South Australian businesses set to jointly purchase electricity
South Australian energy users club together for energy purchasing, AFR, by Angela Macdonald-Smith Simon Evans, 13 Apr 17, Cement maker Adelaide Brighton, steelmaker Arrium and 22 other major energy users in South Australia have won draft clearance from the competition regulator to jointly purchase electricity in a significant move that looks set to change the balance of power in the state’s fragile energy market.
The group, which also includes Brickworks and OZ Minerals, but excludes mining giant BHP Billiton, is spearheaded by the South Australian Chamber of Mines and Energy (SACOME). Together the organisations represent about 15 per cent of electricity demand in South Australia, where industry has been struggling with a series of blackouts that have cost revenues and jobs.
It comes as South Australian Premier Jay Weatherill revealed on Thursday that the state government had received 31 expressions of interest from around the world to build a $360 million fast-start gas-fired power generator which will be owned by taxpayers.
Bidders have come from Australia, China, Malaysia, Singapore, France, Finland and the United Kingdom for that process. The fast-start generator won’t compete against day-to-day power generation rivals but will be able to be turned on quickly when demand exceeds supply in the fragile South Australian electricity market.
Under the preliminary ruling from the Australian Competition and Consumer Commission, the group will be able to jointly tender to buy electricity for 11 years.
SACOME said the move had the potential to avoid the high prices and uncertainty that are “threatening the viability of many businesses”.
ACCC chair Rod Sims said that while the outcome of the tender is uncertain the joint approach by the companies to buy power “has a real chance of changing the wholesale market dynamics” by allowing existing plants to be used more efficiently or encouraging the entry of new generation in South Australia.
“Given the high levels of concentration on the supply side of the market in South Australia, the tender may provide further competition benefits by combining demand and increasing the participants’ bargaining power in the retail supply of energy contracts”, Mr Sims said.
‘Confident’ of getting clearance
Separately, the $360 million fast-start generator tender is one of the centrepieces of the $550 energy plan announced by South Australian Premier Jay Weatherill on March 14. It is the first piece of taxpayer-funded electricity infrastructure to be built in South Australia since the privatisation of the Electricity Trust of South Australia in the late 1990s.
Mr Weatherill said on Thursday it was an important element of the energy plan designed to have the state “standing on its own two feet” when it comes to being self-sufficient in what he claims is a “broken” national electricity market.
A separate tender process for the construction of 100MW of battery storage which the state government wants to be up and running by December 1 has attracted more than 90 different firms including high-profile industry players such as Tesla, United States firm Greensmith in conjunction with local partner ZEN Energy, and AGL Energy.
On the ACCC draft clearance, SACOME chief executive Rebecca Knol said on Thursday the group was “confident” of getting clearance “because it is a sensible and workable concept, but it is great to officially get the tick of approval”……..
The ACCC found there would be “minimal” negative public impact from the joint purchasing move, noting the group accounts for a relatively small share of the total market.
The draft decision from the competition watchdog is open to submissions before a final ruling is made in June whether to allow the joint purchasing group.
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