Queensland has made strong progress in driving electricity sector decarbonisation with renewable energy’s share trebling to 21% over the last four years.
However, a Queensland Audit Office report released this week wants the state to go faster, calling for accelerated action and a public roadmap to ensure the government’s ambitious 50% renewable energy target for 2030 will be attained.
Queensland knows how to spot an investment opportunity
Two decades back, Queensland saw the potential of its coking coal reserves. Today, the state supplies half of the world’s seaborne coking coal trade, bringing in export revenues of A$20bn in 2020/21 and state government royalties of $2-3bn annually.
One decade back, Queensland identified its largely untapped methane gas reserves. Today, the state is one of the largest liquid natural gas (LNG) exporters and together with Western Australia and the Northern Territory, has contributed to Australia being the largest LNG exporter in the world.
Increase in global ambition
Globally, there is collective acknowledgement of the huge financial risks and growing environmental costs of climate change, and acceptance of the urgent need for a pivot away from a reliance on fossil fuels.
At Glasgow’s COP26, financial institutions holding a collective US$130 trillion of assets pledged to align their investments, lending and insurance with a 1.5°C trajectory with strong interim 2030 targets.
And the critically important China-US Joint Glasgow Declaration on Enhancing Climate Action in the 2020s was delivered, highlighting both the need for collaboration and collective action, and the global technology race already well underway.
The local race to decarbonise
Back home, Queensland is poised to become a global leader in this global race to decarbonise.
The huge employment, investment and export opportunities in zero emissions industries of the future are a top priority for the Queensland government and a growing number of industry leaders.
Back in 2017, Queensland’s Premier Annastacia Palaszczuk announced an ambitious target of 50% renewable energy by 2030.
At the time, renewable energy contributed just 5.5% of Queensland’s electricity generation, making the state a laggard relative to the momentum underway in the Australian Capital Territory and South Australia.
Today, renewable energy generation in Queensland has trebled to 20.5% of the state’s total year-to-date in fiscal 2021/22, according to OpenNEM. The state’s Audit Report says if current investments are delivered on, this could reach 35% by 2024/25.
Queensland government initiatives
The Queensland government has announced a range of increasingly ambitious initiatives to deliver on its 50% renewable energy by 2030 target.
In December 2018, the government-owned CleanCo was established to build, own and operate a portfolio of new renewable energy assets, including firming capacity.
The Queensland Hydrogen Industry Strategy was announced in May 2019.
During 2020, the government announced $145m of new funding for the development of renewable energy zones (REZ) and a $500m funding boost for renewable energy investment by state-owned electricity entities.
And in June 2021, the government boosted that funding by an additional $1,500m and committed to preparing a new 10-year energy plan.
Audit report highlights ongoing investment uncertainty
The Queensland Audit Office’s new report highlights the state’s significant progress but says an acceleration in investment is needed to deliver on the government’s ambitious targets.
While investment plans for an additional 55,673 gigawatt-hours (GWh) of new renewable energy have been announced, the report notes progress towards the 33,715GWh needed to deliver on the 50% by 2030 target is insufficient, with many investments still in the early stage of development.
The report also highlights the absence of a clear plan in the public domain, along with necessary grid transmission and firming capacities, suggesting momentum to-date is insufficient to deliver on the 50% target.
IEEFA agrees with all of the recommendations in the report for improved tracking, public disclosure and progress reports, and the likely electricity price deflation that will result. We strongly suggest, however, that the key reason for investor uncertainty delaying projects is largely outside Premier Palaszczuk’s control.
Federal government’s position is deterring investment
Failing to realise the opportunities in decarbonisation, the Federal Government has repeatedly undermined private investment in new zero emissions capacity in Australia.
Instead, the Morrison government has embarked on a massive taxpayer-funded subsidisation of yet more fossil fuel capacity.
That includes the new Collinsville coal-fired power plant, the Kurri Kurri diesel/gas peaker, subsidising new gas exploration in the Beetaloo, and doctoring the Emissions Reduction Fund to provide a $1bn subsidy for Santos’ proposed carbon capture and storage plant at Moomba.
Giving public funds to more fossil fuel development has created significant investor uncertainty and crowded out private investment in zero-emissions alternatives.
It is also in clear contradiction of the International Energy Agency’s May 2021 Roadmap to Net Zero by 2050 which says the world can no longer afford to develop any new coal, oil or gas developments globally if we are to have a liveable planet.
The States out of necessity are running their own race
Historically, there was a Federal-State agreement on how to run the national electricity market (NEM) to the benefit to all consumers, ensuring interstate cooperation and coordination.
With ongoing energy policy chaos from the Federal government, Australian states are increasingly having to go it alone.
The rate of technology, investment and economic change in the Australian electricity market is unprecedented.
Accelerated coal power plant closures are inevitable, as Dr Kerry Schott, Chair of the Energy Security Board warned earlier this year, with coal power likely to be entirely gone by 2035.
The consumer benefits of coal exiting should not be understated. While there are unprecedented rises in LNG, coal and electricity prices globally, Australian electricity prices are seeing ongoing deflation due to record renewable energy output, according to AEMO’s Quarterly Energy Dynamics Q3 2021.
Companies want to invest in Queensland renewables
The investment, employment and export opportunities for Queensland are huge, and leading corporates are increasingly driving this.
Korea Zinc’s Townsville-based Sun Metals zinc refinery is targeting 100% renewable energy by 2025, one of the first refineries in the world to reach 100% decarbonisation.
ASX listed Genex Power has received substantial financial support from the Queensland Government and the Northern Australia Infrastructure Facility (NAIF) to build Australia’s largest private pumped hydro storage facility at Kidston, along with an adjacent 270MW solar development to generate and store electricity during peak daytime periods for release during evening peaks.
And last month, Rio Tinto announced US$7.5bn to drive lower cost energy and 50% decarbonisation by 2030 across Australia. This will likely see massive new investment in the decarbonisation of its aluminium refining, including the Boyne Island site at Gladstone.
A radical energy transformation is accelerating globally on the back of a belated acknowledgement that the costs of inaction on climate change are growing rapidly.
The world is likely to see up to US$4 trillion of annual energy investment in solutions to solve this global problem.
The investment, employment and export opportunities for Australia are huge, and the Palaszczuk Government will want to see Queensland gain its fair share.
This technology race is on, and accelerating. IEEFA is sure Australia will be a renewable energy superpower, despite its Federal Government.
Tim Buckley is Director of Energy Finance Studies at IEEFA Australia