Ian Stirling: State of opportunity

ElectraNet CEO Ian Stirling
ElectraNet CEO Ian Stirling

Having guided increased investment in South Australia’s transmission network infrastructure for almost a decade, ElectraNet CEO Ian Stirling faces new challenges as Australia’s networks look to connect with new sources of renewable generation.

The past decade has seen considerable change for South Australian transmission provider ElectraNet. Having converted from a public to private sector company, facilitated rapid connection of renewable generation and increased its capital expenditure from $30 million per year to more than $850 million in the past five years, ElectraNet is now looking to support further renewable generation opportunities and export additional capacity into the National Energy Market.

With a 100 per cent growth or more in average capital expenditure (capex) for each of its recent five-year regulatory periods, ElectraNet could potentially spend up to $1900 million in the upcoming 2013-2018 regulatory period as it connects new sources of generation and increases its interconnector capabilities with neighbouring states.

Leading ElectraNet through this increasingly dynamic and changing environment since 2002 has been CEO Ian Stirling. The 61-year-old has been a part of the electricity industry since 1982 and has extensive experience in senior management positions in all sectors, including generation, transmission and distribution. Mr Stirling is a director of the Electricity Supply Association of Australia (ESAA), a director of Business SA as well as president of the South Australian Committee for Economic Development of Australia (CEDA). With the state about to experience further step-changes brought about by generation relocation and mining expansion, such as the recently announced Olympic Dam upgrade, the CEO is trying to predict potential growth in demand and to augment the SA transmission network to support new generation.

“One of the things with South Australia is we exist in a state of opportunity at the moment,” Mr Stirling explained to Energy Source & Distribution.

“There are currently eight or 10 operational mines in South Australia. And it is expected that another 15 mines will commence commercial operation between now and about 2020 for copper, gold, iron ore, etc. ElectraNet has already received several connection enquiries for about 500 MW of load on Eyre Peninsula – but that’s just for a couple of mines.

“So there’s big upside potential, but we’re still waiting for the formal direct-connection applications – and the resources industry is driven by world commodity prices,” he said.

Despite the considerable investment potential, ElectraNet must remain a ‘just-in-time’ supplier of power systems and be flexible to tight direct-connect customer deadlines, maintaining a deliberate building process.

“We don’t build them five years in advance of what they need because customers have to pay for that. We build them just when they are needed and of course that requires the mines to get through all their pre-feasibility and feasibility. They need to lock away their supply contracts and that’s about a four-to-five year commitment that they have to get through.”

To help guide its investment decisions ElectraNet launched its Network 2035 Vision Consultative Paper in September, a collaborative document that sets out a framework for the development and operation of South Australia’s electricity transmission network over the next 25 years. It forms the basis of an ongoing relationship between the company and their extensive range of stakeholders for planning the reliable and safe delivery of electricity transmission services. Comments to inform ElectraNet’s network development proposals closed in October and the transmission utility is now preparing for its next regulatory revenue-setting process, due to commence in 2012.

Hastening inter-state collaboration and renewable supply development is the Federal Government’s 20 per cent Renewable Energy Target. South Australia derives 50 per cent of its power from gas and has Australia’s largest operating wind generation output, but Mr Stirling is interested to see the state’s other green technologies developed further.

“We believe we will get large development in concentrated solar thermal over time as the price comes down the curve. South Australia is exposed to waves all the way across from Africa and there’s a lot of power in those waves. I think when (wave energy technology company) Carnegie and others get their technology rapidly rolling out, it’s going to be a fascinating new energy source,” he said.

“And these alternative energy sources will not be sited near traditional power station locations, which are largely on a coal-field or close to a gas pipeline. So, there will be significant changefor the South Australian network.”

With a maximum state demand of 3400 MW, a capacity for an additional 200 MW upgrade (which would evidence a 40 per cent increase in transfer capacity) and neighbouring states hungry for low-carbon energy, the only barriers to increased interstate market exports are South Australia’s two interconnectors. The 460 MW nominal AC Heywood interconnector extends between the south east of South Australia and southern Victoria, while a DC interconnector with a 200 MW nominal capacity owned by Murraylink is located near Swan Hill, and connects with South Australia’s Riverland region. Between them South Australia and Victoria can transfer around 600 MW effectively.

ElectraNet has been working with the Australian Energy Market Operator (AEMO) to investigate a number of upgrade alternatives to increase the Heywood interconnector transfer capacity in order to supply more power to the rest of the nation, potentially anywhere from 100-200 MW.

ElectraNet commissioned ROAM Consulting to study the potential commerciality of wind power in South Australia. The study found that up to 1050 MW of additional new wind development is likely to be commercially profitable (approximately 2300 MW in total) if connected to the existing electricity transmission network in areas with high-quality wind resources and available transmission network capability, such as the state’s mid-north region. But with the interconnector upgrade project likely take up to another two to three years due to planning and consultation, turning the tap on maximum market exports will take time.

While there is vast green potential for South Australia with existing customer enquiries for more than 5000 MW, the high penetration of wind generation has caused South Australia’s electricity prices to be volatile, with swings in wholesale clearing prices caused by the different profile of generation between early morning and peak-demand periods. A price on carbon in 2012 may cause a reduction in carbon-producing generation, but with the rising cost of electricity of concern to everyone, Mr Stirling is concerned that closing down power stations will cause considerable transmission investment challenges.

“What we require is some certainty as we will need to make some pretty substantial transitions and future network augmentations to ensure the continued reliability and security of supply for South Australia and the national electricity market into the future. And what we don’t see, either from the government or from the opposition, is how we are going to achieve this major transition without disrupting the everyday lives of Australians,” he said.

“People talk about compensation, but if you have to close traditional base-load power stations, that requires the establishment of alternative generating plant, to ensure that the consumer’s demand for electricity can continue to be met. Therefore with the NIMBY (Not In My Back Yard) syndrome continuing to be a challenge, replacement generation may take another five to 10 years,” he said.

“No one wants a power station in their backyard. Whether it’s a wind farm, a solar thermal station or even a nuclear power plant. So siting will be a real issue. There’s a whole lot of community concerns that require due consideration. So there’s some significant issues there.”

Like much of Australia’s network, the majority of ElectraNet’s transmission lines were built in the 50s, 60s and 70s. The utility is the process of replacing or upgrading those lines and part of its next five years will see significant line-replacement work being undertaken. With regular online and physical asset monitoring programs in place, ElectraNet has introduced a new asset photography system and is also investigating the economies of drone aircraft with multiple spectrum cameras and high-resolution static output.

“What we are doing is developing technologies that allows overlay of those photos so you can locate visually-undetectable damage, identify hot spots, and target and assess a variety of issues including abnormal corona readings that are of concern on powerlines. And we are integrating these technologies into an efficient system that we already have in place for our high-voltage substations, which is all a best-practice and proactive risk-based approach,” Mr Stirling said.

ElectraNet was also the first transmission company in Australia to build an IEC 61850-based substation. First used for the Clare Valley substation, opened in 2010, and implemented in two other regional substations, Mr Stirling said it has been a successful technology roll out. The communication protocol allows for effectively any type of technology to be used within the substation, opening systems up to more manufacturers and increasing competition.

“This technology is not only modern practice, but it’s also a cheaper build technology then the traditional technologies. So you save a few million dollars a substation, which helps to achieve more cost-effective transmission services. Substations cost $25-30 million in the transmission world, so you’re saving up to about 10 per cent in the cost, which is really great news for end-use customers,” he said.

With backlash to rising electricity prices causing the Australian Energy Regulator to make a dramatic announcement regarding energy framework earlier this year, Mr Stirling questions the way in which the AER announced its referral to the Australian Energy Market Commission about changing the rules in relation to transmission networks.

“I don’t quite understand the politics behind what they are requesting because my view is, they have already exercised all these powers in their determinations to assess and refuse if required, proposed network augmentations,” he said.

“Nevertheless, ElectraNet is more than happy to be engaged in the process and we have a lot of respect for the AER as individuals, so we will proactively engage with this process. And no doubt others will also contribute including the ESAA (Energy Supply Association of Australia), the ENA (Energy Networks Association), Grid Australia – there will be a whole lot of people wanting to comment including the EUAA (Energy Users Association of Australia) from the major customer’s point of view,” he said.

“So its going to be a significant enquiry and it could be a game changer because there are already a number of enquiries running by the AEMC (Australian Energy Market Commission) one on the whole transmission framework, for example, that are all going to come together. All of these things in some ways do effect the risk for investors.”

Despite the challenges ahead, Mr Stirling takes great pleasure in the fact that ElectraNet performs a valuable community service.

“One of the things that keeps people really enjoying their job in utilities is the fact that, in the long run, they are doing things for the community. Yes, we have to sell our transmission services; yes, we make money in the process, but the reality is that you’re actually bringing power to the community to enable metropolitan and regional development – and we actively contribute to supporting the positive economic development of South Australia,” he said.

“We are enablers. It gives myself and my employees a lot of pleasure to actively participate in supporting and growing our state. I think it’s one of the really good things about our industry.”