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Australia – Directions Paper For 30-Year Electricity Strategy In Queensland.

18 January, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance

 

WHAT YOU NEED TO KNOW

 

The Queensland Government has called for submissions on proposals raised in its recently released directions paper for its 30-year electricity strategy, including:

 

  • the draft objectives proposed to underpin the Strategy; and
  • the potential means to transition the current electricity industry to an optimal industry.

 

WHAT YOU NEED TO DO

 

To be involved in the shaping of the Government’s Strategy, the proposals set out in the directions paper should be reviewed and submissions provided to the Department of Energy and Water Supply by 5pm on 25 January 2013. The Queensland Government is establishing a 30-year plan for electricity strategy in Queensland (“Strategy“). Essential to the value and relevance of the Strategy is effective engagement with industry stakeholders. To this end, the Government has released its directions paper which serves to:

 

  • delineate the process that will be adopted for developing the Strategy;
  • propose draft objectives to be adopted in the immediate, medium and long term; and
  • detail the scope and methodology for the strategy development process.

 

The directions paper is publically available from the Department of Energy and Water Supply here. The directions paper details key issues on which the Government is seeking submissions as well as providing a snapshot of the recent history and current state of the Queensland electricity sector.

 

This article sets out at a high level the key proposals that have been outlined in the directions paper and some observations relevant to these key proposals. We expect these proposals to form the basis for any discussions on or submissions made by electricity industry stakeholders in relation to the directions paper.

 

Development of the 30-year electricity strategy

 

The Strategy is proposed to be developed in three stages. The first stage is the issue of the directions paper, which should lead to engagement with key industry stakeholders. Stage two will occur in the first half of 2013 and will involve the issue of a discussion paper which seeks further input on the Government’s proposal. The third and final stage will see the release of the final Strategy in the second half of 2013.

 

Draft objectives

 

To implement its Strategy, the Government has sought to establish short term (2012/13 to 2013/14), medium term (2014/15 to 2018/19) and long term (2019/20 to 2041/42) objectives.

 

The short-term objectives are to address immediate costs pressures on electricity prices and are proposed to include ensuring cost effectiveness for both customers and the Government, and ensuring the viability, sustainability and competitiveness of the electricity industry.

 

The Government has outlined the following as potential medium-term and long-term objectives, though at this stage, these objectives are not final. However, the final objectives will influence the content of the Strategy:

 

Customer  Market  Government
Encourage equitable access to secure, reliable, cost-effective and sustainable electricity supply for Queenslanders to meet their economic and lifestyle requirements Facilitate a competitive market that encourages innovation to drive greater efficiencies Support customers by ensuring adequate protections are in place, while providing cost-effective, equitable, targeted concession arrangements
Empower the customer with greater control, choice and cost outcomes Optimise private sector participation and investment in the sector over the long term Provide a stable regulatory and policy framework that minimises unnecessary market intervention
Encourage environmental responsibility to mitigate
adverse effects from the electricity supply sector

 

It is important that these objectives be expanded to address the various concerns of key stakeholders in the Queensland electricity sector as well as to clarify the Government’s position in relation to the recently released Commonwealth Government energy policy.

 

Optimal future electricity industry and required transition

 

The Government has also outlined what it considers to be the key features of the current electricity sector. Complementing this are proposed optimal future positions of these current key features of the electricity sector and possible means of transition to these optimal future positions.

 

Current state of electricity industry Transitional method Optimal future position
Customer
Concerns regarding price rises and limited understanding/ control over these concerns Education, engagement and empowerment Stable and cost-effective electricity supply
Limited product choice or ability to control consumption or prices Efficient regulatory frameworks Flexible and transparent pricing that better reflect the costs imposed
Unsustainable electricity prices may impact Queensland’s economic growth Cost competitive pricing Electricity supply that is able to support future State growth
Market
Ineffective use of assets resulting in falling productivity Effective price signals and incentives Price signals and incentives to maximise use of assets and drive efficiencies
Policy and regulatory uncertainty and difficulties accessing capital Stable policy and regulatory environment Stable policy and market environment encouraging private sector investment
Strong reliance on fossil fuels due to non-diversified generation plants Supportive regulatory frameworks Electricity generation source mix flexibility in response to energy needs
Government
Shortcomings in providing equitable access to customers suffering hardship Target support frameworks Sustainable and equitable support measures for customers in need
Complex regulation across both Federal and State jurisdictions A clear role for the both the Federal and State government Effective regulation absent of unnecessary market intervention
Poor infrastructure planning, including overbuilding of network assets Effective planning and consultation frameworks Planning processes which avoid unnecessary asset development

 

We agree with the approach set out in the direction paper but also note the importance of developing a concrete view of what the Government and key stakeholders want the electricity sector to look like in 30 years.

 

Comparison with Federal Energy Whitepaper

 

The Government’s attitude to certain key issues in relation to the electricity market raised in the Commonwealth Government’s Energy White Paper are not addressed in the directions paper. This includes the Government’s position on:

 

  • whether there is an intention to deregulate retail prices (and the approaches that the Government is evaluating to facilitate this, such as time-of-use metering and the implementation of the National Energy Customer Framework);
  • what, if any, level of Government ownership of electricity assets will continue in the medium to long term in the Queensland electricity sector; and 
  • what plans the Government has to contribute to regional, national and global energy security.

 

Conclusion

 

The directions paper is an important phase in the development of the Strategy and will invariably shape both the discussion paper and the Strategy itself. We note however, that there are numerous issues that the Government will need to determine its position on in order for the Strategy to be effectively formulated and consistent with developments in both Queensland and Australia.

 

Submissions on the directions paper need to be provided to the Department of Energy and Water Supply prior to the deadline of 5pm, Friday, 25 January 2013. We appreciate that submissions may involve commercial and confidentiality issues.  

 

 

 

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