Queensland considering its next moves

Energy policy played a part in the Queensland Australian Labor Party’s (ALP) successful bid to win government in 2015, and with two recent draft reports from the Queensland Productivity Commission (QPC) and the appointment of a Renewable Energy Expert Panel, the focus is shifting to the finalisation of policies and the implementation phase. Below we look at some of the energy policy areas.

Price Deregulation

Electricity price deregulation for South East Queensland was delayed for 12 months by the Labor Government, while the newly formed QPC was asked to examine the electricity industry.

Following the release of the QPC’s Draft Report from its Electricity Pricing Inquiry deregulation of retail electricity prices in South East Queensland (SEQ) will begin from 1 July 2016. In recommending that it proceed, the QPC found that it would boost competition, could lead to lower prices and that there was sufficient protection in place for consumers. The QPC’s recommendation and comments reflect what has occurred in other states, such as Victoria.

In line with the QPC’s draft report recommendations, Queensland’s Department of Energy and Water Supply has committed to a comprehensive customer education campaign on deregulation. The Department has said that in conjunction with other stakeholders, it will continue to monitor the effects and trends associated with price deregulation in SEQ.

Where to for solar?

Solar and renewable energy policy has been a key focus for the Queensland Government. It has a target of a million solar rooftops (or 3000 MW of PV capacity) by 2020, has asked the QPC to consider a fair price for solar. In addition it has committed to considering a 50 per cent state-based renewable energy target and, as part of that, established a Renewable Energy Expert Panel, headed by Colin Mugglestone. The panel is expected to deliver a final report by the end of the year.

Amongst the 54 recommendations in its Electricity Pricing Inquiry draft report the QPC suggested that the Queensland Government consider an early end to the rooftop solar premium feed-in tariff scheme, which currently runs until 30 June 2028. The Commission found that most of those involved would have recovered their costs by July 2020, and that the scheme would cost around $4.4 billion - with more than $3 billion of that occurring between 2016-17 and 2027-28. The SBS mandated a feed-in tariff of 44 cents per kilowatt hour for energy, which was more than triple the market rate at the time.

The QPC argued that the solar bonus scheme had met its purpose and that it was adding $89 to a typical household bill in 2015-16 with low income and disadvantaged households disproportionately impacted (see Figure 1).

The Queensland Government has remained firm in saying that it would not abandon the scheme, which was introduced by the previous Labor Government in 2008.

The QPC has also recommended that the Queensland Government not intervene in the solar PV market to achieve its 3000MW capacity target by 2020, arguing that there did not seem to be a strong enough economic or environmental case for a new premium feed-in tariff. It did so on the basis that the target would be met without any intervention by 2022 and that a price of 45c/kwh (similar to the Solar Bonus Scheme) would be needed to accelerate the target by 24 months.

Figure 1: Queensland postcodes above 30 per cent penetration rate by income quintile (as at December 2015)

Source: esaa solar report, December 2015

The QPC commissioned ACIL Allen to undertake modelling. The modelling suggested that population and household growth are more important drivers of the uptake of solar PV, rather than the feed-in tariff price. This also reflects that the industry in Queensland now has amongst the highest penetration rates in the world.

QRET

The QPC also considered the Queensland Government’s election pledge to consider a 50 per cent renewable energy target. Based on modelling by ACIL Allen, the QPC projected that the target would lead to retail price increases of 0.5 per cent for households, 0.3 per cent for industry, but a 0.7 per cent reduction in prices for commercial customers over the period 2016-17 and 2034-35.

Its recommendations included that the Queensland Government work with COAG’s Energy Council to find opportunities for collaboration on carbon policy as an alternative to independent action in order to achieve least-cost abatement. It also recommended that the renewable energy taskforce consider the benefits of an inter-jurisdictional approach to emissions reduction policy.

National approaches are inherently more efficient than a variety of state-based approaches to reducing greenhouse gas emissions from the stationary energy sector, and/or deploying low or zero emissions technologies. State-based schemes risk distorting investor incentives between different parts of the National Electricity Market.

Fair Pricing

Separately, the QPC has also handed down its draft report on a fair price for solar.  Submissions are open until 15 April and a series of public forums will be held across the state. It is expected to deliver its final report in June this year.

The draft report found that the national Small Scale Renewable Energy Scheme (SRES) provides a fair price for solar PV owners for carbon emission reductions.

It also highlighted that competition in SEQ is providing a fair and reasonable value for solar PV exports with nine retailers offering feed-in tariffs of between 4 c/kwh and 11c/kwh with the largest retailers offering 6 and 8c/kwh. In such a competitive market, retailers that do not offer attractive feed-in tariffs risk losing customers to competition.

The report also considered the differences between the south-east and regional Queensland and proposed that solar export pricing be regulated to counter the impacts of limited regional competition.

Mergers and non-mergers

The Queensland Government is continuing to progress the merger of Energex and Ergon, with the aim of having a new organisation in place by the middle of this year.

The government has said the merger will remove duplication in areas like administration, shared services, boards, management and corporate costs and drive new jobs in north Queensland, with the new business to be headquartered in Townsville[i].

While the Queensland Government having decided to retain CS Energy and Stanwell as separate generation businesses, following concerns raised by the Australian Competition and Consumer Commission, it has said it will undertake a structural review of the businesses to achieve operational efficiencies within Powerlink, CS Energy and Stanwell.