Utilities minister Frank Sartor released a green paper this week to provoke discussion on how to cope with the state's expected 32% rise in electricity demand over the next 15 years.
He said population growth and the rapidly increasing use of air-conditioners meant the state would need at least one and possibly two new power stations to meet energy needs beyond 2008, and yet another power station could be needed early next decade.
Although the Government insisted supply was adequate for the next four years, demand in summer is growing rapidly. More peak capacity would be needed after 2008-09 if the current extreme weather continues, Sartor said.
Premier Bob Carr said he expected "massive" private sector interest in the plan.
A gas-fired power station would be the most likely solution to the peak load problem, Sartor said. While it would cost more to run than a coal-fired station, a gas plant could be turned on and off quickly.
But according to the green paper, additional base load capacity would also be needed and this could mean a new coal-fired station.
"Generally speaking, gas is economic for peaking plants [but] it would be difficult to see a gas plant provide supply of base load," Sartor said.
"The simple fact is you have to consider economic feasibility, technical feasibility and greenhouse gas impacts when making a decision," he said.
