AlintaGas announced it had signed a memorandum of understanding with Alcoa World Alumina Australia to jointly develop energy efficient co-generation power plants at Alcoa's three alumina refineries in WA.

Alcoa will use all of the steam output from the co-generation plants in its alumina refineries while AlintaGas will sell the electricity into the retail market in direct competition with government-owned electricity utility Western Power.

AlintaGas' chief executive officer Bob Browning said the plan was to install modules of about 120 megawatts (MW) at Alcoa's plants, each of which had the capacity to take up to four modules.

The scheme which has the capability to add up to 1200 MW to the state's generating capacity would be installed in stages, driven by Alcoa's need for steam as well as growth in demand. Each of the modules will cost about $100 million.

AlintaGas said the project will deliver cheaper electricity in the WA market and the company is already in discussions with large customers who are now allowed to seek alternative electricity suppliers because of moves to reform the WA electricity market.

Currently, a task force is reviewing the electricity system and it is expected by many in the industry that the ensuing report will recommend splitting Western Power into separate generating, transmission and distribution operations.