SA Government strikes $219m deal to lease generators to Infigen and Nexif
The generators which were bought by the previous State Government to guard against blackouts will be leased to private operators, largely recouping the initial cost.
The emergency electricity generators owned by the State Government have been leased to two private companies in a $219 million deal.
Infigen Energy and Nexif Energy will take control of the generators, purchased by the former Labor Government in response to blackouts, for 25 years from May.
“The leasing arrangement will result in taxpayers largely recouping the $227 million cost of Labor’s foolish purchase of the generators and avoiding $267 million in future relocation, conversion and maintenance costs,” Energy and Mining Minister Dan van Holst Pellekaan said.
“This is also great news for South Australian electricity consumers who will receive the benefits of lower prices through extra competition in addition to retaining the existing backup generation capacity they currently provide.”
Mr van Holst Pellekaan said the leasing operation was not privatisation.
However, Opposition Leader Peter Malinauskas said South Australians were losing control of the assets.
“This is yet another example of Steven Marshall breaking his promise of no privatisations,” he said.
“These generators were built to protect South Australia against blackouts — and they are doing their job.”
Infigen and Nexif will use the generators to complement their renewable energy assets, enabling them to offer firm contracts to supply power to customers.
“Infigen has operated renewable energy assets in SA since 2005,” chairman Len Gill said.
“We are pleased to be partnering with the SA Government as we lead Australia’s transition to a clean energy future.
“Our strategy is focused on providing commercial and industrial customers with reliable and competitively priced clean energy.”
Infigen will pay about $5 million a year to the Government for the lease and spend another $55 million to move the generators in a couple of years time from the Adelaide Desalination Plant at Lonsdale to the Bolivar Waste Water Treatment Plant, where they will switch from diesel to gas.
Infigen will use the generators in conjunction with the Lake Bonney Wind Farm and battery in the South-East.
Nexif Energy will pay $93.7 million over 25 years and will move its leased generators from the former Holden site in Elizabeth to Outer Harbor and run on gas.
Last year, Mark Livesey QC reviewed the procurement of the generators for the Government.
He concluded the generators had cost up to $200 million for the initial lease, installation and operation, plus $227 million to purchase.
Over the next 25 years, further costs of between $187.5 million and $267.5 million would have been incurred by the Government to move the generators to Bolivar and connect them to gas and to operate and maintain them.
Mr van Holst Pellekaan said reduced emissions from running the generators on natural gas instead of diesel will also be a significant improvement.
The generators were brought into action in January this year, helping SA avoid load shedding when temperatures hit a record 46.6C in Adelaide.
However, Mr van Holst Pellekaan said they should be used more regularly.
“We don’t want generators to be sitting there idle, as is currently the case,” he said.
The Australian Energy Market Operator or the SA Energy Minister will be able to order the generators into service if a potential supply shortfall looms and they are not already operating at full capacity.
“I can guarantee that the contracts we’ve entered into with Nexif and Infigen will mean that these generators will be as available as they’ve ever been at times of potential electricity shortfall,” Mr van Holst Pellekaan said.
“But in addition to that they’ll also be available in the market every other day of the year.”
The leases start in May 2020.