SUBJECT/S: Energy crisis, Liddell power station, AGL, AEMO reports, Clean Energy Target, bipartisanship on energy policy, Hunter Valley, gas, orderly transition, energy market rules
WEDNESDAY, 6 SEPTEMBER 2017
MARK BUTLER, SHADOW MINISTER FOR CLIMATE CHANGE AND ENERGY, MEMBER FOR PORT ADELAIDE: I’m here with Joel Fitzgibbon and Pat Conroy. Pat Conroy is the Assistant Shadow Minister for Energy and both of my colleagues represent the seats in the Hunter Valley that take in the power stations in that community, including Liddell.
We’ve received a couple of reports from the Australian Energy Market Operator (AEMO) over the last 24 hours. The latest of which was only released on the Government’s website an hour or so ago. But both of these reports really lay bare four years of utter failure on the part of Tony Abbott and Malcolm Turnbull on energy policy. Over the course of the last four years, since the election of the Abbott Government, wholesale power prices have doubled, leading to skyrocketing power prices for Australian households and for Australian businesses. We also know that because of complete inaction from this Government to put in place an investment framework the Market Operator tells us there are serious concerns about reliability in our energy system across the National Electricity Market, particularly New South Wales, Victoria and South Australia. What we also know from news reports is that there is yet one more rejection, hopefully the final rejection of Malcolm Turnbull’s fantasy that a solution to the country’s deep energy crisis that has emerged under this Government is to build new coal-fired power stations with taxpayer subsidy if need be. Again, these reports constitute a complete rejection of this fantasy. Finally, these reports constitute yet another call for the national Government just to get past the politics in energy policy; most of the politics of course being in the Coalition’s Party Room itself. It is beyond time for Malcolm Turnbull and his Government to start to implement the key recommendation of the Finkel Report and that is to put in place a Clean Energy Target.
Can I also say that the Market Operator’s report constitutes a substantial endorsement of the practical action that has been taken in South Australia through the State Government’s Energy Plan and to put in place the sorts of things that AEMO are saying should be put in place across the country, a strategic reserve for periods of high demand and large battery storage systems. As everyone knows now South Australia will have the largest lithium ion battery by a significant distance in place by December this year, making sure that South Australia is able to deal with summer if there is high demand during periods of heatwaves.
The nation’s Government is responsible for the nation’s energy policy. We have a National Electricity Market and for four years, under Tony Abbott and now Malcolm Turnbull, this Government has been hopelessly divided on energy policy and as a result we have seen stunning inaction at a time of very substantial transition in our energy system. As a result, all Australians now understand who is responsible for skyrocketing power prices in this country. It was Tony Abbott and now it is Malcolm Turnbull. Over the course of this summer, if there are blackouts across Australia, they will also know who to hold to account, Malcolm Turnbull and Josh Frydenberg.
JOURNALIST: Would a Labor Government justify using taxpayer money to keep open a rundown coal-fired power station?
BUTLER: This has been utterly chaotic over the last 24 hours. First we had the Prime Minister verbal the CEO of the country’s largest power company in Question Time yesterday saying they were having discussions about AGL extending the life of the Liddell power station. Within hours that was rejected by the CEO of AGL, Andy Vesey, and then the Prime Minister changed his tune. Saying actually what they were talking about was AGL selling the power plant to someone else. Then again this morning we’ve seen in a statement by AGL to the ASX, that AGL has no plans to sell the Liddell power station. This just demonstrates that Malcolm Turnbull is making this up as he goes along. Rather than indicating to the country in its broader sense that there is stable, viable energy policy for the country, he is making this up. He is also giving false hope to the Hunter Valley community represented by Joel, Pat and other Labor members in the Parliament that there is somehow this plan to keep open the Liddell power station. It is clear there is no plan and Malcolm Turnbull is making this up as he goes along.
JOURNALIST: Do you think there is a need to maintain Liddell or another large power plant beyond its design life to ensure supply?
BUTLER: Of course we have got to make sure there is reliable, affordable, supply of electricity across the system. We are going to study very carefully the report from AEMO, particularly from the new Chief Executive Officer who has really added a bit of vitality to the energy debate in this country. We are going to study it very carefully; it was only released over the last hour. Obviously it is important to make sure there are no gaps in electricity supply as the inevitable closure of some of the generators that were built in the 1960s and 1970s proceed to come over the coming decade or decade and a half. What we don’t need though is the Prime Minister making stuff up as he goes along. We need a clear, orderly plan. Now AGL, to its credit has given seven years notice to the closure of the Liddell power station. Unlike Engie, the French multinational, which only gave the country, the local community and its workers five months notice of the closure of Hazelwood power station. Let’s have an orderly plan that ensures the inevitable closure of these old power stations happens in a way that means there is still reliable, affordable supply of electricity. What that means is having a plan to ensure that new investment occurs in Australia. The Finkel Report and the AEMO report have made it clear what that is, it is a Clean Energy Target. This was an urgent recommendation prescribed by the Chief Scientist and yet the Prime Minister continues to sit on his hands and pretend that the solution is building new coal-fired power stations or an extension of the Snowy Hydro Scheme that won’t come on train, if at all, before the mid-2020s.
JOURNALIST: AEMO says there is 1000MW of dispatchable power that needs to be replaced by 2022. Labor could be in power for a substantial part of that time. What would Labor do, how would you find that 1000MW of dispatchable power?
BUTLER: As I said we are going to study this report very carefully, it has only been released in the last hour or two. It has got a number of substantial recommendations that reflect some of the thinking in the Finkel Report and also the South Australian Energy Plan that ensures there are strategic reserves to cover those potential gaps as old generators close and new investment takes place.
JOURNALIST: This is beyond the strategic reserves?
BUTLER: This is something that will happen in 2022 if AGL’s plans to close the station take place. It is important that there be a plan. It is important that there is an investment framework to bring through new generation. At the moment there is not going to be any new generation built beyond next year or the year after because there is no policy framework to set out what the rules for new investment are going to be. That is why a central message form the AEMO report is to put in place a Clean Energy Target so that there is new investment in New South Wales beyond 2022.
JOURNALIST: Would Labor support the Federal Government spending money on incentives this summer for people to keep the air-conditioner down and their power usage down during times of peak demand, to try and ease the burden and prevent load shedding?
BUTLER: A really important addition to the debate by the Market Operator has been the idea of demand response, which might involve incentives to consumers to have their air-conditioner turned down a couple of degrees at periods of peak demand, for pool pumps to be turned off during those periods, for industrial consumers to consider arrangements that involve incentives for them to turn their power down at particular stages. AEMO and ARENA, the Renewable Energy Agency, are already doing this work. There is substantial pilot work being done in different states and we want to see that grow. That is arguably something Australia has been behind the 8-ball compared to other nations that see demand response as a very significant part of reducing energy consumption, reducing power bills, and managing those periods of peak demand. We very much encourage that work by AEMO and by private energy companies to put that technology into the market.
JOURNALIST: Do you support Government intervention into an old coal-fired power station?
BUTLER: We want to see a plan. At the moment AGL, which runs this power station has indicated it wants to close or intends to close its power station at the end of its operating life in 2022, it will be 50 years of age.
JOURNALIST: If the Government decides to put money in to keep it going?
BUTLER: Malcolm Turnbull was asked about that an hour ago and he said he has no plans to do that. So we are not going to respond to hypotheticals that not even the Prime Minister is responding to. Let’s see exactly what is being discussed, if anything, between the company and the Government. The Prime Minister’s version of these events seems to change every few hours and we want to see a more orderly idea about what’s going to happen in the New South Wales energy system over coming years put before the Australian people and before the Parliament.
JOURNALIST: Mr Fitzgibbon is there a situation in 2022 or beyond where you would like to see Liddell keep its doors open or do you believe it is inevitable as well?
JOEL FITZGIBBON, SHADOW MINISTER FOR AGRICULTURE, FISHERIES, FORESTRY AND RURAL AND REGIONAL AUSTRALIA: You can’t be the Member for Hunter, or indeed the Member for Shortland, Newcastle, or Patterson without having a deep interest in both energy policy, coal policy and the sector more generally. The people I represent have known for a long time of AGL’s plan to decommission Liddell by 2022. They are quite accepting of that. They have been talking to me about my plans to have an orderly energy transition and to ensure the Hunter remains the engine room of New South Wales and indeed the nation, by bringing investment in new forms of energy. All Malcolm Turnbull is doing now is further confusing that investment framework. It’s funny Malcolm Turnbull has a property in the Upper Hunter, he used to be my constituent now he is the constituent of Barnaby Joyce. Both he and Barnaby Joyce have been driving past Liddell for the last decade at least and they have never uttered a word about Liddell until now. Suddenly, Malcolm Turnbull has got a run of bad newspolls, is under enormous pressure in a dysfunctional Government, he is in a thought bubble. He misrepresented a conversation with Andy Vesey, someone he knows so well he can’t pronounce his name. This is nothing more than a political stunt that is going to hurt my community, not help my community. There are all sorts of complications with Liddell. AGL owns both Bayswater and Liddell, they are across the road, more than 4500MW between them. They share infrastructure, they share a workforce. So has Malcolm Turnbull talked about putting those generators on the market, is he insisting they be put on the market? Has he thought about where the coal is coming from and the conditions around the coal contracts for those power stations? This is not a plan it is a thought bubble.
JOURNALIST: How about the prospect of an upgrade of Liddell? It has been tossed around.
FITZGIBBON: I’ve had discussions with AGL on this matter not just in the last 24 hours but in the past. Malcolm Turnbull is not the first politician to think about extending Liddell, I can assure you. AGL informed me that if this was a 1980s power plant there would be some scope, possibly, to talk about extending its life. But it is not. It is a 1970s power generator and I’m told it just doesn’t stack up, it can’t be done, it would cost between half a billion and a billion dollars to do and of course the returns are highly questionable, and I’m advised that the reliability of the extended stations would be less than the reliability that Liddell delivers now. From AGL’s perspective it doesn’t stack up and of course this energy crisis we now face is, as Mark said, because of a drought in investment generation and that can be all shot home to first Tony Abbott and now aided and abetted by Malcolm Turnbull.
BUTLER: Can I just make another point. Malcolm Turnbull has not talked about anything in the energy system before 2022. The Snowy Hydro scheme, if it stacks up with the feasibility study being done at the moment, won’t be on the market at the earliest until the mid-2020s and he is talking about an asset coming out of the system in 2022. They are all important things to talk about but we have an energy crisis in place right now. We have serious reliability concerns as a result of this Government’s inaction on energy policy confronting Australia this summer. The Prime Minister has said nothing about this. He has said nothing about what he intends to do about skyrocketing power prices hurting Australians right now not in the 2020s. He is going to do nothing; it would appear, about the blackout risks that are going to confront Australia this summer. Not in the 2020s, but this summer.
JOURNALIST: Mark have you had any response yet to Bill Shorten’s offer that you could sit down with Josh Frydenberg and nut out a Clean Energy Target?
BUTLER: I’ve been waiting by the phone, clearing my diary ready for discussions but I’ve had no call, I’ve had no text, no email from Josh Frydenberg. I recognise they have to get something through the Coalition Party Room but this latest report is just the latest in a series of calls to get on with it. We have an investment strike underway at the moment because no one knows what the rules are going to be in the coming years for electricity generation. The sooner that this Prime Minister is able to confront the Coalition Party Room and come out the other end with something to negotiate with Labor, the sooner households around the country will have some confidence that the power price rises we’ve seen under this Government, the reliability concerns they have seen emerge under this Government are going to have some plan to be addressed.
JOURNALIST: Do you accept the argument being made about this problem around dispatchable energy? What you think new dispatchable energy sources over the next five years in particular are going to look like? Are we going to see continued investment in gas, is that the best way forward?
BUTLER: I think it is going to be a mix. We saw this discussion in the Finkel Report, we have seen it in the South Australian Energy Plan. The old concept of baseload power where there is a small number of very large power stations that operate 24/7 365 days a year is becoming a bit more mixed. It is not an Australian phenomenon as the AEMO report makes clear, this is something happening globally. We’ve got to make sure that electricity is dispatchable in the sense that is able to be delivered 24/7 365 days a year from a much larger pool of smaller generation sources. Some of which will be solar, which obviously only generates during the day and wind, which obviously only generates when it is windy. What ensures that dispatchability will be a mix of things, it will be battery storage of the type that is being installed over the next few months in South Australia. It will be pumped hydro, it will be gas-fired peaking plants but we’ve got to set up market mechanisms that make sure that all comes together. Really the central message, if anything, from the AEMO report today is the current market rules don’t underpin that dispatchability question. That’s a point that Labor and many others have been making over the last couple of years. There needs to be an overhaul of the market rules to ensure there are proper incentives for this, it was clear in our election policy last year and yet Malcolm Turnbull has just sat on his hands, continued to trumpet a pumped hydro scheme in the mid-2020s or fantasies about new coal-fired power stations while Australian households and businesses are confronting a very deep energy crisis today.
JOURNALIST: On that though, would Labor commit to investing more in battery storage across the country over the next five years?
BUTLER: There will be a lot more investment in battery storage over the coming five or ten years. That won’t necessarily be Government investment. One of the recommendations from the Finkel Report is to ensure what is described as a generator reliability obligation rolled out and there is now design work happening on that. We’ve indicated we support that, state Governments have indicated they support that as well. Now whether that is built into the market so that generators need to pay for that is still something being worked on. But there is no question the extraordinary revolution in storage technology that is sweeping the world, particularly in battery storage technology is a solution to the dispatchability. It’s not the only solution but it is an important part of the solution to this dispatchability challenge over coming years.
FITZGIBBON: Can I just say something on that on the Hunter Valley. I’ve spoken to AGL again last night and today about their commitment to the Hunter, they do reaffirm their commitment and they are interested in a whole range of technologies, including gas. The quickest way to bringing dispatchable energy online would be through gas and they are interested. They have the land around the existing power stations. They have the skills which are easily transferrable. The transmission lines are right there and we could get the gas really if the Government got off its backside and showed an interest in gas. AGL have their proposal for the LNG receiver terminal with a pipeline that goes through the Hunter and goes within 6km of the power station. It could bring gas from Narrabri again, if the NSW Government, do something about getting gas out of the ground there. So AGL has committed, we could have gas capacity in the Hunter very quickly. You can basically drop these generators off the back of a truck these days and plug them in. But you don’t hear Malcolm Turnbull talking about any vision for the Hunter and any alternative electricity generation in the Hunter. That’s what he could be doing, he could be doing it more quickly than 2022 and talking about a fanciful extension of Liddell in 2022.
JOURNALIST: That’s an interesting thought so you’ve spoken to AGL’s Chief Executive about possibly creating a gas plan in the Hunter regions?
FITZGIBBON: I haven’t spoken to the Chief Executive but I’ve spoken to senior people in the company both overnight and today. They say gas is of interest to them and as part of that conversation we had a further conversation about their proposals for a receiver terminal and other opportunities to secure gas for gas generation in the Hunter.
BUTLER: The reason for that complementarity is gas can be switched on very quickly and be turned off very quickly, which is not a feature of coal-fired generation so it makes a very good complement to solar and wind that might go up and down in generation.
JOURNALIST: So what sort of time frame would they be looking at to get something running?
FITZGIBBON: Mark made the point; Malcolm Turnbull has no plans prior to 2022. If we could get some bipartisanship on Finkel, the full embrace of Finkel and have the market very quickly understand what the rules are in the future, I believe AGL would be keen to move very quickly with additional investment in the Hunter region, including, I can’t speak for them but given the nature of our conversation, including gas generation.
JOURNALIST: As you say the AEMO report pointed out the current policy environment provides no incentives or price signals for new investment. How far do you think the AEMC draft rule change for the five-minute settlement rule will go to encouraging, for example, more batteries to happen quickly?
BUTLER: I think it is part of the answer. The change to a five-minute setting of price will be good for a range of new types of technologies, particularly battery technology. It is not the whole answer and it is not the substitute for a proper investment framework through a Clean Energy Target but obviously these things are happening really in spite of this stunning inaction on behalf of the Turnbull Government not because of it. This of course was a proposal that was initiated by the private sector, by a private energy user, not the Turnbull Government.