Power costs are switching off growth: resource chiefs

25 September 2017

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The Queensland Resources Council’s (QRC) latest quarterly State of the Sector report has found grave industry concerns over the tripling of electricity costs.

QRC Chief Executive Ian Macfarlane said the survey of resource chiefs reaffirms the ongoing need for dispatchable power to balance intermittent sources of energy.
“Unreliable and high-cost power continues to harm the competitiveness of the sector,” Mr Macfarlane said.

“Queensland resource companies have absorbed a three-fold increase in wholesale electricity prices over the last five years. These costs switch off economic growth in our regions.

“The economy needs reliable, dispatchable power at an affordable price. The ideal way to deliver this, and reduce emissions, is to deliver a balanced energy mix.

“Renewable energy clearly has a role in the generation mix to drive down emissions, although it cannot entirely replace the reliability of baseload power.

“We have to compare apples with apples. Adding battery storage to wind and solar to deliver reliability is at least seven times more expensive than a new baseload high efficiency, low emission (HELE) coal-fired power station.

“As electricity costs rise, energy-intensive operations are forced to reduce costs or they go out of business. This is what we saw at the Boyne Island aluminium smelter, where 100 workers were stood down and production was cut by 14 per cent.”

Quotes from the resource chiefs:

“The recent growth in electricity costs have impacted overall costs and therefore restrained investment.”

“Electricity costs and the availability of electrical infrastructure have both impacted the viability of existing operators and decisions on commencing new projects.”

Mr Macfarlane said the survey’s most ominous finding was that the sector expects the cost of electricity to continue to climb.

“The survey found 79 per cent of our member CEOs expect similar or higher growth in electricity costs over the next five years. Not one expects electricity costs to fall over that period,” Mr Macfarlane said.

“Queensland’s economy depends on resources and resources-associated industries including smelting and refining. If we want to keep those jobs and keep regional communities thriving, affordable power is essential.”

Resource industry employers have also restated the need for regulatory certainty to attract new investment.

Quotes from the resource chiefs:

“Overseas investors have mentioned that changes in environmental legislation, taxes and liabilities have made them cautious about further investment in Queensland.”

“The disconnect between federal and state and between states creates an uncertain and confusing investment environment.”

Despite the ongoing industry concerns around energy security there was some good news with the CEO Sentiment survey. The survey showed industry sentiment on regulation, social licence and the global economy all improved compared to the previous quarter.

Every quarter, the State of the Sector reveals what the state’s resource chiefs see as the opportunities and threats facing the sector over the next 12 months.

Media contact: Anthony Donaghy 0412 450 360