The energy trilemma (reliability/security, cost, sustainability) is a wicked problem for the intensive agricultural sector.
It has been difficult to directly compare the offerings from the minor and major parties this election because of the fundamental ideological differences in approaches. The two major parties appear unwilling to forego the massive profits from the government owned energy companies, which currently act as a hidden tax, and the parties’ renewable energy policies. The minor parties are willing to forgo this revenue; however, they have no realistic obligations on delivering on these commitments.
QFF also notes the sheer volume of rhetoric, opinion and expert analysis on the range of policies provided. Much of it contradictory and much of the analysis weighted to household bills rather than small and large businesses.
Whilst QFF has identified some of the major commitments – we recommend each farmer doing their own homework. The diversity of operations and electricity use across the intensive agricultural sector is such that the level of benefit from the numerous political policies will vary. However, QFF believe no single party has offered a complete suite of measures to immediately address the very real pain of electricity pricing and the increasing concerns around energy reliability or energy security.
Labor committed some months ago to the removal of the non-reversion policy. This was welcome measure, given QFF’s (and the QPC’s) extensive advocacy in this area. We welcome the LNP’s support of this policy too. It is essential that regional Queenslanders can to return to Ergon Retail if they want.
While Labor did not address the over-inflation of the network assets, they have committed to various programs for our sector including extension of the Energy Savers Program, with grant funding for new equipment up to $25,000 being included under a match-funded arrangement. The Katter Party, also committing to on-farm solar pumping projects.
The LNP in comparison have offered to write down the RAB (network assets) of Energy Queensland (EQ) by $2 billion. Whilst this only represents around 6.5% of the total network RAB (EQ and Powerlink), and QFF has been justifiably calling for 50% write down on the total network RAB, it is a welcome change of philosophy and may set a precedent into the future. Analysis by others has suggested that the EQ write down proposed by the LNP would only make a difference of around $50 per year to the average householder bill.
It is disappointing that the LNP has made no commitment to future funding of the Energy Savers Program or Large Customer Adjustment Trial. To discontinue these initiatives now, as companies are being encouraged to sign-up would be poor practice and not in the interest of the agricultural sector.
The KAP have vowed to ban the Optimised Replacement Cost Valuation Method, whilst the Greens have committed to move returns from Government Owned Corporations (GOCs) to provide price relief of $600/year for the average household. Both of these initiatives will put immediate and significant downward pressure on electricity bills providing our sector with the immediate price relief it so desperately needs; however, neither party has fully costed the source of the alternative revenue into the state ‘coffers’.
Labor’s $120 annual rebate for small businesses who sign up for monthly billing is a drop in the ocean – particularly for our growers with monthly bills over $40,000. QFF also knows that some farmers (particularly those with high bills) do not necessarily want to pay monthly, rather keeping the cash in their accounts for as long as possible. Although monthly billing may become the norm depending on the outcomes from the Power of Choice changes – unless you specifically opt-out.
Energy sustainability and security
The subject of a coal fired power station is a fundamental divider across the parties, with LNP and One Nation supporting a new facility; whilst the others vehemently opposing it. This is both a political and philosophical issue which QFF has not engaged. That said, with no immediate retirements of any of our existing coal-fired power stations (next one is nearly 7-years away) and a relatively new fleet, coupled with a growing generation from the renewables sector (solar but also base load pumped hydro and more importantly biomass, underpinned by our sector); QFF’s immediate concern is on the future impact of this infrastructure on electricity bills with estimates ranging from $80-200MW. QFF also sees first hand, many of the impacts resulting from a changing climate as we assist with managing our sectors risk into the future. It may also leave us vulnerable to a future price on carbon thus further increasing our bills, not to mention failing to meet our commitments under Paris.
Most of the parties recognised the need for transparency, particularly the funding of the solar bonus scheme from consolidated revenue as opposed to the general electricity bill payers. Only the KAP providing a commitment to remove the Competitive Neutrality payment.
Tariffs for small businesses, large business and irrigators are being phased out. Irrigated agriculture is set to lose three irrigation tariffs (T62, 65, 66) in 2020.
So far, no equivalent or attractive tariffs exist for the many irrigators that rely on these tariffs. Whilst current trials are underway to seek information to inform the design of new tariffs for the sector, it is unlikely that these will reduce costs alone – rather, further increase costs. No party has offered a solution to grandfather or maintain the existing tariffs which many farms rely on. We welcome the opportunity to work with the future government to develop a suite of appropriate tariffs for the agricultural sector to keep our sector profitable and maintain our export potential.
There has been an overall lack of understanding by the parties of the role of new dams play in agriculture. Many of the dams currently under feasibility review in Queensland may not provide viable water outcomes for the agricultural sector. Agriculture’s ability to pay for water is significantly below that of other industry uses, particularly the mining and energy sectors, and urban water supply. New infrastructure would, at face value, require a return on the infrastructure asset which is unlikely to make the water unaffordable to agriculture.
Additionally, there is a cost associated with including agriculture in the completion of the required environmental impact statement (EIS) for new water infrastructure, such as dams. The cost of including agriculture and undertaking the necessary modelling runs into millions. As such, the recent EIS completed for the proposed Nathan Dam did not include agriculture as a user.
The Queensland Bulk Water Opportunities Statement (QBWOS) (see https://www.dews.qld.gov.au/water/initiatives/bulk-water-statement) has sought to discuss the issues associated with water security, the role of new infrastructure and most importantly the efficient use of the existing infrastructure and water we have. However, the document fails to address groundwater, indicating that it could be addressed at a later stage. Again, QFF welcomes the opportunity to work with the next government on this issue.
An important objective of QBWOS is to support projects that may not be commercially viable but may provide significant economic benefits, but it is not clear from the statement how this objective is to be implemented. For example, little progress can be made investigating additional water for the Lockyer Valley without a government decision that an allocation can be made available subject to adequate feasibility assessment.
QBWOS also addressed underutilised irrigation supply and makes a case for improving the utilisation of water for irrigation based on a broad assessment of 300,000ML of existing underutilised water entitlements in schemes across the state. It is understood that the eight irrigation distribution schemes were used to make this assessment.
No single party specifically addressed affordable bulk water pricing. With Queensland heading towards another price-path there is a considerable risk that we will see unsustainable increases in the price of bulk water. This price increase will be from pass-through costs associated with the ongoing management of the bulk water schemes, including but not limited to dam safety measures and the increasing cost of electricity, which is also impacting the GOC bulk water providers.
If there is not a favourable outcome for bulk water pricing, the Local Management Arrangements (LMAs) for several irrigation schemes across the state may be in jeopardy, not to mention the future viability of irrigated agriculture in Queensland.
Over the past 18-months, the Labor Government has made a number of favourable amendments to the water legislation. Most recently, we saw the Mineral, Water and Other Legislation Amendment Bill 2017. Amendments included regulatory amendments to permit the temporary release of water from a strategic water reserve to provide opportunistic supplies while the reserve is unused.
QFF called for and supported this initiative noting that many strategic reserves such as those made available for Nathan Dam were there, but inaccessible to farmers. Under this change, reserve water is to be made available under a water licence granted for a term of up to three years. The regulation also included the inclusion of a condition in a resource operations licence about the holder collecting and publishing the sale price of each temporary trade. QFF noted that it would be useful to have available information on temporary trades within irrigation schemes but the costs of supplying this information should be kept to a minimum and not passed through.
Changes to allow farmers to make minor repairs of sub-artesian bore casing no deeper than 1.2m was also welcome. Sourcing suitable qualified drillers particularly in remote areas is a costly and timely process.
RD&E Water-Energy-Productivity Nexus
Energy and water are inextricably connected in agriculture. Only the Greens acknowledged this relationship and the ability to build resilience in our sector, committing appropriate funding.
We need to further understand the connection between climate change and the water-energy nexus and how efforts to increase efficiency in both energy and water end uses can increase Queensland’s agricultural sector’s resilience. Climate change is continuing to affect water availability and put new stresses on energy systems but the degree of future impacts is uncertain, particularly given the changing climate patterns moving towards increasing frequency and the duration of drought conditions across Queensland.
Whilst there are a range of technological solutions to improve efficiencies and ultimately productivity, further government and policy support is needed and this supports needs to be coordinated to avoid unintended consequences which have arisen from previous historical practices. Efficiency in energy and water end-uses can reduce the sector’s exposure to acute and chronic stressors, including high utility bills which, with climate change, are negatively impacting agricultural productivity.
The productivity slowdown is considered to be heavily influenced by the millennium drought, coupled with declining public investment in agricultural R&D.
Productivity growth is essential to maintaining the competitiveness of Australian farmers in the global market as well as to offset negative impacts to on-farm profit factors such as rising input costs. The sector is managing high production costs (energy, water, labour), excessive regulation, high currency exchange, natural resource pressures associated with climate change and for some sectors increasingly multifaceted ‘social licence to operate’ conditions which has led to a reduction in intensity (for example, the social movement to free-range eggs and poultry).
The sector also continues to struggle with increasingly fluctuating commodity prices and increasing competition from countries with extensive producer-support packages, and the intensity of this competition is increasing.
Increasing agricultural productivity that can be sustained is essential for the long-term welfare and economic security of regional and rural Queensland; while providing increased food security domestically and within the Asia-Pacific area. Queensland’s intensive agricultural sector stands to gain significantly from an energy-water productivity agenda which acknowledges climate change, as does the entire food, fibre, fuel and foliage supply chain.