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Transcript of interview with David Speers: Speers: Sky News: 11 April 2018: national energy guarantee; renewable energy; emissions reduction; hard right of the coalition party room dictating energy policy; energy bipartisanship

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SUBJECT/S: National Energy Guarantee, renewable energy, emissions reduction, hard right of the Coalition party room dictating energy policy, energy bipartisanship.

DAVID SPEERS: Joining me now is the Shadow Climate Change and Energy Minister, Mark Butler. Let’s just go back to the point Josh Frydenberg was making - he reckons households and presumably business prices will start to fall from July. Do you think he is right?

MARK BUTLER, SHADOW MINISTER FOR CLIMATE CHANGE AND ENERGY: You would expect that wholesale power prices would start to come down after the very serious injection of new generation infrastructure discharging the Renewable Energy Target. Now that probably would have happened 18 or 24 months ago if there hadn’t been this very big hiatus in investment, a real crash in renewables investment in 2014 after Tony Abbott came in and initiated that review of the Renewable Energy Target. So this is sort of catch-up investment if you like, that has happened over the last two years which should inject additional supply, or is injecting additional supply into the system, create more competition in the bidding market and bring wholesale power prices down. Prices really have increased quite dramatically.

SPEERS: They certainly have and if they do come down do you say it’s renewables we should tank for that?

BUTLER: I think Josh Frydenberg has admitted that. There is no question; the reason wholesale power prices went up is there wasn’t enough new supply coming into the system. Once you got that investor confidence back in again after Tony Abbott left the scene, you’ve seen probably about 5,500-6,000 megawatts of new renewables built over the last couple of years. As that comes online it will create more competition and bring wholesale power prices down a little bit we hope - we don’t know by how much.

SPEERS: We don’t know yet and lets all hope, keep our fingers crossed. But they’ve been built, all these renewables, with enormous subsidies as well and Josh Frydenberg today made the point it is time for those to end - at least after 2020, enough is enough, they can compete, they can stand on their own two feet, let them battle it out with coal, and gas, and everything else, have a technology-neutral approach. Do you agree it is time to end renewable subsidies?

BUTLER: I’ve said that for years. The Renewable Energy Target created in the last decade, initially by John Howard and expanded under Penny Wong and Ian MacFarlane’s agreement back in 2008/09 is really an example followed by 173 nations. At that stage of the technology’s development, it was effectively a technology pull-through mechanism to ensure that renewables could get to a point where it could compete in a properly constructed market on its own two feet. The critical question, though, is establishing that properly constructed market - that’s the challenge that has eluded the country over the last several years since Tony Abbott dismantled the carbon price mechanism and failed to put anything in its place.

That’s really the challenge before Malcolm Turnbull and Josh Frydenberg. It’s all well and good to have had this new kit constructed over the last two years, but from here on in there won’t be new infrastructure built if there is not an energy policy investment framework that gives investors confidence to build.

SPEERS: That brings us to the National Energy Guarantee, before we do that though; if the right market mechanism is there you are saying the Renewable Energy Target does not need to continue beyond 2020?

BUTLER: I’ve said that for some years that the Renewable Energy Target is probably going to be discharged before 2020 because of the spate of building you’ve seen over the last couple of years. We’ve always said, we said back in 2009 that post 2020 what you should see is a properly constructed market that reflects the different imperatives in electricity, and then you will see renewables competing very comfortably with coal, with gas, with other electricity generation technology. If anything, that competitiveness has come a few years earlier than people expected a decade ago.

SPEERS: Now under the National Energy Guarantee the government is hoping to secure agreement on, it is pointing out that the Energy Security Board says that the mix of renewables will nearly double from 17 per cent today to between 32 and 36 per cent by 2030. You, however, want a higher mix of renewables, 50 per cent by 2030, is that the main sticking point here?

BUTLER: No it’s not, it is just one of them really because that share of renewables really is an extension of the emissions reduction target under this policy. This is the real problem that all of the electricity sector has pointed to in their submissions but particularly other sectors of the economy have pointed to - because the lower the emissions target in electricity, the higher the emissions target in other sectors of the economy is going to be. That really is the core problem with the design of this National

Energy Guarantee. There are other problems which the industry, other business bodies, the stock exchange, the ACCC have all pointed to in the design of this scheme, which if they are not fixed means this National Energy Guarantee has the prospect of actually doing harm to the system - and as the ACCC says has the risk of pushing power prices up rather than bringing them down.

SPEERS: What needs to be fixed in the design of this?

BUTLER: There are two main problems. To expect the electricity industry to only do its mathematical share of the national abatement task of 26 per cent is unsustainable. Everyone agrees with that - the electricity industry agrees with it, other business groups agree with it even more forcefully because expecting electricity only to do that share shifts the responsibility to other sectors of the economy.

There are three problems with it David, the first is it ignores what has happened since 2005 because 26 per cent is a target between 2005 and 2030. Now, electricity has got its emissions down because of the Renewable Energy Target so what that would effectively mean is electricity only needs to reduce its emissions by 12 or 13 per cent over the course of the decade of the 2020s, while every other sector of the economy would then be expected to reduce their emissions by more than 40 per cent. And they don’t have the low-cost abatement options available to them that electricity does through renewable energy technology.

SPEERS: So what should that figure be just for the energy sector?

BUTLER: I’m not going to come up with a figure, I would ask for proper advice from agencies about what that would be and we would engage -

SPEERS: Isn’t that what the Energy Security Board is doing right now, aren’t they looking at that right now?

BUTLER: No because the Turnbull government has put a restriction on this policy to make sure the electricity sector does no more than 26 per cent by 2030 on 2005 levels. That is a fundamental flaw in the system. The other reason we expect electricity to do more, beyond the fact it has the lowest cost abatement options available to it, is that decarbonising electricity drives decarbonisation in other sectors of the economy. Transport is a great example as we move to greater electrification of vehicles.

SPEERS: Sorry to stick on this just for a moment, who should establish what that figure should be for the energy sector? You’re saying there needs to be a proper economy-wide look at this and work out what the burden the energy sector should bear. You’re not willing to identify it today but who should come up with that number?

BUTLER: I imagine it would be a body like the Climate Change Authority or an agency of government that touches the whole economy. The problem with this is the electricity sector -through the Energy Security Board, the COAG Energy Council potentially, and

certainly the Energy Minister - has decided unilaterally without engaging those other sectors of the economy that energy will only do 26 per cent. That has never been the orthodox position here in Australia, or anywhere else in the world. It has always been expected that electricity would do more than its mathematical share because of those features of the industry that I have outlined.

SPEERS: Is that something a Labor government in the future could actually tweak - you could actually say you know we’re going to ramp up that commitment from the energy sector under this National Energy Guarantee?

BUTLER: Yeah it is because we have to ramp up the level of ambition anyway because we think broadly the level of ambition in emissions reduction is just far too low in any event.

SPEERS: Indeed you want to go to 45 per cent.

BUTLER: Bloomberg Finance, for example, has said that large-scale renewable energy investment levels under this target would be 95 per cent lower than they currently are. Ninety-five per cent lower in terms of investment and jobs in the renewable energy industry, so yes we would want to scale it up. But we need to point to the fact that under the current proposal from Malcolm Turnbull and Josh Frydenberg there would be enormous burden-shifting to other areas of the economy like steel, cement and others that simply don’t have a low cost technology to reduce their emissions output.

SPEERS: I hear your point on that. I’m just wondering with this mechanism of the National Energy Guarantee if you were to ramp it up substantially? Do you see merit in the reliability guarantee part of the National Energy Guarantee; to have a certain percentage of dispatchable power?

BUTLER: Obviously we need to ensure that there is enough dispatchable power through the system but I think you need to look through all the submissions that have been made to the Energy Security Board over the last month or two - I have been looking at them over the last few weeks, and engaging with all the relevant bodies. They are concerned this is a solution to a problem that doesn’t exist. You look at the Energy Market Operator’s report around reliability; they indicate the standard has not been breached on any occasion, anywhere in the system, since 2009 - and there is no forecast of any reliability breach. So there is a danger, I think, while we, of course, have to ensure there is enough flexible, dispatchable, reliable power -

SPEERS: Yeah but if we put the foot on the accelerate of renewables as you are suggesting, if we really ramp that up then we may see reliability problems if coal is shutting down and more wind and solar are opening up?

BUTLER: Absolutely and we have got to have a Market Operator, AEMO, that is keeping an eye on that - as they are at the moment.

SPEERS: Which is what this reliability guarantee will do?

BUTLER: Well we don’t know about that, that’s part of the challenge; we don’t know that there is not the risk that this reliability guarantee becomes a political device to satisfy the coal proponents in the Coalition party room.

SPEERS: But it is the regulators who are putting this forward?

BUTLER: To a degree - under instruction about what design Malcolm Turnbull and Josh Frydenberg think they need to be able to get it through the Coalition party room. All I say is that across the industry, the big old coal generators, the renewable energy sector, big users, consumer groups like ACOSS and others - they are all concerned that there is a danger that this reliability guarantee will be overdone, to the extent we end up going down another process of gold plating the system at a cost that ultimately will be borne by households and businesses.

SPEERS: A final one, the Energy Users Association this afternoon has welcomed at least what the Minister was saying about certainty. They said, “while the National Energy Guarantee may not be perfect it does have the potential to deliver investment grade energy policy and the certainty we desperately need.” Do you accept while it may not be the perfect solution as far as you are concerned, after a decade of this we do need a solution?

BUTLER: We’ve been saying that for years. We thought we were there in 2016, we thought we were there last year with Alan Finkel’s report. We still hold out hope for the National Energy Guarantee. But we are not going to agree to something that bakes in elements of design that do real harm to the system and do real harm to consumers.

There is another element that all of the sector and bodies like the ACCC and the stock exchange have pointed to, and that is the current design is almost certain to increase the power of the big three retailers rather than reduce it. And also to significantly reduce the depth and the liquidity in the contracts market system that is an important price stabiliser.

These things can be worked on, they can be overcome. But they can only be overcome if Malcolm Turnbull and Josh Frydenberg are willing to stand up to the hard right in their Coalition party room which has effectively demanded these very poor elements of the design.

SPEERS: Mark Butler, Shadow Minister for Climate Change and Energy, thank you very much for joining us this afternoon.

BUTLER: Thanks David.



Authorised by Noah Carroll ALP Canberra