30 June 2010

Research DirectorEnvironment and Resources CommitteeParliament HouseBRISBANE QLD 4000

Dear Sir / Madam,

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INTERGENInterGen (Australia) Pty Ltd

PO Box 5743Central Plaza

BRISBANE QLD 4001

Tel: (07) 3001-7177Fax: (07) 3001-7178

ACN : OBO 050 737ABN: 71 OBO 050 737

Re: Growing Queensland's Renewable Energy Electricity Sector

Thank you for the opportunity to provide a submission in relation to GrowingQueensland's Renewable Energy Electricity Sector C1the pap~r"). InterGenAustralia (IGA) would like to comment on the proposal by the Queensland Governmentto attract renewable generation to Queensland.

IGA is a leading developer and operator of power generation assets and hasestablished itself as a significant private investor in Queensland generation, providing16% of Queensland's energy requirements. IGA has invested over the past 10 yearsin some of the newest and most greenhouse efficient coal generation, with our majorinterests in the Millmerran and Callide C black coal power projects (both of whichutilise supercritical boiler technology). Refer to figure 1 for Queensland GenerationMarket Share. Further information on IGA is attached to this letter.

Figure 1. Queensland Generation Market Share

Queensland Generation Market Share*

QLD GovernmentOwned

Generators, 76% Private Gas FiredGenerators, 5%

Electricity Retail,3%

InterGen(Australia)

'--__Investments,

16%

• Based on Average Generationoutputover July2008 - June 2010 2 years

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An InterGen - China Huaneng Group Joint Venture

Our shareholders are major international enterprises, including the China HuanengGroup which has over 1OO,OOOMW of installed generation capacity and is the secondlargest generator in the world. We are continually looking to increase our investmentportfolio of generation assets including gas and renewable energy.

We support the National Renewable Energy Target (NRET) scheme operating withoutthe addition of State-based renewable energy schemes, for the preservation ofinvestor certainty and least cost solutions for consumers, with the followingconsiderations:

1. The investment environment for the power sector needs to be conducive toinvesting in long life assets. The life of power assets is typically 20-40 yearsdepending on the type of technology. A high degree of regulatory certainty isrequired in order for private investors to consider committing capital. There isalready a high degree of investment risk in Australia due to regulatoryuncertainty, key examples are uncertainty over a future carbon scheme and themyriad of Federal and State based environmental initiatives.

2. The Federal Government has legislated the National RET Scheme, which isintended to encourage the most cost effective renewable generation on anAustralia wide basis. This goal of least cost project development nationallyis at risk if State-based schemes are introduced in addition.

With reference to suggestions and initiatives in the paper, we provide the followingfeedback:

1. We encourage any initiatives to reduce impediments to good Queensland­based projects being successful - e.g. streamlining project approval processes.

2. The Committee needs to carefully consider the full and potential network costsof renewable energy facilities.

a. The intermittent nature of renewable generation can lead to an increasein network costs.

b. Who pays for the cost of connection and network consequences ofrenewable generation?

3. Assistance needs to acknowledge existing and future transmission andgeneration infrastructure to achieve the most cost effective solution forrenewable energy in Queensland. There are some potential projects whererenewable developments at existing generation facilities provide real reductionsin emissions and least cost renewable generation.

4. Future initiatives should not disadvantage incumbent generation ­Queensland's existing generation owners (such as IGA) have already faceddistortion to the prevalent investment environment under which previousinvestment decisions were made.

By way of example, the Queensland Gas Scheme distorts the wholesalemarket as gas plants receive a subsidy from outside the wholesale market,which consumers pay for. The effect of this is to reduce the revenue IGAearns, disadvantaging IGA's prior investments which were rightfully made.

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For the reasons outlined above we do not support a specific Queensland renewableenergy target or subsidy scheme. However, if the State Government is intending toprovide direct support for renewable energy, we suggest the following principals:

1. A transparent process, to ensure least cost solutions for consumers and toenable private investment to compete with State Owned generation businesseson a level playing field.

2. In assessing least cost, the costs of both generation and transmission need tobe considered.

3. Support projects where Queensland has a competitive advantage - for examplethis is likely to be solar rather than wind.

IGA is continually seeking to build on its existing platform by investing in new powergeneration including renewable energy. We ask the Committee to consider oursubmission and are happy to meet to discuss any aspects further.

Yours sincerely

)

Brent GuntherManaging DirectorInterGen (Australia) Pty Ltd

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