Tasmanian Energy Strategy

This is our submission to the Tasmanian Governments Draft Energy Strategy – issued in December for public comment.

Strategy coverIn welcoming the opportunity to provide comments on the draft Tasmanian Energy Strategy, Climate Tasmania acknowledges the government’s commitment to “restoring Tasmania’s energy advantage” and “positioning Tasmania for the future”. It is critical that Tasmania effectively positions itself to capitalise on the economic opportunities presented by the changing nature of global economies and Tasmania’s renewable energy resource advantages.

We therefore commend the draft Strategy’s consideration of the introduction of smart meters, support for electric vehicles and recognition of the need to adapt the market to reflect the increased availability of lower cost alternative energy sources and storage options.

We also commend the draft Strategy’s commitment to improved mapping and communication tools for strategic planning and to regularly review and monitor the Strategy against performance criteria. The recognition of the need to better integrate energy policy with planning processes is also welcome.

Despite these positive aspects, we are concerned that the draft Strategy misses a significant opportunity to strategically address the broad range of energy issues facing Tasmania. In many instances, while there is a broad recognition of opportunities, these are not reflected in the Actions outlined in s.4.3.7.

This submission briefly addresses three particular concerns with the draft Strategy:

1. The failure to effectively integrate climate change considerations;
2. Continued subsidisation or support for intensive industries and traditional energy networks;
3. The lack of a strategic approach to managing transport energy emissions.

These issues are addressed in more detail below.

Climate change considerations

Tasmania’s renewable energy advantage is unmatched in Australia or indeed around the world, with the possible exception of Iceland. Indeed, Iceland is capitalising strongly on its 100% renewable electricity supply (and cool climate) by attracting electricity (and value) intensive businesses such as major data centres.

In addition, Tasmania has an unparalleled opportunity to export renewable electricity to the mainland, displacing coal-fired generation and related greenhouse gas emissions there. We have seen in recent years that Basslink has been routinely constrained in its physical capacity to export electricity, resulting in opportunity costs and foregone benefits for the state, as well as missed opportunities to reduce Australia’s overall greenhouse gas emissions.

Further, and as discussed below under ‘Transport’, Tasmania has the opportunity to lead in the application of electric vehicles, displacing imported fossil fuels with clean and locally produced renewable electricity.

Another linkage is energy efficiency. By improving the efficiency of energy use in Tasmania – which is very low following decades of neglect of this key policy domain – then the volume of energy/water available to support a) new load in Tasmania or b) clean energy exports, is maximised. Yet in fact Tasmania has virtually no energy efficiency policy at all. This contrasts starkly with other States such as New South Wales (probably Australia’s leader at the moment), South Australia, Victoria and the ACT.

For all these reasons, climate change considerations, and the development of strategies to address these issues, should be integral to the Energy Strategy, as indeed it should be to all aspects of government policy. We call on the government to give priority to the development of a detailed Climate Strategy and set of abatement and mitigation measures, to inform the content of documents such as the draft Energy Strategy, and also to ensure that linkages such as the above are not overlooked.

As it stands, however, the current draft Strategy does not engage effectively with climate change issues, only noting that a Climate Strategy will be released for discussion later in 2015. We consider the separation of energy and climate policies to be counter-productive to the goal of “positioning Tasmania for the future”. It also blinds the Energy Strategy to very significant climate change related risks. We only have to recall that hydro storages fell to just 13% full in 2007-08, a level that placed the state at imminent risk of blackouts, with the very real prospect to damage to major industrials (MIs).

As the Minister will be aware, even modest disruptions to supply to major industrial customers (MIs) could put at risk their continued operation in the state and all of the associated jobs. We have already witnessed an 11% reduction in Hydro Tasmania’s sustainable yield due to long term rainfall reductions. The Climate Futures for Tasmania study projects declining rainfall over and yield into Hydro’s storages, including due to climate change induced effects on the spatial distribution of rainfall and intensity of rainfall events and hence increased spillage.

These climate change effects have material consequences for Tasmania’s energy security – no energy strategy can be considered fit-for-purpose without a detailed examination of their possible effects on energy system outcomes.

Further, we note that the draft Strategy focuses on demand growth and reducing energy costs, but without a detailed consideration of opportunities to reduce overall emissions, promote and facilitate the uptake of renewable energy options and to reduce reliance on non-renewable energy sources.

The draft Strategy does not provide any context in relation to Tasmania’s contribution to the national or international greenhouse gas emissions profile, or the broader imperative to work towards emissions reduction for a range of social, environmental and economic reasons. For example, the draft Strategy considers the interests of the Tasmanian community in the context of ensuring the viability of Hydro Tasmania, retention of major industrial operators and reducing energy prices, but fails to adequately consider the broader, long term public benefits of emission reductions (beyond electricity bill considerations).

Failure to integrate climate change considerations, or to clearly articulate links to climate change policy objectives, will compromise overall energy goals and the achievement of emission reduction targets set out in the Climate Change (State Action) Act 2008. We recommend delaying the further development of the draft Strategy until the Climate Strategy is finalised. We urge the government to review the draft Strategy in light of any Climate Strategy, rather than developing climate policy which is secondary to the Energy Strategy.

Subsidies and support for traditional energy sources

Climate Tasmania commends the Tasmanian government for its commitment to retaining the RET, and urges the government to continue to advocate for national policy settings that support development of renewable energy.

Subsidies

The discussion in s.4.3.1 acknowledges that major industrial operators receive, and will continue to receive, subsidies or capped pricing incentives in order to keep them in Tasmania. Climate Tasmania questions whether this is an appropriate strategy, particularly in view of the emphasis in other parts of the draft Strategy on the economic security of government GBEs. When taxpayer funds are expended on spending programs or tax incentives, or indeed when new regulations are development, extensive ‘business case’ analysis is required prior to approval. No less a standard should be applied when considering subsidising the operations of major corporations, many of whom are multinationals, in the state. Revenue foregone in this manner undermines the government’s ability to protect the interests of low-income energy users, or efforts to improve energy efficiency.

Tasmania should maintain its commitment to achieving 100% renewable energy and increase efforts to attract businesses that are willing to pay market rates for the competitive advantage of obtaining 100% of its energy needs from renewable sources.
Embedded energy

As recently reported by the CSIRO, photovoltaics (PVs) and batteries are predicted to be the lowest cost energy source for Australia by 2050. We refer you to Giles Parkinson’s report, commissioned by the former Tasmanian Climate Action Council, for a detailed commentary on the issues changing market conditions present for Tasmania (attached). This same outlook is confirmed by the Australian Government’s Australian Energy Technology Assessment prepared by the Bureau of Resource and Energy Economics.

Given the emphasis of the draft Strategy on reducing energy costs, we urge the government to ensure that government policies facilitate a rapid transition to domestic and larger scale PVs across Tasmania. However, at a number of points the draft Strategy indicates a lack of enthusiasm for “embedded generation, storage and demand side technologies”. For example, Actions 42 and 43 emphasise the need to “ameliorate negative impacts” on the value of government-owned energy businesses, rather than an active intention to facilitate the uptake of these technologies.

The draft Strategy discusses the spare network capacity that results from increased PVs, but does not articulate the potential this presents for excess capacity to be exported. The draft Strategy, along with the Climate Strategy, should give more detailed consideration to the opportunities presented by changes in the energy mix. Climate Tasmania would support the reintroduction of a robust feed-in tariff to facilitate the expansion of Tasmania’s renewable capacity to allow for net export.

In each of these examples, we are concerned that the government’s ownership of energy businesses risks to deflecting its focus away from the broader interests of the state and public interest of Tasmanians, and instead substitute it with the corporate interests of these businesses. They are not one and the same. We urge the government to place the wider community’s interests above those of government-owned businesses, and to ensure that these businesses are not the only or primary source of information and advice to government on energy policy and strategy matters. Their conflict of interest is clear, as is the Treasury’s.

Fuel-switching

The draft Strategy also encourages fuel-switching, failing to rule out exploitation of unconventional gases as an alternative fuel source. Climate Tasmania does not support the concept ‘transition fuels’, which are fossil fuels, and recommends that Tasmania’s renewable energy advantages should be actively developed rather than expanding investment in alternative fossil fuels. It is important to note that the primary component of these unconventional gases – methane – makes a substantially higher contribution to global warming than carbon dioxide.

Fugitive methane emissions during the extraction process present a risk to both the environment and the economy. Globally, even conservative bodies like the International Energy Agency have concluded that two thirds of existing reserves of coal, oil and gas will never be able to be burnt if we are to stabilise the climate. Giles Parkinson has previously addressed the economic risks associated with “stranded assets” when the ‘carbon bubble’ bursts.

Rather than support mining of ‘unconventional’ gas – a highly polluting and dangerous fossil fuel – the Government should do everything it can to retain and build on the environmental, clean-green image and economic advantages associated with the State’s renewable energy mix.

Research

The most powerful driver in the uptake of renewable energy options is the rapid growth in technology making these options more viable and more cost competitive. Tasmania has an excellent track record in developing technology through innovative research into renewable energy opportunities.

The Tasmanian government should further promote and support research and development for new technologies, innovative implementation of existing technologies, and promotion of local achievements by hosting international conferences and forums.

Climate Tasmania supports previous Tasmanian Renewable Energy Industry Development Board recommendations for a partnership agreement between the Tasmanian government and the University of Tasmania prioritising renewable energy and establishment of a Tasmanian Renewable Energy Institute to increase opportunities for industry, government and research institutes to contribute to the development of renewable technologies.

Tasmania also has an opportunity to encourage and facilitate training for tradespeople specialising in the design and installation of renewable technologies. Development of an accreditation programme that would allow tradespeople to promote themselves as “clean energy” specialists would further stimulate interest in renewable technologies and growth in employment.

Transport

Energy is too often equated exclusively with electricity, masking institutional and public awareness of the significant and growing role that liquid fuel energy plays in the Tasmanian economy. A key deficiency of the draft Strategy is therefore its almost total focus on stationary energy. This focus compromises a strategic approach to addressing the profound implications that transport emissions have for climate change mitigation and the significant expenses liquid fuels represent for both households and businesses.

The stated commitment to achieving 100% renewable energy by 2020 fails to recognise that over half of Tasmania’s energy needs relate to imported liquid fuels. When transport energy is factored in, less than 45% of Tasmania’s overall energy supply comes from renewable sources (hydro, wind, solar and firewood).

Tasmania’s real energy situation is revealed starkly by noting that the state consumes fairly equal proportions of electricity and liquid fuels, as shown in Fig 1, below.

Figure 1.
Figure 1

It is therefore critical that any effective Energy Strategy address both stationary and transport energy issues.

Climate Tasmania acknowledges (and commends) the discussion in the draft Strategy regarding electric vehicles. However, we urge the government to take a much broader view of opportunities to engage with transport energy issues.

Figure 2 shows how each of the two forms of energy impacts on the vast majority of Tasmanians and businesses.

Figure 2.
Figure 2

In relation to climate change mitigation, Climate Tasmania considers that the average Tasmanian citizen and business owner has greater ability to reduce their carbon emission by focusing on travel energy than on their electrical energy consumption.

Figure 3 shows that Tasmania is almost self-sufficient in meeting its electrical energy needs, much of which can be met from renewable sources. By contrast, 100% of our liquid fuel energy is imported, at great cost and none of it is renewable. It is significant that less than one third of Tasmania’s electrical energy is consumed by ordinary consumers. By contrast, over 70 percent of imported liquid fuels are consumed by cars and light vehicles.

Figure 3.

Figure 3

A consequence of this demand stratification is that typical Tasmanian households and businesses carry a higher cost burden for travel energy costs than they do for their electricity supply. Though this is noted in passing in the draft Strategy, this important fact is not taken into account in the draft Strategy itself.

The draft Strategy needs to address the neglected transport energy sector, and consider ways that transport energy needs can be met most efficiently, effectively and sustainably.

In addition to the environmental issues associated with climate change mitigation, it is imperative that the state government addresses potential economic and social welfare risks associated with transport issues. In particular, addressing Tasmania’s vulnerability to energy oil supply disruptions and price volatility requires a comprehensive, integrated response.

Climate Tasmania considers that there are many opportunities for the Energy Strategy to incorporate transport energy issues via infrastructure choices, public education, transport fee schedules, budget allocations and urban and regional planning issues. The creation of liveable cities and a focus on healthy living via active transport offer major scope for strategies that help to trigger fundamental changes in travel behaviours.

Further, electric vehicles also promise a strong synergy with Tasmania’s renewable electricity supply. Recent research in Australia (for example for Moreland Council in Victoria) shows a positive business case for replacing conventional light vehicles with electric vehicles. There is an important role for government – amongst others – in helping to reduce the ‘fear factor’ associated with any technical innovation, by adopting EVs in their own fleets (including GBEs); encouraging private fleets, local government fleets and private car hire companies to also integrate EVs into their fleets; and monitoring and publishing data on operational cost savings and related issues. We note that where ‘range anxiety’ is a consideration, plug-in hybrid EVs (PiHEVs) are available and increasing the vehicle of choice, at least pending further development of very high energy density batteries.

Climate Tasmania acknowledges the good work undertaken by the Tasmanian government, local governments and the community sector in progressively educating the community on opportunities to reduce energy consumption. This work should be replicated so that Tasmanian citizens, businesses and government agencies become much more aware of:

• their travel energy consumption; and
• opportunities to reduce costs and environmental impacts associated with transport energy.


[Climate Tasmania is a group of concerned professionals who have a diverse range of expertise, spanning scientific, legal, economic, health, social and policy aspects of climate change. Our objectives include engaging with business, government and the community regarding appropriate responses to the risks and opportunities presented by a changing climate.] 

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