The traditional manufacturing state of South Australia, with the worst jobless rate in the country, is paying the highest prices in the national electricity market.
South Australia’s lack of access to low-cost coal, an exposure to higher wholesale gas prices and an absence of competition in conventional power generation was to blame, analysts said.
The state’s Liberal opposition has pointed the finger at the Labor’s government’s “overzealous rush into wind power” that it said was driving base-load electricity providers out of the market, pointing to the closure this year of the coal-fired Port Augusta power stations.
Soaring electricity prices in South Australia have seen up to 10 major manufacturers, including BHP Billiton, Arrium and Nyrstar, approach Treasurer Tom Koutsantonis to warn of production shutdowns unless the government intervened.
As a result, an extra 239 megawatts of power will come on line from today after private energy supplier Engie agreed to fire up a previously mothballed generator at Pelican Point, near Port Adelaide.
Spot power prices for South Australia have risen to more than seven times that of the Victorian price and almost eight that in NSW during the past week.
Mr Koutsantonis said yesterday the energy crisis had arisen because of a shortage of electricity being supplied to the state through an interconnector with Victoria, compounded by a planned outage at the Heywood Interconnector for upgrade work, higher gas prices and wild storms.
“A confluence of remarkable events has led to incredible volatility in the spot market over recent days, which has resulted in higher electricity prices and put pressure on South Australian businesses, some of whom have raised their concerns with me,” he said.
“Engie has brought additional generation at Pelican Point online after I approached them with the request. No amount has been paid to Engie to increase generation.”
Mr Koutsantonis said the situation was “another example of the failure of the so-called national energy market”.
The state had allocated $500,000 in last week’s budget for a feasibility study into greater interconnection of energy supply between South Australia and the eastern states, and asked the federal government to assist, he said.
This came as South Australia’s unemployment rate surged to 7 per cent last month, well above the 5.8 per cent national rate.
Business SA and the opposition said a lack of power security, stability and price competitiveness would only lengthen job queues.
“If there are manufacturers that are considering South Australia and looking at another state where it is more cost-competitive, then they’re going to go there,” Business SA’s Anthony Penney said yesterday. “Businesses in this state, particularly our manufacturers, our energy intensive industries, have been telling us for a while that energy prices are getting out of control.
“Right now, renewables in South Australia make up over 40 per cent of the energy, without the technology to effectively store the power being generated.”
Australian Energy Regulator data shows power prices in South Australia during the next two years will be 34 per cent higher than the national average and 69 per cent higher than Victoria.
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