The Queensland government has released an issues paper that sets out the potential options to meet its much touted renewable energy target and transform the country’s most heavily fossil fuel dependent grid into a system powered 50 per cent by renewables. The issues paper – released on Tuesday by energy minister Mark Bailey, and put together by a special panel named earlier this year – notes that Queensland is almost entirely (94 per cent) dependent on coal, gas, diesel and fuel oil, and has largely missed out on the growth of large-scale renewable energy in recent years. The state has led the country in the uptake of rooftop solar – encouraged by generous feed-in tariffs and then by its high network tariffs – and now has 1.5GW of solar on its rooftops, which is collectively the second biggest power generator in the state. In large-scale renewables, however, it has just 12MW of wind capacity and 10MW in “large-scale” solar, with a further 670MW of mostly long-standing biomass and hydro power. By contrast it has 8,200MW of coal-fired capacity, 2,400MW of gas-fired generation, and a further 800MW of diesel and fuel oil capacity. “The Palaszczuk government’s focus is to increase the uptake of renewable energy to create the jobs of the future, continue to boost investment, act on climate change, and also deliver value for energy customers and the government,” Bailey said in an accompanying statement. The issues paper says that meeting the 50 per cent renewable energy target will require a “significant system transformation” and changes to way the energy market is managed. It shows no preference for any particular policy mechanism and is seeking feedback from the public via submissions and a series of public meetings to be held across the state in June and July. It notes that studies by the Australian Energy market Operator, the University of NSW, and CSIRO indicate that demand can reliably be met under growing penetrations of wind and solar, although system requirements will differ on the specific characteristics of each region.

One of the issues is the nature of Queensland’s grid, which is a “long network” with limited meshing, unlike the deeply integrated grids in Europe, the US and China. It noted though, that South Australia, which will reach 50 per cent wind and solar this year, also had high penetration of renewables without any system problems.

However, it recognised that more renewables would require new grid management strategies, and possibly new market mechanisms, such as those to encourage the key grid support services hither provided by coal and gas.

“Although managing future grids may be more challenging, this could be aided by emerging technologies such as storage and advanced inverters,” the report notes.

The issues paper canvasses a range of options, but a couple of things stand out.

One is its forecast for technology costs, and its assumption that renewable energy will require subsidies. At the start, maybe, but mostly they will require clear policy guidance.

The ACT reverse auction for wind capacity, and the ARENA funding round for large-scale solar indicate that wind and solar technology costs are already significantly below the lines plotted above in this graph. And nearly half of those ARENA solar projects are located in Queensland.

Another issue is its reporting on the situation in South Australia, where it infers that the state has the highest wholesale prices in the country because of the growth of wind power and the replacement of gas.





It ignores the fact that South Australia has long had higher renewable energy prices than the rest of Australia, thanks to its historic greater reliance on gas. That margin has been reduced markedly since the advent of wind, and rooftop solar, because less gas generation has been required. Indeed, some plant has been mothballed.

Queensland is now experiencing the cost of gas generation – as the new LNG plants are being fired up, more gas generation is being produced, to the point where Queensland has consistently had the highest wholesale prices in mainland Australia – beaten only by Tasmania, where drought, the loss of the cable to the mainland, and the installation of high-cost gas and diesel generation has caused prices to soar to record levels.