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Select Committee into the Resilience of Electricity Infrastructure in a Warming World
Storage technologies and localised distributed generation in Australian electricity networks

BLUME, Mr Steve, President, Australia Solar Council

GRIMES, Mr John, Chief Executive Officer, Australian Solar Council


CHAIR: Welcome. Thank you for joining us this morning, gentlemen. Apologies that we are running a little over time. Do you have any additional comments about the capacity in which you appear?

Mr Blume : I am also the president of the Australian Energy Storage Council. They are the peak bodies for the solar industry and energy storage industry respectively in Australia. I am also a director of the Global Solar Council, which is the peak body of peak bodies. I am a director of the New Zealand and Pacific Solar and Storage Council, which runs the Pacific islands and remote regions there. I am director and chair of the steering committee of the Asia PV Industry Association and I am also a director of the Australian Institute of Energy but am not appearing in that hat today.

CHAIR: Thank you. I am also appearing for the Australian Energy Storage Council, the peak body for energy storage, battery technology, pumped hydro et cetera

CHAIR: Perfect. Would either of you like to give us an opening statement?

Mr Blume : I have short opening statement. If I could, I will read it. I had an old university professor of statistics who used to say that a single event is not statistically significant, and yet Australian energy policy too often lurches about because of single or just a few events. These are often extreme and have high and medium impact but are poor bases for the development of long-term policy in the public interest. We have had another example just this week where extreme weather events, the cause of more than 75 per cent of all electricity supply outages worldwide, have generated statements that are technically incorrect and with barely a thought beyond today or next week.

The issues your committee are considering are about long-term secure electricity supply to all consumers; Curiously, we have a Commonwealth body, AEMO, the day job of which is to ensure that we have a secure, reliable and quality supply of electricity but, in the last few days, AEMO actually created outages, called load shedding, in South Australia and looks to be doing the same in New South Wales today and probably over the next couple of days.

AEMO use the blunt instrument of load shedding for household and small commercial consumers even though there was more than enough generation capacity available to make that totally unnecessary. This is more proof that the market structure and processes in place to deliver on the primary COAG Energy Council objective to protect consumers do not work at the moment.

In South Australia, we saw the results. AEMO asked for bids to provide electricity. The generators said no, so AEMO simply ordered that power to 40,000 consumers be cut. So far as I am aware, there is no power for AEMO to force a generator to supply into the market to ensure continuity of consumer supply, only rules that dictate how it must act to protect the overall network itself as though there is just a simple binary choice with no consequences.

I do not think we should spend too much time on those single or few events, although they need urgent resolution. However, they bring me to the point of my opening remarks; consumers do not want electrons, they do not want networks, they do not want a market operator and, mostly, they do not really care what the technology types are that generate electricity. I would suggest: most want clean sources for that electricity, they want all services that energy provides and they want it to be as easy and as good as it is now, and that is exceptionally good by world standards now.

The answers to the terms of reference about resilience in robustness of our energy supply systems will come from technical engineering knowledge and capacity and, mostly, I have got to say from those already designing, building and operating our existing systems with a little bit of help from people who know about new technologies.

Other witnesses' submissions will no doubt have referred to SAIDI, the System Average Interruption Duration Index and SAIFI, which is the System Average Interruption Frequency Index—I will not describe what they are. It is a bit of an irony that we are reacting to a few extreme events when generally we are so ignorant of our systems in Australia are. The US has numbers from 150 to 400 minutes of outages a year—that is 152 to 400 minutes of outages, with the average of the top 15 suppliers in the US at 179 minutes. That is not trivial—nearly three hours. The EU were at or below 100 minutes, and Japan is at four minutes. Australia sits at 11 minutes, so we should see our issues in the context of: we have really a good supply of electricity. Of course, with the long thin NEM and our other networks, location matters and local grid risks vary greatly, and the true cost of outages is an area of research that needs doing so we can get a real understanding of what is the value of the system to the community.

We can also expect short-term, unforeseen disruptions as we transition from our existing dirty supply systems to cleaner ones, but we need to be comparing old to new based on evidence and not simply demonising any particular technology.

The takeaway today from me is this: we know how to build a decarbonised electricity system, which means the same secure, reliable quality as what we now have, and the nature of clean technology is already deployed around the world and makes the design of the new systems even more resilient. That transformation can be done using current technologies at lower cost than replacing existing generator facilities and through realignment of existing funding for the networks. These are long-term planning design implementation activities that need to based on long-term policies, not short-term politics. Thank you.

CHAIR: Thank you. Can I ask, given all of that, is it your view that the national energy market is broken?

Mr Blume : No, it works well enough most of the time. So it is like anything we create: it is starting to break a little bit in parts, and the reason for that is that, as the witnesses we just heard a minute ago were talking about, there is a massive technology change happening. The technology change is happening worldwide and it is happening in Australia. The core of that is—and it does not matter if it is householders or small businesses, or even for that matter larger businesses—that we now have a situation where, for the main players in the electricity market, their customers are now their competitors. That has happened rapidly in five to seven years, and so for large organisations that have been running really well for a long, time all of a sudden, they have to rework everything they do. For the most part—I think they are too slow, but that is just me—they are actually trying to work that out.

CHAIR: What about the responsive nature of the federal government in this? You have said we cannot just focus on key events that have happened—of course it is hard not to talk about those things on a day like today, given this week's incidents in South Australia. How would you rate the performance of the federal government in foreseeing the rapid change and providing leadership in terms of making sure the energy market and the distribution of power keeps up with those changes?

Mr Blume : I will answer that shortly as well—I will just make one quick comment: frankly, I think it is difficult for any governments or any large bureaucratic institutions to match and follow policy to a market that is changing so fast. I was in the IT industry 25 years, and it never stopped changing and policy never stayed with it at all—I will put that caveat. Nobody suggests this is easy. These are complex questions, and so I do not think it is easy.

Mr Grimes : Senator, just a couple of quick points: the megatrends that we are seeing in the energy sector really come together around three technologies, although of course it is more involved than this. However, when you think about the commodification of solar PV, it is now so cheap that it outcompetes existing coal-fired power stations. As we get more volume, that price continues to fall. Second, battery technology is reducing dramatically in cost, and that is mainly through the economies of scale of developing and producing batteries for electric vehicles. So lots of companies are putting in billions of dollars of manufacturing capacity, which turns into really cheap batteries for energy storage.

Third, we are seeing an amalgamation of information technology and energy systems. When you think about the energy system that we have had for 100 years, unchanged—big, centralised coal-fired power stations, big transmission lines, distribution lines and a one-way flow of electricity—the rules are all about how that operates and how people make money in that market. Then think about the massive transformation, which has not been driven by ideology. It is not about climate change; it is about economics. When you can put in a system that is cheaper and is inside your control, so presumably more reliable, which takes you substantially off the grid but probably not off the grid entirely, then you see a massive change in the market. That is disruption. That is Uber, Airbnb. That is what is going to happen to the market.

Our message for regulators and legislators is that it is better for Australia to identify what is going to happen and position Australia so we can win a disproportionate value of that change—skills development, training and providing consulting advice to the rest of the world. We are actually leading the world in this stuff, so there are huge economic opportunities.

Most of all, we need a plan. We need a plan to get us from where we are today to where the market is going to take us. Whether you believe in this stuff or not, this is inevitable and it is unstoppable. It is the market. In a sense, having an argument about ideology is a bit like standing on the shore and commanding the tide not to come in. All the experts, I am sure, will talk about the economics of renewables being so radically competitive for energy storage, for smart energy systems. So this is going to happen. It is better that we transition than pretend there is not a problem. It is better that we think about what the benefits are, as opposed to locking in clean coal, for example. That is just a failure of leadership and actually does us a disservice. It does not do us a service.

CHAIR: So there is no plan currently—that is what you are saying? There is no leadership saying, 'This is what's going to happen; let's get on with implementing a system that's going to be able to adapt to it'?

Mr Grimes : Why the Finkel review is so important, in our estimation, is that it has the ability to produce that plan, that blueprint for the future—to recognise what technology is doing and to recommend the most efficient way possible to transition to the new reality, which is coming, ready or not. So we are very supportive of that process. We are disappointed when some things are pre-empted, are already ruled out. I would rather have a non-ideological debate about the economics of the transition and come up with a plan we can all agree on. That is a better outcome for Australia, in my view.

CHAIR: What is your response to, for lack of a better description, the demonisation of the disruptive technologies and the nature of how quickly things are coming on by people like the Prime Minister or the Treasurer, who yesterday brought a lump of coal into the chamber? What impact is that having on investment in technologies that, as you are describing, are going to be common and will take over regardless?

Mr Grimes : Climate policy or energy policy is the most contentious area in our political debate and has been for a number of years now. When I began my role in 2008, I used to get frustrated because ABARES used to produce these reports saying, 'We predict that the value of solar PV in 2020 is going to be X,' and the number they put there was three times what you could buy it on the market for on that particular day. We have had so much confusion, dislocation and uncertainty that in a sense we are a bit numb to it. So when you see reports it actually does not matter what number ABARES writes down on a piece of paper; it does not change anything. The market is going to transition. So you get off the roller-coaster ride, you sit back, you smile and you say, 'The market will drive the change.' Our investors know that. Our industry players know that. Banks are lining up to invest in these projects. Banks almost universally are pulling out of coal, and many of those big coal projects will be unfinanceable. So you can have a debate about it but, at the end of the day, the market is going to sort it out and the market already has a predetermined outcome.

CHAIR: How confident are you that the government will listen to the final outcomes of the Finkel report?

Mr Grimes : I am always hopeful that the government will engage in that way but, if they do not, remember: the people of Australia are smart; they get this stuff. There are backyard conversations after someone has put in a four- or five-kilowatt solar panel and about how their bill has just been slashed or someone that they know has put in a battery system and now they are 80 per cent self-sufficient. All those conversations are happening, and so I think there is a political dimension there and that governments that do not respond to those realties will struggle on this issue with the public.

CHAIR: Do you think AEMO are doing their job properly?

Mr Grimes : One of the big issues is that the energy rules are written around the energy sector at its core. They are designed so that big power companies cannot fail financially. That is how the system is set up. Consumers for the first time have systems they can create around themselves that are all about benefits to the consumer. So, while ever the focus is on power companies making money as opposed to the best outcome for consumers, there is going to be tension and how you resolve that is the million dollar question.

Mr Blume : Just on top of that, you have to remember that history is that they are talking about an organisation that was created to deal with other organisations that were largely public funded. The concept of subsidy is curious here in Australia, because all our electricity systems are publicly funded and have been publicly funded. The coal industry right now is five times more funded by public funds than renewable energy, for example. In a way that is so people have better advocacy at some point or other and manage to get better support than others do. Over time that changes, and somebody gets better and they will get a bit more subsidy and then the subsidy should disappear. You subsidise what you want and you tax what you do not want, and you work out a balance between those things.

The answer is that AEMO is working within the rules it is designed to operate in and you have to say again, moving away from the specific instances—South Australia early last year or in the last couple of days, if you have a look at what happens year by year. I walk at home and everybody I ask, the expectation in Australia is: you switch a switch and your electricity comes on. And guess what? Most of the time, that is exactly what happens, and the challenge for any change of technology to a distributed system—and it does not matter what the technologies are—is to make sure that whatever you provide does exactly the same as that. Early adopters think: 'I'm going to save the world. I'm going to save the planet.' They say that. That is what I am going to do, that is fine, but the end result is you want it to work and you want it to be reliable, secure, resilient and be there all the time.

Senator BACK: Affordable.

Mr Blume : And affordable as well. The evidence suggests, and it is not a secret. This is straight out. There are a couple of things in that background that we put in our submission: 65 per cent of all our current generating capacity has to be replaced on an economic life basis by 2030. For AEMO and all our people who plan our networks, 10 years is their planning horizon. That is how they want to work out. We have to work out what they are going to plan for some time in the next three or four years otherwise they will not be able to start for their 10-year replacement. And some of those are going progressively—we have seen Hazelwood go; we have seen others. So the question then becomes a simple financial comparison and conversing with the financiers and funders, because mostly this will be privately financed: what is the cheapest option to do that? The cheapest option is going to include—it is not going to be everybody going off-grid because the critical factor, which I think a lot of people misunderstand and it is one that homeowners need to understand as well.

Your question Senator Back was a single home, put in a battery and so on. I can do that and I will get 80 per cent of my power for the year out of that system. The point about energy is time as well. When do I want the energy? I want it now; I do not want it in a week, tomorrow, six hours or five hours later. That is what the network is: it is like the community benefit of insurance. You end up a with the a broad, diverse, geographically widely spread network with multiple sources of generation, multiple sources of interconnection, and that gives you the resilience, the security and reliability—

Senator BACK: There is a subtle difference with insurance, though. I am not arguing with you; I am just making a point. The difference with insurance is that there is always an expectation that different people in the market are going to be drawing on the insurance pool at different times, aren't they? The thing about the electricity market, which we know we are going to see today in this city and other places, is that at the time my neighbour needs electricity so do I and so does every other neighbour around. It is peak demand. That really is the difference between the electricity market, for example, and the insurance market, which evens out over time.

Mr Blume : It is actually not a difference at all. This is reasonably technical stuff, but it is not a difference at all.

Senator BACK: If we have a catastrophe and everyone—

Mr Blume : Our system in the past has never done anything about the demand side. The system we have at the moment is designed to say, 'If there's demand, we are going to build whatever it takes to meet that demand.' In the system we have at the moment, that means you build about 15 to 20 per cent more generating capacity than you ever need and you spend a lot of money on plant that is ordinarily too expensive to run, but we run it at $14,000 a kilowatt-hour for 25 hours a year, which is about a quarter of our total electricity costs. That is how we built that system, and we all pay for that. So the question is not what we have now, because it is a problem when everybody wants electricity at once.

But even right now—a lot of people do not know this—in Queensland they have what they call DREDs. They are very primitive little devices: demand response enabling devices. They are very simple little things. There are 750,000 households with them on their hot-water systems. And what do they do? When there is big demand, they either pump electricity into those hot-water systems or turn the hot-water systems off. There are about half a million of them on air conditioners, and they drive the air conditioners. It is not like all of a sudden your air conditioner turns off and you think, 'Bugger—I've got no air conditioning.' They turn it off in lumps all over the network—two minutes off here, two minutes off there. That is called demand response, and the demand response technology up until now has not been used very much.

In the new networks, it will be on the whole lot. So you and your next-door neighbour will be sharing battery storage and energy storage, not just in the household but on networks. There are things like pumped hydro, which is not damming big rivers like we have at the Snowy, which again does not work very efficiently and does not help our electricity system. All those things are about a new design for a different system, so we are not talking about what happens now. The advantage of that is it costs you less.

For example, the energy losses across our network are on average a bit over eight per cent. In some parts of our network in Australia it is 20 per cent. In North Queensland you get these long, thin lines. They are old wires, they are not insulated and you have all sorts of issues. In a community area, where your losses are still going to be five or six per cent, you can share electricity amongst the community locally and that loss disappears. That is real value that comes onto the network. That means that you do not have somebody having to meet that demand, because there is a local supply of stored power, either at the small scale or at a large scale.

So the real issue—and this is where it gets back to the market—is that there is a whole value chain in there that nobody even looks at at the moment. There are some documents out at the moment where the ancillary services market is being considered and talked about. As I said, the customer is now also a competitor. The customer has invested money and is entitled to participate in the market. It is the stacking of little individual bits. You are not going to have a homeowner saying, 'I'm going to fly into the NEM and start bidding.' That is not going to happen.

People like Reposit Power, who were here before, are aggregators. They need to be in the market, and that is how the market will look in the future. There will be aggregators who will look at individual businesses and homeowners and what their energy resources are and they will say: 'We'll give you a deal. Here's the deal. We will manage your system for you.' It is like the telecommunications or mobile phone network: you do not really care what is behind the network. All I know is I will go out and say, 'I need X.' That is my base amount. If I go over that, guess what—I have to pay a penalty, so I will end up with a different amount.

Senator ROBERTS: Mr Blume, you just mentioned in response to Senator Back that we need 20 per cent over-capacity because of the peaks and troughs in electricity demand. Surely with solar generation in the daytime—and, depending upon the time of year, night-time can be as long as or longer than the daytime—we have to generate double the capacity while we are using that power. So that is doubling the solar capacity, which means doubling all of the exotic materials going into the PV cells and all the rest of it. On top of that, if we have to allow for wet days or cloudy days, we will have to have even more capacity than that, and most of that is redundant, just sitting there.

Mr Blume : First of all, that is misstating what I was talking about on the network.

Senator ROBERTS: Okay. Please explain.

Mr Blume : What I said was a diverse network of multiple energy sources across a diverse geography. If what you are saying, it is one of the reasons you are not going to go off grid. I am not going to put a solar system on my house and a battery because, first of all, if I want to be totally independent—and I have friends who are off grid—you have to have a lot of money and a lot of battery storage, and even then you will end up with six or seven hours of outages over a year, and sometimes more. But that is not what we are talking about. It is that insurance model and it is a diverse ecology of energy sources and energy types. There will be pumped hydro, there will be regular hydro, there will be wind, there will be capacitors and there will be flywheels.

There are a number of technologies that are being deployed internationally that are available right now that can provide that generation. Add that to what we are talking about—the elephant room, really: energy efficiency. At the moment, almost nothing is done about the efficient use of the energy, and combine that with demand response. The only issue with electricity supply is supply and demand, and they have to be equal. If you are running a system, that is all you have to do. It is not rocket science, as far as that goes. How you do that is the trick, and you do not do that by saying, 'I'm going to rely solely on a solar cell or a solar PV unit.'

What is the single biggest risk—as the Reposit Power guys said, the single biggest issue? Take, for example, the UK. If they build that nuclear power plant of 2,000 gigawatts, that will be eight per cent of their electricity system. If that goes out, even for maintenance, what do you use to get the eight per cent when that is not running? It is a big question. If you start relying on individual things that is what will happen. What we do here, we actually redundancy built in and we have done that historically because it has been the best way to do it; we knew more about it and there were not really other technologies. The answer is we do now have a lot of those other technology already being deployed around the world.

Senator McALLISTER: Thanks very much for your submission, which is quite detailed and quite straightforward. I want to confirm a few points that come out of that submission for me. The first is the significance of the ageing fleet. You make the point in your submission that of Australia's existing generation assets, 65 per cent need to be replaced by 2030 and 85 per cent by 2040. Is it correct to say that the implication of that fact is that, one way or the other, we need to facilitate a substantial investment in new generation capability over the next decade and that, ultimately, irrespective of what that technology is, there will be costs for consumers associated with that investment?

Mr Blume : The answer is yes—in other words, you are not comparing no cost to one cost. We are going to have to replace it. If you are going to replace it then you do a comparison of what you might replace it with. We have the same issue with our networks. There are arguments about gold-plating and there was excessive cost simply because the model made it more profitable for a company to just keep on investing capital because the return was related to the capital investment, which is a peculiar way of getting an efficient outcome. With the network facilities, there is about a 40- to 50-year life cycle, so you have to maintain and replace a lot of these things. There was a massive investment in the seventies as a result of blackouts and brown-outs and so on. Forty or 50 years later, all of a sudden, those transformers and things have to be replaced. It is a part of the inevitable investment. The question is: what is the cheapest way we need to invest that and then, when we are doing that, can we redesign our network to make sure that the overall cost for the delivered material is to there?

Senator McALLISTER: Following on directly from that, there is a public debate about what this future ought to look like and an assertion is made that the intermittent nature of renewables means they are inherently unsuitable for participation at scale in the National Electricity Market and in the grid in particular. Your submission to the Finkel review expressly contradicts that. Can you talk us through, in simple terms, your view about the relative suitability of renewables and the contribution they might make in the future?

Mr Grimes : Just a comment before Steve answers. What we do at the moment is really, really hard. We take demand and we match supply to demand in real time. It is really, really difficult to do. You have to manage all sorts of things just so—critically. That is because we have fixed generating assets. In the future, with stacking variable renewable energy along with energy storage—particularly pumped hydro, which is very low cost—we will be able to have energy on standby that has already been produced. You basically open the floodgate and water goes through a turbine and creates electricity. So we are going to make it much easier for ourselves to manage a stable and secure network in the future, because that is what these technologies ultimately do.

Senator McALLISTER: Your argument, then, is that it is not a technical or an engineering challenge but it is a market design challenge. You spent some time in your submission talking about tariffs and the structure of tariffs. Other witnesses have also talked about this. In the market as it is currently organised, what role should government or legislators play? Is this a question for government or is this really a question between market participants?

Mr Blume : The answer is that it has to be a question for government, because no markets operate in the public interest. They just do not. They are designed to meet the interests of participants, and there will be differing interests. So the market works out ways to manage those competing interests, but the consumer at the end is not actually listened to in that market. It is like running a business: it is for the shareholders. Public interest is not an obligation of the business formally. We all know that there are social obligations and responsibility, but ultimately it is not. So the government does have a role.

Current governments—all governments, state and federal—have been fairly active participants in creating structures and making sure that their rules are agreed and so on. The difficulty has been that the last major changes about 22 years ago were very successful—the last really big changes—but the changes of the last four or five years, as I said, have just made it much more complex. So the things that have worked quite well up till now need looking at again.

Senator McALLISTER: So your view is that, with the institutions we have in place—the AEMC, AER and the market operator—there is work to be done and work being undertaken to better shape up the market rules so that the market can respond to the diversity of technologies in the system?

Mr Blume : You would have to ask why we have five different bodies involved in creating markets. They each have slightly conflicting terms of reference and obligations. I am not a great centralist, necessarily, but if you were trying to create the best energy market, having five competing bureaucracies, plus the state bureaucracies and the state regulators, does not seem to me to be a very sensible way to do it.

CHAIR: It enables blame-shifting, though, very easily.

Mr Grimes : It does. Maybe I will inject something a bit more controversial to answer that question. At the moment, if I generate solar electricity, it is illegal for me to sell it to my neighbour or to anybody else, right? So what happens when somebody starts up a peer-to-peer trading model where they have excess capacity and they want to sell it to the local preschool or local supermarket or vice versa? At the moment, you would go in there and crush them. What happens when 50,000 people decide to do that at the same time? They will crush the government, actually.

It is like Uber. It was completely unregulated. You cannot do it—not allowed. Guess what: they did it anyway, and they got so many people on side governments could not stop them. That is the political reality of this, so this change is happening. It is empowering people. If the regulators do not respond to that and put the consumer's perspective centre of mind, then I think you will see radical change. That would be my view.

Senator ROBERTS: Thank you both for coming today and giving us your views. Would you agree, Mr Blume, that the customer is the best regulator? You have both talked about markets.

Mr Blume : The answer is that in a perfect world, yes. We are talking about economics and we are talking about people, and there is a massive asymmetry of information that means that customers are not in a position to do that.

Senator ROBERTS: We happen to differ there. In the long term, I see that the customer is the best regulator. You said that markets by themselves need a government to regulate. I would put to you that markets combined with the protection of common law are all we need. In fact, governments are now abrogating the common law and instituting legislation regulation that has been driven by public perception—in other words, governments are guaranteed to distort things just to keep themselves in power. You opened with the comment that we must have policy that is in the public interest, so I just wanted to set that straight.

The second thing I wanted to comment and get your view on is that the United States has more outages than we do in Australia but the United States is one of the most regulated electricity providers in the world. Wisconsin, 100 years ago, first started regulating the electricity market, sadly. I am not sure if you are aware of that or not, but America is highly regulated in many industries—overly regulated—and I would put it to you that that is the source of their problems.

Mr Blume : I do not think the US is any more overregulated then the EU or Japan and, in fact, not Japan by a long shot. Japan has four minutes and the US has 179 minutes. The questions of philosophy and political philosophy are basically—

Senator ROBERTS: I will accept that. Also, Uber has been mentioned by you, Mr Grimes. The market for Uber was created by governments regulating the taxi industry. The taxi industry at first benefited from the monopoly that governments gave them. It gave them a protected market—a monopoly—and now we are seeing that broken down by new technology; I agree with you. Now we are seeing the very people who were protected by the regulations suffering due to the regulations. They are being hoisted with their own petard, so to say.

Mr Grimes : Uber is an example of transformational change—that was all I was referring to, not the underlying regulatory outcomes for consumers. But the consumer needs to be at the centre of thinking for everybody doing this planning, and technological change is also inevitable and so needs to be factored in.

Senator ROBERTS: I agree with you, and that was why I found it a bit strange that you said we should anticipate the future. I do not think we can, because the past has shown us that many times our view of the future has been completely wrong.

Mr Grimes : Look at solar PV. Germany yesterday announced 28 new solar PV projects—they were bid-in projects. The average cost-per-kilowatt hour of electricity was six euro cents. Germany has less than three quarters of the solar resource that Australia does, so put those solar panels here. We have seen big solar projects in the Middle East that have been bid in at 2.9c per kilowatt hour. Solar kicks the butt of every other generation source. That is today; that is just a fact and a reality.

Senator ROBERTS: And yet the reality is that Japan is now going to build a huge number of coal-fired power stations. China is continuing to build them. Germany is building coal-fired power station. Italy is building coal-fired power stations. In Spain, which has been heavily reliant upon solar and wind—

CHAIR: Senator Roberts, on the basis of time, do you have a final question?

Senator ROBERTS: Yes. We have seen that, for every job created in Spain, two to three are under renewables and we have seen 2.3 jobs destroyed. What would happen if we stopped subsidising solar energy overnight forever?

Mr Grimes : Household-scale solar is quickly getting to the point where it does not need subsidies going forward. That is a fantastic policy achievement in the Australian context.

Senator ROBERTS: Could we power an aluminium smelter or a car factory off solar cells?

Mr Grimes : The reason why Australian aluminium smelters cannot compete on the world stage is that aluminium is most efficiently processed in Iceland, where they have an almost 100 per cent renewable energy grid and they sell energy at one or 2c per kilowatt hour. It is renewables that are actually taking our competitive advantage away.

Senator ROBERTS: Same as in Canada: hydropower is what drives the Canadian aluminium industry.

CHAIR: Senator Roberts, we did agree to—

Senator ROBERTS: Hydro is not renewable in the sense of solar and wind.

CHAIR: Mr Grimes, is there any further information that you want to add to that question?

Mr Grimes : No.

CHAIR: We will leave it there, gentlemen. Thank you so much for coming in, I appreciate it, and we will contact you if we need anything else. We will now take a 10-minute break.

Proceedings suspended from 11:09 to 11:20