On Thursday 22 August, Andrew Barger, Policy Director at QRC, Andrew Bills, CEO of CS Energy, and Warwick King, CEO of Australia Pacific LNG, spoke at a QFI Sandwich Workshop about the future of Queensland’s energy consumption and production.
Andrew Barger began the discussion by referring to our current utilisation of natural resources as an “embarrassment of opportunity” and highlighting the need to remove “messy partial energy policies working at cross purposes”. It was clear from the start that the panel saw fossil fuels at the centre of Queensland’s long-term economic outlook, at least until mid-century. Accordingly, the importance of policy certainty, especially with regard to the long-term transition toward cleaner energy sources, was reiterated by all three speakers on different occasions.
Despite acknowledging that leading energy firms have started to include renewable energy sources in their portfolios, all three speakers believed that fossil fuels would maintain its place in the world’s energy supply in the foreseeable future. AP LNG’s King was particularly strong on this point, encouraging all future policy to be constructed with an “open mindset” – to say that all energy sources should be considered when moving forward.
CS Energy’s Bills mentioned that for the last two-weeks CS Energy had been paid negative prices during the day. Bills attributed the low electricity spot prices to two factors: the pleasant temperatures Brisbane has been enjoying recently, getting people out of the house, and the impact of renewables, which have recently reached a 44% share of the electricity grid input at certain times of the day.
The biggest problem for firms in the energy sector right now, Bills explained, is being able to respond to changes in energy demand in such a way that maximises profitability while still ensuring that energy would “be there when called upon.” Here, Bills joked about “the average bloke’s disregard for energy until he couldn’t watch The Bachelor before bed”. To address this issue, CS Energy has been ramping up production during times of peak demand. But coal mining infrastructure is poorly suited to such changes in production speeds because the operator must shoulder considerable start-up and shut-down costs (See costs) as well as the risk of potentially damaging power generation equipment (See damage). As Matthew Warren stated in his book, Black Out,
Coal generators are designed to go on and stay on. They can idle up and down within their operating range, but once they are operating, they need to stay on.
– page 98
Bills mentioned that a long-term solution could be found in the advancements of battery capacities.
Another central topic of the panel’s discussion was the importance of a social license for the energy and resources industry. All three speakers were keenly aware of how fundamental a positive social license is for business, and the two CEOs were open about their allocation of resources toward the development of positive social images. One point that Barger and King spoke at length about was how fossil fuel projects are typically accepted with open arms by those who live in regional communities near the project, but so strongly rejected by those in urban centres. Barger explained that, while people in regional communities view mining as a form of employment and economic stimulus, people in urban communities often disregard its economic benefits. Instead, many urban dwellers stress the importance of environmental preservation and rehabilitation, innovation, applications of cutting edge technology and providing regional educational and training opportunities.
The speakers also made points about how social licenses could be more effectively cultivated within urban areas, acknowledging how leading industry players are now actively engaging in topics of social importance and offering their opinion in public debates. Barger mentioned BHP and Rio Tinto’s recent endorsement of the Uluru Statement as an example of leading energy organisations trying to reconcile with the public.
The event ended on a high note with the panellists agreeing that Queensland could well be considered as the energy hub of Australia and of South-East Asia. Despite recognising Queensland’s fortunate access to high-quality natural resources and geographic proximity to many emerging economies who are hungry for our fossil fuels, the panel did flag a few potential inhibitors for the development of Queensland’s energy sector and the broader economy. Namely, the negative implications of bad policy, poor regulation, slow strategy implementation, and negative social branding were discussed.
In summary, it looks like our energy leaders are generally optimistic about the outlook for fossil fuels and their role in the Queensland economy.
This article was prepared by Ben Scott, Research Assistant, and Gene Tunny, Director, of Adept Economics. Please get in touch with any questions or comments to ben.scott@adepteconomics.com.au.