BIOMASS AND TIDAL
BY THE GREEN ENERGY TASKFORCE
REPORT 2
CovEr Photos
Main Photo: Power and Water signed a power purchase agreement with TKLN Solar Pty Ltd, a wholly owned subsidiary of Epuron Pty Ltd to build and operate three solar power stations, as well as the wind energy system at Alpurrurulam. Conergy Australia and Epuron, as wholly owned subsidiaries of Conergy AG, have been part of these renewable energy projects from design stage through to construction.
Inset Photo: “Uterne” (meaning bright sunny day in local Arrernte language), 1MW solar power station.
In 2011 Power and Water Corporation and SunPower signed the first utility backed Power Purchase Agreement for Uterne, Australia’s largest solar tracking device.
Photos courtesy of Power and Water.
1. EXECUtivE sUMMArY
The Government’s 2009 Climate Change Policy established a Green Energy Taskforce to provide expert advice on strategies, incentives and pathways to encourage the growth and funding of the renewable and low emissions energy industry in the Territory as well as assisting the Territory in meeting its goal of having 20% of its electricity demand met by renewable and low emission sources by 2020. Its Terms of Reference identified priorities for the Taskforce’s first two reports, as follows:
1. Develop a detailed proposal for substituting a large component of diesel generation with renewable and low emissions energy in remote communities, including financing and funding options; and
2. Prepare an evaluation of the relative merits, feasibility and likely costs of the potentially available renewable technologies to be used in the NT, including geothermal, solar, biomass and tidal.
The Taskforce delivered on the first of these objectives, through its report Roadmap to
Renewable and Low Emission Energy in Remote Communities, delivered to the Chief Minister in July 2010.
In preparation of the Second Report, the Taskforce considered a variety of data sets and information sources, as documented within the balance of this report and associated appendices, and has developed a series of conclusions underpinned by the following assessment of the existing energy market:
y Within the regulated energy market (Darwin-Katherine Integrated System [DKIS], Alice Springs, Tennant Creek), there is enough existing and planned generating capacity to meet anticipated demand for peak load and energy beyond 2020;
y Liable entities within the NT, predominantly PWC, have a renewable energy target (RET) obligation that rises to approximately 20% of demand by 2020 (approximately 300 GWh), and the cost will be passed through to all consumers, subject to regulatory approval;
y The obligation exists only for retailers within the DKIS;
y PWC, or other liable entities, could meet that obligation by generating renewable energy itself, buying renewable energy from other parties (located in the NT or elsewhere), or Large Generating Certificates (LGCs)on the market: regardless of the source of the LGCs, it is estimated that by 2020, the direct cost of meeting this obligation will be between $12M and $21M annually; and
y Generation Utilities, utilising fossil fuels, including natural gas, will have an obligation to purchase emissions permits under the proposed Clean Energy Act 2011 (initially at the rate of $23/t of CO2e). This will increase electricity generation costs this cost increase will also be passed through to all consumers.
The NT Government has expressed a desire for the RET obligation to be met from sources within the NT, in order to maximise the benefit to the NT of expenditure required to meet these obligations, and has sought advice from the Taskforce to facilitate the uptake of renewable energy.
The analysis conducted by the Taskforce of the current and near-term status of the technologies suggests that:
y Wind, although relatively mature, is likely to be of marginal value due to the relatively low quality of the resource in the NT;
y Geothermal has significant long-term potential for the NT, but is relatively immature and it is considered unlikely that this status will change sufficiently in the medium-term for geothermal to be able to make a material contribution toward the 2020 objective;
y Hydro is undeveloped and, even if the environmental implications could be managed, would at best be considered a marginal technology for NT, due to both terrain and the seasonal variability in rainfall;
y There is reasonable effort being undertaken to pursue tidal energy within the NT; however, it is unlikely to be sufficiently prospective in the medium term to meet the target;
y Biofuels and biomass have a number of technical and economic hurdles to overcome that would mean that they are unlikely to contribute at commercial scale in the medium term;
y Solar thermal is approaching a stage where it could be deployed in the NT: the best prospects would be in combination with gas generation (to overcome the intermittency). The costs are still high; however, they are decreasing; and
y Solar PV is relatively developed and the NT has an abundance of the solar resource:
intermittency and cost remain the major barriers to widespread uptake in the short term Further to the technical and resource barriers noted by above, additional conclusions reached by the taskforce were as follows:
y The overall regulatory and resource environment is not specifically restrictive to the uptake of renewable energy, nor is it specifically attractive for renewable energy proponents;
y There are, however, a number of policy areas that may need to be addressed in the longer term if some of the renewable energy technologies are to be further developed. These include:
»»“Right of Access” sources of renewable energy as part of the planning scheme;
»»Land Tenure and Land Use limitations;
»»Environmental assessments for renewable energy projects;
y To date, it appears that PWC has shown a willingness to undertake renewable energy projects, within the framework of a power purchase agreement (PP), when a fair and competitive price is offered. A general barrier to determining a fair and competitive price by renewable energy technology proponents and developers is the limited understanding of the real marginal costs of generation within the NT energy markets;
y The NT has high energy generation costs already and a substantial Community Service Obligation (CSO) budget commitment thus providing significant incentive to explore opportunities for reduction in energy consumption and pursuit of alternative generation sources;
y In areas, such as mine sites or large commercial buildings, where the marginal costs of supply would otherwise be considered to be high enough to support the uptake of renewable energy, other constraints exist, including access to capital and overall project risk, that have limited the uptake of renewable energy;
y Significant contributions of energy from intermittent renewable sources such as solar photovoltaic (PV), where storage is not included at single locations could present significant network stability issues for the network operator, implying that distributed, smaller sources would be more effective;
y In 2011, the cost of the most developed renewable technologies, relative to the marginal cost of generation within the regulated market, means that the NT Government would have to provide a substantial subsidy, by way of capital injection or ongoing price support, to meet the objective of meeting the RET obligation from NT sources by 2020; and
y It is estimated that the cumulative value of this subsidy between 2013 and 2020 would be between $60M and $110M1 . This may change in the medium-longer term as the renewable technologies develop further and the cost of fossil fuels rise with global forces and emissions constraints; and
y Given the time frames for infrastructure planning, investment and construction, action to develop and implement a policy intervention, should it be required, would need to commence by 2015 in order for it to be fully implemented and the benefits realised by 2020.
In this light, it is the view of the Green Energy Taskforce there is a strong likelihood that the attractiveness of various renewable technologies will materially increase over the coming years and that, subject to removal of identified non-economic barriers, there is a reasonable probability that either:
a) There will be a natural increase in the uptake of renewable energy as a result of increasing economic viability; or
b) If the level of investment is still not sufficient to meet the entirety of the 2020 RET liability from NT sources, the cost of intervening will be substantially lower than at present;
Beyond the specific challenges of meeting the RET obligation by 2020, it was noted that the NT has unique access to renewable resources such as solar and, as such, the NT Government can play an important role in facilitating and enabling the development of renewable energy technology through research and demonstration.
Given the conclusions noted above the Green Energy Taskforce recommends that the Northern Territory Government:
1. Not intervene directly to subsidise renewable energy in the medium term (3-5 years). Rather it should continue allow market participants to make commercial decisions in the context of the RET and emissions trading legislation. This would mean not actively pursuing, through direct financial support, the objective of meeting the 2020 RET target from NT sources at this time;
2. Support the development of a detailed strategy for engaging and developing an active partnership with the Commonwealth Government in order to ensure that the NT is able maximise the leveraging of Commonwealth funds from programs, including the Australian Solar Institute (ASI), the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC), for investors in renewable energy within the NT. Outcomes of this strategy should specifically include the following:
a) Active facilitation and support for a large solar project that is able to meet the eligibility criteria for Round 2 of the Solar Flagships program, including, where necessary, advocacy for program criteria that accommodate the specific challenges of developing large projects within the NT; and
b) Development of innovative investment support structures that, in conjunction with the CEFC, seek to remove risk barriers in environments that would otherwise have compelling economic justifications for renewable energy , namely sites with high marginal costs of supply such as mine sites, hotels, warehouses and shopping centres;
3. The Government should maintain a formal watching brief on technology developments for solar PV, solar thermal and geothermal as well as monitoring other drivers of the NT energy market, including natural gas prices and movements in LGC and Emission Trading Scheme (ETS) permit prices. Such developments will require a detailed review of Recommendation 1.
This should be facilitated through a detailed review and revision of this report in the following years:
1. Note: these figures are currently only indicative and should be confirmed or amended on the basis of additional review and modelling. Were this further review to suggest that the subsidy is more likely to be at or below the lower figure, then the Taskforce would recommend that the Government intervene to specifically subsidise solar thermal or solar PV, to address its twin objectives of meeting the RET liability from NT sources and developing the Territory’s renewable energy industry.
a) 2013 – with a view to monitoring the impact of the carbon tax and the establishment of ARENA and the CEFC, and making a detailed assessment of those technologies that have proceeded further in the development cycle, most specifically solar thermal as well as a concurrent assessment of the broader community benefits of investment in renewable energy generation; and
b) 2015 – with a view to developing a detailed costing framework for intervention and support of renewable energy to achieve the 2020 RET target, where there remains a gap in investment or an imperative to close such a gap.
4. Support the development of a comprehensive R&D strategy for renewable energy within the NT, with a view to making the NT a Centre of Excellence for Renewable Energy deployment in tropical and arid environments, including:
a) Support for existing research into potential bio-fuel sources such as Pongamia;
b) Support for ongoing research into implications of higher penetrations of intermittent renewable energy such as PV on grids;
c) Positioning the CDU as a hub for warm water tidal and wave power research
d) Develop a working group within the NT to monitor technology development and investment flows in order to ensure the NT is able to respond rapidly;
e) Work with Geosciences Australia, CSIRO and AEMO to develop and maintain extensive resource datasets for the NT including biofuels and biomass, wind, and particularly geothermal;
5. Create an effective and attractive investment environment by:
a) Continuing to work with the Utilities Commission to ensure the efficient development of the electricity energy sector within the NT, allowing for fair competition across technologies and removing any barriers to entry to new technologies and/or market participants;
b) Actively engaging with the Commonwealth Government to ensure that programs such as Solar Flagships are able to be implemented within the NT;
c) Developing an appropriate regulatory framework for encouraging new mine sites to adopt renewable energy as part of their power generation capacity; and
d) Work with native title agencies, NGO’s, government departments and other land
management stakeholders to develop an effective regulatory framework to support land and resource access for renewable energy, in particular
i. Marine access rights for tidal and wave power generation; and
ii. Reducing land use restrictions for pastoral lands where biomass or bio fuel could be generated
The above recommendations are based on the absence of an over-arching policy rationale to subsidise renewable energy in the Territory; however, should the Government determine that it does wish to actively intervene in the energy market to ensure that the 2020 RET liability is met from NT sources, the Taskforce recommends that the Government:
a) Utilise an open tender/bidding process for supply of renewable energy systems able to meet some or all of the RET liability at 2020;
b) Ensure that the tender/bidding process allows for any renewable technology, subject to technical requirements for connection and integration, but noting that it is considered likely that solar PV, possibly thermal could emerge as the most likely candidates; and
c) Leave the structure of its support (e.g. block grants, tariff support, loan guarantees) open to proponents in order to ensure that the most efficient and lowest cost outcome is achieved.
CoNtENts
1. EXECUtivE sUMMArY
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �1 2. MEssAGE froM thE ChAir
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �7 3. BACkGroUNd
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �8
3.1 Acronyms � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �8 3.2 Terms of reference � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �9 3.3 rATionAle And objecTives � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �9 3�3�1 Maximising NT investment IN MEETING THE RET ��������������������������������������������������������������������������������������������������������10 3�3�2 Managing and Meeting energy Demand ����������������������������������������������������������������������������������������������������������������������10 3�3�3 Increased Diversity and Security of Supply ������������������������������������������������������������������������������������������������������������������10 3�3�4 Industry Development ���������������������������������������������������������������������������������������������������������������������������������������������������11 3�3�5 Reducing Pollution associated with Stationary Energy �������������������������������������������������������������������������������������������������11 3�3�6 Positioning the NT in a Carbon Constrained Future �����������������������������������������������������������������������������������������������������11 3.4 reporT meThodology � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 11
4. Nt ENErGY MArkEt
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �13
4.1 mArkeT segmenTATion � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 13 4�1�1 Regulated Market ���������������������������������������������������������������������������������������������������������������������������������������������������������14 4�1�2 Unregulated Market: Remote Communities (IES) ���������������������������������������������������������������������������������������������������������15 4�1�3 Unregulated Market: Mine Sites �����������������������������������������������������������������������������������������������������������������������������������15 4.2 nT policy frAmework � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 17 4�2�1 Energy Policy ����������������������������������������������������������������������������������������������������������������������������������������������������������������17 4�2�2 Regulatory Framework �������������������������������������������������������������������������������������������������������������������������������������������������18 4�2�3 Community Service Obligations ������������������������������������������������������������������������������������������������������������������������������������18 4�2�4 Climate Change Policy ��������������������������������������������������������������������������������������������������������������������������������������������������20 4.3 exTernAl policy frAmework � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 20 4�3�1 Renewable Energy Target (RET) ������������������������������������������������������������������������������������������������������������������������������������20 4�3�2 CArbon Trading Scheme �����������������������������������������������������������������������������������������������������������������������������������������������21 4�3�3 Industry development/support Programs ���������������������������������������������������������������������������������������������������������������������22 4�3�3�1 ARENA �����������������������������������������������������������������������������������������������������������������������������������������������������������������������22 4.4 fuTure sTATe of The energy mArkeT in nT� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 23
5. rENEwABlE ENErGY rEs0UrCE ANd tEChNiCAl PotENtiAl
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �26
5.1 generAl overview� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 26 5.2 wind� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 27 5�2�1 Large Scale Wind Turbines (>500kW) ��������������������������������������������������������������������������������������������������������������������������28 5�2�2 Small-Scale Wind Turbines �������������������������������������������������������������������������������������������������������������������������������������������28 5.3 geoThermAl � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 29 5.4 freshwATer hydro � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 30 5.5 sAlTwATer hydro (TidAl, oceAn, oceAn ThermAl And wAve) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 31 5�5�1 Tidal ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������32 5�5�2 Ocean/ Ocean Thermal and Wave ��������������������������������������������������������������������������������������������������������������������������������32 5.6 biofuels (exTrAcTion of oils from plAnT mATTer) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 33 5.7 biomAss (gAsificATion of plAnT mATTer) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 34 5.8 solAr � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 35 5�8�1 Solar Thermal ���������������������������������������������������������������������������������������������������������������������������������������������������������������36 5�8�2 Solar PV ������������������������������������������������������������������������������������������������������������������������������������������������������������������������37
6. rENEwABlE ENErGY ECoNoMiC ANd MArkEt PotENtiAl
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �38
6.1 mArkeT poTenTiAl And vAriAbiliTy vs inTermiTTAncy � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 40 6.2 Technology economics � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 41 6�2�1 Renewable energy vs GAs fired generation� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 41 6�2�2 Renewable energy vs Diesel �����������������������������������������������������������������������������������������������������������������������������������������45 6.3 policy opTions � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 46 6�3�1 Do Nothing ��������������������������������������������������������������������������������������������������������������������������������������������������������������������47 6�3�2 Invest Now ��������������������������������������������������������������������������������������������������������������������������������������������������������������������48
7. CoNClUsioNs ANd rECoMMENdAtioNs
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �50
7.1 conclusions � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 50 7.2 recommendATions � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 53
8. APPENdiCiEs
� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �56
8.1 gAs energy infrAsTrucTure � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 56 8.2 economic modelling AssumpTions � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 57 8�2�1 Comparative Analysis of LCOE for various generation technologies Assumptions ������������������������������������������������������57 8�2�2 “Invest Now” Life cyle costs Assumption � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 58
2. MEssAGE froM thE ChAir
The Northern Territory Green Energy Taskforce was appointed by the Chief Minister to provide expert advice to assist the Northern Territory Government to support the development of renewable and low emission energy and products in the Northern Territory and to assist the Territory in meeting its goal of having 20% of its electricity demand met by renewable and low emission sources by 2020.
Through the Northern Territory Government’s Climate Change Policy , the Government committed to supporting the green energy industry, reducing greenhouse gas contributions and where possible meeting Power and Water Corporation’s (PWC) Renewable Energy Target (RET) obligations from local sources.
The Taskforce reported on its first term of reference in mid 2010. That report addressed replacing diesel as a primary source of power generation for remote towns and communities.
The Taskforce’s second report addresses the second term of reference which required the Taskforce to:
y prepare an evaluation of the relative merits, feasibility and likely costs of the potentially available renewable technologies to be used in the NT, including geothermal, solar, biomass and tidal.
I commend the Taskforce on their commitment and energy in working through a process that has delivered both the evaluation required of potentially available renewable technologies and a recommended pathway forward. Each of the Taskforce members has bought a high level of experience and skill to the work. The report represents a synthesis of their broad range of perspectives.
I would particularly like to recognise the significant work undertaken by Lyndon Frearson of CAT Projects.
I would also like to thank those staff in the Chief Minister’s Department that have provided ongoing support to the work of the Green Energy Taskforce. In particular, I would like to acknowledge the considerable effort behind development of the comprehensive background brief that formed the basis for much of this second report.
The Taskforce noted that there is considerable variation in the state of maturity and market readiness of renewable technologies. Geothermal has the significant long-term potential for the Northern Territory; however, it is relatively immature compared with solar PV which is relatively well- developed.
When considering the role of government, the Taskforce identified a number of policy areas that could be addressed to ensure available technologies are able to be implemented when ready.
These include addressing access to the sources of renewable energy, land tenure and land-use, and environmental assessments for renewable projects.
The Taskforce recommends that the government support market developments in renewable energy rather than direct financial intervention at this stage. This will require the pursuit of an active partnership with the Commonwealth Government on implementation of renewable energy solutions, maintaining a watching brief on technology developments and supporting the development of a comprehensive research and development strategy for renewable energy within the NT. The Government also has a key role in creating an effective and attractive investment environment for renewable energy.
I am pleased to deliver the Second Report of the Northern Territory Green Energy Taskforce.
Professor Christine Charles Chair
Northern Territory Green Energy Taskforce
3. BACkGroUNd
3.1 ACroNYMs
AC Alternating Current
AEMO Australian Energy Market Operator ARENA Australian Renewable Energy Agency ASI Australian Solar Institute
CCS Carbon Capture and Storage CDU Charles Darwin University
CEFC Clean Energy Finance Corporation COAG Council of Australian Governments
CSIRO Commonwealth Science and Industry Research Organisation CSO Community Service Obligation
EPCC Energy Policy and Climate Change Unit of the Department of Chief Minister ETS Emissions Trading Scheme
FIT Feed in Tariff
GETF Green Energy Taskforce LCOE Levelised Cost of Energy LGC Large Generation Certificates NEM National Electricity Market
NG Natural Gas
NTG Northern Territory Government
ORER Office of Renewable Energy Regulator PPA Power Purchase Agreement
PV Photo Voltaic
PWC Power Water Corporation
RE Renewable Energy
RET Renewable Energy Target
RRPGP Renewable Remote Power Generation Program SHW Solar Hot Water
SRES Small-scale Renewable Energy Scheme STC Small Technology Certificates
TOR Terms of Reference
WACC Weighted Average Cost of Capital
3.2 tErMs of rEfErENCE
The Government’s 2009 Climate Change Policy established a Green Energy Taskforce to provide expert advice on strategies, incentives and pathways to encourage the growth and funding of the renewable and low emissions energy industry in the Territory as well as assisting the Territory in meeting its goal of having 20% of its electricity demand met by renewable and low emission sources by 2020. Its Terms of Reference identified priorities for the Taskforce’s first two reports, as follows:
1. Develop a detailed proposal for substituting a large component of diesel generation with renewable and low emissions energy in remote communities, including financing and funding options; and
2. Prepare an evaluation of the relative merits, feasibility and likely costs of the potentially available renewable technologies to be used in the NT, including geothermal, solar, biomass and tidal.
The Taskforce delivered on the first of these objectives, through its report Roadmap to Renewable and Low Emission Energy in Remote Communities, delivered to the Chief Minister in July 2010.
The Roadmap recommends supplementing existing generation with the rollout of an additional 10 MW of solar PV, to significantly reduce reliance on diesel generators in remote communities. It also recommends designing, constructing and evaluating an advanced pilot renewable energy power station, tailored to the environmental, social, demand/supply and other variables characterising the community at the chosen site. This power station would be built using a Territory-developed methodology and modeling tool to identify the best combination of renewable energy and low emission options for application at other sites in the Territory
The current report addresses the second objective, which includes characterising Territory’s renewable energy resources (including mapping and costing) as a basic prerequisite to attracting investment.
3.3 rAtioNAlE ANd oBjECtivEs
While the terms of reference for the Green Energy Taskforce are quite succinct, the Taskforce determined that a thorough understanding of the rationale behind the establishment of the Taskforce was necessary in order to ensure that the recommendations and conclusions were framed within the correct context.
Consequently the Green Energy Taskforce, in consultation with the Energy Policy and Climate Change Unit of the Department of Chief Minister, undertook an industry roundtable consultation session in September of 2010. This led to the identification of a number of supporting justifications and objectives for the stated terms of reference. These were distilled into the following six priorities:
Minimising the negative revenue/investment flow impact of national legislative and regulatory frameworks, such as the RET legislation (i.e. maximising investment in the NT in meeting the RET);
y Managing and meeting energy demand
y Developing increased diversity and security of supply y Industry development
y Pollution Reduction
y Positioning the NT for a carbon constrained future
While the points noted above are not an explicit extension of the original Terms of Reference, they seek to recognise that the development of a comprehensive response to the Terms of Reference will necessarily require consideration of how the outcomes of the report may impact other policy measures or areas of converging interests within the NT. Consequently the report has not sought to specifically
respond to each of the justifications or objectives noted above in its recommendations. Rather, these priorities have served as an additional verification and validation measure for the various assumptions and conclusions that have been made within the report.
These points are expanded upon below.
3.3.1 MAXiMisiNG Nt iNvEstMENt iN MEEtiNG thE rEt
A consequence of nationally imposed legislative and regulatory frameworks such as the RET, particularly market based mechanisms, is that the least cost approach to compliance may result in negative cashflows from the NT. For example, it is currently cheaper to purchase LGCs from wind farms in Southern Australia than investing in renewable power infrastructure in the NT, with the implication that the purchase of the certificates acts as a net drain on revenue within the NT, rather than providing an investment stimulus for renewable energy activities within the NT.
Whilst, the Chief Minister has enunciated an explicit objective for the Territory to meet RET
obligations from NT sources, the existing regulatory regime prevents the government from mandating that this occur; therefore, a range of alternative market interventions may be required to ensure that RET obligations are able to be met from the NT.
3.3.2 MANAGiNG ANd MEEtiNG ENErGY dEMANd
The Northern Territory is currently faced with a ‘trifecta’ of challenges within the energy market:
y Underlying market prices for fuel, including diesel, bunker oil, kerosene and natural gas are either increasing or are forecast to increase (not withstanding existing long-term natural gas contracts in place with PWC);
y Per capita energy consumption is increasing; and
y The overall population is growing, with the population of the Top End alone forecast to increase by 70,000 by 2030.
Further to this, the growth of the off-grid energy sector will be a critical determinant in the support and management of remote communities, including the 20 Growth Towns, while access to reliable and efficient energy services is a key constraint to the development of new mining ventures, particularly within the North East Barkley Region.
The implication of these challenges is that managing energy demand and developing mechanisms to ensure adequate and efficient supplies are developed will become increasingly challenging in the years to come.
3.3.3 iNCrEAsEd divErsitY ANd sECUritY of sUPPlY The principal fuel sources within the NT are currently:
y Natural gas (regulated grids and some off-grid areas);
y Heavy fuel oil (Gove); and
y Diesel (remote communities, mine sites and pastoral stations).
Concurrently with this, the availability of reliable energy is a key driver of much activity within the NT and as a result, the NT, of all States and Territories within Australia, has an economy that is uniquely exposed to external variances in global liquid fuel prices, most particularly diesel.
In order to effectively manage this potential risk, strategies that either diversify the energy sources available, and/or more efficiently utilise existing fuel sources will become an increasing priority for policy makers within the NT.
3.3.4 iNdUstrY dEvEloPMENt
Given its relatively small population, the NT already has a significant local capacity within the renewable energy industry relative to other areas of Australia, particularly within the solar industry;
however with the significant investment that is occurring within other States presently, without active consideration of opportunities for further industry development, the existing skill base may decline in the face of competition from growing capacity elsewhere, particularly Queensland.
Further to this, the development and deployment of renewable energy supply has the potential to not only retain the existing skill base but to also deliver a nett increase in jobs. For example, the construction of large-scale solar thermal farms and geothermal power plants will require the development of a skilled labour force to construct and maintain such installations.
3.3.5 rEdUCiNG PollUtioN AssoCiAtEd with stAtioNArY ENErGY
Although the pollution associated with the consumption of natural gas is relatively low compared with other fuel sources for stationary energy such as brown coal, the particulate matter associated with diesel consumption is recognised to have more negative health consequences relative to that of natural gas. As a result, measures that reduce overall diesel or heavy fuel oil consumption may have an increased benefit for the health of communities surrounding the respective power stations.
3.3.6 PositioNiNG thE Nt iN A CArBoN CoNstrAiNEd fUtUrE
It is generally recognised that the prevailing international and national dialogue regarding energy will be increasingly framed within the context of climate change and more specifically carbon abatement. Additionally, various models indicate that increased consumption of oil, on a global level, may result in higher costs and constraints for fuels such as diesel. Consequently, there is significant merit in ensuring that there is active policy development within the framework of an energy market that is carbon constrained.
Further, the comparative advantages in solar, tidal and geothermal energy can provide a basis for R&D activity in the Territory. In the short term, collaboration with the entities such as the Australian Solar Institute and the Australian Centre for Renewable Energy could help deliver this activity to the Territory, positioning the NT to capitalise on technology advances and break-throughs as well as generating valuable intellectual property (IP).
The above factors could further lead to local industry development with a range of expertise that will be in demand both locally, interstate and overseas. This expertise would include the design, construction and maintenance of renewable energy facilities, with a specific focus on sparsely populated regions and remote communities.
3.4 rEPort MEthodoloGY
The Taskforce structured its approach to the Terms of Reference by undertaking four discrete bodies of work:
1. NT Energy Market: An analysis of the existing and potential future energy market and the underlying drivers and constraints within it, including the legislative and regulatory framework covering the NT energy market;
2. Renewable Energy Cost Trends: An assessment of the likely cost trends for a variety of renewable technologies relative to the existing energy generating technologies;
3. Technology Assessment: An analysis of the various renewable technologies, their
development status and trajectories, and their relative merits for application within the NT; and 4. Options: An assessment of policy options for direct market intervention.
The bodies of work noted above have been documented and summarised in the following sections.
While they have specifically been analysed within the context of the various perceived barriers noted previously, the summaries do not always directly reference each perceived barrier. Rather, each of the following sections of the report include break-out boxes noting potential barriers or opportunities for increasing the uptake of renewable energy within the NT.
International studies have identified six types of barriers to renewable energy: market factors;
financial and economic factors; institutional factors; technical factors; social and cultural factors;
and community engagement factors.
Independently, the Department of the Chief Minister and the Green Energy Taskforce hosted a forum and undertook industry surveys to further explore the nature of these challenges and identified nine types of perceived barriers, which are defined below as either primary or secondary barriers:
Primary Barriers
1. Legislative and Regulatory. These barriers include matters relating to compliance with regulatory requirements, e.g. number of contracts and legal agreements required to secure sustainable feedstock and income streams;
2. Market/Cost. These barriers relate to the commercial viability of renewable energy compared to other projects and technologies and access to multiple revenue streams. Renewable energy projects potentially have access to the electricity market, renewable energy certificate (REC) market, Green Power and carbon offset markets;
3. Technical Maturity. These barriers relate to the feasibility, maturity and ability to apply the technology; and
4. Resource Availability. The availability and prevalence of various renewable resources.
Secondary Barriers
1. Infrastructure. Distance and proximity to essential infrastructure comprises another obstacle, as do grid integration and the intermittent nature of some renewable energy generation;
2. Cultural. These barriers include perceptions of risk, and the ability of a renewable energy technology to meet needs and be consistent with the attitudes of the community;
3. Policy landscape. The stop-start nature of Government policy and program support comprise another obstacle to the development of renewable energy;
4. Skills. These barriers relate to the availability of skills to design, manufacture, develop and maintain a project; and
5. NT specific issues. Remoteness, huge differences in population density throughout the NT, and climate also comprise challenges to development of renewable energy in the NT
The Taskforce noted that the barriers detailed above had been identified as only having been perceived to exist and it was the purpose of this report to determine the extent to which the barriers actually existed or were merely masking a more significant underlying barrier or perceptions.
4. Nt ENErGY MArkEt
4.1 MArkEt sEGMENtAtioN
The NT energy market is similar to that of Western Australia in that it is dominated by a large number of smaller isolated grids and remote power systems with no external access to generation capacity or support through the National Energy Market; however, the impact of mining and remote Aboriginal communities within the NT is such that the unregulated portion of the energy market is disproportionately high relative to other states, including WA.
The NT energy market is comprised broadly of the following categories:
y Regulated2
»»Darwin Katherine Interconnected System (DKIS)
»»Tennant Creek
»»Alice Springs y Off-Grid
»»Gazetted townships (PWC)
»»Aboriginal Communities (Indigenous Essential Services P/L, IES) y Pastoral Properties
y Mines
Additionally there is a small market associated with road houses and Aboriginal Outstations.
The relative contributions from each of the sectors to the total stationary energy production within the NT can be seen below.
TOTAL GENERATION BY GRID CLASSIFICATION MW GWH
Darwin-Katherine Regulated Network (DKIS) 433.1 1544.9 45.9%
Tennant Creek Regulated Network 16.7 31.1 0.9%
Alice Springs Regulated Network 72.5 186.7 5.6%
Off Grid (PWC and IES) 90.8 125.6 3.7%
Pastoral Properties 31.0 241.2 7.2%
Mines 430.7 1,228.7 36.5%
Other 3.0 4.8 0.1%
Total Regulated 522 1,763 52.4%
Total UnRegulated 555 1,600 47.6%
Total Regulated and Unregulated system 1,078 3,363 100.0%
NT TOTAL BY FUEL - REG and UNREG MW GWH
NG 673.6 2160.5 64.2%
Diesel 197.0 874.5 26.0%
NG/Diesel/CNG 64.6 201.6 6.0%
Heavy Fuel Oil 105.0 101.5 3.0%
Renewable 8.2 21.5 0.64%
Kerosene 30.0 3.1 0.092%
Total Fossil Fuel 1078 3341 99.4%
Total Generation 1,078 3,363 100%
2 Within the specific context of this report the phrase “regulated markets” refers to the areas covered by the Network Access Code as described within the Utilities Commission Act (2000) Section 5(1) “The Network Access Code applies to the electricity networks prescribed by the Minister by notice in the Gazette.” This currently includes only those areas noted in the body of the document.
Table 41 – NT Generation Sources, 2010 Calendar Year (EPCC Unit, 2011)3 4 4.1.1 rEGUlAtEd MArkEt
The regulated market within the NT has historically been managed and overseen by the Power and Water Corporation (PWC), an NT Government owned corporation. PWC was initially established as the NT Power and Water Authority and operated as a public utility, providing services across the Northern Territory for over 50 years.
In 2001, consistent with nationwide trends associated with microeconomic reform, the Northern Territory embarked upon a long term strategy of opening up electricity markets within the NT to competition with a view to ensuring the most economically efficient supply arrangements were in place for the Territory.
During establishment of a strategy for energy competition, it was necessary for the NT Government to determine which areas of the Territory would be open regulated markets and which would be constrained by other operating principles. Key factors in this determination were:
y The size of the potential markets;
y The status of tenure of various communities; and
y The role of independent power producers in certain areas such as mines.
Consequently the regulated market, which represents nearly 50% of total energy consumptions within the NT, was defined as being within the gazetted townships and surrounding areas associated with the following grids:
y Darwin Katherine Interconnected System;
y Tennant Creek Grid;
y Alice Springs Grid; and
y Some remote gazetted townships such as Borroloola, Yulara and Eliot.
As noted within the table above, the predominant fuel source within the regulated market is natural gas (NG), although there is a marked increase in the role renewable energy in some portions of the regulated market, including5:
y 1MWp Tracking flat plate PV system at Uterne Solar Farm, Alice Springs305kWp Fixed flat plat PV system at Crowne Plaza Alice Springs
y 235kWp Tracking concentrated PV at Alice Springs Airport
y 190kWp Combination fixed and tracking PV at the Desert Knowledge Australia Solar Centre y Over 500 household PV systems in Alice Springs averaging 1.5kWp in size
y Over 20 commercial PV systems in Alice Springs averaging 10kWp in size y Over 200 household PV systems in Darwin averaging 1.2kWp in size y 1.1MW of landfill gas from Shoal Bay landfill
Specific detail on the natural gas infrastructure within the NT and the breakdown of the various generating can be found in Appendices 8.1 Gas Energy Infrastructure.
3 Due to variations in reporting mechanisms the table was developed from a variety of data sources utilising different reporting date baselines. Consequently some values have been prorated to provide a best estimate of the 2010 Calendar Year generation
4 The off grid market includes both regulated gazette townships operating on diesel, and unregulated communities managed by Indigenous Essential Services Pty Ltd on behalf of the Department of Local Government and Housing.
5 Alice Solar City and Power Water Corporation (2011)
4.1.2 UNrEGUlAtEd MArkEt: rEMotE CoMMUNitiEs (iEs)
Although the Power and Water Authority had traditionally had responsibility for provision of essential services within the NT’s 72 designated Aboriginal Communities, with the establishment of regulated markets within the NT, and the subsequent corporatisation of the Power and Water Authority into Power Water Corporation, responsibility for essential services was transferred to the NT Department of Housing, Local Government and Regional Services (DHLGRS).
With the establishment of Power and Water Corporation, all existing assets in the 72 remote communities were transferred to a non-profit entity, wholly owned by PWC, called Indigenous Essential Services Pty Ltd (IES).
DHLGRS subsequently contracts IES, on a rolling 5-year engagement, to provide essential services within remote communities. IES then sub-contracts PWC to operate and maintain the IES assets in remote communities in order to meet the contractual obligations associated with the DHLGRS contract.
The predominant fuel source in remote communities is diesel, although recently some communities have been connected to existing natural gas fired grids, and several have significant renewable energy systems integrated into them, including:
y Hermannsburg – Concentrating dishes y Lajamanu - Concentrating dishes y Yuendumu – Concentrating dishes y Bulman – Fixed flat plate
y Jilkminggan – Fixed flat Plate
Further development of renewable power systems is presently underway at:
y Ti Tree – High Penetration PV
y Lake Nash – High Penetration PV and Wind y Kalkarindji – High Penetration PV
4.1.3 UNrEGUlAtEd MArkEt: MiNE sitEs
The NT has 14 major mine sites with a further 11 sites being actively pursued and/or developed.
The predominant fuel sources for these mines are:
y Diesel;
y Heavy Fuel Oil (Bunker Oil); and y Natural Gas
The mine sites generated a combined total of 1,284GWh in 2010 with an installed generating base of 430MW, representing 37% of the energy generation/consumption within the NT6.
6 NT Generation Data Set (EPCC Unit, 2011)