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THE WESTERN AUSTRALIAN POWER DILEMMA *
Author(s) -
SIMSHAUSER PAUL,
WILD PHILLIP
Publication year - 2009
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2009.00381.x
Subject(s) - natural gas , electricity , dilemma , natural resource economics , natural gas field , economics , electricity generation , pollution , agricultural economics , power (physics) , environmental science , economy , environmental protection , business , engineering , waste management , electrical engineering , ecology , philosophy , physics , epistemology , quantum mechanics , biology
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.