Implications of a 50% renewable energy policy on Queensland’s energy sector

We commissioned Jonathan Pavetto, an energy sector economist, to investigate the implications of a 50% renewable energy policy on Queensland’s energy sector. His analysis is based on the Australian Energy Market Operator’s (AEMO) annual National Transmission Network Development Plan published in December 2016.

You can download the report by clicking here.

The AEMO modelling shows that to achieve a 50% generation mix by 2030:

  • a combination of closing existing coal generation and increasing renewable generation is required.
  • 1400MW (Stanwell Corporation’s Tarong plant near Kingaroy) will need to close by 2018/19, 1460MW (the Stanwell plant near Rockhampton) also will need to close by 2026/27.
  • 560MW (two of Gladstone Power Station’s 280MW units) is expected to be withdrawn in 2020-21 and another 280MW unit (a third unit in the same power station) in 2028-29.
  • Most of the shortfall in generation is expected to be made up by rooftop solar PV, with only small gains in gas, large-scale solar and hydro.

A 50% by 2030 renewable energy policy has a number of implications:

  • Closing down the Tarong and Stanwell power stations, as well as three of Gladstone’s six generation units will cause job losses in Kingaroy, Rockhampton and Gladstone – all areas with unemployment rates already above the state average.
  • Coal-fired electricity generation has a higher capacity factor to renewable generation. Transitioning from coal to renewables can cause localised system weakness because of the lower power factor in areas with high penetration of renewables.
  • When the 50% renewable policy is in full force, the risk of state-wide blackouts will become a real risk for up to 15% of the year – the equivalent of the combined months of January and February each year;
  • Uncontrollable state wide blackouts will become likely for up to 3% of the year – equivalent to 11 days a year, presumably over the state’s hottest days in summer;
  • AEMO’s primary solution to avoid local or state-wide blackouts, is through investing in additional network infrastructure, which will increase costs to consumers;
  • Network companies (Energex and Ergon Energy) may hasten their transition to demand based charging, which will reduce opportunities for households to minimise their electricity bills through rooftop solar PV. Under demand-based charging, 42% of residential customers in South East Queensland are expected to be worse off and experience substantial “bill shock.”
  • The progressive closure of Tarong, Stanwell and half of Gladstone Power Station will increase costs for large business and industrial customers in North and Central Queensland, due to increased transmission losses. Such increases in energy costs would lead to wide-scale industrial exit (in the case of minerals processing and manufacturing), reduce capacity to provide services (in the case of hospitals or universities) or will pass costs through the economy to the end consumer (in the case of ports or local governments).
  • The total cost of retiring and rehabilitating Stanwell, Tarong and half of Gladstone Power Station is estimated to cost $63.3 million by 2030.
  • The Queensland Government risks losing its entire dividend stream from its energy GOCs due to loss of income form Stanwell Corporation and a need to write-down redundant network assets.
  • The Queensland Government may be exposed to a number of other financial risks, such as higher CSO payments under the Uniform Tariff Policy and higher costs to run government agencies – including hospitals, schools, ports, water distribution and local government facilities – across Queensland.