Public Works Committee: Zero Cost Energy Future

Mr CREGAN (Kavel) (11:39): I move:

That the 15^th report of the committee for the Fifty-Fourth Parliament, entitled Zero Cost Energy Future, be noted.

SA Water is one of the state's largest electricity users. Based on current business-as-usual forecasts, SA Water's electricity costs are expected to increase to more than $60 million by 2020-21. In response to increasing electricity prices and to reduce CO₂ emissions, SA Water has developed a plan focused on self-generation and storage. This plan is expected to change SA Water's electricity cost structure and enable the delivery of lower and more stable customer prices. The proposed works aim to reach zero net electricity operating costs from 2020 to 2021.

To achieve this, SA Water intends to install an estimated 152 megawatts of solar photovoltaic and 35 megawatt hours of storage at approximately 80 sites. The installation of the solar generation and storage will be on SA Water land or land abutting SA Water sites, purchased from willing sellers. The committee has been informed that a more efficient and effective electricity system is expected to reduce the average household water bill, improve the resilience of water supply services during energy market disruptions, improve environmental outcomes through using clean renewable solar energy and contribute to modernising and strengthening South Australia's electricity network.

The committee wishes SA Water well with its implementation of this project. The estimated total cost of the proposed works is $390.3 million. Construction is expected to be completed by July 2020. The Public Works Committee has examined written and oral evidence in relation to the Zero Cost Energy Future project and has been assured by SA Water officials that acquittals have been received from the Department of Treasury and Finance, the Department of the Premier and Cabinet and the Crown Solicitor that the works and procedures are lawful.

The committee is satisfied that the proposal has been subject to the appropriate agency consultation and meets the criteria for examination of projects, as described in the Parliamentary Committees Act 1991. Based on the evidence considered and pursuant to section 12C of the Parliamentary Committees Act 1991, the Public Works Committee reports to parliament that it recommends the proposed public works.

Mr PATTERSON (Morphett) (11:42): I also rise today to speak about the 15^th report of the Public Works Committee, entitled SA Water's Zero Cost Energy Future. I note that the report examines the history of the proposal and the efficacy of the application of South Australian taxpayer funds to the Zero Cost Energy Future project.

SA Water is one of South Australia's largest electricity users, with a lot of energy-intensive pumping and treatment operations that consumed approximately 220 gigawatt hours in 2016-17, with a cost of around $55 million per annum. It also includes consumption at the Adelaide Desalination Plant. Other projects around SA Water investigated by this committee, including some of the pumping stations and water treatment plants, highlight that a lot of that consumption is based upon pumps and electricity use.

SA Water uses a large amount of electricity. I think it accounts for approximately 5 per cent of the energy usage of the whole of state, so it really is one of the key users in South Australia. As I said, it is one of the largest electricity users with its energy-intensive pumping and treatment operations. Because of this, SA Water has direct access to the wholesale electricity market, which eliminates significant retail margins charged by energy retailers.

Even in light of this, SA Water has experienced growing and more volatile prices over recent years. The wholesale rights have been trending up, impacting these increased electricity prices, which will certainly result in higher costs being passed on for the supply of water to customers, who are the people of South Australia. These costs are under the regulatory framework applied by ESCOSA; nonetheless, it really is a key consideration and forms a component of the actual price charged to consumers.

There have been recent cost reductions in solar generation that have allowed many businesses to install their own electricity generation at a cost similar to that available to the larger energy retailers. That does make it possible for energy users such as SA Water to take control of their own energy costs by installing energy-producing assets that will complement the operational requirements of SA Water, thereby reducing energy costs.

In particular, with the reduction in solar photovoltaic costs and the anticipated reduction in electricity storage costs we have seen—lithium batteries are being made available on a commercial scale and are a necessary component because if you are looking to generate your electricity on a significant scale you also need to complement that with storage—SA Water can install its own generation at a significant financial benefit. It also helps to manage market risks associated with the Australian wholesale market. We have seen spot prices, especially under peak demand, really skyrocket, so this will help ameliorate those costs for SA Water.

As well as reducing costs, a number of other additional benefits will come out of this, such as improving environmental outcomes by decarbonising their electricity consumption. As well, it will provide a stimulus to local industries, where we have companies that can help with the installation around that. It will also improve the resilience of water supply services during energy market disruptions if they were to occur.

A feature of the pumping that goes with SA Water is that by being able to predict weather conditions, pumping can be done in advance to make sure the water is in place, which will also minimise or reduce electricity usage in the South Australian grid overall. Hot weather, in particular, is when there is peak demand; that can be anticipated and pumping done prior to that, an advantage SA Water has because it can reduce its draw on the electricity grid during those peak loads and help provide resilience in the grid.

Increasing SA Water self-generation and storage capacity will also enable savings on its net electricity costs through consuming the energy generated by installed solar photovoltaic rather than consuming from the grid. Also, as I said, at times when they are not using it they can pre-plan water pumping and they can export excess electricity into the national grid when it is economic to do so. It will help reduce network costs through reduced reliance on the national grid, and SA Water will also obtain income from the sale of Renewable Energy Certificates that come with the solar photovoltaic panels that will be installed.

SA Water has proposed to install sufficient self-generation and storage to reduce its net electricity costs to zero from 2020-21. The cost of this will be about $390 million, and hence it has been referred to the Public Works Committee by the minister to have the proposal examined. The scope of the capital works would include the design and installation of 152 megawatts of solar photovoltaic generation and as well as 35 megawatt hours of storage. A control and analytic system will be located on or adjacent to approximately 80 of SA Water's high electricity usage sites.

In carrying out this examination, the committee heard from witnesses and representatives from SA Water. We had the project manager from Zero Cost Energy in. He explained that SA Water has approximately 1,700 sites connected to the electricity grid and the aim of this project was to examine and find an optimum number in the order of about 70 sites at the moment.

Having this generation installed here will provide about 70 per cent of the electricity usage, and then those other means that I mentioned before, such as exporting some of the electricity back into the grid, will look to trend the cost for SA Water down towards zero. The key aim of this project is to design and construct 152 megawatts of solar photovoltaic but also the 35 megawatts of storage, which is a very important component. This project does not look at just the generation side, because it is intermittent and could not be considered base load, but factoring in this 35 megawatt hours of storage really does assist in providing a reliable electricity supply to SA Water.

It will also provide local jobs and economic stimulus because, as we can see, those 1,700 sites, of which 70 are earmarked, are throughout the whole state. They are not in just one particular location. Doing this will also eliminate the risk of SA Water's exposure to high and volatile electricity prices from the wholesale market. The outcome sought by doing this will principally be to reduce the average household water bill because of the zero electricity costs here. It will also improve the resilience of the water supply services during energy market disruptions, if they were to occur—hopefully, that does not happen—as well as improve environmental outcomes through the use of cleaner energy sources.

It will also help modernise and strengthen the state's electricity network overall because being such a significant consumer of electricity in the grid has advantages there. I talked before about being able to predict weather conditions in advance and modify electricity usage because of this and because of the storage, which certainly will help strengthen supply and make it more reliable in South Australia. Briefly, there were other alternative generation technologies considered before using solar photovoltaic. Many hydro plants, micro wind farms and large-scale pumped hydro were looked at and, because of the costs involved and the technologies, these were evaluated, but we went for the solar PV.

In summary, we certainly did as a committee investigate this proposal quite fully. We think it is an exciting proposal. We commend the Minister for Water, the member for Black, for his work in bringing this forward. It is really good for the state and, based on that evidence, we will recommend this proposed public work.

Mr CREGAN (Kavel) (11:52): I thank the deputy chair of the committee, the member for Morphett, for his assistance, other members of the committee and committee executive officers, and I commend the report.

Motion carried.