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Report No. 4 Environment and Resources Committee May 2011 Growing Queensland’s Renewable Energy Electricity Sector GROWING QUEENSLAND’S RENEWABLE ENERGY ELECTRICITY SECTOR Environment and Resources Committee of the 53rd Parliament Chair: Mrs Carryn Sullivan MP, Member for Pumicestone Deputy Chair: Mr Jeff Seeney MP, Member for Callide Members:* Mrs Julie Attwood MP, Member for Mount Ommaney Mr Peter Dowling MP, Member for Redlands Mr Chris Foley MP, Member for Maryborough Mr Mark Ryan MP, Member for Morayfield Research Director: Mr Rob Hansen Principal Research Ms Rachelle Stacey Officer: Ms Grace Field Executive Assistant: Ms Carolyn Heffernan Note: * On 15 February 2011, the House agreed to a motion moved by the Leader of the House that Mr Simon Finn MP, Member for Yeerongpilly, be discharged from the committee and that Hon Curtis Pitt MP, Member for Mulgrave, be appointed to the committee. Mr Finn had been a member of the committee since it was established on 23 April 2009. Mr Pitt was appointed Minister for Disability Services, Mental Health and Aboriginal and Torres Strait Islander Partnerships on 21 February, and was discharged from the Environment and Resources Committee on 8 March 2011. This report is available from the committee’s website: www.parliament.qld.gov.au/erc Environment and Resource Committee Parliament House BRISBANE QLD 4000 Telephone: (07) 3406 7908 1800 504 022 (for callers outside Brisbane) Facsimile: (07) 3406 7070 E-mail: [email protected] Cover: Queensland's first 150 kilowatt solar farm was officially opened at the remote south-west Queensland town of Windorah in October 2009. The solar farm aims to reduce the town's reliance on diesel fuel, and therefore cut greenhouse gas emissions by approximately 300 tonnes a year. (Image courtesy of Solar Systems Pty Ltd) Growing Queensland’s Renewable Energy Electricity Sector FOREWORD On a per capita basis, Australia produces more greenhouse gases than any other country. In fact, around 30 per cent of the nation’s greenhouse gas emissions come from just one state, Queensland. This is a shocking statistic when you consider that Queenslanders only account for around a fifth of the nation’s population. The longer we delay acting to cut our greenhouse gas emissions, the more we are risking the future of our ecosystems, industries and communities. One of the most important areas to address is how we use energy. As our standard of living and quality of life have risen, so has our appetite for energy. We enjoy some of the cheapest electricity in the world, and Queensland electricity prices are among the nation’s lowest. However, prices are certain to rise as long as demand for electricity grows and pressure on the network continues to spiral. We are far too casual about electricity usage in our daily lives, and where that electricity comes from. At least four of every five hours of electricity that lights, heats, cools and powers our homes and businesses every day, comes from a coal-fired power station. This heavy reliance on the burning of coal is unsustainable. On a positive note, Queenslanders are also among the nation’s strongest supporters of GreenPower. The committee considers planning to meet more of Queensland’s future electricity needs from renewable energy to be extremely important for the state’s future. Switching to renewable energy sources will ensure that vital cuts to greenhouse gas emissions are achieved. The other key is using energy more efficiently with less wastage. The greenest watt of electricity will always be the watt you don’t have to produce. This report presents our findings from an inquiry that examined opportunities to grow a stronger renewable electricity generation sector. We have consciously avoided attempting to pick the winning technologies. Instead, we have recommended mechanisms that would allow market forces to shape the future and provide the right environment and infrastructure to support renewable energy sources. I would like to acknowledge the invaluable assistance we received from the submitters, witnesses and other experts who shared their ideas with us in the course of this inquiry. I also thank my colleagues and the staff of the Environment and Resources Committee for their dedication during the inquiry and for helping to produce this report. I commend this report to the House. Carryn Sullivan MP Chair i Growing Queensland’s Renewable Energy Electricity Sector ii Growing Queensland’s Renewable Energy Electricity Sector TABLE OF CONTENTS FOREWORD ................................................................................................................................. I RECOMMENDATIONS ............................................................................................................... VI ABBREVIATIONS ....................................................................................................................... IX PART 1: INTRODUCTION............................................................................................................ 1 The Environment and Resources Committee ..................................................................................1 The inquiry........................................................................................................................................1 Defining renewable energy electricity ..............................................................................................1 Inquiry process .................................................................................................................................3 Responsibility of Ministers................................................................................................................3 PART 2: CONTEXT FOR THE INQUIRY...................................................................................... 5 Climate change and energy .............................................................................................................5 Government responses to climate change.......................................................................................7 The Federal Government’s Renewable Energy Target Scheme .....................................................8 The Queensland Renewable Energy Plan.......................................................................................9 Pricing carbon emissions ...............................................................................................................10 Committee view..............................................................................................................................11 PART 3: ELECTRICITY AND RENEWABLE ENERGY IN QUEENSLAND............................... 13 The Queensland electricity market.................................................................................................13 The Queensland electricity supply industry....................................................................................14 The role of renewables in Queensland’s electricity mix .................................................................15 Should Queensland generate more electricity from renewables? .................................................15 Employment benefits......................................................................................................... 16 Industry and regional development opportunities ............................................................. 17 Demand management....................................................................................................... 17 Popular support for renewable energy.............................................................................. 17 Committee view..............................................................................................................................18 PART 4: BARRIERS TO EXPANDING QUEENSLAND’S RENEWABLE ENERGY ELECTRICITY SECTOR ............................................................................................................ 19 The higher cost of electricity from renewables...............................................................................19 Capital costs...................................................................................................................... 19 Project costs in Queensland relative to other states......................................................... 20 Queensland’s relatively low electricity prices.................................................................... 21 Costs for electricity distributors ......................................................................................... 24 Grid connection issues ...................................................................................................................24 Intermittency...................................................................................................................................25 Difficulties accessing power purchase agreements .......................................................................26 Delays due to government approval processes.............................................................................27 iii Growing Queensland’s Renewable Energy Electricity Sector PART 5: POLICY OPTIONS FOR THE GOVERNMENT ............................................................29 Setting the priorities for energy policy in Queensland....................................................................29 Reliance on coal and gas-fired electricity.........................................................................