Queensland BRIEFING ON Renewable Energy Expert Panel DRAFT REPORT 12 October 2016

1 The panel

COLIN ALLISON PAUL AMANDA PAUL MUGGLESTONE WARBURTON HYSLOP MCKENZIE MEREDITH

12/10/2016 2 Overarching themes

Short-term QLD likely to Longer term Project pipeline opportunity to attract significant policy should be will need to grow leverage funding renewable flexible and to meet 50% under national investment adaptable LRET

QLD likely to see 4,000-5,500 MW of large-scale Govt should encourage the Govt should work considerable investment renewable capacity required market to deliver renewable proactively to support the over the coming years from 2021-2030 to reach 50% energy projects utilising development of integrated Around 2,500 MW of by 2030 LRET funding up to 2020 climate and energy policies projects in the pipeline Generation capacity to meet the Subject to actual delivery of at the national level to target could be lower than 5,500 projects, Govt may consider maximise efficiencies and MW depending on future load reverse auctions for up to uptake of renewable requirements in QLD 400 MW energy Private sector should be QLD approach should be encouraged to contract and adaptable and flexible to scale up or down 12/10/2016 build renewable energy 3 wherever possible Queensland has a strong renewable resource potential

SOLAR IRRADIATION WIND SPEED AT 80 METRES

Average annual sun, period 2007-2012 Wind speed (meters/second)

<1,100 1,300 1,500 1,700 1,900 2,100 2,300 > kWh/m2 4.3 5.6 5.8 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.9 7.0 7.2 7.8 9.6

12/10/2016 4 Leveraging opportunities before 2020

SUMMARY OF PROPOSED PROJECTS

Solar 1,296 MW

Weipa Solar Farm 5 MW Wind 669 MW Pipeline of 2,500 MW of projects, primarily Hydro 330 MW Biomass 237 MW

in regional QLD Geothermal 0.6 MW Lakeland Solar Farm 26 MW TOTAL 2,533 MW

Etheridge Integrated Agricultural Project Tableland Sugar Mill 24 MW 180 MW (PPA Ratch/) Current LRET shortfall – 6,000 MW required Normanton 90 MW Solar Farm High Road Wind Farm 34 MW by 2020* 5 MW Forsayth Wind Farm 75 MW Ingham Integrated Energy Facility 115 MW Rollingstone Solar Farm 110 MW 50 MW Ross River Solar Farm 135 MW (ARENA/Solar 150) Kidston Hydro Clare Solar Farm 100 MW (PPA Origin/FRV) Hughenden Sun Farm 14 MW Project Kelsey Creek Solar Farm 50 MW 330 MW Opportunity for QLD to attract projects at Cloncurry Kennedy Solar Farm Energy Park Whitsunday Solar Farm 58 MW (ARENA/Solar 150) lower cost by leveraging LRET 6 MW 20 MW Kennedy Collinsville Solar Power Station 42 MW (ARENA) Energy Park Winton Geothermal Plant 0.3 MW 30 MW

Longreach Solar Farm 15 MW (ARENA/Solar 150) Lilyvale Solar Farm 150 MW Baralaba Solar Farm 100 MW Barcaldine Remote Community Solar Farm 25 MW Government could consider a reverse Birdsville Geothermal Plant 0.3 MW Isis River 85 MW auction for up to 400 MW subject to actual 350 MW Susan River 125 MW

delivery of projects by the market – would Solar Farm (ARENA) 110 MW Mt Cotton Biomass Cogeneration need to commence by early 2017 to Dalby Solar Farm 30 MW Power Station complete by 2020 Oakey Solar Farm 25 MW (ARENA/Solar 150) 8 MW Ebenezer Solar Project 10 MW * Source:12/10/2016 Clean Energy Regulator 5 Three credible pathways post-2020

STRONGER LINEAR RAMP NATIONAL ACTION

Assumes a uniform rate of Features a ramp up in effort over the Assumes a 45% national emissions reduction renewables build post 2020 (400- period to take advantage of falling scheme is in place from 2020, driving greater 500 MW per annum) technology costs (commencing at 200 MW renewables into QLD and increasing each year)

National emissions reduction scheme Requires Government to support 4,000-5,500 MW could drive 3,600 MW of renewables in of large-scale renewables between 2021-2030 QLD (equivalent to 41% renewables). through reverse auctions for CFDs Govt reverse auctions implemented to deliver remaining 1,900 MW to reach NOTE: All pathways assume: 50% target. ► QLD counts its pro-rata share of the LRET, bringing QLD to 23% renewable energy generation by 2020 ► An emissions intensity scheme is in place for the electricity sector to 12/10/2016achieve 26-28% emissions reduction by 2030 from the sector 6 Three credible pathways post-2020

LARGE SCALE RENEWABLE ENERGY CAPACITY REQUIREMENTS FOR THE 50% RENEWABLE DELIVERED UNDER THE 3 MODELLED PATHWAYS (MW) ENERGY TARGET IN QUEENSLAND (MW)

6,000 14,100 MW of renewable capacity in 2030

5,000

4,000 Note 1 5,500 MW new large-scale

3,000 MW

2,000

1,000 3,400 MW new rooftop PV

0

1,500 MW existing rooftop PV

2030 2021 2022 2023 2024 2025 2026 2027 2028 2029 Linear Ramp 3,300 MW QLD share of LRET Stronger National Action 400 MW Large scale Note 1: Large scale Renewable generating capacity to meet the 50% target (existing pre-RET) could be lower than 5,500 MW depending on future Queensland load requirements. 12/10/2016 7 Falling technology costs

CSIRO LEARNING RATES FORE RENEWABLE INDICATIVE LEVELISED COST OF GENERATION FROM ENERGY TECHNOLOGIES NEW POWER STATIONS OF DIFFERENT TECHNOLOGIES CSIRO has projected indicative cost reductions 160 learning rates (annual reduction in capex) by: 140 ► Wind: 2% per year 120 ► Solar: 4% to 5% per year 100 ► Batteries: 6% to 7% per year 80

60 LCOE LCOE ($/MWh)

40

20

0

2022 2016 2018 2020 2024 2026 2028 2030 Year of construction Wind Utility solar PV Rooftop PV - Commercial

12/10/2016 Source: Mid-point technology costs from Australian 8 Power Generation Technology Report, 2015 Electricity market and emissions outcomes – Linear and Ramp

SUMMARY OF KEY PROJECTED OUTCOMES (RELATIVE TO THE BASE CASE)

INDICATOR LINEAR PATHWAY RAMP PATHWAY

QLD investment (2016-2030) $6.7 billion NPV $6.1 billion NPV

Residential electricity price Broadly neutral Broadly neutral effects (average)

QLD electricity sector emissions 10 Mt CO2-e (20% reduction) 10 Mt CO2-e (20% reduction) reduction in 2030

Cumulative emissions reductions 81 Mt CO2-e 59 Mt CO2-e (NEM) Subsidy payments to renewables $0.9 billion NPV $0.5 billion NPV

12/10/2016 9 Security of supply

WILL QUEENSLAND EXPERIENCE THE SAME GENERATION OUTPUT IN SOUTH AUSTRALIA AND QUEENSLAND SYSTEM SECURITY ISSUES AS SOUTH AUSTRALIA? 100% ► Market modelling analysis did not identify reliability issues in Queensland in reaching 50%, due to 80% significant thermal electricity generation retained in service to 2030 60%

► Queensland has a substantially different and more 40%

diverse generation fleet than SA, with the youngest Share of generation and most efficient fleet of coal plant in the NEM 20% ► SA heavily reliant on high cost gas generation and VIC interconnector 0% SA (2015-16) Qld (2015-16) Qld (2030 projected ► AEMO analysis has not identified any fundamental with target) barriers to achieving higher penetrations of Coal Gas Liquid Biomass renewable generation in NEM provided transition is Hydro Wind Solar PV (large) Rooftop PV planned Source: NEM Review, 2016

► The Panel recommends the Queensland Government works proactively with the COAG Note: Since the closure of Northern Power Station Energy Council, AEMO and the Australian Energy in May 2016, the contribution of gas generation in Regulator (AER) in monitoring power system South Australia has increased to around 58%. reliability and assessing the need for changes or enhancements12/10/2016 in the operation of the NEM 10 Key outcomes – coal generators

PROJECTED COAL GENERATION AGE AND EMISSIONS INTENSITY OF COAL GENERATORS OUTCOMES 50 1.6 VIC ► QLD has approximately 8,200 MW of coal- VIC 40 NSW NSW

fired generation, 2,400 MW of gas-fired QLD 1.2 QLD

e/MWh) - generation and 500 MW of pumped 30 2 storage hydro 0.8 20 0.4 ► QLD has around 3,000 MW of highly 10

efficient supercritical coal plant (years) plant of Age 0 0

► QLD has the youngest coal fleet in the NEM (tCO intensity Emissions

Liddell Liddell

Tarong Tarong

Eraring Eraring

Yallourn Yallourn

Stanwell Stanwell

Callide C Callide B Callide C

with an average age of 21 years, compared Callide B

Gladstone Gladstone

Bayswater Bayswater

LoyB Yang LoyB Yang

LoyA Yang LoyA Yang

Hazelwood Hazelwood

Millmerran Millmerran

KoganCreek KoganCreek

Mount Piper Mount Piper

ValesPoint B ValesPoint B TarongNorth to 28 years in the NEM TarongNorth

► No QLD coal retirements projected under Region Average age of coal % of average Average emissions % of average Linear and Ramp pathways, however will plant (years) intensity of coal depend on actual commercial decision plant Installed capacity making (t CO2-e/MWh) ► Under the Stronger National Action VIC 33.8 122% 1.39 129% pathway, approximately 1,500 MW of QLD NSW 33.6 121% 1.02 94% coal plant is retired QLD 21.1 76% 0.96 89% ► Impacts for QLD generators are moderated by relative age and emissions intensity NEM 27.8 100% 1.08 100% 12/10/2016 11 Key outcomes – prices

ELECTRICITY PRICES RETAIL PRICE IMPACTS (LINEAR PATHWAY)

► Panel recommends policy be funded through market mechanisms 0.6

► No expected impact on prices prior to 2020, 0.4 due to timing of projects and LRET funding 0.2 ► Post 2020, Linear and Ramp pathways 0.0 projected to be broadly cost neutral to 0.1 0.0 0.0 0.0 c/kWh 0.0 0.0 electricity consumers -0.2 -0.1 -0.1 -0.1 -0.2 ► This outcome is due to increased renewable -0.4 -0.3 energy putting downward pressure on wholesale prices and outweighing the -0.6 payments to renewables (CFDs) -0.8

► These modelled outcomes may not reflect

2023 2028 2020 2021 2022 2024 2025 2026 2027 2029 2030 actual outcomes in the market (e.g., if existing Change in wholesale price generation exits the market) Payments to renewables Net impact ► Outcomes are broadly consistent with modelling outcomes for QPC and RET Review.

12/10/2016 12 Economic development

While achieving a 50% renewable energy target in Queensland will represent a significant shift within the electricity sector, the economic modelling indicates the economy wide effects of the policy are relatively modest.

SUMMARY OF KEY ECONOMIC OUTCOMES (RELATIVE TO THE BASE CASE)

INDICATOR LINEAR PATHWAY RAMP PATHWAY

QLD Gross State Product $5.4 billion NPV $5.2 billion NPV

QLD Gross State Income $5.3 billion NPV $5.3 billion NPV

QLD Real Value Add $4.1 billion NPV $4.1 billion NPV

QLD average net additional 6,400 FTEs 6,700 FTEs annual employment QLD Investment $6.7 billion NPV $6.1 billion NPV

Imports to QLD $1.2 billion NPV $1.2 billion NPV

12/10/2016 13