Insights / March 15th, 2017

How big is your battery? The future of energy in South Australia

In a bold move the South Australian Government has released a six point plan to secure the State’s energy future. The plan moves away from a national approach to energy and promotes a return to public ownership of energy assets, incentives for privately owned generators and a focus on renewable energy and cleaner generators.

While the plan lacks detail about how its idealistic objectives are to be achieved and does not provide any substantive detail as to how the State can extricate itself from the national market, it does provide food for thought and an opportunity to look beyond standard energy models.

In summary the six point plan identifies the following key areas:

Battery storage and renewable technology fund

The Government will provide $150 million to support projects that make renewable energy available 24 hours a day 7 days a week. The first of these projects will be a 100 megawatt grid connected battery storage.

There will also be a renewable technology fund which will provide $75 million in grants and $75 million in loans to eligible projects in support of private innovation companies and entrepreneurs. Some of these projects will include solar thermal, biomass, hydrogen energy and pumped hydro.

State owned gas fired electricity generator

The State Government will construct a State owned gas fired electricity generator to provide 250 megawatts of generation. While construction is underway, the State Government will liaise with local transmission and distribution companies to ensure 200 megawatts of temporary generation is available in peak periods when demand can create a shortfall and cannot be met by any other means.

Local power over the national market

Legislative change will be pursued to give the State Minister for Energy powers to direct electricity supply in South Australia in times of a shortfall. It is proposed that this power will allow the Minister to direct generators to operate and direct the Australian Energy Market Operator (AEMO) to control flow on the interconnector with Victoria.

Any new electricity generation projects will need to demonstrate how the project will add to local energy system security.

There will also be new powers for the Office of the Technical Regulator to assess application for all generators above 5 megawatts.

Energy security target

The State Government will establish a new target for energy retailers to ensure that more electricity is derived from cleaner generators that produce their electricity in South Australia.

Retailers will be compelled to source a percentage of energy from local generators rather than through Victorian coal which the State Government claims will “lower energy prices and stimulate exploration investment”.

Incentivise exploration for gas

An additional $24 million will be made available immediately for second round funding of the Plan For Accelerating Exploration (PACE).

To encourage new exploration a new PACE royalty returns scheme will provide 10% of royalties to landowners whose properties overlay a petroleum field which is brought into production.

State Government to tender electricity needs

To encourage new electricity generators to the market, the State Government will tender 75% of its electricity needs for hospitals, schools and government services over the next 10 years.

The remaining 25% will be released for tender to renewable energy initiatives.

New contracts will be tendered on 1 January 2018.

While the plan stands out for its bold objectives there is a striking lack of detail as to how the key points will be achieved and how companies already locked into forward contracts will be able to benefit from opportunities.

Crucial details about how Ministerial powers to direct generators and AEMO in a national market will work have not been detailed in the plan. The plan is also silent as to how the gas exploration incentives will overcome the predicted gas shortage.

If the State is to move forward with a bold and progressive plan, key details of how it will be implemented will need to be worked through carefully.

We will provide a further update once the details are made available but until that time, the six point plan has given our state and indeed the broader country, plenty to think about.

For more information or assistance in relation to accessing tendering opportunities or grants please contact one of our team.