AGE   July 31, 2003

Business  pg1

 

Cool air an ill wind for power

Date: July 31 2003


By Rod Myer

The boom in the use of air-conditioning will push the whole of eastern Australia into a power supply crisis by the summer of 2005-06, according to the National Electricity Market Management Company's latest demand and supply assessment.

Victoria will face a reserve capacity deficit in 2004-05 and would have faced one this summer except for a last-minute decision by Loy Yang Power to push forward an 80-megawatt capacity boost into the current calendar year.

To avoid the looming shortage of generation capacity, billions of dollars of new investment must be committed to the nation's generation system, radical new demand-dampening measures must be taken or a combination of both options adopted.

A NEMMCo spokesman said the use of air-conditioning by households and business had taken off in NSW and Queensland. As a result, peak-power demand in those states was now growing at higher rates than in Victoria and South Australia where the air-conditioning phenomenon had been apparent for some time.

This would turn surpluses of summer power reserves into deficits in the northern states by 2005-06. With all states in reserve deficit, boosting interstate interconnection lines would not resolve the problem.

The NEMMCo figures do not mean there will be insufficient capacity to meet national peak demand by 2005.

Rather, there will be insufficient capacity to meet demand and the safety reserve that the regulator sets to cover for mechanical failure in times of extreme heat. When these safety-reserve levels are breached, generator failure can mean blackouts and prices can spike to as much as $10,000 a megawatt-hour.

The looming crisis comes despite the installation of 850 megawatts of peak capacity and interconnection in Victoria for a cost of about $650 million in the past two years.

Victorian Energy Minister Theo Theophanous said the boost in capacity at Loy Yang would ensure adequate power supplies for this summer and his Government was working to get the right regulatory framework in place to ensure there was adequate investment in the power system to cover rising demand.

Victoria has already implemented agreements with industry to turn off power. The Government is running a trial program with big energy users to expand this measure.

However, demand growth is so strong that even the planned commissioning of the Basslink power connection with Tasmania in 2005 will not cover the looming shortfall in Victoria's power reserve. Basslink will provide an extra 500 to 600 megawatts of power, the equivalent of adding a new unit to the giant Loy Yang complex.

Consumer watchdog the Energy Action Group said that the blow-out in summer peak demand was putting unacceptable strains on the power system and that consumers needed to be charged the real price of providing peak power through the installation of smart meters.

EAG president Andrea Sharam said the present pricing system meant households without air-conditioning were subsidising those with air-conditioners for as much as $1000 a year.

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