Sustainably growing energy and mining in South Australia

Sustainably Growing Energy and Mining in South Australia

CONSULTATION PAPER

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CONSULTATION PAPER

Department for Energy and Mining Level 4, 11 Waymouth Street, Adelaide GPO Box 320, Adelaide SA 5001

www.energymining.sa.gov.au

Disclaimer The contents of this paper are for general information only and are not intended as professional advice, and the Department for Energy and Mining (and the Government of South Australia) makes no representation, express or implied, as to the accuracy, reliability or completeness of the information contained in this paper or as to the suitability of the information for any particular purpose. Use of or reliance upon the information contained in this paper is at the sole risk of the user in all things and the Department for Energy and Mining (and the Government of South Australia) disclaim any responsibility for that use or reliance and any liability to the user.

http://www.energymining.sa.gov.au












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A Strategy to Support Growth State – Our Plan for Prosperity

Inviting your ideasThe Marshall Liberal government has initiated Growth State – Our Plan for Prosperity recognising we need to do things differently to create an environment that is conducive to economic growth and a more sustainable, prosperous future for South Australians.

Carefully designed to leverage South Australia’s competitive advantages, Growth State is a work plan to promote industry growth by responding to the needs of business and industries.

At its heart, Growth State articulates what government is doing, informed by what industry needs.

Growth State is a coordinated government commitment to real, concrete actions and deliverables.

Removing barriers, clearing paths, facilitating, and aggregating, Growth State will be instrumental in focusing government resources and energies. Working in consultation with industry, together we will reaffirm the positive aspects of living and working in South Australia to enhance the prospect of investing here.

The energy and mining sector is one sector where substantial prospects exist to responsibly develop opportunities, grow productivity and grow our competitiveness.

This Consultation Paper outlines current Energy and Mining programs and potential further action to support Growth State in this critical sector of the economy.

Existing industry initiatives such as the Copper Strategy, Magnetite Strategy, South Australian Hydrogen Action Plan and the Roundtable for Oil and Gas will be complemented by the Clean Energy Transition and new initiatives such as the Accelerated Discovery Initiative, Battery and Emerging Minerals Strategy and the Electric Vehicle Strategy foreshadowed in the 2019-2020 State Budget.

This Consultation Paper defines the scope of the energy and mining sector and suggests ambitious targets to support the objectives of Growth State. It also seeks feedback to define what business needs so further actions can be identified that will encourage confidence and address barriers to investment.

The final version of the Strategy will inform government of the energy and mining sector’s priority needs in delivering stronger growth and will highlight relevant government commitments.

Government will respond to sector strategies through the Growth State work plan.

We need energy and mining businesses and industry input for this Energy and Mining Strategy and your feedback on the information provided in this Consultation Paper. You can provide feedback through the Department for Energy and Mining website www.energymining.sa.gov.au/growthstrategy or email [email protected] by 1 November 2019.

http://www.energymining.sa.gov.au/growthstrategy

mailto:[email protected]

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Minister’s forewordProviding affordable energy and economic prosperity through responsible resource developmentAs South Australians, we have a shared responsibility to build a stronger, better future and fulfil our State’s true potential.

For South Australia to succeed in creating an environment that is conducive to sustainable growth, we need to embrace a different approach.

The Government of South Australia is leading this necessary change by developing Growth State.

At its heart, Growth State articulates what government is doing, informed by what industry needs.

To grow our economy, we need a plan to improve our productivity and competitiveness.

To grow our population, we need to project a confidence in ourselves that not only encourages young people see their future here but also attracts other people to want to relocate to our State.

My vision is that all South Australians benefit from the prosperity generated by responsible growth of our energy and mining sectors.

South Australia has a central role in providing reliable and affordable energy to the nation and creating prosperity through the production and export of our resources wealth.

Management of South Australia’s energy and mining assets needs to maximise the community benefit from their responsible and sustainable use.

The community owns our energy and mineral rights and there is an obligation to develop them for the benefit of the South Australian public.

A key principle of the emerging Energy and Mining Strategy is the environmentally and socially sustainable development of our resources.

This Strategy acknowledges the role renewable energy sources, oil and gas have in powering our industries and homes and sets out practical steps to build support for its continued development.

Minister for Energy and Mining Daniel van Holst Pellekaan MP

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Chief Executive’s forewordConfidently and sustainably developing pillar industries

South Australia has long been a supplier of energy and mining commodities to the world through a well-regulated framework of laws and investment policies.

Across the decades, the South Australian Government has adopted practical policies to support environmentally sustainable energy and mining industries.

South Australians rely on an affordable locally produced source of reliable energy whether they are working in industries that use gas or electricity in their operations or households heating their homes and cooking their meals.

The energy and mining industries support tens of thousands of jobs and create economic opportunities for businesses in South Australia, across the nation and internationally through export pathways that connect us with the east coast and the world.

To meet our demand for energy, the search for oil and gas continues not only in our onshore basins but also in offshore frontiers. Sustained demand from urbanising markets in our region for key commodities such as copper, uranium, iron ore, gold, mineral sands and lead support the operations of our major miners and smelters.

Fundamental for support of continued exploration and production is public trust in the laws that govern the industry. The South Australian government strives for continuous improvement of its regulations of the mining, extractives and energy industries.

The six key principles of certainty, openness, transparency, flexibility, practicality and efficiency are the foundations on which we have built our regulatory frameworks.

As part of the discussion about a comprehensive strategy, the Department for Energy and Mining is also seeking feedback on how we can build on those principles to better guide further growth with a focus on: infrastructure; trade and investment; skills and innovation; and land, water and the environment.

Chief Executive, Department for Energy and Mining Dr Paul Heithersay PSM

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ContentsInviting your ideas 3

Minister’s foreword 4

Chief Executive’s foreword 5

Focus areas for an Energy and Mining Strategy 7

Overview of South Australia’s energy and mining sector 8

Growth targets 12Energy and mining exports 13

Capital investment by energy and mining 15

Competitive energy 18

Key growth opportunities 23

Key challenges 24

Government role and focus 25

Energy and mining priorities 27Trade 27

Investment 30

Skills and innovation 31

Infrastructure 32

Land, water and the environment 34

Case studies 35Carrapateena: From discovery to development of a modern copper-gold project 35

Hornsdale: Harnessing energy storage to improve system security and affordability 36

Appendix 1 38Historical events in developing South Australia’s energy and mining industry 38

Next steps 39

Contact 39

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CONSULTATION PAPER

Focus areas for an Energy and Mining Strategy

• Capturing new opportunities from our clean energy transition – adding value to our existing advantages from in-demand resource assets and the advanced state of our energy transition.

The four overarching targets for industry and government in this Consultation Paper collectively support the sustainable 3 per cent economic growth objective for the State.

As the world advances toward a low-carbon future, South Australia has an increasing role to play in providing mineral commodities that support energy efficient cities and providing transitional fuel sources such as gas and hydrogen to support the shift to renewable energy solutions.

The Strategy also acknowledges the importance of the extractives sector to support construction, roads and infrastructure as well as industrial processes.

Our purpose is to work with explorers, producers, providers, industrial and residential consumers, landowners and regional communities to implement a comprehensive and sustainable Energy and Mining Strategy for the benefit of all South Australians.

Growth State – Our Plan for Prosperity invites the key sectors of South Australia’s economy to set ambitious goals for growth to sharpen the opportunities for investment and the policy trade-offs for government consideration.

The Energy and Mining Strategy will outline the potential for growth from this sector and inform government on industry’s needs in delivering stronger sustained economic growth.

There is an inter-relation between energy and mining, between our gas production and energy generation, between the competitiveness of energy prices and the profitability of energy-intense mineral processing, between our renewable energy capacity and our export potential.

Strategic focus areas that both reflect the relationship between energy and mining and leverage our advantages to achieve stronger economic growth are:

• More competitive and sustainable energy – creating a more competitive and productive energy sector to better power all South Australian industrial growth.

• Responsibly unlocking our resources – facilitating discovery, investment and exports of our energy and resources endowment to support sustained economic growth.

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CONSULTATION PAPER

Overview of South Australia’s energy and mining sector

• processing activities – including copper refining, graphite benefication, processing of extractive mineral materials, basic steel production and lead smelter output

• electricity and gas through the value chain – from production, generation, transmission and distribution to retail services and storage options

• energy transition opportunities – including renewable energy and new industries and value chain opportunities such as hydrogen, electric and fuel cell vehicles, and other energy storage technologies and innovation

• direct energy and mining construction activities

• equipment, technology and services for energy and mining, including:

– mining equipment, technology and services (METS) and

– expanded energy demand management options and “smart” energy technologies.

South Australia’s energy and mining sector is a significant contributor to the State’s economy, comprising $8.7 billion or about 8 per cent of the State’s annual Gross State Product (GSP) in 20181 and about 44 per cent of the State’s international goods exports, valued about $5.3 billion. Energy and mining directly employs a diverse workforce of more than 41,000 South Australians, and plays a pivotal role in the economic development of regional South Australia including through its support for Aboriginal businesses and employment.

Figure 1 highlights the regional extent of key current and proposed energy and mining projects.

Table 1 gives the Economic contribution of South Australia’s energy and minerals, 2018.

Appendix 1 shows the development of the energy and mining sector since settlement.

Energy and mining for the purposes of the Strategy includes:

• minerals and petroleum resources exploration and production activities

1 All years in this strategy refer to financial years (e.g. 2018 for 2017-18) unless otherwise stated.

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CONSULTATION PAPER

Figure 1. South Australian energy and mining projects as at 30 June 2019.

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KOOKABURRA GULLY

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JACINTH-AMBROSIA

CENTRAL EYREIRON PROJECT

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Atacama

Oakdale

TyphoonSonoran

Flinders

Mutooroo

Maldorky

Snaefell

Samphire

Poochera

KALKAROO

Tunkillia

Tripitaka

Razorback

Arckaringa

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MountGunson

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D Mineral processingQuarry/extractives lease

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CONSULTATION PAPER

?Is energy and

mining as a sector identified appropriately?

Energy and mining has been identified as one of nine agreed potential growth sectors contributing to South Australia’s growth agenda – which is to achieve a sustainable 3 per cent annual South Australian economic growth over the next five to eight years – or about twice the average growth rate for the State in the 10 years to 2018. Mining2 expanded in that period by an average 3.3 per cent a year. Energy and mining can contribute to even stronger economic growth by: • delivering affordable, reliable and secure energy

supplies in a transitioning national energy market, and • responsibly unlocking the value and opportunities

offered by South Australia’s mineral and energy resources.

South Australia’s resources advantages are considerable. South Australia hosts 65 per cent of Australia’s economically demonstrated copper resource with potential for further discoveries and expansion of existing mines such as Olympic Dam. Extensive exploration has defined a resource base of 15.9 billion tonnes of magnetite iron ore across three regions of the State, representing about 44 per cent of Australia’s economically demonstrated resource.

An extensive extractive resources industry supplies critical inputs to the State’s infrastructure and development sectors. South Australia also has domestic and international granite, slate and limestone trade opportunities.

South Australia’s oil and gas sector is experiencing an increase in exploration and production activities in both the Cooper and Otway basins as well as emerging opportunities for opening new onshore and offshore frontiers. The Cooper-Eromanga Basin has produced more than 5 trillion cubic feet (tcf ) of gas and more than 340 million barrels of petroleum liquids since the field was opened in 1969 with early indications the Cooper Basin could produce considerably more oil and a further 200 tcf of gas supply.

South Australia has a natural confluence of wind and solar resources in the Upper Spencer Gulf, Eyre Peninsula and low-cost, reliable renewable energy in regional areas with

2 Sector as defined by ABS State Accounts.

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CONSULTATION PAPER

Table 1. Economic contribution of South Australia’s energy and mining, 2017-18.

Gross value of production

$b

Contribution to Gross State Product

$b

Employment FTE jobs

ResourcesOil and gas extraction 1.20 .86 2,575Iron and non ferrous mining 4.06 2.63 8,578Non metal mining .38 .27 1,718Exploration .16 .12 249

EnergyElectricity generation 1.47 .36 1,965Electricity distribution and transmission 1.67 1.35 2,837Gas supply .38 .13 722

Manufacturing (Non metallic minerals and basic metals)

3.33 .63 6,276

Mining equipment, technology and services 2.90 1.43 9,104

Capital formation 3.54 .9 7,525

Total energy and mining 8.75 41,551

South Australia 107.4 817,222

Total as a per cent of South Australia 8.2% 5.1%Source: BDO EconSearch 2019

low-population densities. These natural advantages have supported South Australia to become an international leader in large-scale generation and on the cutting edge of storage of renewable energy with a significant number of projects underway throughout the State.

Delivering affordable, reliable and secure energy supplies in a transitioning national energy market supports a global transition toward a low-carbon future that mitigates the impacts of climate change, and increased competitiveness of all our energy-using sectors. Action on both the supply and demand side are required to improve energy productivity and reduce input costs.

The decarbonisation of the State’s electricity grid will make South Australia not only a jurisdiction with low-carbon

risk for its own export commodities but also create opportunities to export commodities such as hydrogen to assist other governments in achieving their international obligations.

South Australia is also committed to maximising the economic and job opportunities associated with renewable energy and energy storage projects across the value-chain in technologies that harness wind, solar, bioenergy, pumped hydro and thermal storage. Innovative industries, that are both connected to these technology opportunities and have access to new research, will not just unlock the value of South Australia’s advantage in energy and mining, but also contribute to efficiencies that underpin much stronger and sustained economic growth.

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CONSULTATION PAPER

South Australia’s energy and mining sectors are a target area for expansion under South Australia’s growth agenda. To achieve the agenda’s ambitious target of sustaining annual growth in Gross State Product (GSP) at 3 per cent in the decades ahead, energy and mining will need to continue and accelerate the significant contribution to economic activity of the past decade. Such a step up in pace will require higher productivity, expediting the development of the State’s project pipeline and accessing new markets for existing and emerging South Australian exports.

Energy and mining as defined in this sector Strategy comprises a substantial 8 per cent share of South Australian economic output. Despite its sustained performance as an economic contributor, the energy and mining sector has an even greater potential for growth. Forecasts for growth in global demand for key commodities supplied by South Australia and a pipeline of renewable energy and utility infrastructure projects underpin its potential for a larger contribution to future economic output.

The proposed four energy and mining targets comprise exports of both energy and minerals, private exploration expenditure, investment attractiveness and competitive energy supplies.

These targets are:

• International exports are to increase from $5.3 billion in financial year 2018 to $8 billion in 2025 and to $13 billion by 2030.

• Private exploration expenditure will increase from $158 million a year in 2018 to a sustainable average of $300 million a year by 2025.

• New capital investment in energy and mining to total $18 billion across seven years to 2025.

• Energy supplies in South Australia are to be nationally competitive before 2025 and internationally competitive by 2030.

Growth targets

?Are these four targets achievable and sufficiently bold to support our Growth State ambitions? Can these targets

serve to identify industry’s barriers and opportunities for stronger economic growth?

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CONSULTATION PAPER

Noting international exports from the sector averaged 5.1 per cent a year growth in nominal terms in the 10 years to 2018, an average 8.1 per cent annual growth proposed to 2030 is necessary to achieve the $13 billion target. While seemingly ambitious, this target rate is of similar magnitude to Australia’s unprecedented expansion of minerals and energy resources export since 2000.

Increased export sales, investment to enable growth and more competitive energy delivery are all well-recognised measures of business growth and target lower costs and productivity to drive sustained economic development beyond the energy and mining sectors. Together they support jobs and increased business activity in transport and logistics, minerals processing, mining equipment, technology and services and training and skills development well outside the mine gate.

Addressing constraints in the energy and mining sectors to achieve these four targets will engender an efficient pathway toward enhanced economic growth that aligns with South Australia’s growth agenda. Near unprecedented performance will be required in a contemporary context and, as a trade-exposed sector, energy and mining remain sensitive to international headwinds such as a commodity price cycles, a retreat towards trade protectionism and constrained capital markets.

As part of a broader effort to monitor and assess performance, these target measures can be used to assess contribution to South Australia’s growth agenda and growth in gross state product more specifically.

“South Australia’s future prosperity will be built by accelerating the growth of sectors that have strong growth prospects globally and in which the State has a comparative advantage. This requires a concerted increase in private sector investment and trade, and requires concentrated effort from the Government to remove barriers to growth.” – Stephen Joyce

Further detail on the proposed targets:

Energy and mining exportsInternational exports are to increase from $5.3 billion in 2018 to $8 billion in 2025 and $13 billion by 2030.

International exports of resources from the energy and mining sectors of $5.3 billion comprised about 44 per cent of South Australia’s total exported goods in 2018. South Australia hosts energy and mined resources that are required to meet forecast global demand, especially in identified growth sectors such as renewable technologies, urbanisation, energy efficient minerals processing and low carbon transport alternatives such electric and fuel cell vehicles.

The proposed export targets have been developed through a bottom-up energy and mining sector-by-sector and major project approach. Achieving the proposed export targets illustrated in Figure 2 does not require the full and concurrent implementation of all current South Australian energy, copper and magnetite mining and steel industry strategies or visions.

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CONSULTATION PAPER

It is however proposed as an ambitious target, requiring the concurrent and unprecedented development of a significant share of already approved or equivalent newly proposed mineral projects, oil and gas reserves and implementing existing project plans for transformed and expanded minerals processing activities, particularly in the Upper Spencer Gulf and Far North regions.

Our regional customers already regard South Australia as a reliable supplier of oil, gas and gas liquids with the Cooper Basin exporting oil and LPG through the Port Bonython processing facility since 1984.

The worldwide energy transition is also creating significant opportunities for South Australia to develop new

export industries and jobs in areas such as hydrogen, electric and fuel cell vehicles, the battery value chain and smart management of grids with high penetration of renewables and flexible demand (such as electric vehicles).

While the proposed targets are yet to quantify these export opportunities, CSIRO estimates that based on growing demand from countries such as Japan, South Korean and China, a hydrogen export industry could be worth $1.7 billion and provide 2,800 jobs in Australia by 2030.

Figure 2. South Australian energy and minerals exports (nominal $Ab). Source: ABS, DEM estimates.

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CONSULTATION PAPER

South Australia has developed a Hydrogen Action Plan and is actively supporting the national strategy for developing this industry. Through the Renewable Technology Fund, the South Australian government has provided grants and concessional loans to encourage projects seeking to demonstrate the feasibility of local hydrogen production and supply capacity that can potentially be scaled-up as new markets emerge both internationally and within Australia.

With established infrastructure, and transport and handling practices, ammonia is one of the most prospective chemical carriers of hydrogen for export purposes.

Opportunities for enhanced interstate trade in electricity, oil and gas and other energy and minerals resources are also not included in these export targets.

This more than doubling of current export values in nominal terms to 2030 equates to an average annual growth rate of real export values of 5.4 per cent a year to 2030.

Capital investment by energy and miningPrivate exploration expenditure will increase from $158 million a year in 2018 to a sustainable average of $300 million a year by 2025.

New capital investment in the energy and mineral resources sectors to total $18 billion across seven years to 2025.

Energy and mining are capital-intensive industries. South Australia has already attracted substantial investment in mineral resources production and processing during the past decade including recent upgrades to smelting capacity at both Roxby Downs and Port Pirie.

Proposed expansions of production at Olympic Dam and the Whyalla Steelworks augur well for continued capital investment. BHP has already moved production into the Southern Mine Area and has completed an extensive Smelter Maintenance Campaign at its Olympic Dam project. A major project declared development proposal seeks to increase annual copper production to 350,000 tonnes, which will require further capital investment. OZ Minerals’ $900 million Carrapateena project is under construction with production expected before the end of 2019 and a proposed expansion of up to $1.3 billion already under consideration.

H2U is developing a 50 tonne a day renewable ammonia facility near Port Lincoln. The State government has committed a $4.7 million grant and a $7.5 million loan from the Renewable Technology Fund to support this project. The facility would be 100 per cent powered by South Australian wind and solar energy, producing renewable ammonia to supply the mining sector’s demand for beneficiation and explosives as well as for refrigeration and agricultural purposes. There is potential for international shipping of renewable ammonia from H2U’s Port Lincoln production facility.

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GFG Alliance has already signed contracts for capital investment projects worth an initial $600 million to put the Whyalla Steelworks on a more commercially sustainable footing by boosting steel production to 1.8 million tonnes a year and has acquired iron ore resources on the Eyre Peninsula to add to its existing mineral assets in the Middleback Ranges.

Iluka Resources has initiated an expansion into the Ambrosia deposit of its Jacinth-Ambrosia heavy mineral sands project in the Eucla Basin and has identified other potential near mine deposits that provide a pipeline of future resources that could be shipped through the Port of Thevenard.

South Australia also has several resource projects in care and maintenance that can potentially return to production in response to more favourable commodity

MINERAL EXPLORATION

$4.6 Billion Production

3 Major Mineral Processors

$150.7 Million Royalties

$955 Million Capital Expenditure

$76.1 Million Exploration Expenditure180

companies700+

mineral exploration licences

with

MINERAL PROJECTS

MINERAL PROCESSING

MINES & DEVELOPING PROJECTS

Nyrstar, BHP & GFG Alliance

MRD Production returns 2018 MRD Royalties 2017-18

Company releases 2017-18

ABS Cat. 8412.0 2018

08/04/2019-205102_001

South Australia Mineral Industry Project Pipeline

www.energymining.sa.gov.au/minerals/invest

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prices, such as the Honeymoon uranium mine.

Graphite projects Siviour, Campoona Shaft and Kookaburra Gully and metalliferous projects such as Hillside copper on Yorke Peninsula, Grants and Maldorky iron ore and Kalkaroo and Mutooroo copper in the Mid-North, and the Central Eyre Iron Project on the western Eyre Peninsula are frontrunners in an extensive pipeline of resource projects advancing through the evaluation, development assessment and permitting process.

Recent investment in exploration in the Otway Basin also augurs well for the reinvigoration of the former gas production sector in the Limestone Coast region and its support for local manufacturers. The discovery of gas with Haselgrove 3 has rekindled interest in this

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CONSULTATION PAPER

onshore basin with further exploration wells at Haselgrove 4, Dombey 1 and Nangwarry 1 as well as proposed investment in a new gas processing plant supported by a Commonwealth grant.

As observed during the recent Australian mining boom (Figure 3), investment in mining projects is a key growth driver and direct source of short-term economic activity as plant and equipment is installed and transport infrastructure and other construction activities are undertaken. Significant export growth of mineral products only occurs after significant capital investment in project development and production.

Effective investment in exploration across a long timeframe is pivotal to resource discovery. A $300 million exploration target by 2025 may not seem ambitious noting that South Australian exploration

expenditure exceeded this value in more than half of the past 10 years (Figure 4).

A sustainable target has been set in the context of the acknowledged variability in private exploration due to cyclical market conditions. About $11 billion of the ambitious $18 billion capital investment target aligns with the proposed energy and minerals export targets. The remaining $7 billion in capital investment out to 2025 will support more competitive, reliable and secure energy, and new industries and job opportunities associated with a successful energy transition.

To further encourage exploration and foster collaboration through information sharing and testing of new technologies, the South Australian government has launched a $10 million Accelerated Discovery Initiative (ADI).

Figure 3. Three phases of the Australian mining boom. Source: Resources and Energy Quarterly, March 2018.

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The ADI takes a more collaborative approach to minerals exploration funding to ensure the knowledge, know-how and broader economic benefits of any supported drilling program are shared with other explorers and industries. The initiative also seeks to reduce the substantial financial risk that resource companies take on when exploring green-field targets and new frontiers.

The ADI’s objectives include: • funding for single deep holes and/

or multiple hole drilling programs in frontier terrains or that test new minerals exploration concepts in other areas

• geophysical programs that focus on the application of innovative technology and concepts

Figure 4. South Australian private exploration expenditure ($m nominal). Source: ABS.

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TARGET$300 million

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• proof-of-concept proposals that are not restricted to a technical discipline to encourage innovation in the sector

• logistical support associated with testing exploration targets in remote greenfields and new frontier regions

• identification and testing to EPA-prescribed guidelines of new groundwater resources

• collaborative technology and/or machine learning projects that will benefit exploration.

Competitive energyEnergy supplies in South Australia are to be nationally competitive before 2025 and internationally competitive by 2030.

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CONSULTATION PAPER

Energy is essential to South Australian economic activity and is a vital input for many industries. In some manufacturing sectors, energy costs can range from 5-10 per cent of sales revenue. For most sectors of the South Australian economy, energy costs represent less than 2 per cent of sales.

However, South Australian businesses have experienced unprecedented increases in electricity and wholesale gas prices in recent years, and this is having a dramatic impact on their profitability and ability to compete.

• Real effective prices for commercial and industrial electricity customers increased by more than 50 per cent in the past 10 years to an average 15.7 c/kWh in 2018 across the national electricity market3.

• Gas contract prices have increased from historical averages of $3-4 a gigajoule (GJ) to about $8-11 a GJ with the ACCC indicator LNG netback price currently averaging $8 a GJ for 2019.

South Australian electricity prices have also been at the upper end both nationally and internationally, as depicted in Figures 5 and 6 showing indicative electricity prices.

State and national policy reform and industry responses may already be having an impact on energy prices. The Australian Energy Market Commission (AEMC)4, the expert energy adviser to Australian governments, has found residential prices in South Australia fell by 1.9 per cent in 2018, and expects prices

3 Australian Competition and Consumer Commission (ACCC).

4 AEMC, 2018 Residential Electricity Price Trends, Final report, 21 December 2018.

to fall by an average 3.3 per cent a year for the next two years as new generation supply enters the market.

Futures prices for wholesale electricity in South Australia are significantly lower than the average $119 a MWh volume weighted wholesale prices of over the last three financial years (Figure 7).

In addition to competitive energy supplies, more productive industry choices and more productive energy services for industry can contribute to South Australia’s growth agenda objectives. Improved energy productivity will help industry adjust to the energy transition, boost competitiveness and economic growth – and reduce South Australia’s greenhouse gas emissions.

The National Energy Productivity Program (NEPP) is targeting improving Australia’s energy productivity by 40 per cent between 2015 and 2030 (Figure 8). South Australia could develop a state-based target to inform energy market reform and energy efficiency measures.

20


CONSULTATION PAPER

cents/kWh (AUD) 205221_002

Denmark 50.2

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Source: VaasaETT data provided to ACCC.

Figure 6. Indicative international electricity prices 2018. Nominal terms, incl. GST. Source: ACCC 2018.

NSW South Australia South east QueenslandVictoria

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205221_001

Figure 5. Indicative SME electricity prices 2018. Real $2017 excl. GST. Source: ACCC 2018.

21


CONSULTATION PAPER

Figure 7. Quarterly base futures prices, Q2 2019 – Q1 2023. Source: AER 2019.

Figure 8. South Australian and Australian energy productivity performance. Source: Department of the Environment and Energy (2018).

1989

-90

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205221_005

22


CONSULTATION PAPER

? Increased energy competitiveness and productivity have two primary impacts on economic growth. More productive, energy-intensive sectors will be more inclined to grow and/or establish in South Australia. South Australia also has the potential to produce and export more – and new – energy products. At a time of growing international concern around the risk of carbon liabilities in finance, insurance, and product sources, South Australia could offer a low-risk investment destination.

Exporting South Australian sunshine is now a real possibility due to advances in hydrogen and ammonia production linked to renewable energy storage and transport and the emergence of demand particularly in North Asia led by Japan and South Korea.

Following the closure of the Hazelwood power plant in Victoria, South Australia became a net electricity exporter into the National Electricity Market in 2018. This represented a turnaround of 3033 GWh and reduced the State’s reliance on energy imports.

Interstate exports of gas, steel, gold and mineral sands are already substantial contributors to South Australia’s two-way trade across our borders. Energy offers the potential to provide another significant addition to this cross-border trade, particularly with improved transmission interconnectivity within the State such as a proposed upgrade for the Eyre Peninsula and through a reformed National Electricity Market (NEM) that encompasses renewable energy zones.

In the short to medium term, the recent upgrade of the Heywood Interconnector with Victoria has bolstered a significant expansion in interstate trade in energy generation with a potential for further increased exports using the proposed South Australia-New South Wales Interconnector between Robertstown in the Mid-North of the State and Wagga Wagga in the NSW Riverina.

Effectively managing the expected growth in electric vehicle (EV) ownership (up to 50 per cent of new car sales are forecast to be electric by 2030) also provides significant opportunities for the State. The transition to EVs can be expected to reduce transport costs, and contribute to smarter cities and reduced greenhouse gas emissions. There are also broader energy market opportunities for South Australia from growth in EV use. Firstly, expanded EV ownership will drive increased demand for electricity. Secondly, productive investment in demand management and smart grid technology should put downward pressure on electricity prices.

Should we adopt an energy

productivity target?

23


CONSULTATION PAPER

Key growth opportunitiesSouth Australia’s key opportunities to grow its energy and mining sector include expanded copper, steel and lead production, mineral and petroleum exploration that has the potential to lead to new discoveries, development of renewable energy generation and storage, and potential new export industries such as hydrogen and ammonia. Supporting low-cost energy delivery at nationally competitive prices also has spill over effects for existing local energy intensive industries and as an investment attraction tool. Key drivers of growth will be South Australia’s global reputation as a prospective jurisdiction for in-demand commodities such as copper, iron ore, graphite, zinc, gold, silver, zircon and other heavy mineral sands. South Australia’s stable government and open and transparent regulatory processes and a positive record as a reliable global supplier also support future growth. Demand for commodities continues to be driven by the continued urbanisation in Asia, a global transition toward low-carbon forms of production, transport and energy generation and sustained global economic growth.Facilitating the existing pipeline of transformative investment projects in both the resources and energy sectors will create demand for jobs and opportunities for the Mining Equipment, Technology and Services (METS) sector as well as generate and sustain demand for a highly skilled and diverse work force.

The internationalisation of the resources sector also offers growing export opportunities for South Australian-based METS suppliers, particularly in innovative and technology-focused concepts such as automation and machine learning.

South Australia’s ambitions for energy and mining also align with Australia’s National Resources Statement, which sets out the Commonwealth’s policy and long-term reform agenda to position the nation’s resources sector as the world’s most advanced, innovative and successful.

Similarly, the COAG Energy Council is developing a Strategic Energy Plan to provide a clear focus for the Council’s priorities and ensure clarity of direction to both the three key market bodies represented by the Energy Security Board and participants in the National Electricity Market. This ongoing work will also feed into the key opportunities for growing the energy sector in South Australia.

? What other growth opportunities should we

be pursuing? Are there any other opportunities for

leveraging South Australia’s clean energy transition to

grow jobs and investment?

https://www.industry.gov.au/data-and-publications/australias-national-resources-statement

https://www.industry.gov.au/data-and-publications/australias-national-resources-statement

http://www.coagenergycouncil.gov.au/publications/consultation-proposed-metrics-strategic-energy-plan

http://www.coagenergycouncil.gov.au/council-priorities

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CONSULTATION PAPER

?Key challenges

Are all the key challenges to

strong sustained growth in the

energy and mining sector

captured in the Consultation

Paper?

The greatest challenge to sustained growth of South Australia’s energy and mining sectors is sensitivity to international headwinds such as foreign exchange movements, commodity price fluctuations, a possible retreat toward trade protectionism and a slowdown in economic activity in Australia’s major trading partners.

Maintaining growth at an average 3 per cent is also unprecedented in a contemporary context although South Australia has historically benefited from international copper booms, favourable terms of trade and a turn of the century upswing in iron ore prices.

Domestically, the challenges include, but are not limited to:

• a reluctance by alternative land users to embrace coexistence

• high cost of servicing remote locations with infrastructure exacerbated by an inability for industry to effectively collaborate on allocation of investment toward shared infrastructure

• difficulties in attracting capital market investment to fund project development

• federal-state policy uncertainty, particularly in energy and climate change interaction, that discourages investment

• a geology that hides significant ore bodies at a greater depth of cover than competing resource jurisdictions.

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CONSULTATION PAPER

Government role and focusThe South Australian government recognises the primary role of private investment and innovative effort by industry in delivering economic growth from the energy and mining sector.

The growth targets proposed in this sector Strategy are intentionally ambitious. They will require a sharp focus on addressing constraints to growth and facilitating the already foreshadowed pipeline of investment projects if they are to be realised.

The government focus is to build the environment for competitive businesses to succeed and create the conditions for business and economic growth. Critical micro-economic reform will address misaligned incentives that lead to inefficient or uncoordinated investment in key infrastructure, as well as de-risking growth opportunities through improved strategic planning at a state-wide level.

In the following section of this Consultation Paper, policy priorities and scope for further action have been organised under the Growth State streams of trade and investment, infrastructure, innovation and skills, and land, water and environment.

These proposed energy and mining priorities have been developed based on existing industry strategies and government programs.

Existing effective energy and mining industry engagement structures include:

• the South Australian Minerals and Energy Advisory Council

• the South Australian Minerals and Petroleum Experts Group

• South Australian Chamber of Mines and Energy, Association of Mining and Exploration Companies, Australian Petroleum Production and Exploration Association, Australian Pipelines and Gas Association, Australian Energy Council and the Minerals Council of Australia

• industry strategies such as Copper Strategy, Magnetite Strategy, the Roadmap for Unconventional Gas Projects and the Hydrogen Action Plan

• company-level engagement for major projects conducted through the Resources Investment and Infrastructure Task Force, Steel Task Force, the Roundtable for Oil and Gas Projects and the Hydrogen Economy Steering Committee.

The South Australian government has recently adopted commodity-based strategies with the aim of providing leadership in strategic planning, guiding industry collaboration and facilitating project management through the assessment and approvals phase of development.

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CONSULTATION PAPER

Commodity-based industry strategies such as Copper Strategy, Magnetite Strategy, and the Hydrogen Action Plan have helped to sharpen the State’s focus on accelerating investment in areas of the economy where there is a clear competitive and comparative advantage. An updated Roadmap for Oil and Gas Projects in South Australia is in progress for release in late 2020. The government has also designed a Multiple Land Use Framework to help encourage coexistence with different industry sectors to improve the productivity and efficiency of capital allocation. South Australia also supported the Commonwealth Government’s review of access arrangements for the Woomera Prohibited Area (WPA) conducted in 2018 by Dr Gordon de Brouwer PSM. While the recommendations of the review reinforced the critical importance of the WPA to national security, they also recognised the area’s considerable value to South Australia for other economic activities including mineral resources development. To achieve the aims of the Magnetite Strategy, it will be critical to develop the sector’s potential outside of the WPA.For the energy and mining sector to significantly contribute to Growth State, the government will need to build on this solid foundation of work and sharpen its focus on the key areas of: • reducing red tape and entrenching

more efficient, digital-by-default assessment processes

• facilitating the capacity of major projects to attract capital investment

• improving and promoting the State’s international attractiveness as an investment destination through

continued engagement with major and emerging trade partners

• collaborative strategic planning • supporting the development and

uptake of innovative mining and exploration technologies, especially those that create export opportunities for the METS sector

• streamlining land access • supporting the development of

innovative technologies in the energy sector, including opportunities to normalise and adopt hydrogen to decarbonise the energy supplies

• further energy market reform to encourage greater productivity, reduction in carbon risk through integrated policy, and market evolution to maximise the benefits of renewable energy sources.

? Are there any priority areas that should be the focus of the Energy and

Mining Strategy? Is there a greater or lesser role for

government/industry? Where can the South

Australian government work in collaboration

with industry, Commonwealth

Government and national industry groups to support the Strategy

over the next 5-10 years?

http://www.energymining.sa.gov.au/minerals/about_us/initiatives/south_australias_copper_strategy

http://www.energymining.sa.gov.au/minerals/about_us/initiatives/magnetite_strategy


http://www.renewablessa.sa.gov.au/topic/hydrogen/hydrogen-action-plan

http://www.energymining.sa.gov.au/minerals/land_access/multiple_land_use_policy_framework

http://www.defence.gov.au/woomera/review.htm



http://www.defence.gov.au/woomera/review/review-2018.htm

27


CONSULTATION PAPER

Energy and mining prioritiesGrowth State – Our Plan for Prosperity will consist of policies, programs and projects collectively designed to lift the State’s competitiveness and attract investment, with a focus on export sectors across four broad streams of government action – trade and investment, skills and innovation, infrastructure, and land, water and the environment.

The Energy and Mining Strategy seeks to be a clear statement of the energy and mining industries priority needs in contributing to stronger economic growth.

Government will consider these priority needs through both the development of Growth State policies, programs and projects and the work of the Department for Energy and Mining or in collaboration with other government agencies and advisory bodies. Collaboration with the Department for Trade, Tourism and Investment, the Department for Innovation and Skills, Primary Industries and Regions SA, the Department for Environment and Water and Infrastructure SA will help to guide both priority needs and policy, program and project implementation.

Industry collaboration through existing steering committees and Task Forces will also play a critical role in addressing these priority areas. The Energy and Mining Strategy seeks to establish a goal, recognise a challenge and plot a way forward for each of the priorities.

Trade • The goal

Grow production of in-demand commodities such as copper, magnetite, oil, natural gas, critical battery chain minerals and steel, and develop export pathways for steel, hydrogen and ammonia. Triple copper production through expanding existing exporters and discovering new copper resources, facilitate $10 billion of investment in iron ore projects, enable the Whyalla Steelworks Transformation and support the first shipments of South Australian hydrogen to North Asia.

In each of the four streams, are

the proposed industry goals, key challenges and scope for further action

correctly identified?

What more could be done?

?

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CONSULTATION PAPER

• The challenge Ensuring that the expansion of copper production captures value-add processing in South Australia, debottlenecking road, rail, power, gas and water infrastructure to enable greater commodity exports, encouraging investment in a hydrogen-export facility. Streamlining land access and encouraging broad acceptance of multiple land use frameworks. Attracting sufficient capital to develop new port facilities and associated transport infrastructure such as rail, road and pipelines.

• What has been done to date Supported exploration through investment in new geoscientific data, declared BHP’s proposed increase in production at Olympic Dam a major development and promoted South Australia’s Copper Strategy to global buyers and investors.

Supported the widening of the channel for access to Outer Harbour, encouraged the opening of the Port of Whyalla to third-party access, provided strategic planning on regional mining and infrastructure options including a deep-water port in the Spencer Gulf, developed a Hydrogen Action Plan to identify export pathways for locally-produced renewable hydrogen and ammonia.

Co-designed, with industry collaboration, a Magnetite Strategy that identifies potential mining projects and port and infrastructure options to establish export pathways but also includes support for the Whyalla Steelworks Transformation.

Provided a financial arrangement to support the Port Pirie Transformation to maintain lead, silver and other metal exports.

• Scope to go further Update South Australia’s Copper Strategy to sharpen its focus on expanding existing production, gathering and publishing geoscientific data through innovation, surveys and supporting drilling campaigns that use new technologies and techniques to assist explorers target new deposits to add to the State’s resources inventory.

Align with the work of MinEx Cooperative Research Centre to develop and apply innovative techniques and technologies that improve the efficiency and therefore drive down the cost and reduce the risk of exploration under cover.

Update the Magnetite Strategy to acknowledge the substantial investment in new technology and facilities required to transform GFG Alliance’s Whyalla Steelworks as well as SIMEC Mining’s intention to develop South Australian magnetite resources beyond the Middleback Ranges for local processing into steel exports. The Strategy will continue to facilitate iron ore projects in the Braemar Province, Far North and Eyre Peninsula that have an export focus.

Investigate and capture, through the value chain, trade opportunities presented by our battery mineral resources and current battery assembly activities.

http://www.energymining.sa.gov.au/minerals/about_us/initiatives/south_australias_copper_strategy



http://www.energymining.sa.gov.au/resources_infrastructure_and_investment_task_force/steel_task_force

http://www.energymining.sa.gov.au/resources_infrastructure_and_investment_task_force/port_pirie_transformation

https://minexcrc.com.au/

https://minexcrc.com.au/

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CONSULTATION PAPER

Facilitate the development of a renewable hydrogen export economy through enabling development of significant scale renewable energy production both solely or mainly for the purpose of hydrogen production. Continue international engagement with markets that will be demanding renewable hydrogen, and a pathway to using hydrogen to decarbonise energy supplies, developing local economies of scale and adopting new electricity storage options.

Inform the work of Infrastructure SA on five-year and 20-year strategies to prioritise pathways for exports of expanded mineral resources production and the development of new energy exports such as hydrogen.

The efforts of the Department for Trade, Tourism and Investment to step up engagement with key markets will also support efforts to boost our trade potential.

The Commonwealth has also secured Free Trade Agreements (FTA) with China, Japan, South Korea, New Zealand, Singapore, Thailand, the U.S., Chile, the Association of South East Asian Nations (ASEAN), Malaysia, and Canada and Mexico through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Local exporters should be encouraged to leverage these access agreements that reduce and eliminate barriers to Australian goods and services.

Scaling up hydrogen’s export potentialSince the launch of the South Australian Hydrogen Roadmap, we have implemented initiatives to assist the gradual scaling up of this fledgling industry, such as:

invested more than $17 million in four green hydrogen projects

developed an interactive hydrogen map to help investors and project developers identify potentially suitable sites in South Australia for hydrogen infrastructure

attracted the 2019 International Conference on Hydrogen Safety to Adelaide and South Australia’s Hydrogen Action Plan

supported Australian Chief Scientist Dr Alan Finkel’s proposal for the COAG Energy Council-endorsed National Hydrogen Strategy

become an observer to Hydrogen Mobility Australia’s member meetings

established a cross-government Hydrogen Regulatory Working Group

sponsored the Future Fuels Cooperative Research Centre

sponsored the 2018 CSIRO National Hydrogen Roadmap

supported delegations to and from Japan and South Korea

opened representative offices in Shanghai, Tokyo and Kuala Lumpur to support trade and development.

South Australia’s growth agenda will support ongoing efforts to guide the continued development of a local hydrogen industry.

http://www.renewablessa.sa.gov.au/topic/hydrogen/hydrogen-projects

http://www.renewablessa.sa.gov.au/topic/hydrogen/hydrogen-projects

http://location.sa.gov.au/HydrogenPotential1/

http://location.sa.gov.au/HydrogenPotential1/

https://www.hysafe.info/ichs2019/

https://www.hysafe.info/ichs2019/


http://www.coagenergycouncil.gov.au/publications/establishment-hydrogen-working-group-coag-energy-council

http://www.coagenergycouncil.gov.au/publications/establishment-hydrogen-working-group-coag-energy-council

https://www.hydrogenmobilityaustralia.com.au/

https://www.hydrogenmobilityaustralia.com.au/

https://www.minister.industry.gov.au/ministers/cash-seselja/media-releases/transitioning-future-fuels-sights-researchers

https://www.minister.industry.gov.au/ministers/cash-seselja/media-releases/transitioning-future-fuels-sights-researchers

https://www.csiro.au/en/Do-business/Futures/Reports/Hydrogen-Roadmap

https://www.csiro.au/en/Do-business/Futures/Reports/Hydrogen-Roadmap

30


CONSULTATION PAPER

Investment • The goal

Attract new capital investment in value-added minerals and petroleum extraction and processing, renewable energy generation, hydrogen production and distributed and grid-scale storage technologies and ensure South Australia is globally recognised as a desirable investment destination.

• The challenge International perception that the absence of integrated energy and climate change policy at the national level is discouraging investment decisions.

Overcoming the comparative disadvantage of South Australia’s deep cover that creates a higher risk for exploration companies seeking to find new discoveries to add to the State’s resource inventory.

Ensuring effective, efficient and transparent environmental assessments and permitting of investment projects.

Modernising safety regulations around gas production, storage and transportation to reflect the emergence of hydrogen as a new no-carbon fuel source for transport and energy generation.

• What has been done to date Supported major development assessment of major mineral production and processing facilities such as BHP’s Olympic Dam and the Port Pirie Transformation.

Committed $50 million towards co-investment in developments that support the sustainability of steel manufacturing in Whyalla.

Provided $50 million for the Grid-Scale Storage Fund and $100 million to the Renewable Technology Fund to support investment in low carbon energy projects.

Participated in national and international industry forums to showcase and promote South Australia as an investment destination.

Provided funds to support early works for the delivery of a new interconnector with New South Wales to provide South Australians with access to cheaper energy prices, a more reliable supply and more opportunities to export renewable energy.

Attracted the International Hydrogen Safety conference to Adelaide.

• Scope to go further Work with the Commonwealth and other States and territories through the COAG Energy Council to develop a clear and long-term climate change policy that incorporates energy policy.

Support the work of the Australian Energy Market Operator to implement an integrated system plan that encourages further investment in energy generation and transmission.

Continue to enable and facilitate grid-scale storage and renewable energy generation to provide reliable and secure electricity. To more economically manage a national electricity market approaching 50 per cent renewables and one with electric vehicle sales penetration of 15-50 per cent by 2030.

http://www.energymining.sa.gov.au/resources_infrastructure_and_investment_task_force/port_pirie_transformation

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CONSULTATION PAPER

Encourage the implementation, and local development, of demand management concepts such as Virtual Power Plants and smart grid management.

Work with GFG Alliance on its proposed 1 gigawatt renewable energy supported intensive industrial hub in the Upper Spencer Gulf as well as the other 7 gigawatt of renewable generation and 5 gigawatt of storage projects under development in South Australia ranging from wind and solar farms through big batteries and pumped hydro to compressed air energy systems.

Expand wind and solar projects into new renewable energy zones in the Far North and Eyre Peninsula in line with the rollout of transmission infrastructure upgrades.

Facilitate case-managed project assessment of major mineral production and processing facilities such as BHP’s Olympic Dam and OZ Mineral’s Carrapateena expansion. Crystallise the commitment of $50 million towards co-investment in developments that support the sustainability of steel manufacturing in South Australia and the Whyalla transformation.

Engage with Japan and South Korea to support the signing of supply contracts for South Australian hydrogen exports.

Support the domestic hydrogen sector through opening multiple value streams.

Skills and innovation • The goal

Increase the number of South Australian school leavers seeking to become mining and energy industry graduates and skilled workers, attract high-skilled workers to South Australia in alignment with the State’s population growth strategy and foster industry innovation including collaboration with universities and start-ups on research, development and commercialisation of new concepts and technologies.

• The challenge Innovation in exploration required to support resource discovery.

Imperfect industry signals for energy and broader resource efficiency and productivity.

Attracting undergraduates into science, technology, engineering and mathematics (STEM) courses such as geoscience and engineering to support the energy and mining sectors.

Skilling young people for entry-level jobs in mining, onshore oil and gas production and the hydrogen supply chain.

Building the capacity of Aboriginal students and enterprises to seek jobs and business opportunities in the resources and energy sectors.

Encouraging the private sector to work more closely with academia and start-ups to identify challenges to overcome through technological and conceptual innovation.

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CONSULTATION PAPER

• What has been done to date Supported the University of Adelaide to develop industry-focused courses and work with the private sector on industry specific research and development opportunities that support innovation.

Established the Onshore Petroleum training facility at the Tonsley innovation precinct.

Engaged with the Resources and Engineering Skills Alliance (RESA) to promote job opportunities in the resources and energy sectors.

Established Stronger Partners, Stronger Futures and facilitated the Cooper Eromanga Basins Aboriginal Conference (CEBAC) to improve industry engagement with traditional owners.

• Scope to go further Support innovation in private exploration through precompetitive geoscience.

Improve energy (and broader resource) productivity through energy market reform and efficiency measures.

Help to design new initiatives to channel apprenticeship support specifically into resource and energy focused enterprises including the METS sector.

Promote geoscience and other related STEM skills throughout the school curriculum.

Work with industry to promote the desirability of careers in the resources and energy sectors.

Foster productivity in the upstream petroleum sector through the Roundtable for Oil and Gas.

Continue to foster collaboration between academia, start-ups and the private sector.

Engage with the Office of the Industry Advocate to develop a framework for the Far North Aboriginal Economic Collective and its aim to increase employment and business growth for Aboriginal people in South Australia’s Far North.

Infrastructure • The goal

Efficient infrastructure services are available to meet industry needs in unlocking the potential value of South Australia’s energy and mining sectors and transforming our existing resource value-adding industries.

Energy infrastructure to support reliability and system security and more affordable supply to enable economic growth.

• The challenge Recognising emergent infrastructure demand – in the past decade the South Australian government has invested significantly in forecasting infrastructure requirements based on the probabilistic assessment of mining project potential.

Historically, Australian governments had a lead role in constructing and operating productive multi-user infrastructure. Microeconomic reforms introduced in the 1990s led to privatisation of state-owned assets and the dominant expectation in all Australian jurisdictions that the private

https://www.resa.org.au/

https://www.resa.org.au/

http://www.energymining.sa.gov.au/minerals/land_access/stronger_partners_stronger_futures

http://www.energymining.sa.gov.au/minerals/land_access/stronger_partners_stronger_futures

33


CONSULTATION PAPER

sector will design, finance and operate much of the productive infrastructure required for the resources and energy sector.

South Australia has not historically achieved high levels of coordination of infrastructure investment particularly across multiple commodity types, to reduce the cost of investment.

However, the private sector faces significant challenges in the unaided commercial provision of required assets and facilities. Infrastructure development relevant to the energy and mining sector is synonymous with significant capital cost, long lead times and lengthy payback periods, but even this belies the complexity of the geographical, governance, and structural challenges facing proponents.

• What have we done to date Developed copper and magnetite strategies that include a forum for discussing the potential for shared infrastructure.

Established Infrastructure SA to identify and prioritise infrastructure projects that unlock economic growth potential of the energy and mining sectors.

• Scope to go further Support the work of Infrastructure SA to prioritise projects that support productive investment in the energy and mining sector including sealing of the Strzelecki Track to the Cooper Basin, expanded multi-commodity

port capabilities in the Spencer Gulf including export pathways for hydrogen and strategic rail, road, electricity, water and pipelines.

Establish infrastructure corridors for highly prospective energy and mining regions.

Projects identified for possible inclusion in Infrastructure SA’s 20-Year Strategy are:

– Multi-access, multi-product port(s) in the Upper Spencer Gulf

– SA–NSW Interconnector

– Reinforce Eyre Peninsula Electricity Transmission Network

– Grid Scale Storage

– Upgrade Far North Electricity Transmission Network

– South East SA (SESA) Gas pipeline spur

– Whyalla gas lateral

– Resource sector rail loops

– Far North water pipeline upgrade

– Braemar utilities corridor

– Sealing Strzelecki Track

– Innovative and soft infrastructure solutions include:

Demand managementDigitisationSmart Energy TechnologiesDistributed energy solutions

https://infrastructure.sa.gov.au/

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CONSULTATION PAPER

Land, water and the environment • The goal

Improve land use allocation to encourage the uptake of its most productive option, streamline regulation and minimise risks to the environment.

• The challenge Lack of agreement on coexistence models for land use allocation especially in regional South Australia.

Stronger South Australian economic growth and construction activities will require access to extractive materials and efficient materials transport services to meet construction demand.

Scarcity of water resources to support an expected upswing in demand from resource and energy projects.

One-third of the State’s area has been set aside for priority use by the Department of Defence for training and research and development.

Increased levels of oil and gas production can be attained but must do so in ways that minimise aquifer impacts.

Greenhouse gas emissions associated with oil and gas will inevitably need to be addressed – and technologies such as carbon capture, utilisation and storage (CCUS) is one such promising solution.

Exports of natural gas will assist a more rapid switch from coal in north Asian economies. A potential increase in fugitive emissions

should be considered alongside the displacement of higher emission sources of power, and the potential for the electricity sector, particularly through the uptake of hydrogen, to be a local and global driver of decarbonisation.

• What has been done to date Enacted transparent and consultative environmental assessment processes through the Development, Mining, and Petroleum and Geothermal Energy Acts.

Designed a Multiple Land Use Framework to guide more efficient resource allocation especially in regional South Australia.

Partnered with the Goyder Institute to support the work of the GFlows project to identify remote water sources.

Supported an agreed access regime for the Woomera Prohibited Area.

Supported the COAG Energy Council to redesign the National Energy Market to incorporate renewable energy generation including South Australia’s role as lead legislator.

Provided a financial arrangement to enable a transformation of Port Pirie’s smelter to improve environmental and health outcomes for the local community.

• Scope to go further Investigate alternative water supplies for remote and regional resources projects as well as improved understanding of the impacts and management options for co-produced water, especially where

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these alternatives can assist the development of coexistent industries such as tourism, defence and pastoralism.

Red tape reduction including greater use of LEAN processes and digital-by-default permitting.

Further legislative and regulatory reform to support the development of a hydrogen industry as a no-carbon alternative for domestic use, transport and energy generation that delivers better environmental outcomes.

Case studiesCarrapateena: From discovery to development of a modern copper-gold projectThe discovery of the Carrapateena iron oxide – copper–gold deposit in 2005 is an exemplar of the success of the Plan for Accelerated Exploration (PACE) and the ability of targeted government support to bring forward economic activity in the mineral resources sector. The discoveries of Olympic Dam and Prominent Hill had already identified the Gawler Craton as highly-prospective for iron oxide – copper–gold (IOCG) deposits. However, the drilling intersection part-funded by PACE not only confirmed Carrapateena as a world-class discovery, but also become a major driver of exploration sentiment in South Australia.

RMG Services’ discovery with the support of PACE funding led to further exploratory drilling as part of a joint venture with Teck Resources Cominco Ltd Exploration. Reinvigorated interest in the prospectivity of the Gawler Craton led to exploratory drilling by OZ Minerals in nearby tenements that confirmed the Khamsin IOCG deposit in late

Streamlining approval processes through Commonwealth-State bilateral agreements for environmental assessments in line with the completion in 2019 of the next scheduled independent review of the Environment Protection and Biodiversity Conservation Act 1999.

Facilitate the transformation of the Whyalla Steelworks to enable higher environmental standards through more efficient steel production and energy co-generation.

Hornsdale

Carrapateena

Port Pirie Jamestown

ADELAIDE

Port Augusta

Olympic Dam

Prominent Hill

Coober Pedy

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2012 and subsequently identified the Fremantle Doctor and Saddle IOCG deposits as possible extensions of the Carrapateena mineralisation. All these deposits are within a 10 kilometre range of the original Carrapateena discovery.

OZ Minerals subsequently acquired the Carrapateena deposit from RMG Services and announced plans to begin construction on a self-funded $916 million mining project. Two parallel declines have recently reached the ore body, and Carrapateena is on schedule for first concentrate production in the fourth quarter of 2019.

OZ Minerals announced in March 2019, the results of a scoping study for a block caving expansion to optimise value from the Carrapateena mine and further unlock possible future value accretive options for the Carrapateena Life of Province Plan. If approved, the additional circa $1.0 to $1.3 billion investment for a Block Cave expansion of the lower portion of the current Carrapateena Sub Level Cave has the potential to increase average life of mine copper production from 65,000 tonnes per annum to ~105,000 – 125,000 tonnes per annum from 2026.

A PIRSA study in 2007 found PACE brought forward the Carrapateena discovery by about 20 years as it is unlikely private sector investment would have been backed the high-risk drilling campaign without the support of government funding. By that measure, Carrapateena’s scheduled first concentrate production in the fourth quarter of 2019 amounts to a fast-tracked development from a possible 2036 start date in the absence of PACE funding.

Similarly, the 2018 announcement by BHP of the discovery of a significant IOCG intersection at Oak Dam West, near both the Olympic Dam and Wirrda Well deposits, has rekindled interests in the prospectivity of the Gawler Craton. This renewed interest is being supported by the timely release of a pipeline of new geoscientific data generated by the Geological Survey of South Australia (GSSA) through the PACE Copper-funded Gawler Craton Airborne Survey and the GSSA’s support for the Geoscience Australia AusLAMP project. AusLAMP is using innovative magnetotelluric mapping techniques to generate undercover imagery that can assist explorers to narrow their search for new discovery targets, improving the efficiency of high-risk exploration at depth.

Hornsdale: Harnessing energy storage to improve system security and affordabilitySouth Australia’s Hornsdale Power Reserve near Jamestown in the State’s Mid-North has demonstrated the value of energy storage to the National Electricity Market by providing fast and accurate system security services.

In July 2017 Hornsdale Power Reserve, a wholly owned subsidiary of French renewable energy company Neoen, was awarded the contract to construct, commission and operate a 100MW/129MWh Battery comprised of Tesla Power packs at the Neoen Hornsdale Wind Farm near Jamestown.

70 MW of the battery is contracted to provide system security services for South Australia, and the whole 100 MW battery capacity is available in certain

http://www.energymining.sa.gov.au/minerals/geoscience/pace_copper/gawler_craton_airborne_survey_community_information

http://www.energymining.sa.gov.au/minerals/geoscience/pace_copper/gawler_craton_airborne_survey_community_information

http://www.energymining.sa.gov.au/minerals/geoscience/geological_survey/gssa_projects/auslamp

http://www.energymining.sa.gov.au/minerals/geoscience/geological_survey/gssa_projects/auslamp

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circumstances, for example, to reduce the risks of load shedding during peak load periods or due to temporary loss of significant generation or interconnector capability.

An April 2018 evaluation of the performance of the Hornsdale Power Reserve by the Australian Energy Market Operator found the frequency response and control services it provided were both rapid and precise when compared with conventional synchronous generation.

The battery’s performance has met and exceeded the expectations of the department and saved South Australia millions of dollars in electricity costs. The average availability of the battery to date has been 99.8 per cent.

In an independent report commissioned for the first anniversary of the battery, engineering consultancy Aurecon found that the battery:

• has responded thousands of times to frequency outside the normal operating band. About one hundred of those were serious

• provides a premium contingency service with response time of 250 milliseconds

• helps protect South Australia from being separated from the National Electricity Market

• is key to the Australian Energy Market Operator’s and ElectraNet’s System Integrity Protection Scheme (SIPS) which protects the South Australian-Victorian Heywood Interconnector from overload.

Hornsdale Power Reserve also stabilised the South Australian grid during a massive transmission failure on 25 August 2018 that caused localised blackouts in other states when both the Queensland-New South Wales and the South Australian-Victorian interconnectors tripped.

The Australia Energy Regulator has found that Frequency Control and Ancillary Services (FCAS) costs in quarter one 2018 averaged 57 per cent lower than in the previous quarter, despite similar volumes of FCAS being required. This could be contributed to the Hornsdale power reserve capturing a large share of the FCAS market in the first quarter of 2018.

The Aurecon report estimated the battery has reduced the South Australian regulation FCAS prices by 75 per cent while also providing these services for other regions within the NEM.

The report also found the battery contributed to the removal of the requirement for a 35 MW local FCAS, saving nearly $40 million a year in typical annual costs.

https://www.aemo.com.au/-/media/Files/Media_Centre/2018/Initial-operation-of-the-Hornsdale-Power-Reserve.pdf

https://www.aurecongroup.com/-/media/files/downloads-library/2018/aurecon-hornsdale-power-reserve-impact-study-2018.ashx?la=en

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Appendix 1Historical events in developing South Australia’s energy and mining industry1841 – Glen Osmond silver mine produces Australia’s first metalliferous exports

1842 – Discovery of copper at Kapunda

1845 – Discovery of copper at Burra

1866 – First onshore oil exploration well at Alfred Flat near Salt Creek

1880 – Australia’s first iron ore mined at Iron Knob near Whyalla

1883 – Charles Rasp stakes a mineral claim at Broken Hill

1941 – Whyalla Steelworks open

1946 – Establishment of the Electricity Trust of South Australia (ETSA)

1954 – Port Augusta Playford A power station begins generation

1959 – First petroleum exploration well drilling in the Cooper Basin

1963 – Gas discovered in the Cooper Basin

1983 – First exports of crude oil and condensate from Port Bonython

1987 – Gas discovered in the onshore Otway Basin

1988 – First production of copper, gold and uranium from Olympic Dam

2003 – Starfish Hill becomes South Australia’s first major wind farm

2004 – Launch of PACE – the Plan for Accelerated Exploration

2010 – SA’s first feed-in-tariff scheme launched to support home solar PV uptake

2017 – Hornsdale Power Reserve, world’s biggest lithium ion battery, operational

2017 – South Australia’s Hydrogen Road Map first published

2018 – Home Battery Scheme and Grid-Scale Storage Fund launched

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Next stepsFeedbackDue 1 November 2019

Feedback is sought from stakeholders on this Consultation Paper and the proposed actions in the Energy and Mining Strategy.

Questions to be considered • Is energy and mining as a sector

identified appropriately? (page 10)

• Are these four targets achievable and sufficiently bold to support our Growth State ambitions? Can these targets serve to identify industry’s barriers and opportunities for stronger economic growth? (page 12)

• Should we adopt an energy productivity target? (page 22)

• What other growth opportunities should we be pursuing? Are there any other opportunities for leveraging South Australia’s clean energy transition to grow jobs and investment? (page 23)

• Are all the key challenges to strong sustained growth in the energy and mining sector captured in the Consultation Paper? (page 24)

• Are there any priority areas that should be the focus of the Energy and Mining Strategy? Is there a greater or lesser role for government/industry? Where can the South Australian government work in collaboration with industry, Commonwealth Government and national industry groups to support the Strategy over the next 5-10 years? (page 26)

• In each of the four streams, are the proposed industry goals, key challenges and scope for further action correctly identified? What more could be done? (page 27)

Launch of the Strategy

Public launch of the Strategy expected first Quarter 2020.

ContactDepartment for Energy and Mining 11 Waymouth Street, Adelaide South Australia, 5000 GPO Box 320, Adelaide, South Australia, 5001

E: [email protected]/growthstrategy

http://[email protected]

http://www.energymining.sa.gov.au/growthstrategy

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Documents

Sustainably growing energy and mining in South Australia