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The Western Australian Power Dilemma

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  • PAUL SIMSHAUSER
  • PHILLIP WILD

Abstract

From 1984 gas-fired power generation had been gradually increasing its share of the electricity market in Western Australia (WA) starting at 1 per cent and rising to about 50 per cent by 2008. Had it continued on this trajectory, the WA power system would have made great advances in terms of cost and environmental efficiencies given the looming commencement of the Carbon Pollution Reduction Scheme in Australia from 2011. However, more recently the cost of natural gas has increased from $3/GJ to $7/GJ following the sudden collapse of the East Spar gas field in the North West Shelf. In this article, we analyse the impact of the gas price increase and demonstrate that despite being the most environmentally efficient conventional technology, natural gas combined cycle plant has been squeezed out of the market which in turn will increase forward electricity price risks to WA consumers through greater exposure to CO 2 pricing in the long run. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

Suggested Citation

  • Paul Simshauser & Phillip Wild, 2009. "The Western Australian Power Dilemma ," Australian Economic Papers, Wiley Blackwell, vol. 48(4), pages 342-369, December.
  • Handle: RePEc:bla:ausecp:v:48:y:2009:i:4:p:342-369
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    References listed on IDEAS

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    1. Paul Simshauser & Thao Doan, 2009. "Emissions Trading, Wealth Transfers and the Wounded Bull Scenario in Power Generation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(1), pages 64-83, March.
    2. Simshauser, Paul & Doan, Thao & Lacey, Ben, 2007. "The Outlook for the Economic and Environmental Performance of Australia's National Electricity Market in 2030," The Electricity Journal, Elsevier, vol. 20(6), pages 58-75, July.
    3. John Foster & Melvin J. Hinich & Phillip Wild, 2008. "Randomly Modulated Periodic Signals in Australias National Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 105-130.
    4. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
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    Cited by:

    1. Paul Simshauser, 2011. "The Hidden Costs of Wind Generation in a Thermal Power System: What Cost?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 44(3), pages 269-292, September.
    2. Phil Wild & William Paul Bell & John Foster, 2012. "Impact of Carbon Prices: State Production Trends, Inter-state Trade and Carbon Emission Reduction Outcomes in the NEM over the period 2007- 2009," Energy Economics and Management Group Working Papers 6-2012, School of Economics, University of Queensland, Australia.
    3. Molyneaux, Lynette & Wagner, Liam & Foster, John, 2016. "Rural electrification in India: Galilee Basin coal versus decentralised renewable energy micro grids," Renewable Energy, Elsevier, vol. 89(C), pages 422-436.
    4. Patrick Hamshere & Liam Wagner, 2012. "Potential Impacts of Subprime Carbon on Australia’s Impending Carbon Market," Energy Economics and Management Group Working Papers 14, School of Economics, University of Queensland, Australia.
    5. Paul Simshauser & Elizabeth Molyneux & Michelle Shepherd, 2010. "The Entry Cost Shock and the Re-rating of Power Prices in New South Wales, Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(2), pages 114-135.
    6. Tim Nelson & Simon Kelley & Fiona Orton & Paul Simshauser, 2010. "Delayed Carbon Policy Certainty and Electricity Prices in Australia," Economic Papers, The Economic Society of Australia, vol. 29(4), pages 446-465, December.
    7. Nelson, Tim & Nelson, James & Ariyaratnam, Jude & Camroux, Simon, 2013. "An analysis of Australia's large scale renewable energy target: Restoring market confidence," Energy Policy, Elsevier, vol. 62(C), pages 386-400.
    8. Alexandra Bratanova & Jacqueline Robinson & Liam Wagner, 2013. "New Technology Adoption for Russian Regional Energy Generation: Moscow Case Study," Energy Economics and Management Group Working Papers 4-2013, School of Economics, University of Queensland, Australia.
    9. Paul Simshauser & Tim Nelson, 2012. "The second-round effects of carbon taxes on power project finance," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(2), pages 104-127, May.
    10. repec:bla:econpa:v:36:y:2017:i:3:p:300-316 is not listed on IDEAS
    11. Simshauser, Paul & Nelson, Tim & Doan, Thao, 0. "The Boomerang Paradox, Part I: How a Nation's Wealth Is Creating Fuel Poverty," The Electricity Journal, Elsevier, vol. 24(1), pages 72-91, January.
    12. Alexandra Bratanova & Jacqueline Robinson & Liam Wagner, 2012. "Energy cost modelling of new technology adoption for Russian regional power and heat generation," Energy Economics and Management Group Working Papers 9-2012, School of Economics, University of Queensland, Australia.
    13. Bratanova, Alexandra & Robinson, Jacqueline & Wagner, Liam, 2016. "New technology adoption for Russian energy generation: What does it cost? A case study for Moscow," Applied Energy, Elsevier, vol. 162(C), pages 924-939.
    14. John Foster & Liam Wagner & Phil Wild & Junhua Zhao & Lucas Skoofa & Craig Froome & Ariel Liebman, 2011. "Market and Economic Modelling of the Intelligent Grid: End of Year Report 2010," Energy Economics and Management Group Working Papers 10, School of Economics, University of Queensland, Australia.
    15. Simshauser, Paul, 2010. "Vertical integration, credit ratings and retail price settings in energy-only markets: Navigating the Resource Adequacy problem," Energy Policy, Elsevier, vol. 38(11), pages 7427-7441, November.

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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