Renewable energy targets could cause ‘substantial declines’ for Territory Generation: Report

The NT government’s 50 per cent renewable energy target will have serious financial implications for Power and Water and Territory Generation, according to a secret government report.

THE Territory Government’s 50 per cent renewable energy target will have serious financial implications for Power and Water and Territory Generation, according to a secret government report.

Economists HoustonKemp warn an increase in renewable energy will reduce the corporations’ ability to generate revenue from gas.

“Territory Generation would experience substantial declines in its market share under the assumptions that new generation is provided by other parties – this would lead to a reduction in revenue from the wholesale electricity market by approximately 40 per cent after the target has been reached (in 2030),” the report says.

A leaked report reveals NT’s renewable energy targets could cause a ‘substantial decline in market share’ for Territory Generation. (Photo by Gints Ivuskans / AFP)

Power and Water has a “take or pay” contract to buy gas from the Blacktip field which runs until 2034.

The economists’ report – delivered to the Government in April 2019 – notes PWC Gas already derives significant revenue from the sale of gas to Territory Generation through this contract.

Increasing renewable generation would see these gas sales fall, forcing the government to increase the Community Service Obligation (CSO) subsidy it pays to Power and Water. These costs could be offset if the gas could be sold to third parties, but the report raises concerns about the ability to do this.

“We understand that opportunities to sell substantial quantities of gas, particularly on a non-firm basis, to alternative users are currently limited,” the report says.

“We have assumed for our analysis that the next best alternative for gas currently used to produce electricity is the sale of gas into the spot market on the east coast, which attracts substantial transport costs and so the economic value of gas that is not used by Territory Generation is likely to be low.”

Independent MLA Robyn Lambley said the report highlighted serious problems.

“The Government is reliant on the sale of this gas to pay for the electricity for Territorians, to balance their budget, there doesn’t appear to be a sufficient market for this gas, and therefore we’re losing even more money because of this,” she said.

The Government has rejected the report’s advice to delay its investment in renewables to save costs, saying it has little relevance given advances in technology since 2019. “I think if you were not to pursue a 50 per cent renewable energy target then you would have your head buried in the sand in today’s modern world,” Deputy Chief Minister Nicole Manison said.

Originally published as Renewable energy targets could cause ‘substantial declines’ for Territory Generation: Report