Excess Electricity Supply, High Operating Costs Create Huge Revenue Drop in Australian Power Industry

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Researched by Industrial Info Resources Australia (Perth, Australia)--Australia is seeing a historic glut in electricity generation, which is causing serious contractions in the Power Industry, with revenues forecasted to fall 30% this year.

Recent trends and industry forecasts show that the capacity overhang will remain for the next five years, contributing to a further decline in revenue. Very few proposed power projects have progressed to the construction stage this year. The viability of several Australian projects are is being assessed in light of the market situation, and some are awaiting the pending Renewable Energy Target (RET) review.

The only major projects that have moved into construction this year are AGL Energy Limited's (New South Wales, Australia) $267.3 million, 102-megawatt (MW) Nyngan and $115.8 million, 53-MW Broken Hill solar projects, and a $196 million, 106-MW Taralga windfarm by Banco Santander S.A. All three are located in New South Wales (NSW).

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The excess supply, the nation's climate goals and government regulation continue to shape the fossil fuel industry's performance in Australia, forcing power plant owners to look for alternatives. Approximately 75% of the existing thermal stations are reaching the end of their lives. However, the owners of these stations are refusing to shut them down, mainly because of the costs associated with closing them permanently. Instead, most of the power plant owners are mothballing the stations or operating at much-reduced capacities to combat the losses. At least five major coal-fired power plants have closed this year due to the cost and demand factors associated with operating old thermal stations.

Millions of dollars worth of renewable energy projects also are in a state of flux, as the developers await the federal government's RET announcement. Although there is support for this type of initiative globally, the industry in Australia is ambiguous regarding the energy scheme due to low demand and excess supply from existing power plants.

According to recent industry forecasts, Australia will not need any additional generation for the next 10 years. This is true even under a worst-case scenario, especially in the eastern-based states, where Victoria alone has more than 2,000 MW of excess generation capacity, with NSW, Queensland (Qld) to follow the lead.

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