Australia considers new power privatisation round

Australia’s government warned the country it urgently needed energy market reform and enormous investment in its power sector to meet domestic and foreign power demand, as justification for its renewed push for privatisation of state electricity assets.

As he unveiled a draft energy paper, Energy Minister Martin Ferguson said the government would also focus on developing the nation’s vast energy resources, mainly gas, and speed up the roll-out of clean energy projects. “Over the next two decades, Australia will require massive investment in the gas and electricity sectors, around AUD240bn (US$242bn) in generation, transmission and distribution,” Ferguson said.

“The White Paper also focuses on the next round of energy market reform, including further privatisation of energy assets and the removal of retail price regulation to increase efficiencies and remove distortions in markets that deter private sector investment,” he added.

He also announced that the government would no longer apply emissions standards for new coal power stations following the new carbon price legislation, thus helping to drive fresh investment to replace its ageing coal-fired power stations, many of which date back to the 1960s. The country relies on such units to generate around 80% of its electricity. New investment has fallen dramatically and Ferguson blamed it on threats by resurgent conservative rivals to unravel the carbon scheme if they won the 2013 elections.

In addition, Australia plans to develop its vast gas resources and domestic gas production is expected to triple by 2030. Most of the output is expected to be exported as LNG to the booming Asian market. Meanwhile, domestic gas consumption is forecast to grow sharply with its contribution to the power mix rising from 15% in 2009-10 to 44% by 2050.