Anne Davies and John Garnaut - October 25, 2006 - www.smh.com.au

NSW faces blackouts and skyrocketing electricity prices within five years unless it increases supply, the national energy market regulator has warned.

In a report to be released today, it forecasts that demand for electricity in the state could outstrip supply by 2010-11, causing the network to fall below its tough reliability standards.

The forecast for NSW and other states will again focus debate on how Australia should meet its power needs in the face of mounting evidence about the effects of climate change on farming, tourism and other industries.

Today the federal and Victorian governments will announce funding to help build one of the world’s biggest solar power stations, a $400 million project that will be a key part of the national strategy to fight climate change.

The federal Treasurer, Peter Costello - who has previously dismissed the prospect of Australian nuclear power as commercially unviable - shifted his position yesterday. He said a nuclear plant would be built as soon as it became commercial, and that was possible within 10 years.

Australia’s greenhouse emissions are among the worst in the world - 3.41 tonnes of CO2 per capita - according to a report released yesterday by the conservation group WWF.

NSW’s energy demand is being fuelled mainly by air-conditioning - a standard feature in new homes - which leads to bigger and more frequent peaks in demand in summer, according to the report by the National Electricity Market Management Company.

NSW’s demand is projected to grow by 0.2 per cent in the year to June 2007, but the number of summer days with a 10 per cent or more likelihood of exceeding the network’s reliability standard is forecast to rise by 2.7 per cent.

Mainland states depend mainly on greenhouse-causing coal, although NSW is turning to gas-fired plants to meet the increasingly sharp peaks in demand. Gas-fired plants are more expensive to run but have about half the emissions and are more suited to peak demand. But the rising population will mean more need for baseload power to meet everyday needs, which are currently met by coal-fired stations running 24 hours a day.

The regulator is responsible for managing the wholesale electricity market, following the introduction of a national trading system. Its predictions are notoriously conservative, based on the worst case, such as the failure of a power station on a hot day.

NSW is not the most vulnerable state. South Australia faces potential power shortages as early as 2007-08 and Victoria a year later.