Oct 06 2022

Qld Energy and Jobs Plan: Energiewende down under

Queensland, with its relatively young and mostly government-owned coal fleet, has often been criticised by environmental advocates for not engaging honestly with its future in a carbon-constrained world. That all changed last Wednesday when the Queensland Government released, with great fanfare, an audacious plan to retire and repurpose all its coal plants and commit to a remarkably large government build of transmission and pumped storage, plus a host of other matters.

In many ways, the Plan has similarities to Germany’s Energiewende, particularly its planned coal phase out approach and management of affected workers. The government deserves credit for apparently successfully navigating a fraught policy matter whilst keeping powerful unions onside. 

At the same time, the Plan consolidates the trend already embarked upon in Victoria and New South Wales by diverting from, indeed ignoring, the National Electricity Market’s (NEM) Rules and institutions. It is also founded on maintaining Queensland’s state government-dominated generation and transmission sectors who are expected to act according to the centrally determined Plan.

Understandably it has drawn a great deal of media coverage, and Energy Networks Australia (ENA) is simultaneously publishing an EnergyInsider piece that engages primarily with the Plan’s overall targets and transmission aspects. Here we focus on the coal retirements, pumped storage and renewable arrangements.

Coal Plan

The Plan phases out of coal-fired generation “…gradually convert all publicly-owned coal-fired power stations into clean energy hubs by 2035...” and presents modelling results that include the two power stations with private equity also closing at about the same timeframe.

Figure 1: Queensland Coal Closure Forecast

Source: Queensland Supergrid Infrastructure Blueprint

The plants are not proposed to simply close. A three-phase process is discussed that sees units moving to seasonal operation, reserve roles and over time converting into synchronous condensers. The excellent connection points of the power stations would remain available for other uses, such as battery storage as is occurring in other states.

The dates have shades of grey, the Plan includes an ongoing process that contemplates system reliability as other sources are constructed.

Figure 2: Indicative Schedule of Government-owned closures

Source: Queensland Supergrid Infrastructure Blueprint

The generator of any conventional power station can theoretically be re-purposed as a synchronous condenser, which is basically a generator synchronised to the system but without a power station attached.  In that mode it will instead consume a small amount of electricity from the grid to overcome its frictional losses but is able to provide dynamic reactive power which supports system strength whilst the generator’s own mass provides some useful system inertia.

In South Australia, in order to restore the loss of system strength and inertia caused by the decline in synchronous plant operation ElectraNet spent $166million on installing four dedicated synchronous condensers, and the Queensland plan anticipates installing at least two of these, now estimated at $80million each. Conversion of an otherwise redundant generator as proposed in Queensland therefore has attractions, but will requiring at least a clutch to enable mechanical disconnection from the turbine. A long-term proposition would require a starter motor to bring the generators up to speed without having to first operate the power station.

However system strength is highly locationally dependent and the power stations may not be ideally located for the way the future power system develops. Meanwhile work is also underway on configuring batteries to provide system strength and synthetic inertia at a low cost.

The material promises support for coal-fired power station workers with a legislated “$150m job security guarantee”. Like in Germany, all are guaranteed a job. This is either in the repurposed plant, another part of the existing or another government owned energy business.

Pumped Storage and Hydrogen-Ready Gas Plant

Perhaps the most eye-catching of all the aspects is the proposal to build two very large pumped-hydro schemes:

  • Borumba, a 2GW/48GWh plant operational in 2030-31; and
  • Pioneer-Burdekin, stage one 2.5GW/60GWh in 2032 and stage two a further 2.5GW/60GWh in 2035.

These are very large projects indeed, with Pioneer-Burdekin claimed to be the world’s largest pumped hydro scheme. Experience with such projects suggests they would involve enormous capital. Transmission works associated with them would be $800m for Borumba and an eye-watering $3.4bn for Pioneer-Burdekin. The latter is described as a “preferred” site for pumped hydro, suggesting it is subject to more analysis.

A new publicly-owned energy company will be created to develop the schemes – Queensland Hydro, at least initially a subsidiary of Powerlink.

The material also described the building of a 200MW gas turbine at Kogan Creek in a CS Energy/Iberdrola partnership by 2026. This plant is to be “hydrogen capable”. The modelling anticipates a need for “up to 3,000MW of new low-to-zero emission gas fuelled generation”. Such investments, even though they may involve some fossil fuel, are a more pragmatic way of achieving reliability in a low carbon system than relying, say, entirely on batteries in pursuit of a 100 per cent renewable goal.

Renewables investment

As suggested by the figures above, the Plan anticipates an enormous investment in renewable energy as the coal plant recedes and demand grows due to electrification and hydrogen production. This is facilitated with new Renewable Energy Zones – see the ENA article for more information on these.

However interestingly, the dominant source of this investment is expected to be private. Importantly, the Plan does not propose a form of underwriting or “Contract for Difference” to limit these generators’ market risks. The broad view from government seems to be that if there is confidence in the coal exit plan and in the new generators’ access thanks to the big transmission build, then renewables will accept market risk and invest.

This contrasts with the approach taken by the Victorian, Australian Capital Territory and New South Wales governments who have all provided either Contracts for Difference which remove all price exposure, or “Put option” contracts that remove downside exposure. The Queensland approach seems preferable both for the lower risk it transfers to customers (ACT, NSW) or taxpayers (Vic) and for the less distortion it creates in the market. Investors will respond to customer needs as expressed in market prices. For example, they will choose the types of technologies that tend to generate at times of highest price, rather than simply optimising against a government contract.


As discussed in the ENA article, the Plan contemplates three groups of very large transmission investments:

  • Three large Renewable Energy Zones;
  • A tremendously large investment in a new 500kV “supergrid backbone” that will run most of the length of Queensland and extend to the new pumped storage facilities;
  • Considering the long-discussed “Copperstring”, first to Hughenden and ultimately to Mount Isa.

The AEC recognises the transition will require a transmission build but still feels projects require strong economic scrutiny to both protect consumers and to ensure the most efficient overall system is built, for example by comparing against a counter-factual of locating supply close to customers. The exact processes are yet to be fully spelt out, but as has occurred in other states, it seems likely the proposed transmission will be built outside the NEM’s Rules and economic justification processes. As the ENA covers in their article, the plan has a governance structure with an Energy Security and Advisory Board, which does have consumer representation.

It also raises questions about where this major plan sits against the Integrated System Plan (ISP) which did not promote the same investments. Again, Queensland is not the first state to depart from the Australian Energy Market Operator’s (AEMO) view in this way. In previous cases, AEMO simply accepts such state plans as fixed and restructures its ISP around them. This will unavoidably undermine the rationale for other transmission projects, most likely interconnectors. The process is self-fulfilling: it becomes impossible to determine whether AEMO’s plans truly reflect an efficient plan or is just a collation of state government proposals.


By any measure, the plan is an impressive and ambitious piece of work. In one fell swoop, we have a plan to manage the decline of coal whilst also overseeing an enormous investment into pumped storage and transmission amongst other matters.

Thanks to Queensland’s unusual circumstance of government ownership, it is possible to stage manage the transition in a way that is likely to give more public and worker confidence than one that is “left to the market”. In doing so it deviates heavily from the AEC’s long-term preferences of private investment, competitive market forces and national rules. But Queensland is not the first state to do this, and its plan appears more comprehensive and better structured than others. In particular, the absence of underwriting arrangements is most welcome.

We will never know, even when it is complete, whether it was in fact the cheapest way to get there and whether, by laying out such a comprehensive early blueprint, it has blocked innovations and efficiencies yet unseen. But such is the price of confidence, and given all the political uncertainties around the transition, Queensland’s preparedness to pay this is entirely understandable.

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