Energy

Energy MINISTERIAL BRIEFING NOTE

ORGANISATION

DELEGATION CONTACT

DELEGATES ATTENDING

DELEGATE ISSUES Cairns TNQ Convoy to CapitalQ

Advance Cairns, Tourism Tropical North Queensland and Cairns Chamber of Commerce are leading the region’s largest ever business delegation to Brisbane. The delegation includes more than 50 business leaders over a two-day period (February 18-19), representing 12 key business sectors to meet with State MPs and attend the Speaker’s Cocktail Reception.

Further information: Nick Trompf, Executive Chairman Advance Cairns E: nicktrompf@advancecairns.com | M: 0412 786 719

Energy:

Dr Allan Dale

1. Dr Allan Dale, Professor of Tropical Regional Development James Cook University 2. James Harding, CEO Genex Power 3. Mike Barry, CEO MSF Sugar 4. Leo Ward, Managing Director Power & Data Support Services

Attached are bios on each delegate.

Energy issues to discuss:

• Strategic Energy Sector Investment Framework

Attached are briefing papers on each issue.

WEBSITE LINKS

ATTACHMENTS • www.advancecairns.com • https://www.facebook.com/AdvanceCairns/

• Attendee biographies • Briefing papers

DR ALLAN DALE PROFESSOR OF TROPICAL REGIONAL DEVELOPMENT JAMES COOK U NIVERSITY

Allan is a Professor of Tropical Regional Development at The Cairns Institute, James Cook University. He has a strong interest in integrated governance, with a particular focus across the tropical world, northern Australia and the Great Barrier Reef.

He has both extensive research and policy expertise in building strong governance systems, but particularly in regional, rural and social development and natural resource management.

Allan was previously the Chair of RDA FNQ&TS, CEO of Terrain NRM and before that was responsible for natural resource policy in Queensland. He is also now the Chief Scientist for the Cooperative Research Centre for Developing Northern Australia.

Allan has a long research background in analysing complex and multi-level governance system and is an Honorary Professorial Research Fellow with Charles Darwin University’s Northern Institute.

J AMES HARDING CEO GENE X POWER

James has 30 years’ experience in the international project business, having been involved with the development, financing and implementation of major capital projects around the world. Prior to joining Genex, James was a Director and Head of Business Development at Abengoa Solar Power Australia, a world leader in commercial solar thermal energy and photovoltaic technology.

He has previously worked in Australia, Europe and Asia, as General Manager Renewables with IPS Australia and MAN Ferrostaal (part of MAN AG), with the German utility RWE as Regional Director for development projects in South-East Asia, and in a variety of business development and management roles with the Kloeckner Group. He started his career in the project and export financing division of Kleinwort Benson, the UK merchant bank.

MIKE BARRY CEO MSF SUGAR

Mike was appointed to the position of CEO in February 2008. Before he joined MSF Sugar, Mike was previously managing director of the private equity-owned Hudson Building Supplies, one of Australia’s largest building supply companies.

For the ten years prior to holding that position, Mr Barry held a number of senior management roles within Boral Limited, the most recent being Regional General Manager for Boral’s Construction Materials business in Western Australia and South Australia, where he had responsibility for the company’s concrete, quarries, transport, pre-cast concrete, asphalt and mining activities in those regions.

LEO WARD MANAGING DIRECTOR POWER & DATA SUPPORT SERVICES

Leo Ward is an Electrical Contractor who grew up in Brisbane until moving to Cairns in 1989. He is currently a councillor on the Master Electricians Australia Board as well as being a Life Member and Alumni of MEA.

In this industry, Leo has over 30years experience in the Cairns region and overall 45years of electrical trade experience. He started his own business Power & Data Support Services in 2003 which specialises in all critical power supply systems including UPS, generator power systems, and FLIR thermal imaging inspections.

Further development opportunities in alternate power solutions with sustainability in solar systems is another project with his new company, ALT Solar.

Leo also owns and operates an agricultural business on a property that has been a part of his family since 1874, with breeding Wagyu, Droughtmaster and Shorthorn livestock as part of a developing program.

COUNCIL: ALL TNQ STATE ELECTORATE: CAIRNS, BARRON RIVER, COOK, HILL FEDERAL ELECTORATES: KENNEDY INDUSTRY DEVELOPMENT

STRATEGIC ENERGY SECTOR FRAMEWORK

BRIEFING NOTE SUMMARY

• Electricity prices are unsustainably high in TNQ and restrict economic growth opportunities.

• The TNQ energy sector is defined by three distinct energy markets: (1) High Demand Fringe of Grid (Cairns); (2) Fringe of Fringe of Grid (Rural Towns/Properties across TNQ); and (3) Off-Grid (Remote Towns/ Properties).

• Surveys indicate 15% of regional Queensland businesses have already cut staff hours or reduced staff numbers in response to escalating electricity bills.

• A TNQ Energy Sector Strategic Investment Framework is proposed which requires shared State and Federal Government investment of approximately $1.5 million.

• A State Government CSO of $465 million is in place to support regional Queenslanders. However, a 5% headroom charge is still applied state-wide which removes the benefit of the CSO in TNQ.

THE ISSUE Tropical North Queensland (TNQ) faces unsustainably high electricity costs to the detriment of regional industries, small, medium and large enterprises, and domestic consumers. An estimated 75% of electricity consumed from the Queensland energy grid is by business customers and more than 97% of Queensland businesses are small business, making up 44% of jobs in the State. Given TNQ’s proximity to two world heritage listed assets, the Great Barrier Reef and the Wet Tropics Rainforest, the vision for the region is energy sector security, affordability and a seamless transition to reduced carbon emissions. At present, the region suffers significant energy security, affordability and transition challenges, while also providing opportunities such as energy export. Despite policy instability over the last decade, there have been major new investments in the region in wind, solar, biomass and hydro-power electricity generation. As more stable State and Federal energy policy frameworks emerge, to achieve energy security and affordability while also transitioning to reduced carbon emissions, TNQ will require a region-wide strategic investment framework and bilateral Government support.

BACKGROUND Current energy prices seriously impact business and domestic consumers, adding to cost-ofliving pressures and resulting in business and industry restricting their regional economic growth opportunities. While subsidies exist for domestic consumers, industry operates in a largely unsubsidised environment, making energy a critical influence in decisions to invest in TNQ. Across northern Queensland, inefficiencies in the electricity network drive the case for increased power generation. High transmission losses and fuel transport needs highlight the overwhelming costs of supplying power across the region and universally, the efficiency, reliability and security of TNQ’s energy supply needs to be assessed and improved. In response to escalating energy costs, the Queensland Electricity Users Network (QEUN) conducted a regional business survey in 2018 and identified that 15% of regional Queensland businesses had already cut staff hours or reduced staff numbers in response to escalating electricity bills. In addition, 30% would consider cutting staff if electricity prices rise again while conversely, 24% would consider expanding their business if electricity prices fell. The survey also identified five business sectors in regional Queensland greatly concerned about their ability to pay their power bills in full

and on time. All five represent critical industries to the TNQ economy which combined, represent 35% of jobs and contribute $3.8 billion toward GRP annually: 1. Accommodation and food service 2. Agriculture 3. Arts and recreation 4. Manufacturing 5. Retail trade As a predominantly tourism, services, resources and agricultural economy, TNQ stands firmly behind the need to: (i) ensure a strong reliable power strategy that delivers substantive energy security; (ii) identify new generation options that deliver improved energy affordability; and (iii) without compromising security and affordability, deliver significantly on reducing carbon intensity in energy production. However, preliminary work by the CSIRO Energy Flagship suggests that the TNQ energy sector is defined by three distinct energy markets: (1) High Demand Fringe of Grid (Cairns); (2) Fringe of Fringe of Grid (Rural Towns/Properties across TNQ); and (3) Off-Grid (Remote Towns/ Properties). The security, affordability and transition challenges and opportunities facing these three markets is diverse, requiring significantly different policy, budgetary and industry investment solutions. In addition, the impacts of disruptive technology, including the uptake of domestic new renewable sources, progress in battery storage technology, and advancements with electric car technology are certain to impact the way that energy is generated, stored, transmitted and consumed in the future. In response to escalating energy costs the State Government provides a Community Service Obligation (CSO) payment to Ergon Energy (Energy Queensland) to subsidise the cost of electricity for domestic and business users in regional Queensland. The purpose of the CSO is to ensure the Uniform Tariff Policy (UTP)

is implemented evenly across the State and in 2018-2019, the total CSO to support regional Queenslanders was $465 million. However, the 5% headroom charge introduced in 2013 to allow competition in south-east Queensland is applied state wide regardless of the fact that there is only one provider in regional Queensland. Coupled with high wholesale costs, this diminishes the benefit of the CSO in TNQ.

NEXT STEPS A decade of policy uncertainty has led to limited activity around the resolution of energy security issues. In addition, the complexity of electricity regulation is a barrier for community and industry engagement in energy reform discussion and delivery. Significant and targeted effort is needed to frame the investment opportunities that deliver security, affordability and carbon emission transition outcomes for regional Queensland. Therefore, through James Cook University’s Cairns Institute, it is proposed to develop an Energy Sector Strategic Investment Framework. This would aim to: • Better understand key security and affordability drivers in our region’s energy markets; • Explore and define the most viable new generation opportunities; • Determine the most critical policy refinement and public-sector investment pathways; • Explore the potential for new energy and energy services export opportunities in the region; • Engage with industry, community, Local Government, and other key regional stakeholders to scope and identify current and future energy options and aspirations; and • Develop a cohesive, bilaterally supported strategic pathway for regional investment.

RECOMMENDED INVESTMENT

Estimated project cost $1.5m

State Investment Federal Investment

2020-2021

$0.75m $0.75m

OUR RECOMMENDATION

• That in 2020-2021 the Queensland and Federal Governments support development of the TNQ Energy Sector Investment Framework through shared investment of approximately $1.5 million (based on 50:50 contributions).

• That to maintain the Uniform Tariff Policy and annual payment of the Community Service Obligation, the Queensland Government remove the 5% headroom requirement and reduce wholesale costs by 10%.