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Queensland lays out three “cost neutral” paths to 50% renewables

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The panel appointed by the Queensland government to canvass options for its renewable energy target has outlined three “credible” pathways for the state to achieve 50 per cent renewable energy by 2030, and says each of them will create jobs, boost the economy, and be “cost neutral” to consumers.

In a direct smackdown to the “scare-mongering” of the federal Coalition government, the report says adding up to 5,500MW of new large-scale renewable energy capacity will cost one quarter of the amount suggested by federal energy minister Josh Frydenberg, and would have no deleterious impacts on energy reliability.

The report, from a five person team led by Macquarie Group banker Colin Mugglestone, and including energy consultant Paul Hyslop, University of Queensland’s Paul Meredith, the Climate Council’s Amanda McKenzie, says the plan will attract billions in investment and add $5 billion to gross state product.

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The first two options are a choice between a “linear” approach to meeting the target, adding around 400-500MW a year, or a “ramp” approach, starting slow at around 200MW a year and then increasing the target to take advantage of falling technology costs.

The third option assumes a federal emissions reduction target of 45 per cent by 2030, in which case the modelling shows that Queensland would source around 41 per cent of its electricity from renewables. It would then use mechanisms such as reverse auctions to add another 1,900MW to top its share to 50 per cent.

All three scenarios are based on the fact that Queensland currently has about 700MW  of large-scale renewables (mostly hydro and biomass), just over 1,500MW of rooftop solar PV, and will build another 3,300MW by 2020 to meet its share of the federal 2020 target.

The scenarios suggest that it could use reverse auctions – like those pioneered in Australia by the ACT – to secure 400MW of new renewable capacity in Queensland by 2020.

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Between 2020 and 2030 it would use those auctions, which would be used to find the cheapest “contract for difference” for a further 4,000MW to 5,500MW of large-scale capacity. Overall, by 2030, it expects around 7,000MW of large-scale solar and 2,000MW of large-scale wind.

(Ironically, this modelling was conducted by Jacobs, which in recent reports released by the Energy Networks Association and the Climate Change Authority had predicted little or no large-scale solar being built in Australia between 2020 and 2030).

The report also expects another 3,400MW of rooftop solar PV – mostly on industrial and commercial properties – as predicted by the Australian Energy Market Operator. All of this rooftop solar would be paid for by the households and businesses and would likely reduce their overall electricity bills. It would require no further subsidy.

In total, the modelling suggests around 14,100MW of current and new renewable energy capacity would be needed to deliver the about 33,000GWh a year needed to source 50 per cent of all electricity from renewables.

Mugglestone says the additional 4,000 to 5,500MW of large-scale capacity would cost somewhere between $6.1 billion and $6.7 billion (net present value). This compares to the Coalition forecast of $27 billion in added costs. (Even if Coalition’s estimate included rooftop solar, it would still come in at around $10 billion).

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The Queensland modelling, however, is based on conservative forecasts for the cost of solar, wind and battery storage (see above) from last year’s Australian Power Generation Technology report and the CSIRO. Mugglestone says these cost predictions could well be beaten, but said the group chose to be conservative.

Its modelling shows that the new build of large-scale solar would require government subsidies (in the form of contracts for difference) of between $500 million and $900 million over the course of the target, but the impact on this would be more than offset by a fall in wholesale prices out to 2030.

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In fact, in most scenarios the modelling suggests a fall of just below and above 1 per cent in electricity costs to consumers, depending on whether they are retail or industrial customers. But the panel prefers to paint this as “cost neutral.”

“That will surprise a lot of people,” state energy minister Mark Bailey said, noting the “scare-mongering” about renewables on the national political front that had “no evidence” to back that up.

Indeed, the Coalition has branded the state-based targets of Queensland, Victoria, South Australia and the ACT as reckless and unrealistic. Bailey said this report “cast those aspersions” aside.

The report predicts this would add around 6,500 jobs, and add $5 billion in value to the economy (state gross product).

The only sector to suffer would be coal power, which now accounts for nearly three quarters of generation. Its total revenue could contract by more than $1 billion as it is progressively displaced by wind and solar. But the modelling suggests that no coal-fired generator would be forced to retire in this time frame, because the state has a relatively young and efficient fleet.

Indeed, the only scenario where coal generation is forced out is if the federal government pushes a national scheme that aims to cut emissions by 45 per cent by 2030 – the level considered by most as the bare minimum needed by Australia to meet its fair share of the Paris climate deal. In this scenario, about 1,500MW of coal-fired capacity might be forced to retire.

Mugglestone says it is clear in the panel’s talks with investors, developers and financiers that there is money to invest in renewable energy in Queensland.

“This is a sensible way of doing things. There is no need for any further subsidy (rooftop solar) …. and there is money to invest (in large-scale projects) and banks are very interested.”

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On system reliability, a hot issue among renewable energy opponents after price spikes and blackouts in South Australia (although none of these were directly attributed to renewable energy), the panel says reliable power supply is a must.

But it points out that AEMO has not identified any fundamental barriers to achieving higher penetrations of renewable generation in Queensland.

“Modelling indicates the 50 per cent renewable energy target for Queensland can be met while maintaining the required reliability standard,” the report says. And it notes the likely retention of coal-fired generators as an important factor.

Queensland says that once a decision is taken after a final report is delivered later this year, the target will be put into place early in 2017, with the first auction of large-scale capacity possibly occurring in that year to ensure that Queensland attracts its fair share of renewable investment.

“This is a priority for us as a government, so we will take a considered and throrough analysis off the three credible pathways,” energy minister Mark Bailey told RenewEconomy.

“It will be 2017 (when we get started), but it is not something that we’ll be wanting to delay in any way. We’re very committed to this, as you can see from this piece of work. This is a substantial piece of work with not just Queensland implications but national implications.”  

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  • Alan S

    I know this is stating the bleedin’ obvious but the staged addition of renewable energy generation must be conducted according to a plan that includes retiring fossil fuelled generation, adding storage and conducting risk assessments of transmission and protection systems at each stage. The SA blackout was not caused by renewable generation but in 40 years of living here I’ve never seen a plan to ensure SA’s power security – nor water security or transport for that matter. Plenty of talk, plenty of good ideas a bit of construction here and there but little forward planning.

  • Neo Lib Yes

    This doesn’t seem to add up, in that QLD already has 12.54 GW of generation capacity and only 9.6GW maximum demand with AEMO then predicting this will remain flat out to 2035, increasing marginally to 10.6GW, but if they build 5.5GW of new renewables by 2030, there would then be around 7.5 GW excess capacity. Something would have to give!

    • Ken Dyer

      I would have thought it was pretty obvious. There are at least 6 coal fired power stations with a capacity of around 5 GW, all built and commissioned between 1965 and 1993, and all nearing the end of useful life. Then there are several gas plants about the same vintage, that could also be retired. Queensland also has over 600 MW of hydro to provide power when the wind doesn’t blow and the sun don’t shine, so Queensland is in a better position than South Australia to more quickly move to renewable energy, and better than the extremely cautious target of 50%.

      • Neo Lib Yes

        But……. they are not proposing to close coal fired thermal! Does not add up.

        • nakedChimp

          It’s simple.. gas peakers will suffer most by not being needed so often.
          Coal will only be forced to close if there are national CO2 emissions targets to be obeyed.
          Coal will still suffer anyway (and might need to close due to being uneconomic) as they will loose revenue.

          But yeah, a Labour gov that would hang this on the highest bell tower might have problems. So they don’t say that directly.

      • Catprog

        500MW of the hydro though is pumped storage.

    • It ain’t the capacity that counts, it is the output. As mentioned in the story, the panel reckons it needs to produce 33,000GWh a year of renewables to meet 50% target (half of 66,000GWh). It reckons to produce that it will need about 14,100 of total capacity, but it might be less than that depending on what is built and the capacity factors of those plant. i.e. if solar with tracking gets 35% capacity factor or more, or less. There may still be all the coal there, but producing at much less capacity factors (like those in NSW now). personally, i reckon some will close before then, but that’s what the panel says.

      • Neo Lib Yes

        Ok, but having that amount of backup is not free, it will cost and, unless renewables come down dramatically, they will cost more than the wholesale rate. Add that all up and it will cost more. This report is a predetermined outcome to back the plan. Sort of reminds me of Stephen Conroys NBN plan. Good thing the State government owns the coal fired generation in QLD.

        • Ren Stimpy

          Please dude, pull your finger out. Cheaper, cleaner, reliable power. Why are you opposing this?

          • Neo Lib Yes

            And you know this will be cheaper, cleaner, reliable what because they are from the government and here to help!

          • Ren Stimpy

            No they are from private investment, slightly aided by ARENA and subsidies. Private capital to meet this hopeless outsourcing government’s promises.

          • wideEyedPupil

            Climate means nothing to you or your offspring presumably. We’re already well past stopping at +1.5º C and probably +2.0º C. Not even +1.0º C is safe. We’d probably lose all reefs and kelp forests if we halted at that temp (which we can’t due to lag and removal of short term cooling sulphates when we do close all the coal), Western Peninsula of Antartica is in irrecoverable, terminal decline, Eastern peninsular now in question too. It goes on and on. Wouldn’t want to be in government in Bangladesh as the 10-20 m SLR eventuates, which is the historical equivalent for +1ºC of average air temp anomaly warming. A third of Bangladeshis live less than 1 metre above SL, and most of their ag and fishing would get wiped out with 1 metre of SL rise alone. Population ~159 million people.

          • Adam Smith

            I do find it interesting that bloggers on this site always get personal and attack anybody who would voice another opinion. I try and stick to the facts. I do care about the environment, have solar on my roof and will buy an EV as soon as they become economically viable. If it is all as bad as you say, then, unless we stop everything immediately, then life as we know it will end. You might want to google the Western Peninsula of Antartica, as from what I read even the climate sites are not saying it is in terminal decline, but has subtle changes and the IPCC concluded that there had been a small increasing trend (about 1.49 ± 0.18 % per decade) in Antarctic sea ice extent for the period of reliable satellite records (since 1979). maybe not the end of the world just yet!

        • nakedChimp

          They put down the numbers to get the capacity inclusive overcapacity.. and it won’t affect end consumers in any meaningful way.
          What of this don’t you get?

          • Neo Lib Yes

            Gee a free lunch (or 7.5GW overcapacity)………. This is what you call creative accounting.

          • Dispassionate

            It is interesting that everyone here is willing to accept without question the assumptions, forecasts and assertions of this report without question, yet if a negative report was presented everyone would be nit picking it and howling it down.
            No judgement just an observation.

          • nakedChimp

            In that case, what numbers don’t you buy?

            The only thing I find fishy is the part about ‘no coal closures, but coal will lose a lot of revenue’. I can fit that in a political dream world sure, but I don’t think it will be what happens in reality.

          • Adam Smith

            If you read the report, it admits that coal closures might occur, due to national emissions reductions targets, which is highly likely even if the Coalition is still in power, which will increase the market price and flow into higher power prices. That is over a term of 14 years! Labor just might get in federally by 2030, but would not count on it! The retention of the coal fired fleet does 2 things, creates downward pressure on the market price and creates security. The assumption is fantasyland. I also believe they are undercooking the starting point, assuming ony 1,500 MW of LRET generation in Queensland by 2020.

          • nakedChimp

            Why would the market price for electricity raise when coal fired power stations close because of cheaper electricity by renewables?
            If you think because of national emissions reductions, fine, you’re entitled to your opinion as am I.
            So far solar and wind come in below coal costs for electricity and as long as we are not at 70%+ RE levels I’m pretty sure the gas generators and whatnot else will be able to provide security of supply. That ‘headache’ is 10 years off minimum anyway and we surely don’t need coal to back us up in a world that has problems with it.

            As for the starting point/LRET/etc… I have no idea what you want to imply there. For what is this important? You need to explain a little bit further.

        • wideEyedPupil

          if it reminds you of the original NBN you’d know how a good proposal can be cut to death with a thousand lies and downgrades by Turnbull. He destroy the infrastructure project of a generation with his multi-tech solution , now with all the acquisitions of redundant and poorly maintained infrastructure and blow outs it’s more costly than the superior FTTP solution.

          NBNco was rolling out fast and clean by the time Turnbull hacked it into Telstra monolith, the very org it was designed to side line!

  • Ren Stimpy

    The ramp approach is the best approach IMO. The costs in this sector are falling so fast that even a five year plan is not worth the paper it’s printed on. Review it on the basis of costs every single year. Capital investment interested in renewables would already know that this investment landscape improves year upon year upon year.

    • wideEyedPupil

      ramp is what the global trends are, in Australia an inverted parabola is what we now have for wind and linear for PV and zero for CSP with Thermal Storage, PHES. it’s the shape of the ramp that’s critical, if you wait back to long the local soft costs don’t drop, but obviously the global hardware costs continue to decline rapidly.

      • Ren Stimpy

        I changed my mind after a follow up article to this, with the rationale that if we’re going to subsidise RE do it early, ie the linear option in the chart. This would widen supply chains etc early in the piece and ‘act’ to reduce costs later in the period, rather than wait for costs to reduce then pile in (which is what unsubsidised countries do). Plus the earlier it goes in the more clean generation happens before 2030.

  • Chris kime

    Cred to the qld gov.if the libs cant accept climate change is real with there heads up there arse af every turn, then atleast the states are actually doing what is responsible.
    Get out our of the way right wing facists,your making us sick…

    • Neo Lib Yes

      And your plan makes us broke.

      • Chris kime

        A Renewable energy future grows our economy,creates jobs for the likes of you and me,creates a more secure grid and hopfully stops runaway climatechange.change is hard to accept but it makes sence on every level to act at every level.if we we let
        Big ff corps delay with spin, and libs
        Keep denying what needs to happen with global concensus, then we will be broke.do you have a consience?

      • nakedChimp

        Got some real facts or are you just spouting the latest nonsense you got feed by the neo lib press?

      • OnionMan77

        Wow, a coal mine stock holder commenting on renew economy!

      • Diego Matter

        The plan will make us broke?
        The report says it’s cost neutral… Who do we want to believe?

        • Adam Smith

          A report for the Labor government to justify 50% renewables, hey presto, it says cost neutral and security maintained! The assumption is that they don’t close the coal plants, but keep them, which is nonsensical, but it will mean that market costs are pushed downward and there will be a huge suplus of capacity (7.5GW). The reality is that, as occurred in SA and will happen in VIC, the coal plants will get shut and then prices go up and security is reduced. Otherwise just believe what the Labor government wants you to hear.

          • Hey neo lib, i’m going to have limit the number of pseudonyms you can write under.

          • MikeH

            Unlike SA, the QLD government owns 75% of the state’s ageing coal generation. As a consequence it can do what it pleases.

            NSW coal plants have operated at an average capacity factor of about 50% for the last five years because the state imports cheap brown coal electricity from Victoria. No whining from you about that.

            Why don’t you take your hysterical trolling over to the IPA or the Minerals Council where it will find a more welcoming audience.

          • wideEyedPupil

            well in SA wind has been reducing the wholesale price of energy and reducing the peak demand price gauging by gas generators

  • onesecond

    Pffft. Saving the planet may be cost neutral, but clearly that doesn’t help when the Coal Barons want profit, so who cares.

  • john

    The historical situation was that Coal fired power stations waited for the a high demand situation to arise they then ramped up to make enough profit in about 4 days to cover the whole year.
    The present situation is this we have Coal fired and Gas peak supply stations and over all a heap of small energy producers who all feed into the grid.
    Now introduce a Large Scale Energy producer to disturb that 4 day profit situation what do you have?
    Well you have lower price of power people pure and simple.
    Is this disruptive yes.
    Is it best practice for society yes.
    Let us get rid of the $12000 a MWH price of power when the delivery of power is short this is not the way we wish to run the system.