Queensland Energy and Jobs Plan – the update

Last September the Queensland Government announced the “Energy and Jobs Plan”, a remarkably comprehensive central plan to revolutionise the Queensland electricity sector, phasing out the currently dominant coal sector over a decade and replacing it with renewables and storage. Meanwhile it will build a great deal of transmission with a “supergrid” 500kV to run the length of the state, three Renewable Energy Zones (REZs), and, to cap it off, two enormous pumped hydro schemes. An AEC EnergyInsider article and at the time rightly described it as ambitious.

This month the government has progressed the plan by announcing new renewable energy targets and by publishing for public comment the draft legislation to enact these and the plan. We take a look.

Renewable Energy Targets

Queensland has had a 50 per cent by 2030 renewable energy target for some years now. Whilst this may seem less ambitious than some other states, it is still quite a stretch from the current share at approximately half this level.

The government is now legislating this along with two additional targets:

• 50 per cent by 2030;
• 70 percent by 2032; and
• 80 per cent by 2035.

Whilst these targets sound simple, there is in fact no one approach to determining a renewable energy percentage, particularly for one state in an interconnected market. It would include behind the meter rooftop PV, which is around 10 per cent now and growing rapidly. And there is scope for different approaches in accounting for interconnector flows, for example where Queensland has exported electricity that may nominally have come from fossil fuels, which could be excluded, or has imported electricity that may nominally have come from renewables and could be included. One approach for example is to add renewable energy certificates that have been surrendered on behalf of Queensland customers.

These differences in methodology can make very significant differences in the resulting figures which is the responsibility of the minister:

“The methodology for calculating the proportion of electricity generated in Queensland that is generated from renewable energy sources is the methodology decided by the Minister.”

Government ownership and jobs

As discussed in the earlier EnergyInsider, the Energy and Jobs Plan also represented a significant move from prior positions that coal generation would not be shuttered early. Significant stakeholder engagement must have been undertaken by the Queensland Government to be in a position to make such an announcement. The government made a number of concessions at the same time.

The first is a commitment to maintain the current extent of government ownership forever, even if the assets themselves dramatically change in the meantime. The policy requires the following will remain or be built in government hands:

• All networks, except for connection assets which have always been contestable.
• The two new large hydro pumped storages.
• Fifty per cent of the total of generation assets; renewable and fossil fuel.

Whilst such policies are not unusual for Labor governments, Queensland has taken it further by legislating the policy as a ministerial objective.

Secondly a job security guarantee allows workers at closing coal plants to transfer to other government energy jobs and be retrained. This is topped up with a $150 million fund to both help retain a workforce in the coal plants until closure and to support their transitions. Overseeing the distribution of the fund is an Energy Industry Council of 10 people, five from the unions and five from government-owned business management.

Legislated derogation from National Electricity Rules

The policy anticipates the development of the “Super Grid” 500kV backbone, lines to the new hydro schemes and three very large REZs. Not the first state government to do so, Queensland will effectively over-rule the National Electricity Market’s (NEM’s) transmission planning and revenue rules to ensure this occurs.

The new legislation:

• Sets up a state-based planning arrangement, “the Infrastructure Blueprint”.
• Enables Powerlink to nominate “Priority Transmission Investments” to the minister. This is then subject to a form of Cost/Benefit Analysis (CBA), conceptually like that in the NEM’s Regulatory Investment Test for Transmission (RIT-T), but still permits negative CBA projects to proceed where consistent with the Blueprint. The Australian Energy Regulator is then obliged to include these investments in the transmission asset base.
• Allows the development of REZs, along broadly similar approaches as that used in the New South Wales Electricity Infrastructure Roadmap[1]. Connectors can purchase access to these, but, to the extent there is a shortfall, can recover costs from Queensland customers.

The National Electricity Rules (NER) framework however is not repealed: both instruments are to operate simultaneously in Queensland. Outside the Priority Transmission Investments and REZs, Powerlink is expected to use the NER arrangements to maintain and incrementally expand its existing network. The Queensland legislation includes a clause that leaves the NER in place but at a lower priority to itself where there is a conflict.

While there has been a significant level of change via the draft legislation, further changes are possible following public comment. The AEC will also make submission on the draft legislation, which will be available on our website.

[1] Note however unlike New South Wales, the market returns of generators connecting to a Queensland REZ are not underwritten through a Long-term Energy Services Agreement (LTESA).