Why Queensland could lead the next clean energy boom
February 28, 2023
Australia’s National Electricity Market (NEM) is going through the biggest transformation in its history, as we move from fossil fuels to renewable energy. This has created a once-in-a-lifetime investment opportunity in the clean energy sector.
The Queensland market, in particular, has very strong fundamentals driving this transition. This article summarises five key takeaways for project developers and investors when considering the Queensland market.
1. State government leading the clean energy transition
Coal currently generates 70% of the state’s electricity (see chart below). However, under the Queensland Energy and Jobs Plan, the state plans to end its reliance on coal by 2035. The plan includes targets for 70% renewable energy by 2032 and 80% renewable energy by 2035. Achieving these targets will require a massive build in new renewable generation and storage capacity. However, it is not just about filling the gaps left by coal…
2. Strong load growth
Electricity usage could increase significantly due to electrification and green hydrogen over the medium to long term. Research by Energy Synapse shows Queensland as having the strongest opportunity for green hydrogen out of any NEM state. Additional renewables and storage will be needed to meet this growth in electricity demand.
3. Above NEM average volatility
Queensland has had some of the highest wholesale electricity prices over the last two years (see chart below). Energy Synapse modelling shows a high probability for continued above NEM average volatility over the next 10-15 years. This could provide a significant revenue ‘uplift’ for local assets.
4. Wind patterns are complementary to solar
The wholesale energy price changes every five minutes in the NEM. Prices change based on live grid conditions and the supply/demand balance. The chart below shows the average wholesale energy price throughout the day in Queensland during 2022.
Prices can vary significantly throughout the day, and hence it is critical for developers and investors to understand the “shape” of their power projects. Wind is particularly interesting in Queensland, because several regions have an intraday profile that is complementary to solar. This means that wind farms in these areas can mitigate the risk of low daytime prices, while taking advantage of higher prices on the solar shoulder period.
Large spreads in intraday wholesale electricity prices also create significant arbitrage opportunities for energy storage.
5. Data is king
Queensland has a development pipeline of 140 power projects totaling over 50 GW. However, these projects are far from equal. In fact, some may end up having returns 3X higher than others. High quality data and analytics is key to picking the most profitable clean energy opportunities. Learn more about how the Energy Synapse Platform can help.