Department of State Growth’s website at www.stategrowth.tas.gov.au In August 2014, an Energy Strategy Issues Paper was released for broader consultation with interested stakeholders and members of the public generally. Thirty submissions were received. The Issues Paper and the submissions are also available on the Department of State Growth’s website. The input from both the Energy Working Group, and contributions from the public submissions, has helped shape the Government’s considerations of this Energy Strategy and is greatly appreciated. The Energy Strategy does not include detailed information and data on Tasmania’s energy markets and industry, as this information was outlined in the Issues Paper. Readers should refer to both documents to gain a complete picture of the basis upon which the Government has developed the Strategy. Further detailed background material is also available from the previous Electricity Supply Industry Expert Panel (the Expert Panel) process. The Energy Strategy also does not explicitly address Tasmania’s climate change policies and current legislative requirements. This is subject to a separate action plan to be released by Government. The Department of State Growth is working closely with the Tasmanian Climate Change Office to ensure the vision, outcomes and actions contained in the Energy Strategy will be consistent with, and complementary to, that action plan. The Energy Strategy will be used by Government to guide its future policy decisions and actions by Government agencies and the Government’s energy businesses. The Government welcomes stakeholder and community views on the Energy Strategy and will take them into account in the finalisation of the Strategy. Details of how to provide feedback are contained in the Next steps section at the end of the Strategy. 2. Vision and outcomes The Government’s election commitment was for the Energy Strategy to “identify ways in which energy can once again be utilised as an economic driver, including by securing a stable and sustainable price path for power that can provide relief to consumers and help grow the economy and attract new investment.” Consistent with this commitment, and taking into account the views and input of the Energy Working Group, stakeholders and members of the public, the Government has determined the Tasmanian Energy Strategy will support the following policy vision: “Restore energy as a competitive advantage for Tasmania by: delivering affordable energy at competitive and predictable prices that are amongst the lowest in Australia; empowering consumer choice; ensuring an efficient energy sector that is customer focussed; utilising energy to facilitate State growth; and maximising Tasmania’s renewable energy opportunities.”
The following outcomes will indicate success against this vision: Tasmanian electricity prices will be amongst the lowest in Australia. Tasmania’s State-owned energy businesses will be more cost efficient thereby contributing to the lowest possible energy prices. Consumers will have greater choice about how to meet their energy supply needs and will pay competitive, fair and predictable prices for those choices. Consumers’ energy needs will be met through a safe, secure, and reliable supply, supported by the minimum necessary regulatory arrangements. Tasmanian businesses will secure increased productivity and reduced cost pressure through affordable and predictable power prices and improved energy efficiency. Tasmanian households will experience less household budget pressure through affordable and predictable power prices and improved energy efficiency. The contribution of energy to cost of living pressure for the most vulnerable customers will be reduced. Tasmania will be attractive for energy intensive industry through the provision of competitive, predictable long term power offerings. Tasmania will continue to contribute significantly to renewable energy nationally reinforcing its reputation as the renewable energy State. The Government recognises that some of these outcomes will be challenging and hard to measure and may take time to achieve. For this reason the timeframe for the Energy Strategy is 20 years. Section three of the Energy Strategy briefly discusses the context and circumstances that exist in Tasmania’s energy markets relevant to progressing our vision. Section four of the Energy Strategy describes the actions that Government will pursue to achieve the vision and its associated outcomes. The majority of these actions are short to medium term. The Strategy will be reviewed at five year intervals as a minimum, to add to and update its actions. 3. Tasmanian energy issues – now and into the future When Tasmanians think of energy they generally think of ‘the Hydro’. This era commenced 100 years ago and since then the history of the Hydro has been inextricably linked with Tasmania’s industrial, economic, geographic and cultural development. In essence, Tasmania’s renewable provided a competitive advantage that helped drive our past prosperity, through creating the energy system to support the attraction and growth of industries. The Hydro is an important part of Tasmania’s energy story – but it is not the only part. For example, many people are surprised to hear that they probably spend more on fuel to run their car than for electricity to power their home. Wood and LPG are also an important heating fuel for many Tasmanian households.
For residential customers, energy efficiency not only lowers bills; it can also increase levels of comfort and standards of living. This is particularly important in Tasmania given our climate, relatively older building stock, and relatively high proportion of vulnerable customer households. For businesses, improved energy efficiency translates into improved productivity – for example through producing the same level of output with reduced costs, or a higher level of output without an increase in costs. Governments need to tread carefully in implementing energy efficiency programs as poorly implemented programs may impose additional costs, which are inevitably paid for by consumers. Recent reviews of the Victorian ‘white certificate’ program led to it being considered for closure as it was becoming an increasingly expensive scheme, without commensurate economic benefits. In a well-informed market, consumers will be incentivised to undertake energy efficiency measures as it makes financial sense. However, energy markets are not perfect, so Government has a role in helping to address market failures, such as information gaps, split incentives or lack of access to capital. Information gaps exist where it is difficult for consumers to calculate the payback period on an energy efficiency upgrade. Examples of energy efficiency payback periods Measure Indicative cost Indicative payback period Lighting (household) $574 5.7 years Draught sealing (household) $1 037 6.6 years Ceiling insulation (household) $1 130 6.8 years Installing (household) $2 500 2.2 years Repairing hot water service leakages (business) $250 2 years Installing on lighting (business) $300 3 Ceiling insulation (business) $20 000 6 years Businesses often have a clear understanding of the payback period but are cash and capital constrained. The Government is willing to explore with the private sector facilitating programs that would help businesses to access funds to undertake energy efficient upgrades.
4.3.5 Smart network solutions The electricity network to have sufficient capacity to reliably supply electricity to consumers during periods of peak demand. Addressing of network constraint was a major driver of network investment and overall electricity costs faced by consumers. Traditionally any areas of constraint have been addressed by building additional poles and wires. However this is not always the most cost effective solution and other non-network solutions may be more appropriate. For example, TasNetworks have used an innovative system protection system, dynamic ratings of lines, smarter technologies and embedded generation to delay or avoid such investment. Bruny Island as an example of solution to network constraint Island is serviced by two under-sea cables which were installed in the early 1950s and are unable to reliably supply electricity during the peak Christmas and Easter holiday periods. Replacing the cables would be very expensive and a more cost effective solution has been successfully used since 2012 where mobile generation units meet the peak holiday load requirements and prevent any over-load on the under-sea cables, thereby prolonging the life of the cables. A smarter electricity network has the potential to significantly improve operational efficiency. For example, at present, faults in the network often need to be manually located and rectified. Smarter network technology can automate this process resulting in increased operational efficiency and improved customer reliability. Any expected network constraints can be managed by a range of options including battery storage, embedded generation and network upgrades to drive a lower cost outcome. Ultimately intelligent networks and solutions are expected to cost through addressing the paradigm of simply ’build more and bigger networks’ to managing both supply and demand side options to deliver cost effective and reliable electricity supply. 4.3.6 The future of energy and positioning Tasmania for advantage Until recent times, energy was something most people and many businesses did not have a strong interest in. Today, after a sustained period of electricity price increases almost everyone has a view on energy. Predicting the future is a challenge but some common themes are beginning to emerge about how the industry may look in the future. The traditional utility model of electricity supply was a large power station located close to its fuel source connected to consumers by a network where energy flowed one way. This centralised model is being challenged as distributed generation, mainly in the form of solar PV, has placed this business model under pressure. It is likely to be under even more pressure as solar PV and other forms of embedded generation and battery technology continue to fall in price and become more efficient.