Generators warn of carbon trading energy ‘collapse’

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THE proposed carbon-trading scheme will cause the collapse of the national electricity market, two of South Australia’s major generators have predicted.

International Power – which operates the Pelican Point power station and wind farms – has warned that to avoid blackouts governments would have to implement emergency plans to generate electricity.

It said this was because investment in power plants would not meet supply under the planned Federal Government carbon-trading scheme.

In its submission to the Government’s ongoing inquiry into energy policy, International Power argues penalties imposed on coal-fired power plants will cause some to become unprofitable and prematurely close before greener replacements come online.

International Power’s Jim Kouts said the future of the national electricity market – in which generators sold electricity at fluctuating prices – was at stake.

He said it took two years to build a significant power station and if a large plant was forced to close it could not immediately be replaced.

“If this (the market) failed (to keep electricity supplies on), governments would have to bring in emergency measures to keep generators operating,” Mr Kouts said.

The International Power view is partly backed by Origin Energy, which operates the Osborne power station.

Origin says the reliability of electricity supply is being “compromised” by uncertainty and delays in the Carbon Pollution Reduction Scheme, which has not yet passed the Senate.

“This is evidenced by the virtual non-existence of long-term contracts beyond 2010 and the relatively low level of reserve generation in Victoria and South Australia,” Origin’s submission states.

Business SA also warned of the dangers of electricity under-supply caused by the CPRS, which it states stretched the distribution system to breaking point in February this year.