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Monday, 20 August 2018
Page: 7821


Mr RAMSEY (GreyGovernment Whip) (19:54): I rise to speak on electricity. It's one of those issues that's been taking up quite a bit of time in this place in recent days. I think I have something to give to the debate insomuch as I've been involved with the electricity transition since 2011, when Alinta Energy first came to me and informed me that the Northern Power Station was in trouble in South Australia.

I think it will pay to backtrack a little there. Alinta had been producing anything up to 40 per cent of Australia's electricity, but, as the RET came along, we saw investment in renewable energy in South Australia, particularly in wind—and I point out that the RET had no regional target, so it was all able to flow to South Australia. At a time in the past, Alinta could sell their electricity to the South Australian market for a profit on 365 days a year—and then it became 300, then 200 and then 100 because they were always underbid by renewable energy, no matter where the price is set. And then, eventually, it went down to about 70 days a year and they were unable to continue. They were bleeding red ink because, at the time, big businesses, big consumers, big manufacturers weren't interested in taking long-term contracts with them. Had they written them at $60 or so, I suspect that the Northern Power Station would still be there. But they chose not to, so the power station closed and the state government turned its back on the pleas from Alinta for what now looks like a very small amount of money to keep the doors open while we managed that transition.

In any case, last year South Australia had 52 per cent renewable electricity. The important point here is that companies are still building renewable electricity in South Australia. The RET, for all intents and purposes, is finished to any newcomers to the market at the moment—it has all been allocated—so they are building new renewable power generators without any prospect of picking up a subsidy. Here's the news: there is no impediment on anyone in Australia building a coal-fired power station. There are no extra taxes. There is no levy on CO2 emissions. There are no planning laws against building coal-fired power stations. But they are not building them. On the other hand, companies are building renewable energy even though there is no subsidy. So one has to start asking why this is. Every renewable generator that comes on the market—and I applaud it; it is a very good thing—shortens the number of days that the base-load generators could sell electricity for at a profit, so it undermines their business case. The reason no-one is building base-load electricity is investor uncertainty. There is too much pain involved. There are too many people locked onto whatever it is the government has settled on on the day to alter that arrangement. Until we reach that point, no-one will unlock their wallets to build new base-load electricity.

And so we come to the National Electricity Guarantee. What is it that it seeks to do? The most important thing is that, firstly, it is going to set regional targets, which is something the RET did not do—and that led to a rush of investment into one area. The second thing it seeks to do is provide a set market for base-load electricity, which is something the retailers will have to put into their energy mix. And the government has also offered to underwrite the bottom line, if you like, of power prices. When we get to that point, we will start to see people investing in base-load electricity—and, boy oh boy, that is exactly what Australia needs.

It doesn't matter whether that base-load electricity is geothermal, coal, gas or renewable—with storage or even with gas back-up. But the market should decide that; that is the best way forward. Just so Australians know, I would make the point that the price a new Healy coal-fired power station would need to break even is around $75 a megawatt hour. Coal at the moment is US$80—or over AUD$100—and you need half a tonne of black coal to make a megawatt of electricity. So you have already got $50 in input costs. That is why the market should decide what they build to service Australia's electricity grid.

Question agreed to.

House adjourned at 19:59