A renewable energy revolution is powering Queensland into the future
WHERE else but the Sunshine State?
A large-scale renewable energy revolution is occurring in Queensland. Fields that grew sugarcane for generations and a former mango farm are being converted to solar energy hubs where photovoltaic panels will stretch for miles.
Wind farms are planned across mountain tablelands and an innovative pumped storage project is taking shape where miners once dug for gold.
Biomass projects that could deliver value-adding opportunities in traditional agricultural districts have been proposed, and geothermal power stations that would displace diesel in some of the state’s most remote and expensive areas will supply electricity.
Put aside, momentarily, the vexed arguments about reliability and power prices.
Step back from the debate about exorbitant subsidies and the political dead end that this nation has reached over the right approach towards emissions reduction in the face of climate change.
Take a look at the investment which is occurring and the jobs being generated in this revolution. Right now, renewable energy is the biggest thing happening in this state.
The jobs and generation figures are updated on nearly a daily basis as additional projects are announced, analysis is undertaken and schemes move through the investment and construction phases.
At the end of June this year there were 17 projects under construction that will collectively see $2.3 billion invested, creating 2200 jobs and have the capacity to generate 1172 megawatts of electricity when the sun shines and the wind blows.
A further 40 are in the development stage.
Some won’t stack up and will cost too much to connect to the electricity grid.
But combined they would deliver a further 5406 megawatts of energy, enable $12.77 billion of investment and employ 8926 people.
Renewable energy is a hobby horse no longer. It’s bloody big business.
Not all the renewables projects are riffing off all the various government green schemes either.
Queensland’s first grid-connected solar farm, for example, is located on a former cane farm in the picturesque Sunshine Coast hinterland and the $50 million project has been fully funded by the local council.
“Out of all the projects we are doing this is the one our ratepayers love the most,” Mayor Mark Jamieson says.
No doubt the council’s bean counters didn’t mind it either considering the sums.
With a 15 megawatt generation capacity, its best described as a boutique solar farm.
But that’s enough to offset the council’s electricity costs for powering all its administration buildings, pools, parks, libraries, galleries and sports fields.
Council estimates the 30,000-panel farm, which is conveniently located next to a 33kV Energex power line, would, after costs, offset $22 million in power bills at today’s electricity prices for the next 30 years.
“With the way prices have been escalating, now we have a hedge if you like,” Jamieson explains. “Whilst our solar farm is Queensland’s only grid connected solar farm, as the price increases so will our return as well.”
Council achieved this without cheap funding that’s available through Federal Government schemes and, unlike other proposals, it paid to connect to the state-owned electricity grid itself.
At the other end of the scale is the 125 megawatt, 1.3 million-panel behemoth being built by Sun Metals on a disused mango farm south of Townsville.
Sun Metals’ zinc refinery is one of the largest power users in the state, churning through 900,000 megawatt-hours of electricity a year.
The farm will generate a third of its energy needs.
Extraordinary wholesale power price spikes, which have been a particular feature in Queensland during recent times, was a major driver behind Korean Zinc’s decision to build what will be one of the largest solar farms in Australia.
The $200 million farm, which the company has sourced private finance for, will not only ensure the viability of Sun Metal’s existing facility by stabilising production costs, it may also provide the platform for a $500 million expansion of the refinery.
“The SMC Solar Farm investment of $199 million is the first step in Korea Zinc ensuring the long-term viability of the existing refinery and also underpinning the potential for its expansion using world-class new technology, with an investment decision due in late 2017,” Sun Metals Chief Executive Officer Yun Choi said earlier this year.
Sun Metal’s decision is somewhat of a game-changer considering it was not government funded.
It is also the kind of industry that critics say renewables will kill off.
The zinc refinery is in a better position than others, however, to adopt renewables as it can scale production up and down in concert with its new energy production while other manufacturers don’t have that luxury.
Funding through the Australian Renewable Energy Agency has been a key driver of projects in the Sunshine State, like the Kidston solar and pumped storage projects on a historic gold mine site near Georgetown.
At the other end, the private sector is incentivised by the Commonwealth’s Renewable Energy Target which aims to create 33,000 gigawatt hours of additional renewable electricity generation by 2020. Because power retailers are obligated to purchase a certain percentage of their energy from “clean” sources, they do so through a market mechanism of certificates.
Yet as the Palaszczuk Government is quick to point out, little of the investment that this market has spawned was occurring in Queensland before it introduced its policy of 50 per cent renewable energy use by 2030.
“When the Palaszczuk Government was elected, there was not one large-scale renewable energy project commissioned in Queensland,” Acting Energy Minister Curtis Pitt told QBM.
“In just 18 months, we’ve kick-started the renewable energy boom.
“There are now 17 projects financially committed and under way in the state bringing strong benefits to regional Queensland, including $2.3 billion of investment and 2200 construction jobs, and there are many more to come.
“Energy is undergoing a transformational change in the way it is generated, transported and used and as a government you have to plan for that and not stick your head in the sand and pretend our only option is coal-fired power stations anymore.
“We’re committed to transitioning to a clean energy future in a responsible, achievable and sustainable way. This includes introducing more generation capacity and price stability.”
Yet calculating the long-term dollar cost of this policy, via pass-throughs to household and business power bills or subsidies and sinecures provided courtesy of taxpayers, is impossible.
And it depends on who you’re prepared to believe.
Same goes for the impact on the reliability of the state’s power supply as intermittent sources threaten to displace coal-fired power stations.
For instance, ACIL modelling conducted for the Queensland Productivity Commission estimated the 50 per cent scheme would be subsidised by taxpayers to the tune of $10.8 billion over the period to 2030.
And because the Queensland market was already oversupplied and new capacity not needed until 2022, the effect would be to export lower energy costs interstate.
“Queensland consumers would effectively subsidise other National Energy Market businesses and households in achieving emissions reduction,” the QPC said.
Economic growth would also be exported interstate.
“Modelling of the macroeconomic impacts of a QRET suggests Queensland’s Gross State Product would be around 0.25 per cent lower compared to the base case by 2034–35, with the rest of Australia 0.04 per cent better off,” it said.
While the ACIL modelling suggested the subsidy would be offset by lower wholesale power prices, the Queensland Government would forego a staggering $8.3 billion in earnings via its coal-fired power stations.
Unsurprisingly, with emissions reductions and costs concentrated in Queensland under the state-based scheme, the QPC recommended to the Government not to proceed.
The Renewable Energy Expert Panel, assembled by the Palaszczuk Government, was much more positive, however.
The panel’s Credible Pathways Report found the 50 per cent renewable energy target would be “broadly cost neutral to electricity consumers” (note, not taxpayers).
“The projected cost-neutral outcome under Queensland policy action is due to the modelled suppression of wholesale prices, which is expected to offset the cost of the subsidy payments to renewables,” it found.
However, this was based on the assumption that all of Queensland’s existing coal and gas-fired plant would continue to operate at reduced profit levels.
“Closure of even one significant coal-fired generator would be expected to lead to higher wholesale prices and the erosion of some or all of the wholesale price benefits,” the panel said.
Critics will remember that similar assumptions about wholesale price depression were made before the introduction of the federal Renewable Energy Target.
And similar warnings about the closure of coal generators were made and came to fruition.
Look what happened in South Australia when it could no longer rely on baseload energy from Victoria.
Queensland, however, is in a lot different position.
Almost 80 per cent of our energy is sourced from generators owned by the State Government.
And the state is more likely to run loss-making coal-fired power stations to keep the lights on while the private sector wouldn’t. Still, any closures and Queensland’s energy reliability may become parlous and send prices skyrocketing.
The Australian Energy Council says the Palaszczuk Government shouldn’t take too much comfort from suggestions that the multi-billion dollar subsidy for 50 per cent renewables policy would be offset by wholesale price declines.
“The low price impact is predicated on the so-called merit order effect of the additional supply persisting through to 2030,” AEC’s Kieran Donoghue said in a submission.
“Should the market conditions induced by the policy cause a material level of coal exit, especially if this occurs in conjunction with further national emissions reduction policy, the merit order effect will rebound and wholesale prices could rise above historical levels.”
The Grattan Institute’s Tony Wood, one of Australia’s most respected voices on energy policy, savaged the claim that the Palaszczuk Government’s policy wouldn’t impact prices.
“The claim of no price impact for consumers is an economic illusion,” Wood says.
He said the panel’s claim that Queensland’s existing fossil-fuel generators would remain in the market should be counterbalanced against the experiences in other states.
“Economic modelling did not forecast the closure of the Northern power station in South Australia or the announced closure of Hazelwood in Victoria,” Wood says.
He also points out the cost of connecting all the new solar and wind farms to the network appeared to have been overlooked. Still, the Grattan Institute’s report, Next Generation: the long-term future of the National Electricity Market, suggested Queensland did not face the shortfalls of other states.
However, while the influx of renewable would make power cheaper when the sun was shining and the wind was blowing, the prospect of extreme price spikes loomed when they weren’t.
Opposition energy spokesman Michael Hart insists this shows the risks that Labor is taking with Queensland’s reliability.
“The very reason the Grattan report concludes Queensland’s power supply is relatively stable at the moment is due to the majority of our baseload power being derived from coal-fired power stations, not renewables,” he says.
“Annastacia Palaszczuk’s bloated 50 per cent renewable energy target by 2030 would plunge Queensland into the same perilous position this report has exposed in South Australia, Victoria and to a lesser extent New South Wales.”
Still, despite the political divergence, investors are backing a significant number of projects in Queensland with a long-range view that a low emissions electricity environment is inevitable.
And the business investment and jobs are welcome in Queensland, particularly in the regions where there’s been a dearth of new projects as the mining boom dwindled, helping to ensure unemployment remained stubbornly high.
However, debate over the implications of the 50 per cent renewables policy is not going to go away, and for good reason.
What are the costs of the power purchasing agreements entered into by the state and what are the implications for electricity bills?
What are the Budget implications if the state is stripped of dividends from its generation fleet and what happens if private power stations pull out?
Right now, we haven’t got the answers.
Regardless, the Palaszczuk Government is basking in the glory of a renewables revolution finally coming to the state where the sun shines.
Wednesday, October 04, 2017
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