SUBJECT: Turnbull’s latest energy policy
SKY NEWS PM AGENDA
WEDNESDAY 18 OCTOBER 2017
HOST DAVID SPEERS: Now with us, Craig Laundy and Joel Fitzgibbon, good to see you both this afternoon, let’s get straight into this energy debate. This new policy, the National Energy Guarantee, will it drive down prices?
CRAIG LAUNDY: Yes, we believe so and more importantly we have been told so by the independent experts in the field. It’s their policy. It was work done by them and given to the Prime Minister and Minister Frydenberg and endorsed strongly by the Party Room yesterday.
SPEERS: So how much can we expect to save?
LAUNDY: There is going to be a few parts to it. And it is not just this measure in isolation where the savings will come from. So the work that has been done before now, you are starting to see the gas prices come down from $12 to $14 a petajoule down to $8 to $10. You put them all together mate, it’s a collective sum. We are looking at taking what we can.
SPEERS: Just on this one? What can we expect?
LAUNDY: They are talking, back of the envelope, $125 a year or 22 to 25 per cent off the wholesale price.
SPEERS: I thought it was $115 a year.
LAUNDY: $115 to $125 sorry, range.
SPEERS: $110 TO $115, anyway.
LAUNDY: It is more than 90 under the CET anyway, and there is no $66 Billion of subsidies for renewables.
SPEERS: There is no modelling to show that is there?
LAUNDY: They have come back with that and they do this day in and day out. There would have been some numbers put behind it. They didn’t just pluck it out of the air is what I am saying.
SPEERS: Labor had a session with the regulators last night, didn’t you, they talked about this, did they convince you?
JOEL FITZGIBBON, SHADOW MINISTER FOR AGRICULTURE, FISHERIES, FORESTRY AND RURAL AND REGIONAL AUSTRALIA: No, absolutely not. As you have just seen David, the number changes by the hour. They over-reached making this big claim on a reduction in energy prices.
SPEERS: So you are talking to same regulators aren’t you?
FITZGIBBON: Kerry Schott last night on Lateline was very very clear that she wasn’t prepared to predict that this policy would cause prices to fall.
SPEERS: Hang on, here’s what she said.
FITZGIBBON: This is the expert that Craig is relying upon.
SPEERS: Let’s be accurate here, she said what will happen when those mechanisms are put in place, is that prices are likely to come down and they are likely to keep coming down. I don’t think anybody can guarantee a price reduction about anything actually. Because what happens with prices depends on too many things. But she is saying prices will come down.
FITZGIBBON: It hasn’t demonstrated to us how they have modelled that. How they have come to that conclusion.
SPEERS: [inaudible] .
FITZGIBBON: There is an inherent conflict. We want to work with the Government to put this issue to bed. We need to get investment back in the sector David. We have been desperately trying to work with the Government. Every time they take another step in a different direction we do our best to go with them.
SPEERS: There is no modelling on this is there?
LAUNDY: The reason she used the term most likely to come down and keep coming down is because what is very hard to model is changes in behaviour.
SPEERS: So you don’t think they will come down?
LAUNDY: Yes, yes we do. They have reported to us, based on their expert opinion. They have given us an opinion and we have accepted their opinion. However you have got to remember there will be changes in behaviour so we are looking - .
SPEERS: But will that be accurate or not? Why wasn’t this done before?
LAUNDY: It was their model. It is not unusual -. They have come to us with their best case analysis.
SPEERS: Why didn’t you say to them go and do some modelling?
LAUNDY: I am not the Minister responsible David. I didn’t run this.
SPEERS: I’m just saying-
LAUNDY: It was their idea David.
SPEERS: The Party Room can surely say, go off and do some modelling on this please. And then give it a tick or a cross.
LAUNDY: I wasn’t at Joel’s briefing last night but I am guessing he would have been presented with the same information we were presented with. We were presented with very comprehensive information, sitting behind the opinion. As I say they didn’t just pluck it out of the air. You are talking about four people who are extremely experienced, and not just our side of the fence, you know what Mark Butler thinks of them. You are talking about people with vast experience -
SPEERS: I am not questioning their experience or their authority but -
LAUNDY: When they tell you something, sounds like you are questioning their experience.
SPEERS: No, I am questioning the Coalition Party Room ticking off on something without any modelling.
LAUNDY: We didn’t question their expertise David. They gave us, and as I said I wasn’t at Joel’s briefing.
SPEERS: So whatever they gave you, you have gone thumbs up?
LAUNDY: It wasn’t just, they said just number, we were presented with 20 or 30 pages of slides.
SPEERS: Did you get to see the 20 or 30 slides?
FITZGIBBON: I wasn’t in the briefing.
LAUNDY: You didn’t even go?
FITZGIBBON: I wasn’t invited to go.
LAUNDY: Lights are on but no one’s home.
FITZGIBBON: It wasn’t a briefing for the Caucus, it was for key people in the area of this portfolio responsibility.
LAUNDY: You are a key person Joel, surely. Don’t talk yourself down. C’mon mate. I’m with you. I’m with you.
FITZGIBBON: The Government appoints a Board in the same way as they appointed Finkel, they rejected Finkel but they accepted this Board’s recommendations. There is no consistency there. Just because the Government appointed Board puts forward a proposition doesn’t mean –
LAUNDY: Finkel -
FITZGIBBON: It is not the normal course that necessarily that because the Board said we could do this, everything is ok. You have got to be able to provide some evidence. I haven’t seen anything to help me through this inherent conflict that you are going to mandate dispatchable power, and there are questions about whether coal is dispatchable power by the way.
SPEERS: Let’s leave this modelling thing right, if there is modelling behind a policy that says it is going to benefit it, it is ok to support it?
FITZGIBBON: David if I am a Minister and I am going to be presented with a proposition, if it is evidence based policy, if people can demonstrate it with the modelling and with all other evidence that it is a good idea, I will embrace it.
SPEERS: Come back next week with modelling that says this is going to reduce prices, you’ll back it?
FITZGIBBON: We are saying now that we will back it to work with the Government to put this conflict to rest so that we can get some investment -
SPEERS: You can do that if the modelling shows –
FITZGIBBON: If at the end of the day, the Government can persuade us that this model will maintain jobs, put downward pressure on electricity prices and improve reliability and help us make the path to a cleaner carbon economy, that is exactly what we want to support. But we have to see the evidence David. There is a lot of doubt. There is no shortage of experts writing in the newspapers today about the flaws, including David Uren from the Australian, no left-winger by any stretch of the imagination, highlighting the flaws in this model.
SPEERS: What is your main concern?
FITZGIBBON: At the end of the day, what we need more than anything in the energy sector is additional supply. We have to get investment flowing again. Where is the signal in this that is going to cause that to happen? You have got Government mandating that retailers take x amount of their power from dispatchable sources, but at the same time the second obligation is to reduce their carbon emissions. So where is all this additional dispatchable supply going to come from? How are they going to grab it in a way which at the same time -
SPEERS: I guess it is, finally you will have some certainty about what the rules of the road are, it has got to be clean, it has got to be reliable, to a degree, and so they can -
FITZGIBBON: But where is the additional supply coming from?
SPEERS: New investment.
FITZGIBBON: But where is the signal? So, because I am telling the retailers to buy so much dispatchable energy. I am going to out now and build new gas-fired generation for example. I am not convinced -
SPEERS: You are going to incentivise investment -
FITZGIBBON: No one has provided me with any evidence yet that mandating dispatchable power is going to be sufficient to overcome hurdle rates on dispatchable power . It is going to send investment away from renewables.
SPEERS: If we didn’t have the mandate for reliability for dispatchable power then it would be ok?
FITZGIBBON: Well what you are basically left with here is, is an emissions intensity scheme aren’t you? Something the Government walked away from some time ago so –
SPEERS: That is what Labor supported, that is what you took to the last election. If you took out that dispatchability obligation –
FITZGIBBON: Is the Government going to take that out now is it?
SPEERS: No, that is what Labor wants –
FITZGIBBON: It is a hugely -
SPEERS: Take out the dispatchability –
FITZGIBBON: Labor wants investment certainty so investment can start flowing into generation again and we –
SPEERS: If you take away that dispatchability obligation.
FITZGIBBON: I am saying no one has explained to me how investment is going to be incentivised when a Government is mandating what retailers are able to buy and where to buy it.
SPEERS: It would be incentivised if there weren’t that dispatchability obligation.
FITZGIBBON: I am not going to say to you it would be a wonderful policy if you chopped half of it out. That doesn’t make any sense David.
SPEERS: The problem is I suppose, are we going to have enough dispatchable power?
LAUNDY: David that is the reason it is there. Joel’s little cousins in South Australia – I have been sitting listening for a while. I am completely unclear at the moment. I will be clear, The energy regulator told us yesterday and would have told Joel’s team last night, AEMO had to intervene in South Australia 32 times 10 years ago. Last year 232 times, sorry two years ago, 232 times; last year 966 times.
SPEERS: There is a problem there.
LAUNDY: They are cactus. I am just telling you what the truth is; everyone knows it, every time the wind doesn’t blow and the sun don’t shine, the lights go out. So if we want certainty on dispatchability and why that will drive investment is because for the first time the energy regulator tells the provider what mix they actually need. They work it out. They work it out. And the way they are changing the mechanism. So at the moment you can buy over the counter full contract, but what is happening is, the market has been shorted. They are playing spot games all the time. Because it is generated half an hour out. This takes it a day ahead. They are changing the market mechanism as well, which most people have missed. There are a lot of subtle changes in here.
SPEERS: I was talking to Matthew Warren here, he is the head of the Australian Energy Council, represents the electricity retailers generators. I said, is this a carbon price? And he said, yes, yes it is a carbon price. Is he right?
LAUNDY: No. He is wrong.
LAUNDY: Let me explain, for three main reasons, firstly, the letter from the regulators to us on page 5 said there was no certificates, no price so this is not a carbon pricing scheme, that’s one, and they are the experts. So I am prepared to go with them.
SPEERS: Yes, I have got that quote here as well. The Energy Security Board says this is not a carbon pricing –
LAUNDY: I did well with the first point.
SPEERS: The point is you have got the retailers, you said this the emissions have got to hit this line, and here is what you have got to hit this year, some of them are going to be below that line already, some are going to be above it, they are allowed to trade.
LAUNDY: They can trade there is no doubt, they can go over the counter or forward contracts right now on the spot market.
SPEERS: I am talking about trading their emissions.
LAUNDY: No David, if they can come up with third party agreements there are all sorts of ways contractual -
FITZGIBBON: Buy international permits –
SPEERS: - has another company set up –
LAUNDY: - the dispatchability -
SPEERS: - does the trading -
LAUNDY: - no, you can go to the company direct.
FITZGIBBON: As Mark Butler says you have got the emergency secondary market, who is paying in the end? Now look David, if you are going to make someone buy say 40 per cent of their energy from what they call dispatchable generators, and Malcolm Turnbull has conceded the price of renewables is in free-fall, so in other words you are making them buy more expensive power, who pays?
SPEERS: Say I am AGL and you are Origin, say you are AGL and you are Origin, and your energy mix is below the line and yours is above the line, what happens? Are you two allowed to trade?
LAUNDY: You have a commercial relationship – you buy dispatchable power –
SPEERS: I am talking about the emissions -
LAUNDY: You buy dispatchable power, the emission guarantees will again by set by the regulator –
SPEERS: I am talking about the emissions -
FITZGIBBON: I am going to buy more renewable energy off him or I have got to go and buy an international permit. That cost passed onto someone.
LAUNDY: - energy mix or come up with a third party arrangement.
FITZGIBBON: What is the third party arrangement?
LAUNDY: An agreement, mate, you can’t look at one side without the other. And for Joel’s answer for investment, why are you are going to get more renewable investment off the back end of this? Because they can’t come up with the dispatchable power -
SPEERS: Say AGL doesn’t necessarily want to go and build a whole new solar farm just to meet that benchmark for the year on its emissions, can’t it then go to you and buy some off you?
LAUNDY: Yes. It can do that now. It can do that now David, It can do that on an over the counter market.
SPEERS: It is trading.
LAUNDY: There is trading going on now David. I don’t get the point.
SPEERS: The point is, now you are going to have a new line of emissions everyone has to meet. Now some are going to need to trade their emissions against each other.
LAUNDY: No, they are going to trade the source of their power and that leads to the emissions -
FITZGIBBON: The Prime Minister was saying today that he is on track to his Kyoto commitments ,are you arguing now that you can –
LAUNDY: The Paris stuff.
FITZGIBBON: Yes sorry Paris. I am going back a bit there, his Paris commitment, are you saying he can reach that now at no cost?
LAUNDY: I am saying the additional capacity investment in the market that will come off the back of this policy will make us meet that yes.
FITZGIBBON: Where is the investment going? To dispatchable power isn’t it?
LAUNDY: No, into a combination of the two.
FITZGIBBON: Oh, OK. So no investment in dispatchable power-
LAUNDY: You may re- invest in coal-fired power -
FITZGIBBON: It doesn’t add up David.
LAUNDY: It does add up, the experts think that it adds up Joel. You weren’t even in the briefing.
FITZGIBBON: If it is renewables why doesn’t Barnaby Joyce and people like that keep saying we are for the coal and the Labor Party for renewables?
LAUNDY: I don’t know. I haven’t heard Barnaby say that. I can assure you this is technology agnostic It genuinely is. Post 2020 everything stands on its own two feet. If renewables are cheaperthen so they should.
FITZGIBBON: Where is the proposal which will magically allow coal-fired generators to produce less emissions? It can’t be technology agnostic. You are mandating one side –
LAUNDY: You are looking at one side Joel. You have missed the point. Go to the briefing.
FITZGIBBON: For renewable investment to fall -
LAUNDY: Go to the briefing.
SPEERS: There is something in this though. Labor is saying there needs to be more renewables than this policy allows for. We know Labor’s policy is for a 50 per cent -
LAUNDY: Uncosted. Unfunded.
SPEERS: For a 50 per cent renewables by 2030. So you would have less coal in the system by 2030, correct?
FITZGIBBON: I will answer that, but we know the predictions on where we will be on renewables under the CET is going to be much lower under this proposal. Craig keeps saying there is going to be all this additional investment in renewables but in the CET we were going to be by 2030 I think it is, 42 per cent. Now we are going to be 28. How can Craig say all this additional investment is coming when –
SPEERS: Labor would then have a lot less coal.
FITZGIBBON: Well you are not going to get to your Paris commitments without continuing our transition to renewables and Barnaby Joyce loves renewables. He goes to every sod turning exercise in his electorate. He said at one wind farm there was enough generation coming out of one wind farm in his electorate to power his whole electorate. He loves renewables in his electorate where it is creating jobs.
SPEERS: He is not saying coal has to go, whereas you are saying there will inevitably be a lot less coal.
FITZGIBBON: The whole world knows if you are going to meet your Paris commitments you are going to have to grow renewables as a proportion of the sector, of course you are.
SPEERS: And shut down more coal?
FITZGIBBON: We are not going to shut down more coal. Power generators –
LAUNDY: Exactly what I said was going to have happen.
FITZGIBBON: - reach the end of their commercial life.
LAUNDY: - will keep growing and meet our commitments.
SPEERS: We have got to go -
FITZGIBBON: Not at that rate.
SPEERS: Thank you both very much for what has been the most detailed conversation on energy policy so far.
LAUNDY: Considering Joel didn’t go to the briefing.
SPEERS: Alright we are going to take a break. We will be back with more. Stay with us.