER andAEMC);

Respond to recommendations arising from NERA's expert review of the rulesregarding treatment of distributed generation and demand side response;

32 Department of Prime Minister and Cabinet (2002) Securing Australia's Energy Future', Energy SectorOverview(p2) (www.pmc.gov.au/publications/energy_future/index.htm)
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Implement recommendations from the Energy Reform Implementation Groupreport; and

Introduction of the retail legislative package into South Australian parliament(South Australia being the lead jurisdiction).

Greenhouse Gas Abatement MeasuresThe generation and direct combustion of stationary energy such as electricity andfossil fuels is Australias largest source of greenhouse gas emissions, accounting for50% of total greenhouse gas emissions in 2005 and this proportion is rising. Anincrease in coal-related emissions accounted for 72.2% of the overall increase inemissions, with gas accounting for 21.8%, and oil 7%

An Emissions Trading Scheme33

On 3 June 2007, the Prime Minister accepted the final report of the EmissionsTrading Taskforce, which recommended that Australia introduce an emissionstrading scheme by 2012. On 17 July 2007, the Prime Minister released Australia's

Climate Change Policy - our economy, our environment, our future. The reportexplains how the Government will:

reducing domestic emissions at least economic cost;

develop key low emissions technologies, improving energy efficiency andsupporting households and communities to reduce emissions;

support world class climate science and adapting to the impacts ofunavoidable climate change; and

pursue effective international responses to climate change that involve allmajor emitters, and that reflect our domestic policies.

National Emissions Trading Taskforce (NETT)New South Wales is the only Australian state with a carbon emissions tradingscheme. However in 2004 the Australian State and Territory Governmentsestablished the National Emissions Trading Taskforce to develop a multi-jurisdictional emissions trading scheme for consideration by State and TerritoryGovernments. The work of the National Emissions Trading Taskforce is to developan agreed model for such a scheme which will:

Provide a framework for Australian States and Territories to reduce greenhousegas emissions and assist in meeting Australias Kyoto Protocol target;

Position Australia for a carbon constrained future and emission reductions

beyond 2012; Allow for consistency with international developments;

Include coverage of the stationary energy sector, and may include coverage ofother sectors or economy-wide coverage if this is considered appropriate; and

Minimise the cost of compliance and administration for participants and theRegulator.

The Low Emissions Technology Demonstration Fundis an A$500 millionprogram to develop low-emissions technologies and to demonstrate their commercial

33 A fact sheet outlining the key features and significant milestones of the Australian Emissions TradingScheme can be downloaded from www.pmc.gov.au/publications/climate_policy/docs/features_ets.rtf
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potential in Australian circumstances by 2030. The program began in 2005-06 andwill offer funding through 2019-20.34

Low Emissions Technology and Abatementis an A$27 million program,operating since 2004, to encourage technologies that reduce energy demand andemission intensity in the electricity sector, as well as generally in general business,industry and the community. Projects supporting the local deployment, industrydevelopment and export of renewable technologies are eligible to apply.

Australian Coal Mine Methane Reduction Program

Fugitive emissions from Australian black coal mines have been estimated by theAustralian Greenhouse Office to constitute 3.1% of Australia's net greenhouseemissions. To help reduce these emissions the Australian Government is offeringcompetitive grants (totalling A$15.9 million from 2007-08 to 2012-13) to reduceemissions by up to 0.9Mt per year (totalling 4.5Mt by 2012-13).

Greenhouse Challenge Plusis a largely voluntary program to support and

encourage businesses to manage greenhouse emissions through emissionsinventory reporting and action plans for cost effective abatement. The programincludes generator efficiency standards to encourage generators using fossil fuels toachieve best practice performance in their power plants to lower greenhouseemissions.

Greenhouse Gas Abatement Programprovides funding to leverage privatesector investment in greenhouse abatement activities or technologies. Funding isprovided for projects such as co-generation (the use of waste heat or steam frompower production or industrial processes for power generation), energy efficiency,coal mine gas technologies and fuel conversion.

Mandatory Renewable Energy Target (MRET)

The MRET commenced on 1 April 2001. The Renewable Energy (Electricity) Act2000requires the generation of 9500GWh of extra renewable electricity per year by2010, enough power to meet the residential electricity needs of four million people.Under the target, all electricity retailers and wholesale buyers have a legal liability tocontribute towards the generation of additional renewable energy. They are calledliable parties and meet their legal obligation by acquiring renewable energycertificates from the generators of energy from renewable sources. Thesecertificates can be traded between retailers and wholesale buyers in the event of anysurplus or deficiency in their use of renewable energy. The MRET has encouragedthe growth of renewable generation, particularly in the case of wind farms.

MRET applies nationally, with the majority of electricity retailers and wholesaleelectricity buyers on liable grids exceeding 100MW in all States and Territoriescontributing proportionately to increase Australia's renewable energy sources.

The Office of the Renewable Energy Regulator has been established to oversee theimplementation of the measure. Information on the measure, including registrationand accreditation forms, fact sheets, the Renewable Energy (Electricity) Act 2000and the Renewable Energy (Electricity) Regulations 2001, is available atwww.orer.gov.au.

34 Australian Greenhouse Office, LETDF website: www.greenhouse.gov.au/demonstrationfund.
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Renewable Energy Certificates (RECs)35

Owners or operators of eligible renewable power generators can earn one REC foreach MWh of renewable electricity produced, by applying to the ORER. RECs aretraded, purchased by electricity wholesalers liable for their electricity generationunder MRET. The sale of RECs provides an additional income stream for renewable

energy generators, improving the viability of projects. The value of RECs is not fixedand is subject to the market. There is currently a surplus of RECs (above thenumber that needs to be acquitted), which has deflated their value. From September2005 to September 2006, RECs began trading at A$27 and ended trading at A$16 onthe spot market. However, additional RECs are still required to meet demand in thelater years of the scheme and this may result in some increase in REC price if thecurrent surplus is exhausted.

GreenPower

Established in 1997, GreenPower is a national accreditation program that setsstringent environmental and reporting standards for renewable electricity productsoffered by energy suppliers to households and businesses across Australia.GreenPower aims to increase Australias capacity to produce environmentallyfriendly renewable electricity by driving demand for alternative energy generation.Since 1997, over 500,000 residential and commercial customers Australia wide havecontributed to reducing greenhouse gas emissions by buying GreenPower, resultingin savings of over 3.9Mt of greenhouse gas emissions.36

National Electricity Industry Regulators

The National Electricity Market Management Company (www.nemmco.com.au)manages the operation of the wholesale electricity market;

The Australian Energy Market Commission (www.aemc.gov.au) has responsibility

for rule changes, rule making and market development. The Australian Energy Regulator (www.aer.gov.au) enforces economic

regulation of the wholesale electricity market and electricity transmissionnetworks and the National Electricity Law and National Electricity Rules. From 1July 2007, the AER is also responsible for economic regulation of electricitydistribution as well as gas transmission and distribution.

The Office of Renewable Energy Regulator (www.orer.gov.au) manages theRenewable Energy (Electricity) Act 2000and the registering and transferring ofRenewable Energy Certificates;

The Australian Competition and Consumer Commission (www.accc.gov.au) is anindependent authority that administers the Trade Practices Act, including itscompetition and access provisions;

The National Electricity Tribunal, established under the National Electricity Law,determines applications that Code Participants have breached the code;

The Australian Securities and Investments Commission(www.asic.gov.au/asic/asic.nsf) regulates the financial instruments used byparticipants to manage the risk of trading in the National Electricity Market.

35 Further information is available at www.greenhouse.gov.au/markets/mret and www.orer.gov.au36 Further information is available at www.greenpower.gov.au
http://www.nemmco.com.au/http://www.aemc.gov.au/http://www.aer.gov.au/http://www.orer.gov.au/http://www.accc.gov.au/http://../SBrook/Local%20Settings/Temporary%20Internet%20Files/OLKE/www.asic.gov.au/asic/asic.nsfhttp://www.greenhouse.gov.au/markets/mrethttp://www.orer.gov.au/http://www.greenpower.gov.au/http://www.greenpower.gov.au/http://www.orer.gov.au/http://www.greenhouse.gov.au/markets/mrethttp://../SBrook/Local%20Settings/Temporary%20Internet%20Files/OLKE/www.asic.gov.au/asic/asic.nsfhttp://www.accc.gov.au/http://www.orer.gov.au/http://www.aer.gov.au/http://www.aemc.gov.au/http://www.nemmco.com.au/


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National Electricity Industry Representative Bodies

The National Generators Forum (www.ngf.com.au/html) represents the 22 majorpower generators in the National Electricity Market;

The Renewable Energy Generators Australia Ltd (www.rega.com.au) is a nationalbody representing zero emission electricity generators, equipment suppliers andindustry specialists;

The Energy Supply Association of Australia (www.esaa.com.au) is a nationalbody representing members involved in electricity generation, transmission,distribution and retailing;

The Energy Retailers Association of Australia (www.eraa.com.au) is anindependent association lobbying in the interests of retailers of electricity and gasthroughout the National Electricity Market the National Gas Market;

The Energy Users Association Australia (www.euaa.com.au) represents businessusers of energy with activities across all states and many sectors of the economy;

The Energy Networks Association (www.ena.asn.au) is the peak national bodyrepresenting gas.

State & Territory Government Policies and Programs

Green Energy Targets

The Victorian Government has introduced to State Parliament the VictorianRenewable Energy Target Act 2006that sets a target of 10% (approximately3274GWh) of the States energy supply to be sourced from renewable sourced by2016. This policy is expected to attract some A$2 billion of investment in renewableenergy generation to Victoria.37

The South Australia, Climate Change and Greenhouse Emissions Reduction Act2007sets three targets: to reduce state emissions by at least 60% by 2050 (anamount equal to or less than 40% of 1990 levels); and 20% renewable energy target(as a percentage of total state electricity generation capacity and total state electricityconsumption) by 31 December 2014.

From 2008, the New South Wales Government will requiring electricity retailers tosource 10% (~1317GWh by 2010) and 15% (~7250GWh by 2020) of NSW end useconsumption from renewable sources. Retailers will have access to RenewableEnergy Certificate trading (income stream) but penalties for non-compliance with thetarget will also be enforced. In addition, under the New South Wales Greenhouse

Plan, electricity retailers will be required to offer a product with at least 10% GreenPower to all new (or moving) residential customers.

The Western Australian Government has set a renewable energy target of 6% on theSouth-West Interconnected System electricity transmission grid by 2010. In February2007 the Premier announced that the state government will be also required topurchase 20% of its electricity requirements from renewable energy sources by 2010.

In the Northern Territory, Power and Water Corporation has set a 2% renewableenergy target to meet its obligations under MRET.

37 Sustainability Victoria website, www.sustainability.vic.gov.au/www/html/1632-victorian-legislation-and-guidelines.asp
http://../SBrook/Local%20Settings/Temporary%20Internet%20Files/OLKE/www.ngf.com.au/htmlhttp://www.rega.com.au/http://www.esaa.com.au/http://www.eraa.com.au/http://www.euaa.com.au/http://www.ena.asn.au/http://www.sustainability.vic.gov.au/www/html/1632-victorian-legislation-and-guidelines.asphttp://www.sustainability.vic.gov.au/www/html/1632-victorian-legislation-and-guidelines.asphttp://www.sustainability.vic.gov.au/www/html/1632-victorian-legislation-and-guidelines.asphttp://www.sustainability.vic.gov.au/www/html/1632-victorian-legislation-and-guidelines.asphttp://www.ena.asn.au/http://www.euaa.com.au/http://www.eraa.com.au/http://www.esaa.com.au/http://www.rega.com.au/http://../SBrook/Local%20Settings/Temporary%20Internet%20Files/OLKE/www.ngf.com.au/html


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Links to State and Territory renewable energy programs andelectricity industry regulatory bodies

Australian Capital Territory Department of Environment www.environment.act.gov.auIndependent Competition and Regulation Commissionwww.icrc.act.gov.au

New South Wales Department of Water and Energy www.dwe.nsw.gov.auIndependent Pricing and Regulatory Tribunalwww.ipart.nsw.gov.au

Northern Territory www.minerals.nt.gov.au

Queensland Environmental Protection Agencywww.epa.qld.gov.au/environmental_management/sustainability/energy/renewable_energy_rebate_programsOffice of Energy, Department of Treasurywww.energy.qld.gov.auQueensland Competition Authority www.qca.org.au

South Australia Department of Energy www.energy.sa.gov.au/index.php

Essential Services Commissionwww.escosa.sa.gov.au

Tasmania Department Of Infrastructure Energy and Resourceshttp://www.dier.tas.gov.au/energyTasmanian Energy Regulatorhttp://www.energyregulator.tas.gov.au

Victoria SustainabilityVictoriawww.sustainability.vic.gov.auEssential Services Commission www.esc.vic.gov.au

Department of Primary Industries www.dpi.vic.gov.au

Western Australia Sustainable Energy Development Officehttp://www1.sedo.wa.gov.au

New South Wales Greenhouse Gas Abatement Scheme (GGAS)

GGAS was the worlds first mandatory greenhouse trading reduction scheme. TheScheme began operation on 1 January 2003, regulating mandatory targets forgreenhouse gas emissions abatement from electricity production and use.Participants are required to reduce greenhouse gas emissions to a benchmark of7.27 tonnes of carbon dioxide equivalent per head of state population by the end of2007. This benchmark will be maintained until the end of 2020 or until a nationalemission trading scheme is established (scheduled for 2012).

Queensland 18 per cent gas scheme

Electricity retailers in Queensland are required to source at least 13% of theelectricity they from gas-fired generation. The scheme aims to encourage greaterpenetration of gas and the development of new gas sources (including coal seammethane) and infrastructure in Queensland and to reduce greenhouse gas emissionsfrom the Queensland electricity sector. Building on the success of the currentscheme, the State government has announced that the target will be increased to18% by 2020.

Queensland: Climate Smart 2050

The Queensland Governments climate change strategy details a number of futureinitiatives to promote a lower carbon future, in particular, A$900 million FutureGrowth Fund, to demonstrate clean coal technologies (A$600 million of the funding isprovided by the Queensland coal industry); and introducing (staged) a low emissionsenergy target of 10% by 2020.
http://www.environment.act.gov.au/http://www.icrc.act.gov.au/http://www.dwe.nsw.gov.au/http://www.ipart.nsw.gov.au/welcome.asphttp://www.minerals.nt.gov.au/http://www.epa.qld.gov.au/environmental_management/sustainability/energy/renewable_energy_rebate_programs/http://www.epa.qld.gov.au/environmental_management/sustainability/energy/renewable_energy_rebate_programs/http://www.energy.qld.gov.au/http://www.qca.org.au/http://www.energy.sa.gov.au/index.phphttp://www.escosa.sa.gov.au/site/page.cfmhttp://www.dier.tas.gov.au/energyhttp://www.energyregulator.tas.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.esc.vic.gov.au/http://www.dpi.vic.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www1.sedo.was.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.dpi.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.esc.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.sustainability.vic.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.energyregulator.tas.gov.au/http://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://www.dier.tas.gov.au/energyhttp://ww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Electricity Infrastructure Market Intelligence Report

Attachment A: Ownership of Australias major energy companies

Company Name Energy Sector Primarylocation

Primary Owner(s)

ACT Government ActewAGL Distribution ACTAGL

AGL Generation; distribution Vic, SA, ACT The Australian Gas Light Company Alinta Generation; distribution Vic, WA Alinta Ltd Aurora Energy Distribution Tas Tasmanian Government Basslink Transmission Vic, Tas CitySpring Infrastructure Management CitiPower Distribution Vic Cheung Kong Infrastructure Country Energy Distribution NSW NSW Government CS Energy Generation Qld Queensland Government Delta Electricity Generation NSW NSW Government

Babcock & Brown Infrastructure Ecogen Energy Generation VicBabcock & Brown Development Group

International Power IPM Eagle Generation Vic Mitsui Electranet SA Transmission SA ABB; Powerlink; YTL Power Investment ENERGEX Distribution Qld Qld Government EnergyAustralia Distribution NSW NSW Government Enertrade Generation trader Qld Queensland Government Eraring Energy Generation NSW NSW Government Ergon Energy Distribution Qld Qld Government ETSA Utilities Distribution SA Cheung Kong Infrastructure

International Power Australia International PowerHazelwood

Generation VicCommonwealth Financial Services

Hydro Tasmania Generation Tas Tasmanian Government Integral Energy Distribution NSW NSW Government International Power Australia Generation SA International Power Australia

The Australian Gas Light Company Tokyo Electric Power Company

Loy Yang Power Generation Vic

Commonwealth Bank of Australia (leader of international consortia)


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Electricity Infrastructure Market Intelligence Report

Company Name Energy Sector Primarylocation

Primary Owner(s)

Macquarie Generation Generation NSW NSW Government NRG Flinders Generation SA NRG Asia-Pacific

Comalco NRG Gladstone Generation Qld NRG Asia-Pacific Origin Energy Generation; retail SA, Qld, Vic Origin Energy Osborne Cogen Generation SA ATCO Group

InterGen Intergen Australia Generation QldChina Huaneng Group

Powerco Distribution Tas Babcock and Brown Power &Water Corporation Generation,

transmission, distributionNT NT Government

Powercor Australia Distribution Vic Cheung Kong Infrastructure Powerlink Queensland Transmission Qld Qld Government Snowy Hydro Limited Generation NSW NSW, Vic. and Commonwealth governmentsSP Ausnet Transmission; distribution Vic Singapore Power International

Stanwell Corporation Generation Qld Qld Government Tarong Energy Generation Qld Qld Government Transend Network Transmission Tas Tas.Government Transnergie Transmission NSW, Qld,

Vic, SAHydro-Qubec

TransGrid Transmission NSW NSW Government TRUenergy Generation; distribution Vic, SA CLP Power Asia Western Power Corporation Generation,

transmission, distributionWA WA Government


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Attachment B: Major Electricity Generation Businesses38

Generation (GWh)Share

(%)Revenue

(A$ million) Share (%)New South Walesa

Macquarie Generation 28,030 14.56 867 13.24

Delta Electricity 23, 286 12.10 876 13.37Sithe Energies 1,016 0.53 44 0.68National Power 1,064 0.55 38 0.57Earing Energy 14,456 7.51 792 12.09Snowy Hydro Limited 5,167 2.68 323 4.94VictoriaAGL 296 0.15 51 0.77Alintab 66 0.03 8 0.12Energy Brix 1,064 0.55 31 0.48Hazelwood Power 11,330 5.89 339 5.17Loy Yang Power 17,086 8.88 494 7.54IPM Eagle 8,772 4.56 254 3.88

TRUenergy 11,276 5.86 318 4.86Ecogen Energy 484 0.25 48 0.74Alcoa 1,355 0.70 41 0.63Others 197 0.10 24 0.37QueenslandStanwell Corporation 10,703 5.56 279 4.26Enertrade 142 0.07 5 0.08CS Energy 14,599 7.59 399 6.10Intergen 6,236 3.24 153 2.33Tarong Energy 14,964 7.77 395 6.03Transfield Holdings 2,205 1.15 70 1.06Comalco/ NRG 8,110 4.21 245 3.74Others 75 0.04 9 0.14South AustraliaInternational Power (Synergen) 1,622 0.84 69 1.06Origin Energy 477 0.25 24 0.37NRG Flinders 4,521 2.35 158 2.41TRUenergy 2,502 1.30 142 2.17ATCO Power 1,167 0.61 44 0.68Western AustraliaWestern Power Corporation 13,875 6.32 NA NAOthers 1,783 0.81 NA NANorthern TerritoryPower and Water Corporation 1,366 0.62 NA NAOthers 395 0.18 NA NA

TasmaniaTasmanian Hydro 9, 213 4.19 NA NAOthers 609 0.28 NA NA

a Including the Australian Capital Territoryb Alinta was acquired by Babcock & Brown Infrastructure and Singapore Power on 17 August 2007.ASX trading of Alinta (AAN) ETO positions are suspended until 30 August 2007.

38 Australian Bureau of Agriculture Research Economics (ABARE), Energy in Australia 2006(p51)


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Attachment C: Proposed Electricity Generation Projects, as at April 2Power station Developer Capacity

(MW)Plant type Primary fuel typ

New South WalesBamarang Delta Electricity 400 Gas turbine Natural Gas Bega Wambo Power Ventures 120 CCGT Natural Gas Cobar Wambo Power Ventures 114 Gas turbine Natural Gas Eraring Eraring Energy 50 Gas turbine Natural Gas Leafs Gully Stage 1 AGL 300 Gas turbine Natural Gas Leafs Gully Stage 2 AGL 500 Gas turbine Natural Gas Marulan Stage 1 Delta Electricity 250-320 Gas turbine Natural Gas Marulan Stage 2 Delta Electricity 400-450 CCGT Natural Gas Munmorah Delta Electricity 667 Gas turbine Natural Gas Mt Piper upgrade Delta Electricity 180 Steam Black Coal Tallawarra TRUenergy 430 Gas turbine Natural gas Tomago Stage 2 Macquarie Generation 260 Gas turbine Natural gas Tomago stage 3 Macquarie Generation 270 Steam Black coal Wagga Wagga Wambo Power Ventures 600 Gas turbine Natural gas

VictoriaBogong AGL 130 Hydro Water Loy Yang A upgrade Loy Yang Power 236 Steam Brown coal Macarthur AGL 330 Wind Wind Maryvale Paperlinx/ Alinta 200 Cogen Natural gas Mortlake Origin Energy 1000 CCGT Natural gas Portland (including Yambuk) Pacific Hydro 195 Wind turbine Wind Yaloak Pacific Hydro 115.5 Wind turbine Wind QueenslandBHP (Peak Downs) BHP (Peak Downs) 230 Steam Coal Chinchilla Queensland Gas Company 57 CCGT Natural Gas Kogan Creek CS Energy 750 Steam Coal

MIM/ Entergy (Wandoan Energy) MIM/Entergy 700 Steam Coal

Spring Gully Origin Energy 1000 CCGT Natural gas Stanwell Stanwell Corporation /

Macarthur Coal350 Steam Black Coal

Surat Surat Dawson Development 470 Steam Coal

39 ABARE, Major Projects List, April 2007



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Power station Developer Capacity(MW)

Plant type Primary fuel typ

CorporationTownsville AGL 370 CCGT Natural gas Townsville Stanwell 766 CCGT Natural gas South AustraliaATCO Auspine 60 Cogen Natural Gas Lake Bonney Stage 2 Babcock & Brown 159.5 Wind turbine Wind Hallett expansion AGL 250 Gas turbine Natural gas Innamincka Geodynamics 13 Steam Hot dry rocks Pelican Point expansion International Power Australia 250-300 Gas turbine Natural gas Port Pirie International Power Australia 230 Gas turbine Natural gas Quarantine expansion Origin Energy 70-200 CCGT Natural gas The Bluff AGL 45 Wind turbine Wind Tungketta Hill Ausker Energie/ ANZ

Infrastructure Services55 Wind turbine Wind

Vincent North Pacific Hydro 59.4 Wind turbine Wind Western AustraliaBluewaters 1 Griffin Group 200 Steam Black coal

Bluewaters 2 Griffin Group 200 Steam Black coal Bluewaters 3 Griffin Group 200 Steam Black coal Centauri 1 Eneabba Gas 168 Gas turbine Natural gas DESTEC Energy DESTEC Energy 660 Gas turbine Natural Gas Kwinana NewGen Power 320 Gas turbine Natural gas Muja D upgrade Verve Energy 52 Steam Black coal Siemens AG Siemens AG 400 CCGT Natural gas Telfer Gold Mine Newcrest Mining 135 Gas turbine Natural gas TransAlta TransAlta 470 CCGT Natural gas Wagerup Alinta Stage 1 Alinta 140 Cogen Natural gas Wagerup Alinta Stage 2 Alinta 140 Cogen Natural gas Tasmania

Bell Bay Pulp Mill Gunns Limited 80 Steam Black Liquer Musselroe Hydro Tasmania 150 Wind turbine Wind Tamar Valley Power Babcock and Brown 210

180CCGTOCGT

Gas

lectricity Infrastructure Market Intelligence Report 27E


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Electricity Infrastructure Market Intelligence Report28

Attachment D: OWEN INQUIRY INTO ELECTRICITYSUPPLYIN NSW- Key Points and RecommendationsThe Owen Inquiry noted:

NSW needs to prepare for new base load supply by 2013-2014. Given thetypical 6 year gestation period for major power plant preparation for suchplant needs to start now.

Coal or gas will meet most of the new baseload generation needs.as othertechnologies can only contribute on a relatively small scale or will not matureuntil 2020 at the earliest.

There in an additional need for peaking capacity in NSW to provide forchanging commercial and residential useage patterns. Hydro and open cyclegas turbines are the main providers for peak demand in NSW. Future peakdemand is likely to be satisfied by combined cycle gas turbine plant (CCGT)and to a lesser extent, renewable options.

While NSW is experiencing a declining rate of growth in consumption(projected growth over the next decade is 1.8% per annum compared to 2.5%per annum over the previouis decade), NSW should be prepared foradditional baseload demand by 2013-2014.

The establishment of the National Energy Market has meant that newinvestment in generation must be delivered with commercial discipline. Thecost of new investment in new generating capacity over the next 10-15 yearsis estimated at A$7 to A$8 billion. Additionally, the inquiry found evidencesuggesting that State owned retail businesses will need to invest A$2 billionto A$3 billion in order to compete in the NEM. Finally, the cost of retrofittingexisting plant with carbon reduction technology could be as high as

A$3 billion to A$4 billion. In addition to new investment of A$12 billion to A$15 billion to ensure future

competitiveness and regulatory compliance over the next 10-15 years,another A$10 billion will need to be spent over the next 4 years on the State'stransmission and distribution networks.

The combined impact of both the divestment of generation and retail and theavoidance of new generation investment means that total State net debtwould be up to $26 billion lower in 2020 compared to a retain and investscenario. The report maintained Government ownership of transmissionassets, the "poles and wires" could be continued.

Overall, the Owen report concluded that private sector investment couldensure security of supply and achieve appropriate price, social andenvironmental outcomes.

The Owen Inquiry recommended:

1. Divest the retail arms of EnergyAustralia, Integral Energy, and CountryEnergy.

2. Divest or lease the States generation businesses: Macquarie Generation,Delta Electricity, and Eraring Energy, including their development sites.

3. Ensure efficient, timely, and co-ordinated development application andenvironmental planning processes for generation stations and new resources

of fuel, such as coal and coal seam methane projects.


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4. Commence the process of obtaining development approval for thedevelopment sites of existing generators.

5. The Commonwealth should design a set of guiding principles to reduce someof the uncertainties regarding the impact of the introduction of emissionstrading on investment in the electricity generation sector and to facilitate the

adoption of ultra low CO2 emissions technologies. Specifically, as soon aspossible it should: establish the economy-wide greenhouse gas emissionscaps and associated time frames; establish the penalty price for non-compliance; announce the criteria upon which emissions permits will beallocated; and, announce trade exposed exemptions.

A full copy of the inquiry's findings is available at:http://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/OwenInq

uiryIntoElectricitySupplyInNSW.htm
http://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/OwenInquiryIntoElectricitySupplyInNSW.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/OwenInquiryIntoElectricitySupplyInNSW.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/OwenInquiryIntoElectricitySupplyInNSW.htmhttp://www.premiers.nsw.gov.au/WorkAndBusiness/DoingBusinessInNSW/OwenInquiryIntoElectricitySupplyInNSW.htm

Electricity Infrastructure August 07

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