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25 March 2024
Department of Climate Change, Energy, the Environment and Water
Submission uploaded via Have Your Say website
To whom it may concern
RE: Capacity Investment Scheme (CIS) Implementation Design Paper
Introduction
The Australian Sugar Milling Council (ASMC) is the peak industry organisation for the raw sugar manufacturing sector. We represent five sugar manufacturing companies which collectively produce
85 percent of Australia’s raw sugar at 13 sugar mills in Queensland.
The Australian milling sector has a long history of producing cogeneration electricity. In 2023 the sector generated almost 1 million MWh’s of green co-generated electricity from 440MW’s of installed co- generation capacity from units ranging from 9 to 67.2 MW of nameplate capacity. This electricity is synchronous and provides valuable reliability and security to the grid. Some export generators are classified as Market Generators and all are classified as Non-Scheduled (per the
Scheduled generator exemption under Clause 2.2.3 (b) of the NER).
The milling sector also has capacity to augment its co-generation capacity further with an estimated additional 500 MW of cogeneration power supply possible if mills invest in factory energy efficiencies and liberalise the bagasse feedstock (taking total supply capacity to approximately 1
GW)1.
Our issues
The ASMC appreciates the opportunity to comment on the CIS Implementation Paper. The milling sector supports Government policies that de-risk renewable energy investments and the CIS has a number of strong design features. However, there are elements that we do not support and where more clarification in terms of the eligibility of cogeneration to participate in the CIS is required. Our concerns are outlined below for Government’s consideration.
CIS market assumptions should be shared
To achieve the national 82% renewable energy target by 2030, 32 GW of new renewable energy investment will be required. Furthermore, given the intermittent nature of this supply, and the need to maintain the reliability and security of the system, considerable dispatchable supply will also be required.
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L.E.K Consulting report to the ASMC, 2022
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There are a number of assumptions that support the policy design of the CIS that have not been publicly disclosed – including the bid ranges that Government believes will deliver value for money for taxpayers and for electricity consumers. Underpinning this would be forecast costs to government and assumed future market scenarios.
Sharing information on future market scenarios and government’s expectations of bid ranges will help the market determine its competitiveness to supply electricity both within and outside of the
CIS policy. Government’s intervention in the NEM via the CIS is very significant and it should be prepared to release as much information as possible to help the market make informed decisions.
Eligibility of new brownfield generation projects needs to be clarified
Over the past 100+ years, sugar mill co-generation plants have utilised the by-product cane fibre
(bagasse), and other feedstock, to generate high and low pressure steam from boilers that are used:
(1) For electricity generation (i.e. high-pressure steam to drive integrated generator turbines
that supporting systems that have been significantly upgraded or replaced over time);
and
(2) To power internal processes (e.g. high pressure steam to drive turbines and shredders
and the spent steam that is converted to low pressure steam for heating and
evaporation).
The Australian sugar industry continues to assess revenue diversification opportunities to decrease the industry’s 80 percent revenue reliance on raw sugar exports (and exposure to volatile global sugar prices). Various opportunities are currently being considered – such as more (bagasse) co- generation output. Positively, given the de-carbonisation transition currently occurring and faster than anticipated retirement of coal fired generation, the NEM will require significant additional low- emissions and dispatchable power supply of which the sugar industry is capable of supplying both.
Preliminary analysis indicates that if Queensland sugar mills were to modernise and electrify their factories, reduce bagasse consumption and ‘make available’ (liberalise) more bagasse, co- generation capacity could increase to in excess of 1 GW.
It is anticipated that almost all of the augmentations to the cogeneration systems in the sugar mills will be upgrades where bagasse to the current mill is liberalised and additional MW's of capacity is installed on the brownfield site. For example an 11 MW cogeneration system (built three decades ago for example) is augmented to a 32 MW system with 21 MW's of 'new' capacity.
If this augmentation occurs per the eligibility criteria (i.e will not have reached committed status before the CIS expansion announcement on 23 November 2023 for generation CISA tenders) how much capacity will be eligible under the CIS? ASMC seeks clarification from Government on this issue.
Generation that is not Scheduled and does not participate in central despatch should also be eligible to participate in the CIS
Some of the exporting mills are registered with AEMO as a Market Generator and sell electricity through the spot market and accept payments from AEMO for sent out generation. All mills that
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export power are currently classified as Non-Scheduled meaning they do NOT participate in AEMO’s central dispatch process which schedules the dispatch of electricity produced by Market Generators and aligns it with market and system needs.
Under the NER, generating units with nameplate ratings of greater than 30 MW’s are generally classified as Scheduled Generators and are required to participate in central dispatch. However, and consistent with clause 2.2.3 (b) of the NER, co-generation units greater than 30 MW’s in the
Australian milling sector are classified as ‘Non-Scheduled’ generating units under the following
AEMO exemptions:
Scheduled generator exemption under Clause 2.2.3 (b) of the NER
(a) their primary purpose for which the generating unit operates remains
local use, no more than 25% of the annual electricity supplied from the
generating unit (gross generation less auxiliary load) is exported to the
network, and the aggregate sent out generation at its connection point
rarely, if ever, exceeds 30MW,
or
(b) the physical and technical attributes of the generating unit are such
that it is not practicable for it to participate in central dispatch because:
- the generating unit’s fuel or energy source is dependent on an
industrial process not related to the production of electricity; or
- the generating unit is unable to vary its output in response to a
dispatch instruction for some technical reason (other than fuel supply
constraints).
The Implementation Paper requires renewable energy projects to be above 30 MW and participate in the central despatch system to ensure that projects support system reliability and affordability for consumers.
The ASMC would argue that Non-Scheduled cogeneration projects should also be eligible to participate in the NEM as consumer affordability is achieved if they are competitive in the CIS competitive bidding process irrespective of whether they are centrally despatched and because of their synchronous nature, these co-generation projects already promote system reliability.
Please don’t hesitate to contact David Rynne, Director Policy, Economics & Trade on david.rynne@asmc.com.au or 0431 729 509 for further clarification on the issues raised in this submission.
Yours sincerely
David Rynne
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