Thursday, 24 May 2007

Australia Power Prices Surge

As reported by the Wall Street Journal:

As I've said before in this post, Australia has been predicted to be the first developed country to be significantly impacted by climate change.

Here are some energy and manufacturing related statistics from the linked article:

Widespread drought in Australia is causing electricity prices to soar, as hydroelectric water-storage levels plummet and coal-fired power stations cut output because of lack of water for cooling.

Energy-intensive manufacturers, already wrestling with expensive oil and a strong currency, face the loss of one competitive advantage: cheap power, long provided by Australia's abundant reserves of coal.

And while the spike in power prices is benefiting generators in areas unaffected by the drought, electricity retailers' margins are being squeezed, and consumers might soon feel the pinch as state governments consider lifting price caps on retail power.

"If energy is an important component of your business, then these sorts of price increases are very difficult to swallow and it starts to impact on operations and investment decisions," said Roman Domanski, executive director of the Energy Users Association of Australia, which represents major users like Alcoa Inc., based in the U.S., and BlueScope Steel Ltd.

Water-storage levels for the bodies that feed Australia's biggest hydropower generator, Snowy Hydro Ltd., which provides 4% of Australia's electricity, have fallen to 8% of capacity.

An even bigger concern is the impact of the drought on coal-fired power stations, which provide 85% of Australia's electricity.

In Queensland, the state-government-owned Tarong, Tarong North and Swanbank B coal-fired power stations have all cut output because of a shortage of water for cooling, and stations in New South Wales state might face the same fate.

The combined loss of production from those three stations amounts to more than 1,000 megawatts, representing more than 5% of Australia's baseload electricity demand.

Reduced output from the Tarong power station has led to job cuts. The 1,400-megawatt station slashed output by 70%, leading Rio Tinto Ltd. to halve production at the coal mine that feeds the station and eliminate 160 positions.

Nuclear power plants (located on the coast of course) are an example of one proven solution to these problems.

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