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Killing Queensland coal?

By Geoff Carmody - posted Monday, 13 November 2017


Australia's Renewable Energy Target (RET) cacophony

The Palaszczuk caretaker Government supports a Queensland RET of 50% by 2030. This is about double the Commonwealth's Australia-wide RET to be achieved by 2020 (but with subsidies continuing until 2030). South Australia, Victoria, and, especially, the ACT, also have very ambitious RETs (for the ACT, 100% by 2020).

How these different targets are reconciled within the so-called 'National Electricity Market' (NEM) is unclear. The Commonwealth Government's National Energy 'Guarantee' (NE'G') provides no detail. The NE'G' has not been agreed by COAG, and prospects for agreement look doubtful.

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One member of the Energy Security Board suggested State RET targets greater than the national target would reduce their energy reliability or further increase costs compared with the national averages. How this will work is unclear.

In general, RETs require states within the NEM to supply a specified proportion of total electricity from renewable energy. The overall target generally is set by legislation, and financial incentives to supply renewable energy are supported by certificates received and surrendered to the Clean Energy Regulator.

In effect, governments quantify RET targets and offer subsidies to renewable suppliers to meet them.

Fossil fuel generators can't receive RET subsidies. In fact, they incur penalties as the RET target increases. How so?

Coal base-load basics

Existing coal-fired generators minimise costs by spinning 24/7. Their turbines take time to spin up and spin down. They last longest and operate most cheaply when allowed to keep spinning. So they are ideal as lowest-cost, base-load, generators. Grid stability itself is supported by this, and compromised when it's gone.

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Until recently, Australia has been a global leader in low-cost energy generation. This was a huge competitive advantage. Queensland was a major beneficiary, using black coal power generation to fuel Queensland industry, and to export power to other States via the Queensland-NSW interconnector links.

But this cost advantage is particularly vulnerable to the time 'crowding-out' inherent in meeting RET targets.

The 24/7 ideal operating time for coal-fired generators can be directly reduced by imposing RETs. Coal plant cost-recovery for investment viability can be compressed into shorter generation dispatch times. Costs rise – a lot.

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My apologies. In my previous opinion piece (Are renewables and batteries part of the power generation & storage solution?) on 9 November 2017, I promised a piece on 'poles and wires': the electricity transmission and distribution network. I hope to write that piece next time.



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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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