The Audit found that, in 2011, WA had an installed electricity generation capacity of 6,224 MW. Transmission peak demand was 3,581 MW and distribution peak demand was 3,696 MW. The utilisation of electricity in WA in 2011 was 18,814 GWh for generation, 17,838 GWh for transmission and 18,270 GWh for distribution.
The DEC from electricity infrastructure in 2011 was $2.3 billion. The Audit forecasts a 31 per cent increase in the use of electricity from 2011 to 2031. This equates to 24,469 GWh for generation, 23,374 GWh for transmission and 24,132 GWh for distribution by 2031. Based on these forecasts, the Audit projects a 121 per cent increase in the DEC of electricity infrastructure to $5.2 billion in 2031.
The Independent Market Operator of WA (IMO) forecast413 an increase in annual electricity from 17,930 GWh in 2011, and 18,324 GWh in 2013-14, to 21,984 GWh in 2023-24 in the Wholesale Electricity Market (WEM). Although the IMO only forecasts 10 years ahead, this is broadly consistent with Audit projections.
However, the IMO forecast cannot be compared directly with the Audit's projections for DEC. The IMO reports and forecasts unit electricity consumption in gigawatt-hours, whereas DEC is a measure of the value-add provided by electricity infrastructure, expressed in dollar terms. The two are not necessarily perfectly correlated. Nonetheless, unlike most other jurisdictions, both the regulator and the Audit project a rise in electricity consumption in the years ahead as WA's population grows more quickly than elsewhere.
Several new generation assets were built on the basis of the expected growth in demand, such as the Bluewaters power station in WA in 2009. This has led to a surplus of generation capacity, which will lead to higher retailer prices. This is because the WEM, unlike the NEM, is a capacity market where generators are provided with a fixed payment for the provision of capacity.
The Large-scale Renewable Energy Target (and the previous Renewable Energy Target) have led to a substantial increase in the penetration of wind farms across the Australia. This has led to growth in installed wind capacity in WA, including the 206 MW Collgar wind farm, one of the largest wind farms in Australia. At the same time, the Small-scale Renewable Energy Scheme, feed-in tariffs and other solar photovoltaic (PV) subsidies have led to a significant increase in the penetration of solar PV systems in the last five years. In WA, the capacity of installed solar PV has increased from 18 MW at the start of 2010 to 427 MW as of October 2014 and the IMO forecast a rise to around 1,090 MW in 2023-24.
The combination of flattening growth in demand and rising penetration of renewables has led to an ongoing structural change in the wholesale sector.
At the same time, there have been considerable rises in network charges in the WEM. These rising network charges have in turn influenced retail prices, creating an impetus for regulators to investigate options that may diminish, or delay, further expansion of the network. There have been significant changes in WA, including:
■ The announcement of a merger of the government-owned entities of Synergy, an electricity retailer, and Verve, a generator. The objective is to facilitate cost savings and encourage private sector investment in the future.
■ The government's current electricity market review, which is being undertaken to examine market structure and options for reform that can reduce the cost of supplying electricity and encourage private sector investment in the WEM.
The implications of surplus capacity differ by sector. For the generation sector, surplus capacity and renewable policy settings are likely to lessen the need for new capacity. IMO has assessed that no new capacity will be required through to 2020-21 in the WEM, or through to 2018-19 if Kwinana Stage C is decommissioned, based on existing supply and demand conditions.
For the network sector, the decline in demand has lessened the need for augmentation investment. However, Western Power has foreshadowed the need for a number of network augmentation investments over the next five years.414
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413. Independent Market Operator (2014a)
414. Western Power (2015)