The Queensland government established the Renewable Energy Expert Panel in early 2016 to provide advice on credible pathways to achieving a 50 per cent Renewable Energy Target (RET) for Queensland by 2030.
The Queensland RET policy seeks to reduce greenhouse gas emissions, balanced with the need to create economic development opportunities in the state. The panel released the Credible Pathways to a 50% Renewable Energy Target for Queensland draft report in October 2016.
Public consultations conducted by the panel since the issue’s paper release in May 2016 (which is continuing in November 2016) shows there is high level of interest in the proposed renewable energy target from the public and key stakeholders. Parallel to the public consultations, the panel also commissioned modelling and analysis from Jacobs, the Centre of Policy Studies, and KPMG.
Falling technology costs, market dynamics and a current project pipeline of around 2,500 megawatts (MW) of committed and proposed large scale renewable plant capacity, primarily in regional Queensland, shows Queensland has strong potential to grow its renewable energy industry. The panel argues that the government should encourage the market to contract and deliver large and small-scale renewable energy, and to develop a competitive advantage in the supply chain components of development and design, fabrication and construction, operations and maintenance, and power system ancillary services.
Pursuing research and development (R&D) and innovation in developing new and emerging renewable energy technologies, the Queensland Government could consider targeting the development of dispatchable renewable technology and also fringe-of-grid solutions as part of its reverse auction program.
Economic modelling projects that meeting a 50 per cent RET would have a small positive effect on the overall Queensland economy. This would largely be driven by the additional $6.7 billion (NPV) investment in renewable energy for the development of up to 5,500 MW of new large scale generation plant in Queensland. With significant government policy action to reach a 50 per cent target between 2020 and 2030, 4,000 to 5,500 MW of new large- scale renewable generation capacity will be needed.
The panel argues for the Queensland government to leverage existing federal funding to attract projects to Queensland, given the potential challenges in meeting the national Large Scale Renewable Energy Target (LRET) in the period up to 2020.
The panel also recommends the implementation of a competitive reverse auction process, applying an indicative target of up to 400 MW prior to 2020, with the target to be reviewed based on the level of renewables developed by the market. Beyond 2020, the panel has assessed three alternative post-2020 pathways to meeting a 50 per cent target for Queensland by 2030:
- Linear pathway: Assumes a uniform rate of renewables build from 2020 to 2030
- Ramp pathway: Features a ramp up in effort later in the period to capitalise on falling technology costs later in the period
- Stronger National Action pathway: Assesses what additional Queensland government action would be required to reach a 50 per cent target if a stronger national emissions reduction scheme is put in place from 2020 to achieve a 45 per cent reduction in electricity sector emissions on 2005 levels by 2030.
It needs to be noted the draft report was released within weeks of the South Australia Blackout. With that in mind, it is worth considering that:
- The blackout was blamed by the federal government on the instability caused by the South Australian Government’s high renewable energy target and the state’s subsequent reliance on the renewables for supply
- It resulted in the National Energy Market Review (NEMR) chaired by Dr. Alan Finkel (Australia’s Chief Scientist)
The impact of the NEMR on the LRET and its operations will be a matter of significant concern to the renewable industry and the state governments that have large RETs.
What effect the NEMR will have on the pathways Queensland will take to achieve its 50 per cent target is yet to be seen.
Each pathway results in variations in benefits, costs and policy relativities. The Ramp pathway delivers the 50 per cent RET at lower cost than the Linear pathway, though with less cumulative emissions reduction to 2030. The Stronger National Action pathway results in significant emission reductions nationally and closure of around 1,500 MW of coal-fired generation in Queensland. Annual Queensland electricity sector emissions would be 25 per cent lower in 2030 relative to 2016 under the Linear and Ramp pathways, and 31 per cent lower under the Stronger National Action pathway.
Under the Linear and Ramp pathways, there is no closure of existing fossil fuel generators expected prior to 2030. However, a 50 per cent renewable energy target is projected to have a significant longer-term effect on this predominantly Queensland government-owned plant, with an estimated reduction in operating cash flow of $600 million to $1,100 million (NPV) to 2030 under the Linear and Ramp pathways.
The panel has recommended that the shareholding ministers consider the effect on government-owned corporations. Given the political difficulty to sell state-owned assets in Queensland, and the possible inability to sell abandoned assets, there may be a high cost to the Queensland government and the taxpayers of Queensland after 2030.
The Stronger National Action pathway is not within the direct control of the Queensland government. The panel argues the modelling conducted shows the 50 per cent RET, applied through the Stronger National Action plan, represents a credible scenario in the context of national climate change policy.
Under this pathway, Queensland is projected to reach 41 per cent renewable energy generation through the operation of the national emissions intensity scheme. If 41 per cent renewable energy generation (REG) is realized as projected, direct policy action from the Queensland government will be required to deliver only another 1,900 MW to reach the 50 per cent target.
Given technology and cost improvements in large-scale renewable energy generation and storage (REGS), it is conceivable that 1900 MW could actually be derived through upgrading the REGS infrastructure constructed to achieve the 41 per cent REG. Remember, REG is derived from the eight to 10 hours of daylight hours for solar and whenever there is enough breeze for wind. There are other REG supply formats, though the scale of these REG formats are minimal at present.
The panel notes that in the event of further reductions in Queensland demand, such as through greater energy efficiency of machinery, equipment and buildings, or the closure of large industrial load before 2030, the requirements under the target could be lower. In the panel’s analysis, these factors could reduce the large-scale renewable capacity requirement in Queensland post-2020 to around 4,000 MW.
The panel has not recommended a preferred pathway. It has emphasised the importance of flexibility in designing Queensland’s longer-term policy, given the rapidly changing electricity market and uncertain national policy context.
The Queensland government needs to take the lead in the development of integrated climate and energy policies (generation and storage) at the national level to maximise efficiencies in emissions reduction and uptake of renewable energy.
Queensland has some of the cleanest coal generated power plants in the country and a number of gas-fired plants. The Queensland plants have been modelled by the panel as having the longest life spans of all existing plants in Australia. However, eventually the coal-fired power plants will be closed down due to economic and/or environmental and/or social demands.
The panel modeled the effect of the Queensland RET on the NEM, and the life spans of the coal-fired power plants across the NEM (particularly east coast plants). Hazelwood was recognized as the most likely short to medium-term closure.
The panel has recommended that the policy action should be funded through electricity market mechanisms where modelling indicates that through the suppression of wholesale prices.
It is unlikely that there will be a price effect on electricity consumers prior to 2020 under Queensland policy measures, given the timing of project development and leveraging of LRET revenues, offsetting the cost of the subsidy payments to renewables, which are estimated at $900 million (NPV)
Post-2020, the Linear and Ramp pathways would be broadly cost neutral to electricity consumers, offsetting the cost of the subsidy payments to renewables, which are estimated at $500 million (NPV)
The cost to achieve the 50% target under the Stronger National Action pathway is not projected to affect retail bills due to new renewable capacity being primarily driven through the national emissions intensity scheme and offsetting the cost of the subsidy payments to renewables, which are estimated at $50 million (NPV)
The panel notes there will be a significant additional requirement for planning approvals and network connections over the period to 2030, and has suggested ways to streamline processes and improve information provision to project proponents. State government policies and local government planning schemes often appear to be at odds with each other in the promotion and development of the renewable energy sector in Queensland. Energy security, reliability, cost effectiveness and policy settings are all considered in the draft report as critical to achieving the 50 per cent RET in a cost effective, stable national electricity market.
While the panel considers there is no requirement for additional policy mechanisms that provide financial assistance for small scale renewables in Queensland, there are some non-financial measures that could be implemented to facilitate uptake of small-to-medium scale renewables both in the residential and commercial and industrial sectors.
Missing from the paper is an assessment of where the power of distributive energy systems can be included in the energy mix to minimise the need for infrastructure scale developments and bring some pricing controls back to the consumer.
Economic planning and development, and employment
Under the 50 per cent RET, the panel states Queensland will achieve an increase of around 6,400 to 6,700 full-time equivalent (FTE) employees on average between 2020 and 2030 under the Linear and Ramp pathways. There is a projected change in the composition of employment, with an increase in construction employment and a reduction in operational employment within the generation sector (two to five staff are needed to operate and maintain a 100MW solar PV farm on average).
The Queensland Labor governments should work with the impacted communities, individuals and relevant bodies to consider future training and workforce requirements. The Australian Council of Trade Unions has entered the public discourse on this aspect of the debate around renewables.
In recognizing the impact of REG on the economy and direct and indirect employment prospects on the regions in which coal-fired power plants are located, Australia’s unions have thrown their weight behind a transition away from coal-generated electricity, calling for a new statutory authority to manage a “just transition” that supports workers and communities that rely on fossil fuel-related jobs.
The Australian Council of Trade Unions (ACTU) has released a discussion paper noting a planned closure of coal power stations – along with both a jobs and energy plan for the country – would “create a more prosperous and diversified economy.” The ACTU is calling for an independent statutory body, Energy Transition Australia (ETA), to be created inside the environment and energy portfolio. ETA would be responsible for managing an orderly move to a clean energy economy.
The ACTU discussion paper, titled Sharing the challenges and opportunities of a clean energy economy, acknowledges Australia’s current emission cuts planned for 2030 would need to be strengthened in order to meet commitments made in Paris to keep global warming “well below” two degrees Celsius, noting:
- Australia will need to move toward net zero by 2050 if it is to play a valued part in global efforts to limit the impact of global warming
- Australian unions recognise that the transition of coal-fired power stations has been identified as crucial to achieving emissions reduction targets
- An industry-wide multi-employer pooling and redeployment scheme for retrenched workers is needed
- A labour adjustment package that supports workers to find new jobs with job services, retraining, financial and personal support, and travel subsidies and relocation assistance.
Given the modelling of the panel, the capacity for Queensland to achieve the 50 per cent RET appears to be realistic. Adoption of policy positions and implementation of supporting programs to achieve the 50 per cent RET needs to be considered in light of the disruptions to rural and regional communities that have strong economic and social ties to coal and related mining sectors, and/or industries or major enterprises that require significant base-load energy are supported and sustainable in the medium term.