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Transcript of interview with Ticky Fullerton: Sky News: 25 October 2018power prices, renewable energy, emissions reduction, divestment, National Energy Guarantee.

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SUBJECT/S: Power prices, renewable energy, emissions reduction, divestment, National Energy Guarantee.

TICKY FULLERTON: Mark Butler, great to talk to you there. Now is the government right to prioritise electricity prices for hard-working Australians over absolutely everything else including climate change?

MARK BUTLER, SHADOW MINISTER FOR CLIMATE CHANGE AND ENERGY: Well we’re obviously all very concerned about the price rises that we’ve seen over the last several years, particularly as the energy crisis in the eastern states has bitten so hard on businesses and households. We’ve seen power prices go up and up and up, and obviously we’re all very focused on doing everything we can to bring them down. But I think it’s a sense of a false choice that reducing emissions is inconsistent with reducing power prices, when actually what we know from evidence here in Australia and all around the world is that the cheapest way to build new power is to put renewables into the system. We know that through our experience right now. The only reason wholesale power prices were coming down over the last 12 or 18 months is the very big build in cheap renewables we’ve seen to discharge the Renewable Energy Target. Through Senate estimates processes over the course of this week the government’s own departments have admitted that. So it’s a false choice. What we obviously need to do is get power prices down; they’re really crippling household and business’ budgets. But we also do need to get carbon emissions down and we can do both at the same time by expanding renewable energy.

TICKY: One of the problems, though, has been, I mean we’ve had the Energy Security Board chair describing the market out there as anarchy, one of the problems of the amount of renewable energy that is being thrown into the grid at the moment, as you know, is not stable and it’s the issue of transition that is so tricky for any government of the day to manage. Everybody wants to move to renewables but we’ve got this problem with dispatchability and it is going to be quite costly, the government argues, if you push the amount of renewables and continue to push the amount into the grid that Labor

would like to do so.

BUTLER: Well not everyone wants to move to renewables. The government certainly does not want to expand renewable energy. They’ve made that very clear, particularly with the new energy minister who has really built his career on campaigning against renewable energy.

TICKY: Well he says there’s enough there already, it’s going gangbusters, renewables, as we know, both at the household level and indeed in corporate land.

BUTLER: I expect household renewables will continue to expand fast, particularly as power prices stay high, as they will if this government is not able to get energy policy under control. But you will see investment in large-scale renewable energy really start to slow very significantly as the Renewable Energy Target investment period comes to an end over the next 12 months or so. But you’re right, obviously a grid that’s based on more renewable energy than historically we’ve been used to is going to need firming up technology. We are going to see investment in pumped hydro, some of the new battery technology, a much cleverer demand response, so really being careful about energy use at the peak periods. But you do see that through the market operator’s work already. You do see that through different business approaches to their energy use at peak times to reduce their bills at peak times.

TICKY: Isn’t this what the government is trying to do though, what Angus Taylor is trying to do in terms of delivering firmed up power and indeed he’s going to COAG tomorrow to ask for approval to do exactly that and to get some of these projects underwritten by the government.

BUTLER: No, that’s what the National Energy Guarantee was intending to do. For the first time it was going to bring emissions policy that will underwrite or underpin almost all the new investment in a system that shifts to renewables, with the reliability obligation that the energy security board have been working on for so long. This was really the holy grail that we’d be working towards for such a long period of time. The states, businesses organisations, Federal Labor, and frankly Malcolm Turnbull and Josh Frydenberg as well and we almost got there until Angus Taylor and Tony Abbott tore the last Prime Minister down based on that energy policy. So yes, Angus Taylor will take the reliability obligation to the COAG Energy Council tomorrow but that’s only half of the solution. The other half is to have an investment framework that sets the rules for energy companies that do want to build new energy, that do want to build new electricity generation. And frankly, we need them to do that because we’ll start to see more and more of the old generators start to exit the system over the coming decade.

TICKY: Yeah, but going back to trying to make sure there’s a smooth transition, we all know what happened when Hazelwood shut too fast. It created, really, the basis of the problem we’ve got at the moment with prices. If we don’t make sure that we have that firmed up power, and it may indeed, as the Energy Minister has said, including supporting existing coal power stations to stick around as they’re being hollowed out at

the moment by the use of renewable energy in the grid. Would you support that? Would you support what he’s taking to COAG tomorrow?

BUTLER: Well we support the reliability obligation, we always have. Now, it’s a matter for the states to determine whether the position that Angus Taylor puts to them tomorrow is something they can tick off then and there. I’m not quite sure what the finer details of that is, but the reliability obligation has been worked on now for quite a considerable period since Alan Finkel, the Chief Scientist, first handed down his report. The market operator has been working on it, the industry has, the states and territories have as well and I’ve said a number of times it would be an enormous pity if the vandalism that really the coalition party room conducted against the National Energy Guarantee also saw that important reliability work interrupted as well. So I hope that does continue; whether it gets ticked off tomorrow or not is a matter for the states.

TICKY: Well indeed business is looking, we’ve heard from those conferences that happened a couple of weeks ago that business itself seems to be looking at some sort of emissions target that they could get together. If Labor does bring back an NEG, were it to move into government and it still has its 45 per cent emissions reduction target, how can customers and Australian taxpayers be confident that you can manage this without either customers or taxpayers actually getting hit by the lumpy way the transition is going to eventuate?

BUTLER: Well there’s no doubt that there needs to be a better approach to, particularly, the older generators. We saw Hazelwood come out with about 5 months’ notice only given to the system, and perhaps more importantly to the community and the workers that lost their jobs. At Alinta in the Iron Triangle in South Australia, the Northern power station closed with only 11 months’ notice. Alan Finkel, the Chief Scientist, made the point very strongly that we can’t have such big, important parts of our electricity system exit with such short periods of notice. We do need to try and make this transition out of a generation of electricity generators that were built in the 60s and 70s; inevitably they’re going to retire. We can’t see that happen in that very chaotic way that we’ve seen over the last several years and it is important that we continue to work on Alan Finkel’s recommendation for a minimum 3 year notice period of those generators and focus heavily on reliability as well.

TICKY: The market is so out of kilter that intervention of one sort or another is inevitable, even for free-marketeers I think, but are you going to get to a stage where you’re going to be forcing companies to stay open. Already the gas companies we’re seeing the price cuts that have happened as a result of intervention, are you going to force companies, say coal-fired power stations open, against business’ interests and shareholders’ interests?

BUTLER: Well that’s really what the government has been playing at around the Liddell power station, which is almost 50 years old. I think everyone in the industry would agree is one of the clunkier power stations.

TICKY: Well it has gone quiet now it seems.

BUTLER: Well I think their announcement about a divestment power a couple of days ago, I think if you read between the lines, is all about Liddell power station. Now AGL - TICKY: This is the big stick, this is the big stick.

BUTLER: Well the so-called “big stick” we don’t know what it is going to be used for. It wasn’t a recommendation from the ACCC, it’s important to point out. The ACCC considered through its lengthy retail inquiry whether a divestment power should be used and would be in the best interests of consumers, both business and households, and it came to the view that it would not. It did not recommend a divestment power. If this was about consumers the ACCC would have recommended it and they didn’t and Rod Sims, the chair of the ACCC -

TICKY: Do you support it?

BUTLER: No, I don’t. We’ve made that very clear. Rod Sims, the chair of the ACCC said at senate estimates earlier today that he wasn’t even consulted doesn’t whether a divestment power would be in the interests of consumers and he re-iterated his view that such a power would be, in his words, “an extreme step” and his view hadn’t changed. And that is, that he hadn’t recommended that the government pick it up. So really what you’re talking about is a view in the Coalition party room that says coal stations should never close. Now AGL has said to keep Liddell open for another 5 or 7 years would cost about $900 million, which would have to be recouped over a very short period of time and would deliver power at 25 per cent higher prices than the portfolio of renewables, pumped hydro -

TICKY: Yes, but, sorry to interrupt you, but business is equally concerned about Labor’s 45 per cent emissions reduction target and how it will manage the transition to renewables in terms of investment certainty, there seems to be very unclear about how you’re going to manage such a tricky issue.

BUTLER: Well up until 8 weeks ago I think every business organisation in the country, states and territories, Federal Labor and the Federal Government itself were working on these issues through the prism of the National Energy Guarantee and that’s been the table.

TICKY: So that’s what you’ll bring back, the NEG?

BUTLER: Well we’ve said the government should come back to the table on the NEG. We’ve had every business organisation out this morning calling on the government to bring emissions reductions back into energy policy, we’ve had the institute of company directors with their regular survey for the first time ever put climate change - TICKY: So Mark if you came back into government would you bring it back on the table?

BUTLER: Well we’ve said the NEG was an important piece of work that business organisations, industry and the electricity agencies put a lot of work into. We thought it was a workable model, a scalable model. Now at the end of the day it only really works if there is bi-partisan agreement. That was the value you got from the National Energy Guarantee or the previous iterations of policy like Alan Finkel’s clean energy target. Both major parties would agree on the investment rules and give investors that level of certainty that they need to put very substantial sums of money into renewing our ageing, increasingly unreliable infrastructure. Now if the Liberal party doesn’t come back to the table on this we do have a very serious problem with the approach of a bi-partisan market mechanism.

TICKY: Finally can I just ask you about the actual price, the idea of this default price that Angus Taylor will be taking to COAG tomorrow? Do you support it and would you also support that of default price returning into a cap if prices don’t fall as the government expects they will?

BUTLER: Well we were the first out to accept the recommendation, in this respect, from the ACCC when the report was released some months ago. I think it’s more than 10 weeks ago that Bill Shorten and I accepted that recommendation that there be a default price that would effectively replace the standing offers in the system. There’s a potpourri of standing offers in every market, it’s very hard for consumers to work out quite what benchmarks are being used when they’re considering different discounts. We said 10 weeks ago we supported it, Malcolm Turnbull and Josh Frydenberg followed suit within 24 hours. This has been a bi-partisan position in energy policy now for 10 weeks. There’s nothing new about what Angus Taylor and Scott Morrison announced this week.

TICKY: Would you turn it into a cap if prices didn’t come down?

BUTLER: Well we think that the recommendation that Rod Sims made about the design of this was a recommendation considered over a very lengthy inquiry and we accept the advice of the consumer watchdog. Now obviously, there needs to be work about designing how that default price is set, making sure there’s a little bit of headroom, as Rod Sims describes it, to allow good competition between retailers to the benefit of consumers. But we accept the advice of the ACCC and we think there should be good work on implementing it.

TICKY: Yeah, but does that mean a cap if it doesn’t work?

BUTLER: Well let’s cross that bridge when we come to it. Rod Sims considered a whole range of different models. He, after a very lengthy inquiry, recommended this. We haven’t even gotten to the point of starting to design it. So let’s not worry about moving on to another alternative, let’s see whether the considered advice of the consumer watchdog works.

TICKY: Climate Change and Energy Shadow Minister, thank you very much for joining us.

BUTLER: My pleasure.