Queensland's review gives power to the people

There’s an interesting exercise going on north of the Tweed River. A government is not only wrestling with its electricity strategy for the immediate and longer term, but also getting out and asking the community what it thinks.

“Powering Queensland’s future” is the tag the Newman government has stuck on the exercise, and it is seeking to address the next five years and the next 30 years.

When it comes to electricity, Queensland is not a sideshow.

The state has muscled Victoria aside to become the second-largest power region in the country and the load forecasts by the Energy Supply Association predict the state will be treading on the heels of New South Wales in terms of grid system energy by early next decade.

Queensland already has more than three times the power output of South Australia, about which the green-minded can’t stop prattling, and is on its way to having more than four times output by 2022.

What’s more, should Origin Energy’s Purari River hydroelectric project in Papua New Guinea come to fruition, Queensland will become the first part of Australia linked to an electricity source beyond its borders.

Of course, the exercise is a political ploy. The Newman government was under extreme fire about power bills when it launched the review; politics is always close at hand when Queensland is playing with electricity.

In the late 1990s, the political focus was all on driving down power costs and maximising the profit that flowed to state treasury from government-owned assets. But the inevitable exposure of Brisbane to substantially increased risks of extended blackouts saw a new (and expensive) focus on network reliability just as reduced prices for air-conditioning enabled local households to opt big-time for cooler homes.

Taken together, and bolstered by green schemes, this has resulted in much higher costs and consumer choler, so now the focus is on price reduction while maintaining subsidies worth hundreds of millions of dollars a year to users outside the south-east corner.

And so it goes.

Nonetheless, the review is a valid activity because Energy Minister Mark McArdle is pursuing opinion across a broad canvas (regional communities, social services and the Bundaberg Regional Irrigators Group), as well as the usual suspects in the shape of peak industry bodies, large companies, academics and ideologues.

The government has contributed papers highlighting the challenges it believes electricity supply faces.

McArdle, who tabled the latest paper in state parliament in mid-September, has set December 6 as a deadline for submissions.

The government is hinting at a short-term reform agenda, including a possible move from regulated retail power pricing in the populous south-east corner from 2015, implementation of the national energy customer framework proposed by the Gillard government, a customer-driven smart meter roll-out and an easing of network reliability standards.

Longer term, the government has used three scenarios to illustrate what might be pursued. Unlike some, it has been honest about these outlooks, emphasising that they are not predictions.

“The future for Queensland’s electricity supply system is unknown,” it declares. “The only certainty is that the sector will not look or operate the way it is today.”

The trio of long-term scenarios are not relentlessly Panglossian either. One envisages “the system is in for a bumpy ride, [with] slow demand growth and inefficient use of assets seeing price pressures increase.” It sees the market “forced through a set of rapids” with new generation needed but investors uncertain, with no viable, cost-effective low-emissions technology available to keep down prices.

In this world, customers are confused and resistant to engaging in the market, which they expect government to continue managing.

The power price debate remains highly contentious and continues to impose a financial burden on the state.

The sceptics among us would see all this as only too likely.

A second scenario moots a smooth ride in to a price-driven, customer-led environment – for a while. 

But global negotiations have so far failed to produce an early international agreement on carbon abatement. When an agreement comes, it will hurt — especially if Queensland has opted for large-scale use of gas for generation.

Absent mature, competitive, large-scale renewable technologies, it asks, is this when nuclear power becomes a real option?

The third scenario sees international and national carbon action, along with high gas prices, pushing renewable technologies, including energy storage.

This is the two-speed scenario for Queensland where the resources sector grows rapidly (reacting to international demand), some regional population centres expand substantially and industry demand sees a lot more investment in generation and networks.

The worm in this apple is that non-boom areas end up dealing with price pressures while the industrial and commercial sectors find local costs are undermining their cost competitiveness.

All this drives along low-emission technologies and new energy management practices.

Does it also end up driving technology like carbon capture and storage?

Unlike so much that has been trotted out over the past six years, there doesn’t appear to be a great deal of pie in this sky being pictured by the government and its advisers. However, what a bunch of politicians will make of it all is questionable.

As they are busy demonstrating over in the west, even a supposedly hard-headed government is capable of falling over its feet when it comes to electricity supply issues.

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. he was made a member of the Order of Australia in 2004 for services to the energy industry.