Gas currently provides more than 2,000 megawatts (MW) of Queensland’s electricity generating capacity. This is expected to increase dramatically, with a further 1,700 MW of gas-fired generating capacity planned.

Under the scheme, which will reduce greenhouse gas emissions by approximately 14 million tonnes over its 15-year life, retailers and other large electricity users are required to source at least 13 per cent of their power from gas-fired generation. More specifically, generators for gas-fired power stations are certified to create gas electricity certificates (GECs) for each whole megawatt hour (MWh) of gas-generated electricity. Electricity retailers can purchase or trade these GECs, but at the end of each year, retailers are required to surrender GECs worth approximately 13 per cent of the electricity load supplied to Queensland customers in that year or face penalties.

Since its inception in January 2005, the scheme has seen the creation of 9,879,091 MWh of GECs. Some 8,199,730 MWh of this has been surrendered, with approximately 1,679,361 MWh traded or ‘live’. 2007 was the first year where the number of GECs registered by electricity generators exceeded the GECs surrendered by electricity retailers.

Late last year, the Queensland Government increased the target to 18 per cent by 2020 as part of its ClimateSmart 2050 scheme. The government now aims to further encourage the development of new gas sources and gas infrastructure to meet the state’s energy mix and reduce the growth in greenhouse gases associated with electricity use.

Gas-fired power generation

One of the chief beneficiaries of the scheme has been gas-fired electricity generation, with the targets providing the financial incentive to develop new or upgrade existing power stations.

In 2007, four major gas-fired generation projects were approved for construction and approved to accredit GECs:

* Xstrata’s 30 MW gas-fired power plant, to be located near Mt Isa * Queensland Gas Company’s 135 MW power station at Condamine near Roma * Origin Energy’s 630 MW power station at Braemar near Dalby * A 450 MW expansion of the Braemar Power Station, already accredited under the Scheme, by Energy Resource Managers Power.

When constructed, these power stations will provide approximately 40 per cent of Queensland’s electricity generation capacity. The Roma and Rabat power stations are shortly expected to accredit another 80 MW under the scheme.

These new gas-fired power plants have clear environmental benefits, creating 40 - 60 per cent less CO2 and using 40 - 60 per cent less water than coal-fired plants.

Implications on coal seam gas producers

Undoubtedly, coal seam gas (CSG) developers have been one of the scheme’s biggest winners, with CSG now supplying around 80 per cent of Queensland’s gas market.

“Coal seam gas is an integral part of Queensland’s future gas development,” Queensland Minister for Mines and Energy Geoff Wilson said, noting that the scheme had delivered well over $1 billion of investment into the state’s CSG industry.

Not only does the prominence of CSG further the scheme’s aims to diversify the state’s energy mix but it provides a range of environmental benefits.

“People are not really seeing the multiplicity of benefits of CSG,” said Queensland Gas Company Chief Executive Richard Cottee. “At present, you have Snowy Hydro not producing electricity because of a lack of water. You have Tarong Power Station in southern Queensland being cut back 70 per cent because of a lack of water. You have further and further threats to the power houses in the Latrobe Valley because of a lack of water. Water is going to become an issue – and CSG produces water.”

A snapshot of Queensland’s energy mix

The Queensland economy has shifted from being highly dependent on its abundant, high-quality and low-cost coal supplies and the competitively priced electricity it produces. In 2002-03, Queensland’s electricity demand was overwhelmingly met by coal-fired generation (almost 90 per cent). In 2007, coal met only 80.5 per cent of Queensland’s electricity needs, with a concomitant increase in gas generated electricity from 6.7 to 14.6 per cent.

With the Queensland Government’s recent decision to increase mandatory gas electricity generation to 18 per cent, the scheme will now run parallel with the Federal Government’s Mandatory Renewable Energy Targets (MRET). MRET mandates a 20 per cent share for renewable energy in Australia’s electricity supply by 2020, with a further expansion planned for 2030, as emissions trading matures.

“It has been decided that the Queensland Gas Scheme will transition into emissions trading as soon as is practicable. A similar approach has been proposed by the Federal Government in relation to MRET,” said a Queensland Department of Mines and Energy spokesperson, adding that the exact impact on the Queensland scheme will depend on the eventual form of the emissions trading system.

The introduction of a national emissions trading scheme is likely to further bolster the achievements of Queensland’s 13 per cent gas scheme. It has already promoted clear environmental benefits, not only in the considerable reduction of greenhouse gas emissions but also in producing water through CSG development. In addition, the scheme has proved so successful that there has been an excess of gas-fired electricity produced; a trend that is likely to continue with the rapid development, expansion and accreditation of more gas-fired generators.