Feb 18 2021

New Energy Jobs Plan: Bold or brash?

Elections always bring plenty of big announcements from the main candidates. The Western Australian election scheduled for 13 March has already seen both sides come out early with bold policies to gain traction and capture early votes.

The energy policy announced by Liberal leader Zak Kirkup last week has shaken up the election race and put a line in the sand between the Liberals’ vision for renewable energy in WA and the approach taken by the incumbent McGowan government.

The political landscape in WA – like elsewhere across Australia – offers different visions for the best way to obtain a reliable, secure and cost-effective energy system. The energy policy released by the Liberals is head turning for the numbers included and the aggressive move towards renewables.

Here we take a look at the policy and what it might mean for key stakeholders.  

Big and bold: The Liberals’ policy

The newly unveiled "New Energy Jobs Plan" marks the latest chapter in Liberals, at a state level, falling out of stride from the Federal Liberal Government.

It wasn’t too long ago that the WA Liberal opposition stated that “Labor's 50 per cent renewables target means blackouts like South Australia, higher power prices for WA families and seniors, bad for business and jobs.”[i]

Fast forward a couple of years, and behind in the polls, Kirkup has created an ambitious policy that has gone a step further to promise a zero emission electricity system by 2030. There are some other big headlines in the policy announcement, including:

  • A 1500 MW renewable energy project costing $3 billion to be constructed by 2025 in conjunction with the private sector between Shark Bay and Geraldton.
  • Closing all State Government coal-fired power stations by 2025.
  • Extending the 330kV transmission line from Three Springs to Geraldton at a cost of $500 million.
  • A 500 MW battery storage project.
  • Zero emission public transport system and state fleet by 2030.
  • A 4500 MW Renewable Energy Export Mega-Project costing $9 billion to create green hydrogen for transport to export markets.
  • A $100 million Collie Training and Transition Fund.

Each of these are huge announcements in themselves but together this policy is on a grand scale, designed to win the hearts of voters looking toward a renewable future. 

Zero emissions

Aspects of the policy announcement are commendable and various sections of the community have been supportive. Of particular focus for many is the goal of zero emissions from the electricity sector by 2030. It’s a brave policy but, like anything, the detail reveals some challenges.

The Whole of System Plan (WOSP) produced by Energy Policy WA in 2020, was created to demonstrate how electricity can be supplied at the lowest sustainable cost within the reliability and security standards over a 20-year period.[ii] It then used four models to forecast demand, the uptake of renewables and the output of coal generation in the South West Interconnected System (SWIS). In all scenarios, emissions are reduced from current levels as a direct result of the introduction of renewable generation capacity to meet new demand and replace ageing thermal generation.

Figure 1: Annual emissions intensity to meet end-user demand, tonnes CO2-e per MWh

Source: Whole of System Plan 2020

The above graph shows that emissions intensity is forecast to reduce from over 0.6 tonnes of CO2-e per MWh to between 0.3 tonnes of CO2-e per MWh under the low demand scenarios (Cast Away and Groundhog Day) and 0.18 to 0.25 tonnes of CO2-e per MWh under the higher demand scenarios (Techtopia and Double Bubble). And in each of these scenarios, coal generation is expected to remain until 2040 albeit at lower levels.

While the Whole of System Plan emissions fall greatly over time, in no scenario does it ever reach zero. In fact, in a system without hydro or nuclear, it is not clear that achieving absolute zero emissions is technically realistic. Renewables and batteries can push out the vast majority of fossil fuels, but extended periods of unfavourable weather do occur for which some gas back-up is needed. In that regard a NET zero is the sensible ambition, with the small amount of emissions offset with carbon sinks. The Liberal’s position is however presented as a GROSS zero in electricity.

Even a target of net zero emissions from the electricity sector by 2030 would be aggressive and require a quick and sustained change in the SWIS generation mix over the next decade – something that would have a profound cost impact on existing generation through retrofits and closures (not to mention the cost of terminating existing coal contracts) that will inevitably be passed through to consumers.

This position will also have a huge impact on the community around Collie with the premature closure of coal generation. Kirkup has addressed this with a $100 million Collie Training and Transition Fund but in a tight-knit area dependent on coal this has already received a lot of attention.

And, finally, it’s important to be clear about this policy. The announcement is for zero emissions in the electricity sector only, despite the opening line of the policy document claiming, “net zero emissions for the Western Australian State Government by 2030, two decades earlier than WA Labor.”[iii] The comparison to Labor’s target is misleading. While WA Labor has committed to an economy wide net zero emissions by 2050, the Liberal announcement only focuses on State Government emissions and doesn’t contemplate emissions from other sectors.

The ‘mega-project’

A centrepiece of the policy announcement is the embrace of renewables with a 1500 MW renewable project located between Geraldton and Shark Bay. According to Kirkup, this will allow the closure of the Muja and Collie Power Stations and simultaneously boost jobs in the mid-west. The initial 1500 MW project will be underwritten by the State Government, most likely through Power Purchase Agreements with Synergy.

To facilitate the 1500 MW renewable project, the Liberals will build a $500 million 330kV transmission line extension from Three Springs to Geraldton (Moonyoonooka). This represents a significant cost to unlock renewable capacity in the mid-west and no modelling was provided with the announcement to support the investment. That aside, it was an interesting decision to propose a transmission line extension and the establishment of a sizable renewable project in the mid-west.

The WOSP actually points to new wind generation being better suited to the south-west of the state, saying that, “the recently installed wind capacity in the north has sufficiently utilised the existing network capacity, which means it is a lower cost to the system to build new wind capacity in the southern areas of the SWIS to utilise existing network capacity”.[iv]

Adding wind generation in the south-west, where there is currently little or no wind capacity installed, would also improve diversity of supply.

The WOSP also modelled transmission network augmentation requirements under the four scenarios. It concluded that:

“There is no requirement for transmission network augmentations to increase transfer capacity between transmission network zones under the lower demand scenarios. Under both higher demand scenarios, transmission network augmentation is required – the first of which is to increase the transfer capacity between Muja and the Eastern Goldfields.”[v]

There are challenges to locating new renewables in the south-west – such as more difficult terrain and community acceptance issues – but questions can be raised on whether the mid-west is the optimal location for new generation and if it will add unnecessary costs. There are other concerns, as well, around the system stability required for such a large project, the impact on competition in the Wholesale Electricity Market (WEM), and whether 2025 is realistic for such a project.

Perhaps part of the reason for the location is the Liberals’ plan to extend the initial project to 6000 MW by 2030. The additional 4500 MW capacity will be used to generate green hydrogen for export. The prospect for local iron ore being processed into green steel for export is genuine – evidenced by BMW recently agreeing to buy aluminium produced with solar power from the United Arab Emirates – and it is becoming a competitive market with giants such as Japan’s Nippon Steel and Germany’s Thyssenkrupp already making big inroads into green steel.

Western Power becomes a generator

Behind the big targets and large projects is one aspect that is potentially significant for market participants and investors – the Liberal announcement has, seemingly, created a new role for Western Power.

Western Power is traditionally responsible for the ‘poles and wires’ in the SWIS. This started to change in 2020 through the amendments to the Electricity Networks Access Code (Access Code) which, for the first time, gave Western Power the ability to generate unregulated revenue from regulated battery storage assets. This was met with considerable concern by the Australian Energy Council, the Australian Energy Market Operator (AEMO) and other stakeholders[vi] and the Economic Regulation Authority (ERA) stated:

“Western Power’s ownership of batteries could represent a conflict in the same way it would be conflicted by owning generation ... Western Power is prohibited from owning generation facilities as this would provide an incentive for it to limit competitors’ access to the network. For example, Western Power may have an incentive to make it difficult for third parties to invest in batteries that would compete with its own investment in batteries, by setting onerous technical performance standards or unfavourable network tariffs.”[vii]

Despite this, the Liberal announcement made clear that “Western Power will construct large-scale batteries to provide energy when the wind is not blowing”[viii] and that “Western Power will continue to operate the transmission and distribution network in the SWIS, with the additional responsibility for … commercial battery operations across the SWIS.”[ix]

This potential new role for Western Power will create ripples through the WEM. Western Power can use its position to crowd out competition and discourage market participants from investing in battery storage. At the least, it’s at odds with the competitive philosophy of the WEM and goes against the advice of the independent ERA. This position will likely come under the microscope if the Liberals are successful on 13 March.

A brave plan with little detail

The Liberal announcement is big and bold – and possibly brave. Critics will argue that the plan lacks detail, may increase costs, is too aggressive for such a short timeframe, puts generation in the wrong location and discourages competition. But Zac Kirkup put a stake in the ground when he launched the Liberals’ energy policy last week. He quickly moved the party towards a renewables focused future and made some big and impressive commitments, such as a zero emissions electricity sector, 500 MW of battery storage, a $500 million transmission line upgrade and a combined 6000 MW project in the mid-west that will partly be used to create green hydrogen.

It’s only weeks away from the election and voters have now been given a clear choice.  

 


[i] See Liberals WA Twitter feed

[ii] See page 7 Whole of System Plan, Industry Forum, July 2019

[iii] See page 1, Nation’s largest renewable energy export and jobs project, downloaded here

[iv] See page 62, Whole of System Plan

[v] See page 79, Whole of System Plan

[vi] See Stakeholder Submissions

[vii] See page 14, Report on the effectiveness of the Wholesale Electricity Market 2020

[viii] See page 6, Nation’s largest renewable energy export and jobs project, downloaded here

[ix] See page 15, Nation’s largest renewable energy export and jobs project, downloaded here

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