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Good morning ladies and gentlemen and let me begin by acknowledging the traditional owners of the land that we meet upon today.
May I also acknowledge my fellow presenters, and thank CEDA for organising this event and inviting my participation on behalf of the Queensland Resources Council.
The QRC is the peak representative body for minerals and energy companies operating in Queensland, with a membership comprising explorers, miners, mineral processors, contractors, oil and gas producers and electricity generators.
Briefly, those industries translate into 20 per cent of Queensland’s state gross product, and they are responsible directly and indirectly for one in every eight jobs across the state.
The QRC is in a unique position when talk turns to energy, as our members include some of the state’s largest energy producers alongside some of the state’s largest energy consumers.
Among our energy producing members are the operators of coal and gas-fired power stations, coal seam gas producers and the developers of emerging technologies including underground coal gasification, oil shale and coal to liquid fuel processing.
In light of recent developments, I will have something specific to say about those industries later.
As Peter mentioned in his introduction, the QRC is a broad church and it is my hope that not too far down the track, our ranks will also be swelled by renewable energy generators.
In particular, we are looking forward to welcoming those who take advantage of the opportunity on offer via the construction of a high voltage transmission link between Townsville and Mount Isa, as outlined by John O’Brien.
The QRC’s vision for a renewable energy corridor stretching across the north of the state is bold but achievable with forward-looking political commitment.
Interconnection with the National Electricity Market would not only support the development of one of the world’s great minerals provinces but also link east coast markets with multiple energy resources including wind, solar thermal, geothermal, bagasse, biofuels, coal seam gas and shale oil.
It should be clear from my comments that the QRC does not play favourites or seek to obtain advantage for one industry or commodity over another.
We take a holistic approach to sector issues and inspiration from the maxim of ‘strength through unity’.
Such unity was well illustrated during the campaign against the Resource Super Profits Tax and the subsequently negotiated tax reform package that the Gillard Government proposes to implement if re-elected on 21 August.
The Prime Minister has reiterated that the Minerals Resource Rent Tax will be implemented in the form in which it has been outlined, notwithstanding an election preference deal with the Greens.
The Prime Minister has also reportedly rejected a carbon tax in the next term of a Gillard Government, while Opposition Leader Tony Abbott, has ruled out such an impost altogether. 1
The electorate is reportedly anxious to hear what a Gillard Government’s climate change policy would entail, and I imagine it would be risky politics going into a nationally televised television debate next Sunday without one.
Not even MasterChef is going to deflect questioning on climate change.
Stepping away from the election campaign, I would venture to suggest that there is broad consensus emerging for a clear, predictable and long-term carbon price signal.
The QRC believes this will in turn provide clear, predictable and long-term incentives to invest in low emission technologies and abatement measures.
However, it is also evident that a carbon price alone – delivered via a tax or some form of market-based trading scheme – is unlikely in the early phase to be a sufficient policy response to tackle the array of national, sectoral and technology circumstances and challenges.
A suite of renewable and non-renewable energy sources will be required to meet our significant future domestic and global energy requirements and to lower greenhouse gas emissions.
Considered energy research and forecasting by organisations including the International Energy Agency and our own CSIRO have concurred that fossil fuels will continue to play a major role in energy production for decades to come.
Over the next 20 years, global electricity demand is forecast to more than double with the large bulk of that growth occurring in non-OECD countries. After all an estimated 1.6 billion people on this earth do not yet have access to electricity.
The International Energy Agency estimates that by 2030, coal will still account for 30 per cent of global energy demand.
It is a simple reality that coal is the most abundant fuel on earth and in terms of its affordability and reliability, it will prevail as an energy fuel of choice, particularly in developing countries such as China and India, which have considerably larger coal resources than Australia.
In Australia, a broad market mechanism via a carbon price would drive an efficient allocation of resources and the necessary energy profile to achieve broadly agreed and reasonable climate targets at least cost.
However, it can’t work alone. Federal, state and territory governments have a number of policies in place to encourage greater renewable energy generation.
The Federal Government Renewable Energy Target of 20 per cent by 2020 represents around 45,000 Gigawatt hours of energy production based on current consumption.
The target’s dual policy objectives of renewable industry development as well as greenhouse gas abatement are unlikely to favour Queensland.
Indeed, an Access Economics report for the Clean Energy Council released last year suggests that even under the most favourable policy settings, Queensland would experience a net negative employment impact as new investment is literally blown towards the south of the continent.
As a very large consumer of energy, the industries represented by the QRC have a significant interest in energy policy to ensure ongoing access to reliable and affordable energy. From an Australian exporter’s viewpoint, reliable and affordable energy is an important source of competitive advantage in global markets.
The vast majority of resource companies are price takers in increasingly competitive global resource markets and international competitiveness can be lost overnight when costs increase.
‘Investment leakage’ is the jargon used when industrial activity and associated socio-economic benefits migrate to jurisdictions with lower cost and reliable supplies of inputs such as energy.
It is a significant but avoidable risk. The QRC has serious reservations that the Renewable Energy Target will encourage the deployment of ‘next-generation’ renewable energy technologies.
Based on current assumptions, wind generation offers the most significant potential for Queensland with the state government estimating that if Queensland were to obtain a pro-rated share of the national target, wind capacity could grow from 12 to 750 Megawatts by 2020.
However, it is also the case based on current assumptions that wind will be two and a half times more expensive than open cycle gas turbine generation.
Our view is that while federal initiatives such as solar flagships, the Renewable Energy Fund, Renewable Australia and the geothermal drilling fund are all worthwhile, a significantly expanded, publicly-funded research and development effort is needed across the range of energy fuel options.
A renewable energy target scheme will provide a very large quantity of mainly non-peak and non-baseload power at very high cost, and with very little incentive for suppliers to push those costs down.
An explicit Queensland state target for renewable generation runs the risk of creating additional distortions in resource allocation that may drive costs up even further.
Now you know what we don’t like, what’s on the other side of the coin?
The QRC supports three main policy pillars to drive a comprehensive and measured transition to a low emissions global economy:
First – a global agreement for greenhouse gas emission abatement that includes emissions reduction commitments from all major emitting nations.
Second – market-based policy measures that promote the abatement of greenhouse gas emissions at the lowest cost, while minimising adverse social and economic impacts, including the competitiveness of our export industries.
And third – substantial new government and industry investment in a broad range of low carbon technologies and adaptation measures.
I am wondering how out of step this position sounds compared with a recent commentary from the International Energy Agency – and thank you to our conference chairman Keith Orchison in bringing it to our attention in his Business Spectator column.
Quoting the Agency: ‘While policies such as carbon trading are likely to be an important driver of change, they are not necessarily the most effective way to deliver short-term investment in the more costly technologies that have longer-term emissions reduction benefits. Moreover, a truly global carbon market is likely to be many years away.’
Keith goes on to say that from the IEA perspective – one shared by, I might add, an increasing number of more pragmatic environmental organisations – that working energy efficiency much harder than we have before offers an important new ‘fuel’ for the future.
From my own recent experience, Queensland – indeed Australia as a whole – should be taking a bigger leaf out of British Columbia's book in Canada.
That provincial government has stipulated that half the growth in electricity load to 2020 must be satisfied by energy efficiency and conservation. This approach and the target have won the support of experts in both government and non-government sectors.
Achieving the target means tough new building codes for houses and commercial buildings, incentives to throw out energy-inefficient appliances, rebates for efficient lighting, funding for ‘energy managers’ to work with large commercial and industrial users of electricity and pricing that encourages electricity conservation.
These are low-cost options to reduce actual consumption, not dramatically force up the price of one of the most politically sensitive basic necessities of life in Australia.
In the resources sector, energy efficiency and conservation goes straight to the bottom line. Since we started canvassing the efforts of QRC members just a couple of years ago as a contribution to Earth Hour observances, they have reported energy savings equivalent to the electricity used annually by more than 700,000 households.
Let’s hope during the federal election campaign that there’s some time devoted to a conversation about energy security.
Less than five years from now, Australia’s annual import bill for liquid fuels is forecast to be around $30 billion a year. On current figures, that’s equivalent to wiping the entire value of our agricultural exports off the balance of payments ledger.
For reasons linked to the demise of the Carbon Pollution Reduction Scheme in 2009, work has stopped on the federal government’s energy white paper. It’s a luxury we can’t afford. Liquid fuels may be a luxury we can’t continue to import let alone afford in five years.
I raise this point in the context of local politics and what we can legitimately call Queensland’s Energy Supermarket.
If you work on the basis that this state has at least two centuries worth of coal and gas reserves along with an estimated 135 million pounds of uranium in the ground – that’s a couple of supermarket aisles filled immediately.
And you can add to that inventory, demonstrated oil shale resources of 36.7 billion barrels. To put that figure into perspective, Queensland's oil shale reserves are more than Nigeria's conventional oil reserves, and Nigeria has the tenth largest reserves in the world.
Unfortunately our state government has form when it comes to trying to turn our energy supermarket into a 7/11 convenience store in which coal and gas are tolerated, but not much else. Where’s my evidence?
First, back in 2007 we had Queensland’s refusal to adopt federal Labor’s pro-uranium mining policy, surely a tribute to retro- politics worthy of the platform shoes and flared trousers of the 1970s. Across the border in South Australia another Labor Government has been happily approving new uranium mines.
This was followed in August 2008 by the sterilisation of a Bass Strait-sized shale oil resource south of Proserpine through the imposition of a 20-year moratorium on any development. It’s difficult to imagine that global energy demand or the nation’s energy security was raised in the context of these decisions – but they have certainly elevated the precautionary principle to dizzy new heights.
Let me remind you that less than five years from now, our balance of payments will be taking an annual hit of $30 billion a year and we are yet to see a train, truck or tractor that runs on batteries.
We have to do something about that. It will not go away if we shut our eyes and there is no evidence of anyone from another planet arriving to help us. We have to get over the notion that it is either beyond our capabilities or not our responsibility to foster and develop new energy technologies.
Despite extreme pressure from conservationists, former Minister for Mines and Energy Geoff Wilson convinced state cabinet back in February 2009 to give the underground coal gasification sector a chance to demonstrate – through three tightly-regulated trials – that it had a viable future.
There were always going to be setbacks and hurdles to overcome, such as we’ve seen recently with an underground coal gasification pilot plant at Kingaroy; but does that mean we pull down the shutters and wait for the inevitable energy crisis?
Do we let the hysteria and misinformation, the timidity of certain politicians and regulators prevail? Or do we adopt the mature and balanced approach displayed in recent days by the current Minister for Natural Resources, Mines and Energy, Stephen Robertson.
There’s a minister who has had to handle the ‘shroud-waving’ that typifies debates about our health system. He seems up to the job of making fair and balanced judgements when there are such setbacks.
We are a rich nation blessed with a wealth of natural resources but I do fear that we are increasingly prepared to sacrifice energy security on the altar of short-term green politics rather than face up to the challenges and opportunities staring us in the face.
I am convinced there is a huge opportunity in Queensland for an industry based on converting coal to liquid fuels. Ambre Energy has a Darling Downs project in the planning stages which would supply 20 per cent of Queensland’s unleaded petrol needs, and I fully expect there will be other like-minded projects to emerge in coming months.
Wait for the firestorm of opposition from green groups who will not offer a single alternative to the country racking up that $30 billion annual fuel import bill.
Where will our governments stand? Will they wilt as they have on shale oil and uranium – and as some would do on underground coal gasification – or will they show the resolve demonstrated in support of coal, coal seam gas and LNG?
We are the world’s largest exporter of coal, a major exporter of LNG – soon to become much bigger – and we rely on fossil fuels for over 93% of our electricity.
It therefore should go without saying that it is in Australia’s long-term strategic interest to support the development and global deployment of carbon capture and storage technologies for low-emission electricity production using coal and gas.
Those are the facts of the matter. The ball is now in the court of our state and federal governments to explain to the electorate that fossil fuels will remain an important part of the energy mix for years to come.
Those fuels need to be supported by low-emission power production technologies and renewables in the interests of sustainable development. This is a national conversation we should be having right now but to date have been denied by timid political leadership and resort to glib sloganeering.
I am far from confident that we will have these issues discussed during the current Federal election campaign, but they cannot be avoided by the incoming federal government, nor by our state political leaders.
I hope that I have ‘belled enough cats’ to stimulate some interesting discussion for the Q & A session to follow. |
