Queensland’s CleanCo targets energy ‘duck curve’
The chief executive of Queensland’s new state-owned renewable energy company CleanCo said its generation assets will help flatten out the so-called “duck curve” on the energy grid and deliver lower prices when it begins trading this week.
CleanCo was established by Premier Annastacia Palaszczuk’s Labor government to fund and build its own renewable energy generation. But critics say it could leave taxpayers financially exposed and crowd out private sector investment.
CleanCo will take control of the state-owned existing renewable assets – a portfolio of 1170 megawatts including four hydro-electricity stations and the Swanbank E combined gas-fired power station – but also help facilitate the development of a further 1000 megawatts of new renewable generation by 2025.
It will also help the coal-rich state reach its ambitious renewable energy target of 50 per cent by 2030 – a target criticised by federal Energy Minister Angus Taylor as being likely to destabilise the grid.
CleanCo’s new chief executive, Maia Schweizer, a former McKinsey & Company management consultant who started in the role a few weeks ago, said her mandate from the state government was to lower wholesale prices and provide more reliability on the grid.
“That’s a very different model that these assets have had in the past. I think we will be treating those assets with those outcomes in mind,” Dr Schweizer told The Australian Financial Review.
“When we are approaching the peak of the peak – those really high demand, high cost times, especially in the summer – that’s when we will be operating our portfolio differently to try and bring down wholesale prices.”
The flood of wind and solar projects into the grid has caused a headache for energy market operators and participants alike.
During the day – when the sun is shining and wind is blowing and there is ample renewable energy available – wholesale electricity prices have fallen sharply, even to the point where some generators have been forced to pay for someone to accept their power.
Prices spike again later in the afternoon and early evening when renewable output wanes. This is especially so in summer because people switch on their air-conditioners when they get home from work.
The “duck curve” is squeezing the profitability of traditional coal-fired power stations.
But Dr Schweizer said she believed renewable and coal-fired assets could co-exist in the Queensland market, even as the state moves to the 50 per cent renewable target.
Dr Schweizer, who most recently held general management roles in the gas and retail businesses of Origin Energy, said the hydro and gas assets were very useful because they could be switched on or off at short notice.
“Our foundation assets are dispatchable – they don’t rely on the wind or the sun – and they can be flexible in terms of when they can be dispatched. So they can absolutely help with that peak of the peak period,” she said.
CleanCo will take over the “reverse auction” process proposed by the Palaszczuk government to deliver 400 megawatts of renewable energy, including 100 megawatts of storage.
Dr Schweizer said all options would be on the table for commissioning 1000 megawatts of new generation by 2025, including building and funding projects or signing off-take agreements with private proponents. The state government has given CleanCo $250 million to kickstart the process.
But given the high level of roof-top and large-scale solar in Queensland, it is likely CleanCo will look to other renewable technologies.
“In terms of projects and technology we really need to help the overall system problem, not exacerbate it,” she said.
“For me, when I look ahead, it’s less about choosing a technology. It’s more about achieving overall clean, reliable competitive energy for Queensland. But it is likely to be more than new solar.”
When CleanCo was announced in August 2018, the Palaszczuk government claimed it should reduce wholesale electricity prices by about $7 per megawatt hour. That is expected to translate to an estimated $70 per year saving for the average Queensland household.
The report upon which this claim was based has never been released.
Grattan Institute’s energy program director, Tony Wood, said his biggest concern was that CleanCo made dud investments that left Queensland taxpayers out of pocket.
“It’s not like Snowy Hydro, which is a gorilla. CleanCo won’t necessarily deter private sector development but if it builds it itself, it will be investment the private sector won’t build,” Mr Wood said.
“Additional participation in the market is good, [Australian Competition and Consumer Commission chairman] Rod Sims would like that. But there is a risk it will be influenced by government policy and it will make a decision the private sector would not have made. It will be taxpayers who carry that risk.”
Queensland Energy Minister Anthony Lynham said CleanCo was the most significant development in the state’s electricity sector for 20 years. He said private sector investment had not been hampered, with more than 2300 megawatts in new large-scale renewable capacity since 2015.
“The key factor distorting private investment is the continued absence of a meaningful federal energy policy,” he said.