PERTH (miningweekly.com) – The South Australian government has announced a A$550-million plan to improve energy security and boost competition in the state’s energy sector, following state-wide electricity blackouts last year.

South Australia suffered state-wide blackouts after a severe storm knocked over transmission towers in September 2016.

Premier Jay Weatherill on Tuesday said the South Australian Power for South Australians Plan will ensure more of the state’s power is sourced, generated and controlled in South Australia.

The plan will include building Australia’s largest battery to store energy from the wind and sun, as part of a new Renewable Technology Fund that supports clean, dispatchable and affordable power.

Bloomberg last week reported that South African-born billionaire Elon Musk has offered to provide the state with a 100 MWh energy-storage plant within 100 days, at a battery pack price of $250/kWh.

The state government will also build a A$360-million government-owned 250 MW gas-fired power plant to provide emergency back-up power and system stability services for South Australians.

New Ministerial powers will also be introduced to direct the market to operate in the interests of South Australians, while the government will incentivise increased gas production to ensure more of the state’s gas is sourced and used in South Australia.

Further, the state government will introduce an energy security target to ensure its power system uses more clean, secure energy that is generated in South Australia.

Lastly, the state will use the government’s purchasing power through its own electricity contract to attract a new power generator, increasing competition in the market.

“We’re taking charge of our energy future with a plan that will deliver South Australian power for South Australians,” Weatherill said on Tuesday.

“South Australians have been let down by a broken national energy market that puts profits before people. We’re going to put people first.

“Our plan will restore security and put downward pressure on prices. We’ll get reliable, affordable and clean power and ensure more of the state’s power is sourced, generated and controlled here in South Australia.”

The South Australian government’s plan comes amid warnings that gas prices in eastern Australia are likely to double by 2030 unless urgent action is taken to develop net supply.

The Australian Petroleum Production and Exploration Association (Appea) on Tuesday released data from a study by McKinsey & Company that warned gas customers would pay a high price if restrictions on developing new gas projects continued.

Appea CEO Dr Malcolm Roberts said the report was an urgent call to action for policymakers, especially those in New South Wales, Victoria and the Northern Territory.

“McKinsey finds that there are sufficient undeveloped resources and efficiency opportunities to meet our future needs,” Roberts said.

“But to turn those undeveloped resources into new supply, A$50-billion must be invested in the next 15 years. And the door is closing fast. Some supply options are time-sensitive. Decisions are needed by 2020.

“If we act now, according to McKinsey, we could contain the cost of gas on the east coast to around A$7/GJ to A$8/GJ. Failure to act, however, will likely see the price rise up to A$12/GJ.

“The impact of this failure is likely to add around A$2-billion to the annual energy costs for households, businesses and industry,” Roberts said.

He noted that the McKinsey study was especially timely with Prime Minister Malcolm Turnbull and the industry currently meeting to discuss options to increase local gas production.

“The Australian Energy Market Operator has highlighted that gas-fired generation must stay in the energy mix to protect energy security. Appea welcomes the Prime Minister’s initiative to work with the industry to remove the barriers to more gas supply,” Roberts said.

“The Commonwealth, South Australia and Queensland understand how much energy security and economic prosperity rely on responsible development of Australia’s gas resources. Their example must be followed by New South Wales and Victoria.”

Meanwhile, Australian Competition and Consumer Commission (ACCC) chairperson Rod Sims has told a conference in Sydney that the east coast gas crisis was worse than originally feared by the ACCC in is April 2016 inquiry.

“One year ago, at this conference, I warned of an urgent need for both new and, importantly, more diverse sources of gas supply into the domestic market.”

“The outlook for gas supply is now even worse than it was a year ago; indeed, our worst fears are being realised,” Sims said.

He pointed out that the scarcity of available gas on the east coast has seen prices increase one-and-a-half to four times above historic levels, with the price increases having seen a significant reduction in gas used for electricity generation, which is expected to flow through to significantly higher prices for residential customers.

“The most important problem, however, perhaps the real crisis, is the difficulties faced by industrial companies who rely on gas as a feedstock or as an energy source,” Sims said.

“Some are experiencing difficulties gaining supply; all are, or seem likely to, face huge price hikes that will perhaps permanently damage their businesses.”

Sims pointed out that Australia has a surprising number of industrial companies for whom gas makes up 15% to 40% of their costs; for many other companies, gas as an energy source is around 5% of their costs.

“At best, it makes it hard for these companies to invest and plan with such high and uncertain gas prices and with considerable supply uncertainty. At worst, plants will close and jobs will be lost purely as a result of the current gas crisis,” he said.