The North Queensland Energy Forum

The North Queensland Energy Forum is an annual conference held in Townsville for the discussion of energy related issues. The forum started off with a welcome dinner and networking event on Monday evening. The food was good and the company interesting. The meat and potatoes of the event arrived on Tuesday where sixteen different speakers presented topics as diverse as nuclear electricity generation to distribution network operations to sugar cane based cogeneration plans. All of the speakers were highly informative.

The Tyranny of Distance

The cost of power was once again at the forefront of peoples’ minds. North Queensland has a number of unique issues that energy users and suppliers have to grapple with. Not least of which is the tyranny of distance. While Queensland itself is quite well supplied with a number of cheap base load coal fired generators, there are none in the north of Queensland, which has lead to a situation where heavy industry has been reluctant to invest in the region. The feeling by some at the conference was that a base load generator would assist the region in attracting investment. John O’Brien of Hill Michael highlighted the problem by showing that due to transmission losses users in Townsville pay 22% more than users in Gladstone for power. Gordon Jardine, CEO of Powerlink also mentioned that following some soon to be complete projects, there was the possibility for a 500 MW generator to be built in the region.

Yet Townsville users are at least connected to the national market. Users in Mount Isa are not and some of the most interesting talk was about the situation in Mount Isa. Rod Sims of Port Jackson Partners spoke primarily about how to address Mount Isa’s energy needs, based on research that he recently completed on the issue. Mount Isa faces a crossroads. Most of the long term energy contracts are nearing expiration. There is growing demand due to industry in the region. Even more importantly, there is a lot of prospective interest in Mount Isa and if investment into the region is to go ahead, there needs to be long term energy security. Currently there is one station that services the whole area – Mica Creek, which is a gas fired generator that is now in the vicinity of fifty years old (though it has been upgraded at various times since it was built). To meet the new energy demands, Mount Isa has a couple of realistic options. The first is to expand Mica Creek. The second is to build a transmission line from Townsville.

There are a number of challenges in determining the way forward. The first is the uncertainty around the price of gas. With the rise of the LNG market worldwide, the gas producers who would supply Mica Creek are now interested in shipping the gas overseas, effectively tying the local gas price to the world market, which is significantly more expensive at the moment. There is no way of knowing what the gas price will be in five years time and therefore what the cost of generation at Mica Creek will be as gas suppliers have been reluctant to provide long term contracts. There are also some location based problems with the gas pipeline used to supply an expanded Mica Creek. Alternatively, to build an adequate transmission line to Mount Isa would be immediately more expensive, though would expose Mount Isa to the cheaper national electricity market and remove the monopoly that Mica Creek currently enjoys. Yet exposing Mount Isa to the national market may have some negative consequences once the CPRS is introduced, as without the interconnection the carbon intensity of Mount Isa is much lower than the carbon intensity of the national grid. The Sims report suggested that the most economical option was based almost entirely on the long term gas price.  From my perspective the added cost in building the transmission line would have a net benefit, even if it resulted in higher costs in the immediate term. The economic efficiency of interconnection will, I feel, result in a better long term solution for both Mount Isa and the rest of the National Market.

Similar sentiments were later echoed by John O’Brien in his discussion on the proposed Cu String (Copper String) project, which involves the creation of a 400 MW AC interconnection between Townsville and Mount Isa and the building of up to four separate renewable projects – wind, bio-diesel, solar and ethanol, which will provide up to 1050 MW of generation. The claim is that this would provide around 10% of the national renewable energy target and north Queensland would change from producing 35% of its own power to 70% of its own power.

Renewable Opportunities

Renewable technology was a big focus of this conference. Two speakers gave presentations on various solar thermal technologies and another speaker gave a presentation on cane sugar cogeneration possibilities. While the talks were mostly informational in nature, there was some concern that the cogeneration options had to be acted on within the next decade or the sugar industry would move on to other ventures. According to Sharon Denny, a large part of the problem that they face is that the Queensland government views the proposed plants as a series of small isolated projects instead of one large renewable project. Currently there is 450 MW of planned plants along the Queensland coast. The belief is that each of these plants will produce two products – power and Renewable Energy Certificates.

One of the things that stood out from both the annual EUAA conference and the North Queensland Energy forum was just how reliant the renewable energy market is on electricity retailers. Ultimately many renewable projects will live or die based on whether they can get an agreement with a retailer for the purchase of RECs. What makes this more difficult at the moment is the current oversupply of RECs in the market. There are other market distortions in place which are contributing to this oversupply, the largest of which is the extra RECs that are generated by solar hot water systems. Due to a political decision, solar hot water systems now produce five times the RECs than they “should”. The other factor in the REC market is that it faces an effective price cap of $65 (increased recently from $40), which is the REC shortfall penalty. Though in the current oversupplied market this soft cap is in no danger of being reached.

This is not the only problem that some renewable technologies face. Due to their high cost, solar thermal solutions have to be heavily subsidised by the government. Wind power tends to have a negative correlation with temperature – that is, when temperatures are high and demand in the NEM is subsequently high, wind power tends to drop. This, combined with the inherent system stability problems with wind power, means that more peaking plants need to be built to back up the wind generation. Even with these shortcomings, Walter Gerardi from McLennan Magasanik Associates suggests that wind will make up around one third of the 2020 renewable energy target, provided that geothermal power comes online by around 2016. As not even a single deep hot rock geothermal power station has been built yet this is not guaranteed. If this technology does not get off the ground then wind will form around 60%+ of the renewable energy supply. Finally, on the topic of renewables, it was interesting to me to listen to Craig Froome from the University of Queensland talk about the reasons for the uptake of renewable technology worldwide. Craig proposed that the European countries which have been the leaders in renewable energy uptake worldwide have done so for energy security reasons, whereas in Australia the push is almost entirely for global warming reasons. This key difference is significant in understanding the current political debate over the emissions trading scheme in this country. Australia has hundreds of years worth of coal supplies remaining in the ground and gas reserves are increasing very rapidly. This explains the push towards carbon free coal and gas solutions.

A Proven, Carbon Free, Cost Effective Baseload Solution?

The final point that I would like to talk about is the debate over uranium in Queensland. Michael Angwin of the Australian Uranium Association spoke on the topic and highlighted a number of societal trends. In Europe, there has been a push by France, Italy and Germany back towards nuclear power. The Intergovernmental Panel on Climate Change forcasts a doubling of nuclear demand worldwide in the medium term future. 15-16% of power worldwide is currently generated through nuclear power. The lifetime greenhouse gas contributions of nuclear power are lower than many renewable technologies and are almost identical to wind power. Governmental subsidies for nuclear power worldwide are lower than any renewable power source other than hydro (which barely attracts any subsidy). There are large GDP gains to be made from the export of uranium from Queensland and yet uranium mining is still banned in the state.

Uranium and Queensland’s nuclear future was also the topic of the debate, held at the end of the day. Unfortunately I found the debate to be quite lightweight in nature, with the typical responses from both sides. The “for nuclear” side cited the economic and carbon benefits of the technology, while the “against” side primarily focussed on the potential for catastrophe and the long lived nature of the waste. I did find that a number of the “against” arguments were a little weak, such as “there are massive [political] barriers to growth except in authoritarian regimes” but overall the “for” side were not entirely convincing either.

Overall I found the North Queensland Energy forum was quite a good event with a lot of stimulating discussion from a wide variety of presenters.

1 Comment on "The North Queensland Energy Forum"

  1. I would just like to clarify one of the points I made in this article.

    Why does interconnection increase economic efficiency?

    In general terms, the more interconnected a network and the larger a market, the more efficient it becomes. Connecting Mount Isa to the rest of the NEM will allow Mount Isa to purchase cheaper power during off peak periods, and will provide strong price signals for demand management during peak times. From the point of view of the generator at Mount Isa, exposure to the NEM makes them able to operate more efficiently as well, by allowing them to take advantage of high price periods.

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