SA government opens tender to bring new (renewable) competitors into energy market

The South Australian government has announced a new energy tender designed to introduce new competition in the market and remove the stranglehold of the existing gas generators, renewing hope that Australia’s first large-scale solar towers with storage can be built in the state.

The government will relaunch a tender for 75 per cent of its own long-term electricity needs, with the specific goal of introducing a new competitor into the market.

That has increased hope that a large-scale solar tower project like that proposed by SolarReserve for Port Augusta could be built, although it appears that energy minister Tom Koutsantonis favours gas.

Bizarrely, the Pelican Point gas generator, which was built 17 years ago and had been mothballed because its owners saw bigger profits selling gas into the export market, will be allowed to bid into the tender, despite not strictly being a new competitor as it has been operating again since July.

Indeed, the state government is helping the case of gas by offering $24 million in assistance to bring new local production on line, to lower the cost of gas, and also appears to be under the mistaken impression that the new solar tower and molten salt installations rely on gas to deliver dispatchable power.

The dice is further loaded in favour of Pelican Point because the government contract is for 10 years. Although this is said to be “negotiable”, the shorter time frame gives a major advantage to a plant that is already built, and largely depreciated, over a new first-of-its-kind facility.

South Australia’s government is under enormous pressure from consumers, the conservative media and the Coalition over the cost of electricity in the state, and as its share of wind and solar reaches 50 per cent of local generation, and in some cases demand.

This may explain its preference for gas over new technologies, but it has historically been the price of gas and the dominance in the local market of a few generators that has caused the state to have higher wholesale prices than elsewhere.

The state government held a tender for all of its electricity needs earlier this year, but decided only on allocating contracts for 25 per cent of its needs – relating to its carbon-free commitment to the Adelaide CBD – to smaller scale projects linking renewable energy with storage.

The new tender does not have an emissions limit, and is not technology specific, although it does say it wants to “reduce carbon emissions”. But by that it means substituting the amount of coal-fired power imported from Victoria.

© 2016 Solar Choice Pty Ltd

Giles Parkinson

Giles Parkinson regularly contributes unique content to Solar Choice News. Giles is the founder and editor of clean energy industry news service RenewEconomy. He is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the founding editor of Climate Spectator.
Giles Parkinson