Progress Report Tasmanian Energy Strategy Department of State Growth A Contents Energy supply challenges.................................................................................................................................. 2 Tasmanian Energy Security Taskforce........................................................................................................... 3 Keeping prices as low as possible.................................................................................................................. 3 Keeping energy affordable............................................................................................................................... 3 Driving investment and growth...................................................................................................................... 4 Case for a second Bass Strait interconnector............................................................................................ 4 Energy Strategy actions that have been completed to date.................................................................... 5 Progress on other Energy Strategy actions................................................................................................. 9 Copyright notice and disclaimer Copyright in this publication is owned by the Crown in Right of Tasmania, represented by the Department of State Growth. Information in this publication is intended for general information only and does not constitute professional advice and should not be relied upon as such. No representation or warranty is made as to the accuracy, reliability or completeness of any information in this publication. Readers should make their own enquiries and seek independent professional advice before acting on or relying upon any of the information provided. The Crown, its officers, employees and agents do not accept liability however arising, including liability for negligence, for any loss resulting from the use of or reliance upon information in this publication. Images used within this publication remain the property of the copyright holder. Images courtesy of the Tasmanian Government, Roger T Wong and Hydo Tasmania. © State of Tasmania July 2016 1 Energy supply challenges The Tasmanian Government released the Tasmanian Energy Strategy on 7 May 2015. Since the release of this Strategy, Tasmania has experienced one of the most significant and difficult energy security challenges in its history. This was a consequence of the combined impact of two extreme events – the record low rainfall over the spring/summer period and the first ever substantive outage of the Basslink cable. This experience has re-emphasised the importance of energy security in Tasmania. The Tasmanian Energy Strategy was developed to identify ways in which energy can used as a key economic driver and aims to restore energy as a competitive advantage for Tasmania by: • delivering affordable energy at competitive and predictable prices that are amongst the lowest in Australia; The Government responded to these challenges by implementing the Energy Supply Plan. This Plan ensured Tasmania’s energy needs were met through a range of actions and contingencies. It delivered a measured, prudent approach in response to the energy supply challenges and was designed to meet Tasmania’s ongoing energy requirements, even if extreme conditions had continued. • empowering customer choice; • ensuring an efficient energy sector that is customer focussed; • utilising energy to facilitate State growth; and • maximising Tasmania's renewable energy opportunities. The Tasmanian Energy Strategy outlines a comprehensive suite of 43 actions organised under three broad themes - making energy work for people; reducing the cost of delivering energy; and positioning Tasmania for the future. This update provides information on the progress of implementing these actions. Key elements of the Plan were the use of over 300 MW of gas generation, installation of over 220 MW of temporary diesel generation and commercially agreed major industrial load reductions in excess of 100 MW. The Plan was successfully implemented and achieved the Government’s four key objectives of: Responsibility for implementing the work program is divided between the Departments of State Growth, Premier and Cabinet and Treasury and Finance and the Government's three electricity businesses. • ensuring energy security for Tasmania; • avoiding forced power rationing; • protecting jobs and the economy; and • keeping power prices as low as possible. 2 Tasmanian Energy Security Taskforce Keeping prices as low as possible In response to these events, the Government has established the Tasmanian Energy Security Taskforce to undertake an independent energy security risk assessment for Tasmania. The Taskforce will provide advice back to Government on recommended steps to strengthen energy security for Tasmania. The Taskforce will consider the following aspects of energy security in its review: A key focus of the Government is to deliver affordable energy at competitive and predictable prices that are amongst the lowest in Australia. Consistent with Actions 21 and 22 of the Energy Strategy, our energy businesses are operating more efficiently, with operating cost-savings across the energy businesses of approximately $50 million per annum. The independent Tasmanian Economic Regulator has released the standing offer electricity prices for 2016-17 which represent an increase of 3.4 per cent on last year. This increase is less than recent price movements for electricity in other states such as 6 per cent in the ACT and up to 10 per cent in South Australia. • best practice water management including consideration of water requirements across a range of stakeholders; • Tasmania’s future load growth opportunities and risks and likely impact on projected energy supply and demand; Despite this recent increase, the regulated electricity price is still 2.4 per cent lower (in nominal terms) today than it was in early 2014. • the opportunity for further renewable energy development in Tasmania, including in wind, solar, biomass and other renewable technologies considered in the context of anticipated transition of the national electricity market and the potential for a second interconnector; Keeping energy affordable • likely developments in technology, such as battery storage and electric vehicles; While electricity prices are 2.4 per cent lower than they were in early 2014, electricity concessions have also increased by 5.4 per cent during the same period, assisting vulnerable customers who need support. • Tasmania’s future exposure to gas price risk; • the potential impact of climate change on energy security and supply; and • a review of energy security oversight arrangements. The Government is also focused on making energy more affordable through promoting energy efficiency. In 2015-16, the Government, in partnership with Aurora Energy through the Your Energy Support (YES) program, invested approximately $600 000 on supporting grants aligned to the NILS scheme that allowed concession customers to purchase energy efficiency appliances. The Energy Security Taskforce will deliver its final report to Government around mid-2017. 3 Case for a second Bass Strait interconnector This will continue in 2016-17 along with the $10 million Tasmanian Energy Efficiency Loan Scheme that will provide residential and small business customers interest free loans to purchase energy efficiency products such as heat pumps, solar hot water or solar panels to help improve and reduce energy use. Through 2015-16, the Government’s study into the preconditions for a second Bass Strait interconnector was completed (Action 35). This study has indicated that a second interconnector could provide significant value in the National Electricity Market (NEM) and help to promote further renewable energy development in Tasmania. A second interconnector also has the potential to play a significant role in transitioning the NEM to a low carbon emissions system. Driving investment and growth A key aspect of the Energy Strategy is utilising energy to facilitate economic growth through retaining and attracting industries and businesses in Tasmania. The Government has been engaged with major energy users in Tasmania to identify opportunities for growth and to secure their future in the State. Examples of this include: There is still much work to be done to evaluate whether this potential can be realised and to understand the broader benefits and costs for Tasmania and the NEM. This work will be aided by the significant and positive announcement of a joint Australian-Tasmanian Government feasibility study into a second interconnector, to be undertaken by the Hon Warwick Smith AM. • Bell Bay Aluminium looking at the potential to increase production by 10 per cent, supported by agreements with Hydro Tasmania and TasNetworks; The Tasmanian Government’s report is being provided to Warwick Smith to facilitate further progress on this study, which will feed into the Energy Security Taskforce’s review of Tasmania’s energy security. • Nyrstar investing $52 million in its Hobart smelter, facilitated by a loan guarantee from the Government; and • Norske Skog paper mill exploring a bio solvent demonstration plant to assist with securing its ongoing sustainability, through the provision of a Government grant. Utilising Tasmania’s renewable energy advantage to attract new industries, businesses and investment to Tasmania, has also included focussing on growing Information and Communication Technology (ICT) investment through the development of a Data Centre Action Strategy and promoting opportunities for high load energy industries in the Bell Bay region through a new industrial precinct prospectus. The Government has also actively promoted load growth opportunities through energy round tables, including one held in Beijing. 4 Further details on progress made against actions set out in the Tasmanian Energy Strategy are provided in the Tables below. Energy Strategy actions that have been completed to date No. Action Update of Progress Status 12 Implement programs aimed at reducing energy bills and improving comfort and health outcomes for vulnerable customers through improving the energy efficiency of their homes The Government has implemented the Save Home Energy Program to upgrade direct electric heaters to heat pumps in 100 public housing properties and install ceiling insulation in a further 50 properties. Tenants in these households will benefit from being warmer, healthier and more comfortable, while saving on their electricity bills. The Government and Aurora Energy continue to help vulnerable customers reduce their energy bills and improve energy efficiency through the Your Energy Support (YES) program and the NILS Energy Saver program. In the 2016-17 Budget the Government also announced the $10 million Tasmanian Energy Efficiency Loan Scheme to help households and small businesses purchase energy efficient appliances to help reduce their energy use and power bills. COMPLETE Undertake a pilot program to reduce energy costs for aged care facilities. The pilot program conducted energy audits on nine residential aged care facilities. These audits identified current energy usage, areas where efficiencies can be made and recommended actions to achieve energy efficiency and cost savings. The Government is now working with the aged care sector to identify how best to encourage and facilitate implementation of these recommendations across the sector. COMPLETE Explore options to simplify energy procurement arrangements for Major Industrial customers. The potential to simplify energy procurement arrangements through an alternative process was explored and tested with key stakeholders and peak bodies. It was concluded that such a move may be perceived to be anti-competitive, and as such no changes to current contracting options have been made. Ongoing monitoring of opportunities will continue. COMPLETE 15 16 5 Continuation of programs Ongoing followon activities Ongoing followon activities No. Action Update of Progress Status 21 Government-owned energy businesses will adopt 2014-15 Budget policies, as outlined in the Fiscal Strategy chapter of Budget Paper no. 1, for all Government owned businesses. During the 2014-15 corporate planning process, the Government wrote to each State-owned electricity business outlining its expectation that each Corporate Plan would be framed in the context of the Fiscal Strategy and related Government policies, including the Energy Strategy. Each Corporate Plan was submitted in this context. A similar process was followed for the 2015-16 corporate planning process and will be followed for subsequent planning periods. This has contributed to operating cost savings of approximately $50 million per annum across the energy businesses. Of note, there was 54 per cent reduction in international travel costs for Hydro Tasmania employees (non Entura client related travel) in 2014-15. COMPLETE 22 Government will work closely with the three electricity businesses to drive ongoing efficiency improvements. Targeted efficiency frameworks and measures, including cost, service and rates of return for each business will be established through the annual SCI process. The 2015-16 Statement of Corporate Intent (SCI) prepared by each of the energy businesses established financial and non-financial performance measures and targets aimed at improving business efficiency. These are published in the respective 2014-15 Annual Report for each business. Similar measures will be included in the SCI for subsequent planning periods. As indicated in action 21, this has contributed to operating cost savings of approximately $50 million per annum across the energy businesses. COMPLETE Review the current network planning and demand forecast arrangements and consider potential alternatives in an effort to ensure efficient network costs while ensuring reliability is not compromised. A review was undertaken to consider whether it was beneficial for the Australian Energy Market Operator (AEMO) to perform the functions of network planning in Tasmania, as is done in Victoria. The review concluded that there was likely to be little benefit with some risks and material cost involved, particularly given there is very little augmentation expenditure in the current regulatory period. Further consideration of AEMO’s involvement or other models will continue to be reviewed in the future. COMPLETE 25 6 Ongoing followon activities No. Action Update of Progress Status 27 Align transmission and distribution regulatory periods. The Australian Energy Regulator (AER) has approved the alignment of TasNetworks’ transmission and distribution regulatory periods from 1 July 2019. The benefit of this change is that TasNetworks will undertake a single combined process for its revenue determinations, rather than two separate processes. This will remove administrative duplication and improve TasNetworks’ efficiency for the benefit of its customers. COMPLETE 28 Develop accessible information on Tasmania’s electricity network which identifies areas of spare network capacity, for use as a planning tool by prospective developers. A network map has been included in TasNetworks’ Annual Planning Report 2016 to provide useful and relevant information to prospective parties on favourable areas of the network for load growth associated with new investment. TasNetworks has also provided information for a project being undertaken by the University of Technology in Sydney in partnership with the Australian Renewable Energy Agency which is developing an online tool indicating capacity across the National Electricity Market. COMPLETE 35 Identify the necessary preconditions for a second electricity interconnector across Bass Strait to be viable. The Department of State Growth, in collaboration with Hydro Tasmania, has completed a report that assesses the market conditions and necessary preconditions for a second Bass Strait interconnector. A separate joint Australian and Tasmanian Government feasibility study into a second Bass Strait interconnector is being undertaken by the Hon. Warwick Smith AM, with a preliminary report released in June. The State Growth report is being provided to Warwick Smith to facilitate further progress on this project. COMPLETE 7 No. Action Update of Progress Status 41 Design and implement a small-scale electric vehicle demonstration program The electric vehicles (EV) demonstration program was completed in 2015 and delivered: COMPLETE • an increased awareness of EV options for public and private sector fleet managers; • an assessment of the EVs currently available and suitable for fleet use; • business cases for 13 fleets; • trialing of demonstration vehicles by seven organisations; and • attractive sale and lease deals for participating fleets. As a result of the program, a number of EVs are being rolled out in various fleets across the state, including TasNetworks and Hydro Tasmania. More work will proceed on the EV strategy under the Government’s Climate Change Action Plan, and the role of EVs in the future energy mix will be considered by the Energy Security Taskforce. This will also deliver Action 42 of the strategy in 2016-17. 8 Ongoing followon activities Progress on other Energy Strategy actions No. Indicative FY Quarter for Completion Action Update of Progress 1 Monitor the level of competition in the small customer segment of the Tasmanian electricity retail market and where necessary facilitate further development of a competitive market. The Government continues to monitor the market and engage with retailers to understand the barriers to entry in the Tasmanian market. Ongoing 2 Improve customer information to assist customers in understanding what drives their energy bills. Aurora Energy has released a new tool on its website to inform customers of their energy use www. auroraenergy.com.au/energy-calculator Aurora Energy has also initiated its winter campaign to raise customers’ awareness of their energy consumption during the colder months. During the energy security situation in 2016, the Government directed consumers to energy efficiency tips to help reduce demand. Supporting information is also provided on the Tasmanian Climate Change Office’s website www. dpac.tas.gov.au/divisions/climatechange/what_you_ can_do Ongoing 5 Advocate for Tasmania’s interests in national reform processes, principally through the COAG Energy Council (CEC). The Government attends bi-annual COAG Energy Council meetings to advocate for Tasmania’s energy interests. Key activities have included supporting the need to consolidate energy and carbon policies, reviewing gas markets, reviewing governance arrangements for the energy markets, empowering consumers and progressing enhanced competition and innovation (ie regulatory settings to support future technologies including batteries). Ongoing 7 Advocate for allowing market mechanisms to efficiently exit excess generation capacity to address the current oversupply in the NEM. The COAG Energy Council supports this approach advocated by the Tasmanian Government. COAG is considering approaches to integrate energy and carbon policies to help support a lower emissions NEM. Ongoing 9 Indicative FY Quarter for Completion No. Action Update of Progress 10 Consider the national move towards more costreflective tariffs in the small customer market; and ensure that in any Tasmanian response there is an emphasis on fairness and equity, and consistency with the Government’s objective of affordable and predictable prices TasNetworks’ proposed tariff strategy for 2017-2019 was submitted to the Australian Energy Regulator in January 2016. Aurora Energy’s proposed pricing strategy for 2016-2019 was submitted to the Tasmanian Economic Regulator in February 2016 and approved in May 2016 subject to a number of amendments. This includes a new time of use tariff to provide greater customer choice. Both are based on a transitional approach to providing customer choice of new tariff products while reducing price impacts, consistent with the Government’s objective of affordable and predictable power prices that are amongst the lowest in Australia. TasNetworks has also initiated a tariff trial to understand the benefits of various tariff structures to customers. Progressing requires ongoing monitoring 13 Provide information on the efficient management of energy for businesses and households A project has been scoped to educate community sector workers so they can help their clients access other programs such as the Save Home Energy Program, Aurora Energy’s YES program and NILS energy efficiency loans. During the next two months, procurement will be undertaken and project delivery will commence. Q4 2016-17 14 Investigates mechanisms for facilitating investment in business energy efficiency, including the case for introducing Environmental Upgrade Agreements to enable commercial building owners and tenants the opportunity to improve productivity through energy (and water) savings. The Government, in partnership with Aurora Energy, is developing a Tasmanian Energy Efficiency Loan Scheme. This new scheme will facilitate no interest loans to support small businesses and households to invest in a range of energy efficiency products. Up to $10 million in loan funding will be made available to support the scheme with the final design to be announced in coming months. The Government, together with Hobart City Council, has also scoped a study to assess the potential for Environmental Upgrade Agreements or other mechanisms to enhance the efficiency of Tasmanian commercial buildings, lift occupancy rates and revitalise business districts. During the next six months, procurement will be undertaken and project delivery will commence. Q4 2016-17 10 Indicative FY Quarter for Completion No. Action Update of Progress 18 Undertake a review of gas legislation in Tasmania to ensure it is contemporary with market conditions and ensures administrative overlaps are removed. As part of this review evaluate the effectiveness of gas customer protections and consider the costs and benefits of regulatory and non-regulatory approaches to address any identified gaps. Work has commenced on this action through the initial review of the legislation. Stakeholder consultation is planned in 2016-17. Q4 2016-17 19 Undertake a pilot program to help Government and private sector vehicle fleets reduce their fuel and operational costs The Smarter Fleets project is being implemented and provides tailored guidance and insights for participating Tasmanian Government agencies, Councils and the private and education sectors to reduce their fleet costs. A final report will be produced at the completion of the project and will include reporting on achievements, lessons learnt and recommendations. Q4 2016-17 20 Increase the efficiency of public transport through system improvements. Metro Tasmania’s Hobart urban services review has been completed, with new timetables introduced in January 2016. As a result, there was a 6.8% increase in passenger numbers in April 2016 compared to April 2015. A review of Metro’s Launceston urban services is being undertaken in 2016. A Greater Launceston Metropolitan Passenger Transport Plan has been developed, which is a ten-year strategic document to guide investment in passenger transport in Greater Launceston. The Government has commenced a review of school bus services in preparation for the expiry of current contracts, commencing in 2018. The Government has also commenced the Metro Bus Initiative which will see the delivery of 100 new buses to the Metro fleet over four years. Q1 2016-17, with some projects continuing through to 201718 11 Indicative FY Quarter for Completion No. Action Update of Progress 23 Clearly set out roles and expectations of the Government’s energy businesses, with risk appetite statements set accordingly. The Government has, and will continue to, set its expectations regarding the need for energy businesses to focus on efficient operations (including the prudent use of consultants, overseas travel etc) by direct correspondence, through the TasNetworks and Aurora Energy Members’ Statement of Expectations and through Hydro Tasmania’s Ministerial Charter. The businesses have reflected these expectations in various policies, procedures, protocols, and planning documents. This has contributed to operating cost savings of approximately $50 million per annum across the energy businesses and a 54 per cent reduction in international travel costs for Hydro Tasmania employees (non Entura client related travel) in 2014-15. Q1 2016-17 29 Identify target industries for load growth and develop a prospectus for each industry which includes provision of all key information in regard to energy (and other required services) and optimal site locations. The Office of the Coordinator-General has been established by the Government to promote and attract investment into Tasmania. The promotion of investment opportunities with large energy load requirements are being progressed. An example of this is the development of the Data Centre Action Strategy. Promotion of investment opportunities with large energy load requirements in the tin and silica smelter sector within the State has also occurred. Ongoing The Government continues to develop prospectuses for Tasmania’s largest industrial precincts. These prospectuses provide detailed information about the services and infrastructure in these areas and highlight the competitive advantages for each site for businesses wishing to establish operations and invest in Tasmania. A prospectus and precinct plan was developed for the Bell Bay Industrial Precinct in 2015. Prospectuses are currently being developed with the respective Councils for the Launceston Airport and Translink Precinct and the Valley Central Industrial Precinct (near Westbury). 12 No. Action Update of Progress 31 Ensure Government has a contemporary retention of major businesses strategy which includes evaluating the merits of Government activity aimed at attracting new businesses versus retaining existing ones. The Government continues to work closely with major businesses in Tasmania to explore opportunities for growth and to enhance the retention of these businesses. Positive outcomes in retaining major businesses in the State include: Indicative FY Quarter for Completion Q4 2016-17 • facilitating an agreement between Bell Bay Aluminium (BBA), Hydro Tasmania and TasNetworks to provide the potential for an increase in the amount of power supplied to BBA’s smelter by 10 per cent, allowing it to increase production; • providing a loan guarantee to secure a $52 Million investment by Nyrstar to upgrade and redevelop its smelter; and • providing a $1.5 million grant to assist Norkse Skog build a commercial demonstration bio-solvent manufacturing plant. 32 Evaluate the potential for Tasmania to offer major energy intensive businesses a block of delivered energy at certain long term prices, which could provide those businesses with the predictability of a major input cost to support current and new investments. The promotion of investment opportunities with large energy load requirements is being progressed by the Office of the Coordinator-General. This work includes power cost modelling to identify the best sites in terms of delivered energy prices and power system capacity for specific proposals. These opportunities have been actively promoted at energy round tables that have been held over the past year. 13 Q3 2016-17 No. Action Update of Progress 33 Assess the impacts of increasing levels of renewable generation (wind, photovoltaics and other forms of renewables), storage and demand side technologies on the Tasmanian electricity network and develop recommendations and plans to ensure the integrity of the network is maintained for those that use it. Work undertaken as part of the second interconnector preconditions study (action 35) has shown that there is the potential for a second interconnector to facilitate significant further renewables development in the state. Indicative FY Quarter for Completion Ongoing The Energy Security Taskforce will examine the role of new technology options and increased renewables in terms of Tasmania’s ongoing energy security needs. Two projects investigating the future role of new technologies in the electricity market are: • TasNetworks is undertaking a three year solar photovoltaics and battery storage research project on Bruny Island to help address network issues, supported by a $2.9 million ARENA grant; and • Hydro Tasmania is developing the Flinders Island Hybrid Energy Hub to understand the integration of numerous renewable energy and energy storage technologies and to reduce diesel generation on the island. 34 Identify the necessary preconditions for increasing Tasmanian hydro generation output by 10 per cent (in collaboration with Hydro Tasmania). Work is progressing in collaboration with Hydro Tasmania to assess the market conditions and necessary preconditions for increasing hydro generation output. This work will be considered by the Energy Security Taskforce in examining Tasmania’s future energy mix. Q1 2016-17 36 Facilitate commercial development of forest residues through scoping and feasibility studies and seed funding ($550 000 over four years) to deliver forest residue solutions The 2016-17 Budget allocates $1.25 million (including the previously committed $550 000) towards a wood and fibre processing innovation program, which will help develop innovative uses for wood and fibre, such as for higher value engineered building products as well as biomass for renewable energy and heat production. It will also focus on increasing the use of timber and agricultural residues to create value-added products, and includes targeted programs for the Dorset and Huon regions and the private forestry sector. Q3 2016-17 14 Indicative FY Quarter for Completion No. Action Update of Progress 37 Partner with industry and/ or local government on a dollar-for-dollar basis to build on the work on biofuels that has already been undertaken in the Dorset and Huon municipalities ($200 000 over two years). As for Action 36, the 2016-17 Budget allocates $1.25 million (including the previously committed $200 000 for work in the Huon and Dorset municipalities) towards a wood and fibre processing innovation program. Q3 2016-17 38 Develop scenarios of possible energy futures and review strategy and actions against those scenarios, so that they can be adapted rapidly against actual market changes. This action will be undertaken by the Energy Security Taskforce in 2016-17. Q4 2016-17 39 Monitor Tasmania’s level of energy security in regard to current and projected demand scenarios, considering all forms of energy supply and their existing and projected capacities. The Government has robust and comprehensive strategies and processes in place to maintain Tasmania’s energy security and to manage emergency situations. During 2015-16 and due to the energy security issues faced, these processes were utilised and the Energy Supply Plan was implemented to manage the specific circumstances faced. The Energy Supply Plan was successful in ensuring energy security for Tasmania, avoiding forced power rationing, protecting jobs and the economy and keeping power prices as low as possible. Advice on recommended steps to strengthen Tasmania’s energy security will be undertaken by the Energy Security Taskforce in 2016-17. Ongoing 15 Department of State Growth GPO Box 536 Hobart TAS 7001 Australia Phone: 1800 030 688 Fax: 03 6233 5800 Email: [email protected] Web: www.stategrowth.tas.gov.au
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