Title Environment and Communications Legislation Committee
03/05/2021
Estimates
INDUSTRY, SCIENCE, ENERGY AND RESOURCES PORTFOLIO
Department of Industry, Science, Energy and Resources
Database Estimates Committees
Date 03-05-2021
Committee Name Environment and Communications Legislation Committee
Page 3
Questioner CHAIR
McAllister, Sen Jenny
Hanson-Young, Sen Sarah
Van, Sen David
Siewert, Sen Rachel
McMahon, Sen Sam
Responder Seselja, Sen Zed
Mr Fredericks
Mr Sullivan
Ms Parry
Ms Croker
Mr White
Mr Gaddes
Mr Campbell
System Id committees/estimate/0047f0e9-cc94-4100-95ea-d884a8d15f16/0002


Environment and Communications Legislation Committee - 03/05/2021 - Estimates - INDUSTRY, SCIENCE, ENERGY AND RESOURCES PORTFOLIO - Department of Industry, Science, Energy and Resources

Department of Industry, Science, Energy and Resources

[09:03]

CHAIR: I welcome Senator the Hon. Zed Seselja, Minister for International Development and the Pacific, representing the Minister for Energy and Emissions Reduction, and portfolio officers. Minister, do you wish to make an opening statement?

Senator Seselja: No, thank you, Chair.

CHAIR: I also welcome back the department secretary, Mr David Fredericks. Do you have an opening statement?

Mr Fredericks : No, thank you, Chair.

CHAIR: I now invite questions on outcome 3 of the energy portfolio. Senator McAllister, I believe you are seeking the call.

Senator McALLISTER: Thanks, Chair. I would like to start with concerning reports that ministerial pressure and departmental pressure has been placed on the experts within our energy system governance arrangements. I want to ask questions, in the first instance, about the interaction with Ms Schott and the Energy Security Board. A recent Four Corners report claimed, Mr Fredericks, that you called Ms Schott and urged her resignation. Are you able to refute this?

Mr Fredericks : Sorry Senator, you're just breaking up a little bit on me. Could you just repeat that for me, please?

Senator McALLISTER: The Four Corners report claimed that you called Ms Kerry Schott at the Energy Security Board and urged her resignation. Are you able to refute this?

Mr Fredericks : Yes, I am able to refute that.

Senator McALLISTER: Can you provide some detail of the conversation that did take place? What was the purpose of the conversation?

Mr Fredericks : The gist of the conversation was: I phoned Ms Schott in order to determine, to ask her what her intentions were about staying on as the chair of the ESB.

Senator McALLISTER: Why was that in question? Why were you interested in that issue?

Mr Fredericks : I can't really remember the time frames, but I know that at a relatively short period of time before then the terms of reference for the review of the ESB had been released by the energy ministers, and the terms of reference for that review went to the potential future of the ESB. Secondly, I knew at the time that Ms Schott's term as the head of the ESB expired in something like two or three months time. Given that there was a review of the ESB, and given that her term was due to expire at some time into the future, I phoned her to get an understanding of her intentions about whether she would want to remain in the position.

Senator McALLISTER: Did you speak to the minister prior to making that telephone call?

Mr Fredericks : I don't believe I did.

Senator McALLISTER: Did you suggest that she resign?

Mr Fredericks : I didn't suggest that she resign. I did absolutely seek her intentions about whether she intended to. Her desire was to continue in the position.

Senator McALLISTER: Did you provide any indication about the government's expectations if she were to stay on?

Mr Fredericks : I didn't.

Senator McALLISTER: Did you give any indication about the government's preference for the kind of advice they would like to receive from the Energy Security Board?

Mr Fredericks : I genuinely don't believe I did.

Senator McALLISTER: Did you indicate that Ms Schott would be allowed to stay on and the ESB able to continue its reform work if they changed their position to be more supportive of the government, in relation to gas?

Mr Fredericks : Absolutely not.

Senator McALLISTER: The same Four Corners report claimed that the minister personally intervened to pressure AEMO to change their conclusions around gas price modelling in the ISP that was released last July. Why was the minister trying to get AEMO to change its advice?

Mr Fredericks : I can't answer that question in relation to the minister, obviously.

Senator McALLISTER: Mr Seselja?

Senator Seselja: Sorry, could you repeat the question?

Senator McALLISTER: The Four Corners report claimed that the minister personally intervened to pressure AEMO to change their conclusions around gas price modelling in the ISP that was released last July. Why was the minister trying to get AEMO to change its advice?

Senator Seselja: I don't accept the premise. I think the minister has spoken to this. I will just try and find that. I think the minister has rejected that. Sorry, I'm just seeking a little more clarification. I might have to come back to you as soon as I can on that. I think the minister has rejected that, but I'll just clarify exactly what he's had to say on it.

Senator McALLISTER: AEMO's modelling of gas prices undermines the government's claim of a gas-fired recovery. That's correct, isn't it, Minister Seselja?

Senator Seselja: No, it's not.

Senator McALLISTER: So you're happy with the advice that's been provided by AEMO; you accept it?

Senator Seselja: I will ask officials to give a little more information on that.

Mr Sullivan : It's not a question of whether we're happy or not with the advice with AEMO. The ISP, which is the report in question, is a really important part of the fabric of the transition at the moment. I don't think I'm in a position to judge AEMO's performance with that ISP. It was a very long, involved process that went into extraordinary amounts of detail.

Senator McALLISTER: Does the department accept the analysis that if gas is going to compete with batteries in electricity generation the price will need to be well below $4 a gigajoule by 2030?

Mr Sullivan : No, I don't accept that, because the direct comparison at the moment is not one that holds. Basically, what we require is a portfolio of different firming capacities. There are six—two major and four minor grid scale—batteries operating at the moment who operate almost exclusively in the FCAS market and take up a very small proportion of energy that comes into the grid, but they are playing an increasingly important role in the FCAS market. To do the straight comparison, around 2030 our advice has been that you need to have a mixture of pumped hydro and gas—and gas that's capable of then moving to hydrogen as part of the transition—as well as batteries. They all play significant roles, so it's not either/or.

Senator McALLISTER: So you don't accept the AEMO analysis?

Mr Sullivan : No, I think part of the AEMO analysis—I think that's potentially selectively quoting from one of the scenarios, and I don't have the ISP in front of me, but the issue at hand here was the issue around gas prices that were used in the ISP report. AEMO used an independent consultant to establish those gas prices and the gas price assumptions for their modelling. When that analysis was done for AEMO and, as I understand it, between that time period to when the report was released, there were significant reductions in both spot and future price gas prices. So it was that issue around clarification of: when were the assumptions set for the integrated system plan, and to what extent have the changes in gas prices impacted on the advice that's within the ISP? Ms Parry.

Ms Parry : There are a couple of points to pick up from where Mr Sullivan left off. He's absolutely right: core energy provided the fuel forecasts within AEMO's ISP. Those were actually done in 2019, and, obviously, during the course of 2020 we saw significant reduction in gas prices both in 2020 and in futures. Part of our process around consultation with the ISP—and AEMO does do a lot of consultation with the ISP—is we received a preliminary overview briefing from AEMO on the final 2020 ISP on Friday 24 July in 2020, as it had done with other jurisdictions. As Mr Sullivan said, we just sought to gain a better understanding of, in a decreasing gas price environment, what the impacts on the ISP would be. We asked AEMO whether or not there was a specific gas price sensitivity that had been run in the context of the ISP, and they indicated they had not run that gas price sensitivity but that it was still within the decision tools of the ISP, for example, within VNI West, that would allow it to revisit a project if gas prices varied significantly. I would point out as well within AEMO's ISP, on page 53 where they go into quite a discussion about gas powered generation, they do point to the fact that gas powered generation is going to play a continued and significant role within the grid given the high number of renewables that are pushing into the system. The ISP also assumes an orderly exit of coal and particularly gas peaking. Potentially CCGT gas powered generation also plays a significant role if coal is to exit early. They point to the importance of the role of gas, both OCG systems and CCGT systems, as playing a really critical role in the mix, as Mr Sullivan was alluding to, of capacity that's in the NEM.

Senator McALLISTER: In the briefing that you received on 24 July, Ms Parry, you were present. Who else was present from the department?

Ms Parry : I would have to take that question on notice. There were quite a few of us present. As I say, AEMO does jurisdiction-by-jurisdiction consultation, and there would have been a number of people from the department who would have received that briefing at that time. I was there; I was present at that briefing, but I would have to take on notice as to what other officers were present during that briefing.

Senator McALLISTER: Was the minister or the minister's staff present for that briefing, Ms Parry?

Ms Parry : I don't recall, so I will have to take that on notice.

Senator McALLISTER: Did you brief the minister after that briefing, Ms Parry?

Ms Parry : It was an embargoed copy that we received on 28 July. We received an embargoed copy of the executive summary on 28 July, and the full ISP on 29 July, and then the actual ISP was publicly released on 30 July, so we would have provided a briefing to the minister, but I don't recall whether we briefed him on the executive summary, the full report or after it had been publicly released. But, we can take that on notice.

Mr Sullivan : We'll take that on notice. My memory of the 28th was a verbal briefing; we weren't given material to take away. We then got an embargoed copy of the executive summary, the same as other jurisdictions, so we could provide heads up to ministers within the—

Senator McALLISTER: Sorry, I just want to clarify something. I think you've misspoken, because I think Ms Parry said the verbal briefing was on 24 July and then a document was provided on the 28th. Is that correct?

Mr Sullivan : They gave us an overview briefing on Friday the 24th. The following Tuesday they gave us an embargoed copy of the executive summary. At midnight or the next morning the full ISP was released on 29 July. Sorry, we got an embargoed copy on 29 July and the full ISP was then published on Thursday, the 30th.

Ms Parry : Yes. We can take on notice, Senator, when we briefed the minister. As Mr Sullivan said, the ISP is a really significant document. It's a very technical document. It's a very thorough document. So we would have briefed the minister. But how soon after that publication or in that embargoed period we would have briefed him, I simply don't recall. We can take that on notice.

Senator McALLISTER: Did the minister speak with Ms Zibelman or anyone else at AEMO between 24 July and the publication of the ISP on 30 July?

Ms Parry : I just had a little bit of trouble hearing that question. Did you say, 'Did minister speak with AEMO'?

Senator McALLISTER: I did, correct, with Ms Zibelman or any other staff member at AEMO.

Ms Parry : I don't know the answer to that question. I am unaware of the conversations that minister has with his various stakeholders, so I really wouldn't know.

Senator McALLISTER: Minister Seselja?

Senator Seselja: In terms of those exact dates, I will take it on notice. I think the minister would have spoken regularly with Ms Zibelman, but in terms of exact dates of exact discussions I will need to take that question on notice. Four Corners is reporting that Ms Zibelman was pressured to change the assumptions in the ISP directly by the minister, which is the purpose of these questions. Two months after this report was released, she hands in her resignation. Are you aware of any concerns raised by Ms Zibelman with the department or the minister about undue pressure being placed on her?

Mr Fredericks : I think I can speak on behalf of the department on that. I've certainly had no can have with Ms Zibelman to that effect. I'll ask my officials the same question.

Mr Sullivan : I had follow-up conversations, with both Ms Zibelman and with senior people inside AEMO, not specifically about pressuring but about getting a better understanding of how we're going to look at lessons learnt for the future ISP, particularly in terms of that time gap between assumptions being locked in and very detailed analysis being done. We have talked about that assumption-setting process for future ISPs, but it wasn't specifically assigned to any sense of pressure from the department to change things in what was a document that was already in the public domain.

Ms Parry : I can confirm Mr Fredericks statement that, no, we're completely unaware of any pressure being applied to Ms Zibelman leaving. Our understanding is that she returned to the United States for personal and professional reasons.

Senator McALLISTER: Did Ms Zibelman provide a reason for her resignation? You've indicated personal and professional reasons, Ms Parry. What's the basis for that assertion?

Ms Parry : She has never communicated to the department formally about her reasons to leave. That was more in casual conversations with Ms Zibelman. She is originally from the United States, as you would be aware, and was returning to her family and she had a fantastic opportunity. I think her public statements that she had made around her departure were that she was very pleased with the role and the opportunities that she had had in Australia and the significant impact she had made, and there was no suggestion at all that she was being pressured to leave her position.

Senator McALLISTER: Are you able to table a copy of her resignation letter?

Ms Parry : We didn't receive a copy of her resignation letter. She would have resigned to the AEMO board.

Mr Sullivan : That resignation would have gone to the AEMO board, addressed to the AEMO chairman.

Senator McALLISTER: That was communicated to the department by someone?

Mr Sullivan : From memory, both the chair of AEMO and Ms Zibelman told me.

Mr Fredericks : And I should say I remember Audrey phoned me as well, Senator.

Senator McALLISTER: Did she give you a reason for her resignation, Mr Fredericks?

Mr Fredericks : It was in accord with Ms Parry's. Obviously there was no suggestion of pressure. Audrey is a very robust individual, and I think, for her, it was an opportunity back in the States that she wanted to seize.

Senator McALLISTER: Can I ask about continuing the department's approach to obtaining analysis? There are reports from earlier this year that indicate that, since September, the department has allocated more than $9 million in consultancy fees to Boston Consulting Group. Is that correct?

Mr Fredericks : We're just looking around. This one may require a change in personnel, depending on which consultancy. To assist, do you have a description of the consultancy? I presume you got that from AusTender?

Senator McALLISTER: I am looking at the article, published by the journalist George Roberts, which mentions the tender documents and the more than $9 million spent in four tenders since September last year. He writes, 'The department engaged BCG to advise on gas modelling, business delivery and infrastructure.'

Mr Fredericks : Do we have the right personnel at the table now?

Mr Sullivan : Well, we do for the gas component of that. There are elements of that BCG contracts list that don't fall within outcome 3, but we will do our best to talk to you about the energy related BCG contract, if that's okay?

Senator McALLISTER: We have been through this before, and you are the officer who also answers questions about gas when we do get to that part of the program. Are you not able to tell me—

Mr Fredericks : We'll take those gas questions. I think what Mr Sullivan is saying is there may be one or other of those consultancies that falls outside outcome 3, but those that fall within outcome 3 we're happy to take, obviously. And I think the right personnel are now at the table to do it.

Senator McALLISTER: These contracts which have been allocated to BCG—what are they for?

Ms Croker : We have two Boston Consulting Group contracts. One is complete and one is current. The first one that we have is an engagement with Boston Consulting Group to design and deliver an integrated gas model and provide us with two reports to inform the development of the National Gas Infrastructure Plan. As for the date of that contract, we engaged Boston Consulting group on 7 December 2020 to undertake that work, and that's currently underway. We have had a previous Boston Consulting Group contract. We engaged them on 31 August 2020 to provide us with some professional advice to develop an initial view of global and domestic gas price regimes, to establish model logic required for calculating localised price equilibrium, to provide an initial review of scenarios that a model would be able to test, and to provide us with some advice on technical architecture requirements for the model.

Senator McALLISTER: Which model were you thinking about?

Ms Croker : This is the model that we would be able to develop to inform the National Gas Infrastructure Plan.

Senator McALLISTER: So not a model that exists at the moment but in preparation for developing a model that would enable you to do this work—is that a correct understanding of what you're trying to do?

Ms Croker : Sorry, could you repeat that question? I couldn't quite hear.

Senator McALLISTER: My apologies. It appears that the tech isn't working very well, so I'm sorry if it's difficult for people in the room. If it gets too bad, Chair, you should tell me, and I could switch over to teleconference.

CHAIR: If you could perhaps finish this bracket of questions, and we will go to Senator Hanson-Young. Then perhaps you could come back on teleconference, because it is a bit broken.

Senator McALLISTER: Is it? Okay, that's frustrating, I'm sorry. You said in relation to the second contract that you were obtaining assumptions around gas pricing domestically and internationally and into the future. You indicated that it is for the purpose of modelling, that these would be inputs to modelling. I'm trying to understand which model you have in mind. Is it a model that already exists somewhere within the department or one that you are developing?

Ms Croker : That work—the work that we engaged Boston Consulting Group to prepare on the 31 August—was to provide us with an initial view of advice on what type of model we may need to have to be able to model the domestic east-coast gas market. It's about what type of architecture and requirements we would need to go ahead and develop a model.

Senator McALLISTER: The other contracts?

Ms Croker : They are the only two Boston Consulting contracts that are in the gas space.

Senator McALLISTER: What was the value of each of the contracts, the September contract and the August one? I'll wrap it up there, Chair.

Ms Croker : The contract that we entered into on the 7 December last year to develop the integrated gas model is $5.5 million, GST inclusive. The earlier piece of work that Boston Consulting did for us that we engaged them to do on 31 August 2020 was $80,000, GST inclusive.

Senator McALLISTER: Thanks, Chair.

Senator HANSON-YOUNG: Firstly, I'll follow up on questions from Senator McAllister, particularly in relation to the former head of AEMO and the ISP report released last year. You've said that the minister didn't require the resignation of Ms Zibelman. Is it fair to say, Minister, that there were disagreements between Minister Taylor and the head of AEMO in relation to that report?

Senator Seselja: I think it's fair to say that the government sought to understand, and raised, I think, the very clear discrepancy between the ISP gas assumptions and the significant reductions in gas prices over the last 18 months and the forward gas price. To that extent, I think there was a disagreement.

Senator HANSON-YOUNG: Does the government have independent statutory bodies so they can get independent advice, even if it is inconvenient to the government of the day?

Mr Fredericks : Can I just assist on one issue there to make sure.

Senator HANSON-YOUNG: Hang on a second. That was a question to the Minister and I would like him to answer it.

Senator Seselja: I will be happy for Mr Fredericks to supplement the answer, but certainly we have independent bodies to give all sorts of independent advice. We are also free to question that advice and particularly when we see price assumptions that don't always match what has been the actual results going forward. I might ask Mr Fredericks or other officials to supplement that.

Mr Fredericks : I do apologise for breaking in. I will get Mr Sullivan to supplement me, but I think it is just important to understand the nature of AEMO. AEMO is not a federal government body. AEMO is a market body which is responsible, ultimately, to the energy ministers as a collective, and of course, it has its own independent board as well.

Senator HANSON-YOUNG: I'm quite well aware of the structure of AEMO. Thank you for the explanation.

Mr Sullivan : Its an NGO. I just wanted to make sure that it was on the record that it is not a statutory authority; it's an NGO made up of industry shareholders—

Senator HANSON-YOUNG: But it is independent of government, isn't it?

Mr Sullivan : Governments are shareholders in the organisation. You're right in terms of the degree of separation. The CEO of AEMO is appointed by the AEMO board. I think we're in furious agreement that it's not a statutory authority, but there is a degree of independence from both government and industry.

Senator HANSON-YOUNG: So, minister, the main disagreement is in relation to the finding in the ISP that there was no cheap gas left on the east coast?

Senator Seselja: The main disagreement is as I've outlined it. Whether there are other disagreements, I'll ask officials to add to my answer.

Senator HANSON-YOUNG: Was there disagreement in relation the view that new batteries could already beat new gas, in terms of price? Anyone?

Ms Parry : Going back to the issue at hand, I'll provide a little bit of context here. The ISP is a document that was about two years in the making. A lot of assumptions get built in as kind of foundational elements of the ISP, and then various models and scenarios are run. So it is quite appropriate that there is an exchange between AEMO and stakeholders, and we wouldn't have been the only stakeholder, frankly, who would have been questioning and having input into AEMO's assumptions throughout the entire process. That's the nature of the development of the ISP. So none of this is unusual, in terms of: they set up consultation processes in order to ascertain the views of stakeholders. When the ISP was reaching a conclusion, we became concerned that the gas price assumptions that had been used to underpin the ISP were almost a year—when I say 'out of date', they had been kind of baked into the ISP almost a year earlier, in 2019. So we wanted to make sure that we were testing the ISP outputs in terms of: what happens if that gas price continues to go south? Does that change the outcome of the ISP? You can appreciate that state governments, federal governments, planning bodies—they put a lot of stock in the ISP and the outcomes of the ISP, and we make significant plans around the outcome of the ISP.

Senator HANSON-YOUNG: In reality, who is advising that the gas price on the east coast is going to go below $4? Who's suggesting that? No-one is, are they?

Ms Parry : We have a lot of different market analysts who would suggest that gas price assumptions and forward gas prices are decreasing. I think the other point to make—

Senator HANSON-YOUNG: What's the price point—

CHAIR: Senator Hanson-Young, please let the official finish her answer.

Senator HANSON-YOUNG: Sorry, Chair.

Ms Parry : I'm just making the point that we were not hung up on a specific price; we were not probing or saying to AEMO, 'What happens if the gas price hits this dollar amount?' We were looking at a general trend downwards and a general forecast trend downwards. So what we were testing was whether or not the assumptions in the ISP and the outputs of the ISP still held in a declining gas price scenario. That went to the nature of the questions and the exchange that we had with AEMO through their consultation process.

Mr Sullivan : And the exchange was a lot broader than just gas prices. As I've said before, it actually went to electricity prices, battery prices. All the assumptions came in 15 to 12 months before the ISP was released. And this is underpinning $10 billion worth of potential future investment. So it wasn't questioning that; it was basically saying, 'In terms of the next ISP, is there any way we can actually have a list of the assumptions but also have them, hopefully, more accurate with respect to when the next ISP is released?' That includes battery prices. It also includes forecasts for electricity prices moving forward. So, with this enormous investment that's going to be paid for by consumers, it's trying to make sure that there is value for money for that, and that we're getting the best value, in terms of the advice.

Senator HANSON-YOUNG: You've raised batteries. I had a question specifically about batteries that Ms Parry didn't answer. Could you answer that please.

Ms Parry : Can you repeat the question please? I think it got lost in—

Senator HANSON-YOUNG: Was it an area of disagreement with the minister that new batteries could already beat new gas power plants on price and by 2030 would beat new gas power plants on price under almost every single scenario.

Ms Parry : I don't think there's any disagreement that the cost of batteries is going to come down. But if we go back to the context and the assumptions in the ISP and the way we look at the market, none of these technologies are mutually exclusive. I think that's the important point—batteries have an incredibly important role to play. The technology is getting better; prices are going down. That's a really positive thing. But the fact of the matter is gas, as was pointed out in the ISP, will continue to have a really critical role in the market, both as a peaking capacity and as coal exits the system. The ISP makes that point, market analysts make that point, and the government is very keen to ensure that there's a broad range of different technologies and capacity within the NEM, within the market, to ensure that in a market which is transitioning faster than any other market globally we have the right mix of technologies in the market playing very important roles. It becomes quite a binary argument—batteries over gas or this technology over this one. We're saying they all have a really important role to play. But the fact of the matter is, right now, batteries comprise of 0.5 per cent of generation in the NEM, they're short storage, they play primarily in the FCAS market—not the energy market—and gas has a really important role to play in backing in a high influx of renewables and making sure there's good dispatchable capacity when it is needed, where it is needed.

Senator HANSON-YOUNG: What is the gas price point needed for it to be competitive against batteries?

Ms Parry : I don't have the answer to that question. I think it's highly contextual around what type of gas plant you're talking about—whether it's a peaking plant—how that gas plant is playing in the market, whether or not a battery is providing dispatchable capacity, storage or whether it's playing in the EFCAS market. There are a lot of variables. The ISP does point out—

Senator HANSON-YOUNG: Sorry, I'm going to interrupt you. Surely, the government is putting the bulk of its eggs in the gas basket. There would have been analysis done, a view of the government and advice from the department about what price gas needs to be to be competitive against these technologies like batteries that are rapidly coming down in price. Now, experts say it has got to be at the vicinity of $4.

Mr Sullivan : Sorry, I don't know where the $4 figure comes from.

Ms Parry : I don't know either.

Mr Sullivan : It might come from one of the scenarios in the ISP.

Senator HANSON-YOUNG: You have never heard that figure?

Mr Sullivan : I've heard $4 put out during some of the debate last year around the role that gas will play in the border economic recovery.

Senator HANSON-YOUNG: What is the price point that the department advises?

Mr Sullivan : With respect to the energy transition, Ms Parry and I both said today it's not a binary case around batteries or gas, both CCG and OCGT; it's a mixture of pumped hydro as well as gas, including gas peakers.

Senator HANSON-YOUNG: We are not hearing the government say they are having a pumped hydro-led recovery. The government are saying they want a gas-led recovery.

Mr Sullivan : That's a matter for government. I'm purely making the point—

Senator HANSON-YOUNG: That is the reason why I'm asking these questions.

Mr Sullivan : I understand that but I think the straight price comparison points, the gen cost price assumption points that CSIRO does in terms of a levelled cost of energy is one thing. But in terms of where gas goes, gas is also critical for achieving a hydrogen based economy and is part of the transition to ensure that gas performs that peaker role. A gas plant will only operate four per cent of the time and can be profitable at three to four per cent of the operational time because a coal-fired plant needs to operate above 80 per cent to come anywhere near being economical. So we are talking about very, very different things here. At the moment where we are going with market reform, where the energy security board's advice is going is that we actually need a mixture; it is not one or the other.

Senator HANSON-YOUNG: I understand that. However, when we have the government ministers and spruikers of the government's gas-led recovery plan, the push to open new gas wells, to have more fracking, to have pipelines, the government must have advice as to what the gas price will be in order to ensure that it fits into any of these scenarios; otherwise this is just pie-in-the-sky stuff.

Mr Sullivan : It's definitely not pie in the sky. You are asking me for a single number, and I don't have the number. What is the magic number for—no?

Senator HANSON-YOUNG: The government hasn't modelled this? It's not going to be cheap, it is?

Mr Sullivan : I don't know what point you're making.

Senator HANSON-YOUNG: Well, the whole idea of doing this is because the government says they want cheap gas. They can't make it cheap, can they?

Mr Sullivan : It's a different point to what's the price required for low-cost reliable energy, where emissions continue to fall. Gas, and particularly gas as a peaker, as variable renewables increase and will continue to keep on increasing, they are going to play a critical role as they do in other countries. If you look at the European Union, they have 252,000 kilometres of pipelines. They are currently looking at what component of that can be hydrogen capable. We are doing the same thing, looking at the transition to a hydrogen economy as well. I understand where you are coming from but I don't have a magic number for you.

Senator HANSON-YOUNG: No, I can see you don't have the number. It was inconvenient, wasn't it, for AEMO to release an ISP that said there wasn't any cheap gas? That was an inconvenient truth, wasn't it?

Ms Parry : The 2020 ISP has a significant chapter on the role and importance of gas-powered generation in the NEM and in the mix. AEMO has been very clear and the Energy Security Board has been very clear that the role of gas is critically important given the high number of variable renewable energy penetration we have seen in the market. That is what will provide dispatchable and firm capacity when VREs are not able to dispatch and it will continue to play a really critical role.

Senator HANSON-YOUNG: Senator McAllister was asking about a consultation report done by Boston Consulting Group for $9 million. I would like the department to outline how much money in contracts, advice or reports have been commissioned from the Boston Consulting in the last five years—the figures of those in total—and whether there have been any reports written and commissioned by McKinsey as well and the value of those.

Mr Fredericks : I will take that on notice.

Senator VAN: Just circling back to Senator Hanson-Young's previous questions, how long can the largest utility scale battery currently in the NEM last for?

Ms Parry : To give you a bit of context about batteries in the market, right now there are six grid-connected batteries within the NEM for a total registered capacity of 272 megawatts. Batteries contributed about 0.5 per cent of the NEM's generation for the calendar year 2020. They primarily, as we have stated before, make a really important contribution to the frequency control ancillary service markets, and nearly 80 per cent of battery revenue comes from the FCAS markets. Batteries, again, depending on the configuration, I think last four hours. I just want to check my colleagues to make sure that is correct. I believe the longest-running battery currently in the EM is four hours but I will double-check that figure. There are a number of big batteries that have not yet reached final investment decision but that will look to be coming on to the market following recent announcements. That includes Neoen's big battery—300 megawatts—in Victoria. That will receive $160 million of investment from the Clean Energy Finance Corporation, so the government is making significant investment in batteries. Neoen also has a 500 megawatt battery at the site of a former coal-fired power station west of Sydney. Origin has a proposed 700 megawatt battery, AGL has a 850 megawatt battery and Energy Australia is planning on building a 350 megawatt battery. None of those have come into the market at this point.

Senator VAN: So is it safe to say the government is investing in batteries?

Ms Parry : I should also point out that ARENA, the Australian Renewable Energy Agency, has also provided over $75 million to battery storage projects.

Senator VAN: But it's also safe to say that batteries, for the foreseeable future, even at the numbers you just mentioned—I think the largest was 700 megawatts?

Mr Sullivan : That's a proposed—

Ms Parry : It hasn't been built yet.

Senator VAN: Its life would still be measured in hours at tops.

Ms Parry : Yes, it would be measured in hours. Again, as we've been discussing today, what's important is the role of the mix of generation types, and batteries play a really critical role. Clearly, in terms of the FCAS markets, they can provide short-term bursts of support.

Senator VAN: It's very important. Could you tell the committee a bit more about FCAS, or system services, and how vital they are to the energy mix and to supporting the network.

Ms Parry : I might turn to my colleague. Mr White, would you like to discuss some of the more technical requirements around system security, because batteries do play an important role there, as do other types of generation sources.

Mr Sullivan : While Mr White is making his way here, Ms Parry talked about support from ARENA and how ARENA has provided around $75 million to support the battery projects. The CEFC is also underpinning investment. The Neoen 300-megawatt big battery in Geelong is financed by the CEFC. So, there is significant government support for batteries.

Mr White : I think your question was the role of the FCAS markets?

Senator VAN: Batteries are servicing the FCAS, or system services. What is the importance of that to the network? When there are shortfalls, they can kick in quickly and provide those services, those frequency control ancillary services, which is what FCAS stands for. Why is that important to the market?

Mr White : We have a number of markets. We talk about the NEM as being an energy-only market—

Senator VAN: Sorry, rather than the market, it's the services and what they do. I don't want to labour this point, but why is it important to have those system services available?

Mr White : The electricity system needs to sit within a particular frequency and voltage in order to keep the frequency within the desired level, which is approximately 50 hertz. There are a number of frequency control ancillary services markets. If there are frequency changes that move outside the acceptable band of frequency—and the electricity markets need to be rectified very, very quickly—typically you will adjust frequency by having a very rapid increase in supply into the system or a very rapid decrease, depending on which way the frequency problem is going.

Senator VAN: Thank you. As well as batteries, what other generation types can provide that service?

Mr White : There are different frequency response speeds that are needed. But, in summary, batteries can provide them, hydroelectricity can provide them, including pumped hydro, and fast-start generators—

Senator VAN: With gas?

Mr White : including reciprocating engines and open-cycle gas turbines.

Senator VAN: Thank you very much. I want to return to some questions on AEMO, if I may—

Mr White : Sorry, in terms of the questions you asked Ms Parry earlier, the advice we have about the maximum storage duration of batteries in the NEM at the moment is two hours.

Senator VAN: Thank you for clarifying that. AEMO have produced a series of reports that cover gas. There's the ISP as well as the Gas statement of opportunities. I understand that, in these reports, AEMO uses a series of assumptions and forecasts. I wonder if the accuracy of these forecasts has ever been tested. Obviously, it's quite important to get these things right. It's even more important, when it comes to generation capacity, in relation to making sure that the grid is reliable. I assume that part of the AEMO forecasting is the future demand for gas generation, which is a key factor for ensuring that we have enough supply to keep electricity prices low. Can you tell us what AEMO's track record is of getting these forecasts on gas demand correct? Has what they've modelled previously been accurate?

Ms Parry : I'd make two observations there. One: as we have previously indicated, ISP takes almost two years of development. A lot of work goes into assumptions, and then scenarios and models get run on top of those assumptions. What I think we are seeing is a market that is shifting really, really rapidly. AEMO—fair enough—has to lock down their assumptions at some point, and they build their model on top of that. Gas price assumptions was one area. We certainly saw gas price trends going down. As we've already canvassed, we questioned that. AEMO also makes statements—and our minister has made public commentary on this—about forecasts for renewables and the penetration of renewables, particularly rooftop solar. AEMO's assumptions have been more conservative in terms of where they see the uptake of rooftop solar. The Clean Energy Regulator, in fact, takes a more bullish view. What we've seen is that, in fact, the actual numbers have been closer to where the CER has tracked rooftop penetration. There has been a discrepancy there.

But, again, AEMO do a very thorough job. They do a lot of modelling. They do a lot of assessments. This market is moving very rapidly, and, as is our job, as part of our consultation processes we can and do question those assumptions. We have questioned AEMOs assumptions on rooftop solar penetration. The minister has questioned those assumptions as well. These things move, and they move fast.

Senator VAN: I should also preface this, just for transparency, by saying that I used to work for AEMO. I worked on building both the gas markets, so I had some internal knowledge of the workings of the organisation. The first gas market wasn't AEMO at that point in time; it was VENCorp, but I do have some understanding of the organisation.

Mr Sullivan : Should I turn the question around then, Senator?

Senator VAN: No. I don't think that's within the rules. You possibly could, but I don't think that's within the rules of estimates.

Mr Sullivan : Forecasting is really, really tough, and it's tough to get right at the best of times. When you have an energy system that is going through so much transition so quickly, getting it right is almost impossible, to be really frank. Some of the International Energy Agency's forecasts and projections around the uptake of renewables were off by 40 to 50 per cent in terms of short-term and medium-term projections for a number of years. We've talked to AEMO about their current forecasting and the challenges of forecasting when you've got a model that was developed before the transition began. I know that, as part of this, AEMO is looking internally at reviews to make sure that they are best of breed. They want to be best of breed internationally. They've got a really difficult system to manage. I'll join the bandwagon. I'm not being critical, but it is really tough in terms of forecasting, for future gas, future renewables and the whole plethora of things that AEMO is asked to forecast and model.

Senator VAN: It hasn't been that long since I read the recent GSOO. It says that gas demand is going to stay relatively flat, if I read it right. What other factors affect gas prices, other than demand? What would be the most significant thing to bring down gas prices?

Ms Parry : I'm just going to ask my colleague to come back to the table.

Senator VAN: It's an economics-101-type question.

Mr Sullivan : It's the wrong answer to talk about supply, but Ms Croker will talk about supply.

Ms Croker : In terms of what other factors will bring down gas prices—as you said, domestic demand is going to remain relatively flat—there's the bringing-on of new gas supply.

Senator VAN: So opening up new gas fields and lifting moratoriums on onshore and offshore gas exploration and production—doing all that would increase supply?

Ms Croker : That's right. Bringing on that new supply, that production, and having an efficiently operating gas transportation system will help to ensure that you've got adequate gas supply.

Senator VAN: Thank you. Since the introduction of the government's default market offer—

Senator HANSON-YOUNG: Withholding subsidies.

CHAIR: Order!

Senator VAN: Like the ones we were just talking about, with batteries?

CHAIR: Order!

Senator VAN: Since the introduction of the government's default market offer, have electricity bills reduced in the National Electricity Market? Sorry to get you swapping backwards and forwards.

Ms Parry : That's okay.

Mr Sullivan : At some point I'll leave and they can take over.

Senator VAN: I've only got one more question after this.

Ms Parry : There are two points to make here. There's the impact of electricity pricing in the wholesale market and the impacts on the retail market, and there have been 19 straight months of decline in year-on-year wholesale electricity costs across the NEM, with prices in 2020 falling below the government's target of 70 megawatt hours. According to the Australian Energy Regulator, average spot prices in the 2020 calendar year were below 70 megawatt hours in all regions of the NEM. It's the first time since 2015 that spot prices across all jurisdictions have been below 70 megawatt hours. There are a number of reasons for that, including lower fuel input costs—in particular, lower gas prices and lower coal prices—and growth in renewable energy generation. We are anticipating that those wholesale prices will continue to go forward.

In terms of how that's flowing through to retail prices, the government's intent behind the big stick legislation was to ensure any significant cost declines that retailers were enjoying, or were experiencing, were passed on to consumers and enshrine that. There are various steps within that legislation to make sure that happens. And then, through the government's default market offer, the government capped the maximum price for electricity standing offers from 1 July 2019 in relevant jurisdictions. Standing offer prices have dropped in every distribution zone where the DMO is applied.

When the AER released its determination for the DMO for 2021-22, customers who were on the highest standing offers prior to the DMO and remain on standing offers could see, depending on the location, up to $802 per year for an average residential customer and up to $3,354 per year for a small-business customer. So we are seeing quite significant benefits as a result of the implementation of the DMO. Consumers are enjoying lower prices. That does vary by jurisdiction and that is an average over a course of time.

As I mentioned, the big stick requires electricity companies to pass on those reductions to customers. So consumers are certainly enjoying the benefits of lower electricity prices, and, as always, the government is encouraging consumers to shop around and to jump on websites such as Energy Made Easy or energy.gov.au and look at what those best offers are.

Senator VAN: Thank you, Ms Parry. You've answered my last question, as well.

CHAIR: Senator McAllister, you have the call.

Senator McALLISTER: I'm hoping to ask about the contracts that were allocated to Boston Consulting Group. You indicated that there was a $5.5 million contract, including GST, awarded to Boston Consulting Group. I believe that was for the National Gas Infrastructure Plan, is that correct?

Ms Croker : No, it's not for the National Gas Infrastructure Plan. It's for Boston Consulting Group to design and develop an integrated gas model for the department. We will be using that gas modelling capability both to inform the development of the National Gas Infrastructure Plan and in considering gas market issues going forward.

Senator McALLISTER: Was that the subject of an open tender?

Ms Croker : Yes, that was subject to a—

Mr Fredericks : It was an open tender in the process where we utilised the Infrastructure Advisory Services Panel.

Ms Croker : That's right.

Senator McALLISTER: So it was procured from the panel?

Ms Croker : Yes. We initiated an open tender procurement process and, as the secretary said, utilised the Infrastructure Advisory Services Panel.

Senator McALLISTER: Was the minister involved in any way in recommending Boston, or requesting that Boston be engaged for this work?

Ms Croker : No, he wasn't.

Senator McALLISTER: Did the department have any consultation with the minister's office over the award of this contract?

Ms Croker : No.

Senator McALLISTER: Is it correct that it's for designing a model rather than conducting a particular modelling exercise?

Ms Croker : We have asked them to design an integrated model capability for us. Also, as part of the work, they're providing us with two reports. The first report will identify near-term, least-cost gas market measures to address emerging supply constraints in the market. The second report is to provide us with some options for what a sequenced plan for a gas market development could look like based on the modelling that they're providing to us.

Senator McALLISTER: They are, in fact, building a model, undertaking a series of scenarios—or some kind of scenario work—and then using that to generate these two reports—is that correct?

Ms Croker : Yes. They will provide us with advice on scenarios that we are asking them to model, through the model.

Senator McALLISTER: Have you engaged with the AEMO at all about the scenarios that they will be modelling?

Ms Croker : As part of our work for the National Gas Infrastructure Plan, we have established a steering committee which is used to facilitate and support expert advice from the key market bodies. That does include the Australian Energy Market Operator, along with the Australian Energy Regulator, the Australian Energy Market Commission and the Infrastructure and Project Financing Agency.

Senator McALLISTER: Will they be consulted on the scenarios deployed by Boston in this particular piece of work?

Ms Croker : Yes. We are drawing on their expert advice in deciding what assumptions we would like to model. That's correct.

Senator McALLISTER: That's all on that matter, thank you. I want to move on to questions about overall system reform and a report released by the Energy Security Board on Friday. I understand that the present name for the state and federal ministers' committee is the energy council. Is that the correct name? These bodies change their names frequently.

Ms Parry : There are two committees, Senator. There's the Energy National Cabinet Reform Committee and there's the Energy Ministers' Meeting.

Mr Sullivan : The first one is a national cabinet subcommittee. It has a dedicated set of terms of reference and tasks that is the delivery of the post-2025 market design work that you just referred to with respect to the ESB report but also work with respect to gas reform. So, as a subcommittee of national cabinet, that work will end up before national cabinet. The second one, the Energy Ministers' Meeting, is basically taking up the remainder of the work that used to be done by the COAG Energy Council.

Senator SIEWERT: What is the name of that entity?

Ms Parry : The Energy Ministers' Meeting.

Senator SIEWERT: That is the Energy Ministers' Meeting, and then we have an energy reform subcommittee of national cabinet.

Ms Parry : Yes. It's the Energy National Cabinet Reform Committee. We abbreviate that with ENCRC.

Senator SIEWERT: Incredible, but great. Thank you. Does the ENCRC involve energy ministers or first ministers?

Ms Parry : Energy ministers.

Senator SIEWERT: How frequently has it met over the last 12 months?

Ms Parry : I can run through some dates. On 4 September 2020, national cabinet tasked the Energy National Cabinet Reform Committee with the specific jobs that they wanted energy ministers to look at, which was the reliability and security of the electricity grid, the redesign of the national electricity market in the form of post 2025 as well as the package of reforms to unlock new gas supplies. ENCRC has met twice since it was established. It met on 29 September 2020 and discussed the national cabinet tasking, including progressing those reforms. It met again on 15 December and noted the progress made on the national electricity market reliability and security measures, discussed the ongoing work of the ESB and discussed the framework for the package of reforms to the gas pipeline regulation. They have also continued to agree on work and kept work moving through out-of-session decisions, including the release of the now publicly available post-2025 market design paper. Ministers, I understand, are looking to meet within the coming weeks to discuss the options paper that is out for public consultation now. So we're just working to find a date that suits all the ministers' diaries.

Senator SIEWERT: So no date yet for that body?

Mr Sullivan : I'm happy to tell you that there's a tentative date that's been set for 28 May. The reason Ms Parry was rightly hesitant in saying that was that that hasn't been locked in with other ministers, but I imagine that will be locked in over the coming days. At the December meeting, there was very clear direction from ministers noting that the ESB options paper is the next key document in terms of the post-2025 environment. It was agreed then that the next meeting of ENCRC would happen post the release of that paper. Now that that paper was released, a tentative date's been set for later in May. But, as I said, that'll be confirmed with other state and territory ministers hopefully early this week.

Senator SIEWERT: So this body has been in place since last September. Prior to that, the responsibility for national reform was in the hands of the energy ministers under COAG. How many times has that body met over the last 12 months?

Ms Parry : I would have to take that question on notice. I can certainly ask my colleagues back in the department to get that information now, and we can come back to you within the session with that answer.

Mr Sullivan : My memory is that there were two to three meetings of COAG before it was firmly established as the ENCRC last year. So it was either four or five meetings in total last calendar year.

Senator SIEWERT: In 2020?

Mr Sullivan : Yes.

Senator SIEWERT: Of energy ministers?

Mr Sullivan : Yes.

Senator SIEWERT: Ms Parry, if you are able to get those dates, I'd appreciate it.

Ms Parry : Yes.

Senator SIEWERT: Great, thank you. I want to ask about the AEMC's draft determination on household solar. Has the department provided advice to government on that draft determination?

Ms Parry : Just bear with me for a minute while I pull up that information. It is important to note that the AEMC draft determination—so this is not a government led initiative; this is a proposal by the AEMC in response to two rule change requests—would look to remove a prohibition on network businesses charging for electricity exported to the grid. The proposed reform would not mandate charging for exports. Those rule change requests were submitted by the St Vincent de Paul Society in Victoria and by the South Australian network provider, SA Power Networks, in July 2020. They in essence argue that the current arrangements are inequitable because all customers, including those without rooftop solar, pay for networks to support the growing levels of rooftop solar, and they're worried about the growing implications for the bills of those customers who do not have solar. The draft determination includes some consumer protections such as: if a network business wanted to introduce export charges it would need to consult customers, and the network would need to have a transition plan approved by the AER detailing its approach. The AEMC is currently consulting on the draft determination, and the final determination is due in June 2021. In essence, this is not a government led initiative; this is being led by the AEMC, as it properly should be, as a rule change request.

Senator McALLISTER: Will the department be making a submission to the rule change process?

Ms Parry : It is not our intention at this point to put in a submission, no.

Senator McALLISTER: One expert cited by the ABC has indicated that the changes would cost solar households 80 per cent of their current feed-in tariff. Do you have any reason to doubt that analysis?

Ms Parry : I have not seen that analysis. I have seen some media reporting on that. This is something the AEMC will look at through their rule change process. They undertake their own analysis. They undertake extensive consultation. I am sure the AEMC will look at all their analysis before coming to a final determination.

Senator McALLISTER: The department is, from the earlier evidence, engaged in a hot contest with the AEMO over its analysis of the gas market, but doesn't have a view about rooftop solar. Is that the advice you're providing—that you're not going to engage in this process, but you are heavily engaged in contesting what the AEMO is up to?

Mr Sullivan : I need to challenge the premise of the question. In terms of a formal submission to the AEMC, at the moment that is our view. However, we do talk to the AEMC. We will talk to the AEMC more openly and in more detail around these draft determination implications, particularly around the impact for those current customers and for future projections with respect to rooftop solar. As you know, Australia is leading the world in rooftop solar. That's a great thing, but it's also causing security system issues. South Australia has already had to introduce its own set of laws that are state specific, with respect to making sure those systems can be remotely cut off in terms of managing the impact of those days where 100 per cent of Adelaide's power is coming from rooftop solar. There is a sense that this impact on existing customers as well as future customers is something we will work through at a technical level. In terms of whether we influence that, the AEMC process is very clear. It is responding to rule change requests from St Vincent de Paul. I just wanted to challenge that question. It's not as though we don't talk to the AEMO, the AEMC, the market bodies and the AER on a regular basis about the technical details with respect to rule changes, policy developments, determinations et cetera.

Ms Parry : Just to build on that response: you'll note that that's one of the workstreams of the ESB's post-2025 market reform. It is looking at essential system services, and, as Mr Sullivan has said, the concern that the AEMO in particular has around the high penetration of renewables and the problems that that can cause in terms of system security. That is a process we're heavily engaged with.

Senator McALLISTER: Their analysis is that this change is required because the grid is under strain and because of what they describe as traffic jams on the network. You'd accept that basic analysis?

Mr Sullivan : I don't think anyone's questioning that there's a problem that needs to be addressed. I think one of those issues is the price equity issue. That's why St Vincent de Paul and consumer advocates have made this application. You can make the argument that those without solar on their rooftops are getting an easy deal compared to those who don't, with respect to who pays for the transmission lines and the upkeep of those.

There is an issue both in terms of price and congestion. As I said, South Australia has brought in a way to look at this. In terms of being able to remotely switch off, the ESB is looking at that in terms of distributed energy resources and how we better integrate distributed energy resources. This is a real challenge, where the rest of the world is looking at us to say, 'What's the best way to do this?' because of our penetration of rooftop solar.

Senator McALLISTER: So you accept that there is a congestion issue on the grid, and you accept the analysis that the AEMC provides in this regard?

Mr Sullivan : At times there are, in specific localities. It's not just South Australia; I shouldn't just single them out. In south-west WA there are times of congestion, and in South-East Queensland there are times of congestion. New South Wales is increasingly seeing potential congestion. We don't want to see either that congestion issue or that leading to curtailment of renewables.

Senator McALLISTER: Isn't this effectively an admission that the government has failed to invest in the grid or to encourage the states or the grid operators to do so?

Mr Sullivan : I think part of that is roles and responsibilities. We're not necessarily talking about congestion at the macro level with respect to transmission; we're talking about congestion that's occurring both at a regional and a distribution level.

Ms Parry : The government has absolutely backed in support for transmission and networks, and has supported every priority transmission project identified in the AEMO's ISP. The government is very concerned about the congestion issues you've identified; that's why it's a workstream of the ESB's post-2025 review. That's why the states and the federal government are looking at renewable energy zones, to look at how we ensure that grid congestion is managed, in a system that was originally built for one-way transmission, between a large generator going to households and businesses in a one-way flow, when we are now transitioning rapidly to a market and a system that has two-way flows of energy. Supply can increase in a two-way flow from rooftops back into the grid. It wasn't designed to do that. We are looking at various reforms to make sure that the grid can be managed for security and reliability. The AEMC is looking at this particular determination and this particular location to address a particular problem, but writ large this is also being addressed through the post-2025 review.

Senator McALLISTER: But, in fact, this has been a problem for some time, and, in fact, the post-2025 report that we were talking about earlier made it very clear that this is now urgent. It's also true that the government has had no energy policy since it abandoned the National Energy Guarantee in 2018. When you say, 'We are doing work on this', what are you talking about? It's another review, isn't it? There's nothing actually happening.

Mr Sullivan : The distinction here is between the distribution network that Ms Parry was talking about and the broader transmission network. We talked long and hard about the ISP. What we haven't said is that the Commonwealth government is working bilaterally with states and across states in terms of the major ISP projects. The Commonwealth has provided underwriting support for HumeLink, supporting the development of Marinus in terms of the connection into Tasmania, we are supporting VNI West collaboratively with Victoria and New South Wales, with respect to better interconnection with the south and we' working with South Australia and New South Wales with respect to Project EnergyConnect.

Senator McALLISTER: Are you arguing that this will deal with the challenges arising from rooftop solar?

Mr Sullivan : No. I'm making the point around roles and responsibilities. The Commonwealth role here is primarily with respect to the broader transmission and implementation of the priority projects with the ISP. With respect to distribution networks, that is primarily a role for state governments, but there is now an emerging issue because these congestion issues are rising at particular points within the distribution network where a broader national approach is being looked at. You're right in terms of the urgency, but this has been raised by various state energy ministers going back some years through COAG council to say that they had it under control, that they were looking at it. Now the ESB is looking at it through a national prism, and the AMC looking at it in terms of a price mechanism.

Senator McALLISTER: I see. Just for clarity: the Energy Security Board is doing some work, the states are doing some work and the AEMC is doing some work, but the Commonwealth itself is not, in fact, doing anything at all? Is that a fair assessment of the situation?

Ms Parry : No, it is not. As Mr Sullivan has indicated, the government is very active in supporting and underwriting all of the major ISP projects coming out of AEMO's 2020 ISP. We are working very closely with our colleagues on the implementation of those projects.

Senator McALLISTER: I am talking about rooftop solar.

Ms Parry : Yes, and we are working very closely. This goes to rooftop solar, because you're looking at managing the flows of energy in an interconnected system. In terms of rooftop solar and its export of power into a grid, causing congestion and causing system security problems and of looking at how a market can be designed so that it has a demand-side response so that customers can feed into the grid in an appropriate way to certain technical standards, this is work that is all being done by the federal government in conjunction with the states.

Senator McALLISTER: I am trying to understand what specifically the Commonwealth is contributing, because between the officials so far, in your evidence you've pointed to the work of the AEMC, you've pointed to the work of the states and you've pointed to the work of the Energy Security Board. I'm trying to understand in what specific way the Commonwealth is in fact assisting households with rooftop solar. Can you point to anything at all where you are taking responsibility for this, because I am struggling to hear that from your evidence. If the answer is no and you think it is someone else's responsibility that's fine, that's the evidence. But I am trying to understand the Commonwealth's position.

Mr Sullivan : Ms Parry was talking about—if I give the South Australian example, where South Australia's had to introduce its own regulatory regime to address this issue. The project I talked about, EnergyConnect, will be a mechanism by which that potential curtailment can be distributed to the east coast and distributed to the NEM. That's part of the solution. In terms of what ARENA has done, ARENA has been working through the distributed energy integration program, and ARENA convenes that program. It is not in outcome 3, but I will take on notice if you want, Senator, what ARENA has been doing with respect to working with jurisdictions. I just wanted to reinforce that my evidence by no means says we have vacated the field. It is basically around where are the key roles and responsibilities. We've actually had to come in, or we are coming in, with respect to support from ARENA and also to support from the broader transmission network as to how the distribution networks can be better managed.

Senator McALLISTER: I see. In relation to the bilateral work with the states, which you referred to earlier, which states does the Commonwealth have agreements with?

Mr Sullivan : We have a bilateral agreement already in place with New South Wales, and that's been in place for some time now. We have an agreed bilateral with Tasmania. The Prime Minister signed off both of those, and he also signed off on an agreement at first-minister level with South Australia last week or the week before. We are reasonably close to finalising agreements with Western Australia. That was on track to be finished but got caught up in the WA caretaker period, so I think—

Senator McALLISTER: I can only imagine—

Mr Sullivan : That is close to being finished. Our Northern Territory bilateral is well underway. Most recently we've opened up discussions with Queensland. The next meeting of the Queensland steering committee is scheduled for the coming weeks.

Senator McALLISTER: So so far agreements with Liberal states but working on possible agreements with Labor states.

Mr Sullivan : We also have an agreement in place with Victoria. The initial part of that is with respect of VNI West, the ISP transmission priority project that I referred to. We've made progress in terms of agreement—signing for four of those. The Victorian one is open to adding more on emissions and energy more broadly, rather than just the VNI West agreement, but that was needed because of urgency with respect to delivery of that both for Victoria and for the NEM more generally. In terms of Western Australia, the Northern Territory and Queensland, I think Western Australia and the Northern Territory are very close and we've made excellent progress with Queensland.

CHAIR: Senator McAllister, just to—

Senator McALLISTER: Chair, I will leave it there.

CHAIR: Thank you. Senator Hanson-Young.

Senator HANSON-YOUNG: Thank you. I've got some questions in some other areas, but I just want to go back to this issue of gas. I would like to know has Mr Fredericks, Mr Sullivan or Mr Parry—anyone in your department—had any meetings with Andrew Liveris since he has been chair of the government's task force?

Mr Fredericks : I certainly had the odd meeting with Andrew Liveris. I think we did as a department as well.

Mr Sullivan : Just to clarify, Mr Liveris is not the chair of the task force. He was a special adviser to the task force. I could get the date for you, Senator, but it was some time ago—

Senator HANSON-YOUNG: What makes him a special adviser?

Mr Fredericks : That is just what his title was when he was appointed.

Mr Sullivan : It was probably a year ago. I think David Fredericks and myself met with Mr Liveris at the NCCC close to 12 months ago, I think.

Senator HANSON-YOUNG: What was Mr Liveris's position to you in those meetings?

Mr Fredericks : That is a very general question, Senator—

Senator HANSON-YOUNG: What were the meetings about?

Mr Fredericks : He was filling his responsibilities as a special adviser to the NCCC. He engaged with the department in relation to the gas market and his views around potential reforms of the gas market.

Senator HANSON-YOUNG: He's considered to be an expert in this field is he?

Mr Fredericks : As far as we were concerned, he was a dually appointed adviser to the NCCC. This department, as you've heard, Senator, does pride itself, particularly in this area, on engaging with all the various sources of advice through the market bodies—very strong engagement with states. We engage the expert advice when we need to. The NCCC was in position. I certainly believed we had an obligation to engage with them and hear their views.

Senator HANSON-YOUNG: You think if that were the case Mr Liveris would have his figures right wouldn't he?

Mr Fredericks : I can't comment on that.

Senator HANSON-YOUNG: Mr Liveris made a claim a week and a half ago on the ABC that 850,000 people were employed in the plastic fertiliser industry and other industries that used gas as feedstock. Are you aware of those comments?

Mr Fredericks : I'm not personally aware of them.

Senator Seselja: Chair, could I ask, it is common courtesy where there's a quote from a media article, if people could see the transcript rather than get, perhaps, a summary of the proposition?

CHAIR: Do you have the article, Senator Hanson-Young, at the table?

Senator HANSON-YOUNG: I don't have the exact article. I just have seen the footage many times. But I'm happy to get that for you.

Senator Seselja: It's difficult for witnesses to respond to a broad—

Senator HANSON-YOUNG: Okay, why don't I get that? We're here until 12.45, so we can come back to those questions. Maybe someone in our department will look it up or have a look as well. Anyway, it's extraordinary that 850,000 people were employed in that sector. I'd say those figures were well and truly out of whack. I'd like to go to some questions in relation to a proposed coal fired power station in Queensland, if I could. Ms Parry, has the Department of Industry, Science, Energy and Resources received or is the department aware of any requests for funding or support for Waratah Coal's proposed high-energy, low-emissions coal fired station in Alpha, Queensland?

Ms Parry : No I'm not aware.

Senator HANSON-YOUNG: Are you aware of the project?

Ms Parry : No, I'm not.

Senator HANSON-YOUNG: At what point do these types of proposals usually get to the department?

Ms Parry : That can vary depending on if it's part of a program, such as UNGI, or through a grant process, such as Supporting Reliable Energy Infrastructure. It can be known just through our own market analysis, but not all projects would come to the department

Senator HANSON-YOUNG: So no-one in the department is aware of a project by Waratah Coal?

Ms Parry : I can't say that no-one in the department would be aware of it. I'm not aware of it and it's not something we're actively looking at.

Mr Fredericks : We can take it on notice.

Senator HANSON-YOUNG: You're representing the department here. That's what your job is.

Ms Parry : I can take that on notice. I'm saying I don't personally know about it, but I can't speak for the 100-odd people in the electricity division. Someone is probably aware of it, but I can find out.

Senator HANSON-YOUNG: Again, we're here until 12.45, so if somebody is aware, that would be helpful to know.

Ms Parry : Okay.

Mr Fredericks : We'll see how we go. We will take that on notice, if we could.

Senator HANSON-YOUNG: Thank you. Is the department aware of any request by Waratah Coal, or other corporate entities owned by Clive Palmer, for transmission infrastructure that would have the effect of supporting Waratah Coal's proposed power station?

Mr Sullivan : Again, as I'm not aware of the Waratah project then I don't think that relates to any sort of position on transmission. But we can check that as well. I don't know the location of that, so I'm not sure whether that relates to other grant investments that have been made around transmission—

Senator HANSON-YOUNG: To Alpha in Queensland.

Mr Sullivan : and whether copper string is part of that.

Senator HANSON-YOUNG: Could you enlighten us as to whether Mr Palmer has any proposals currently before the department for advice, support or any other type of assistance through infrastructure?

Mr Fredericks : We will take that on notice.

Senator HANSON-YOUNG: Is Mr Palmer somebody that the department has been dealing with recently?

Ms Parry : No.

Senator HANSON-YOUNG: Or any of his entities?

Mr Sullivan : Certainly the three of us haven't.

Mr Fredericks : I've never met him, but we will take it on notice.

Senator HANSON-YOUNG: I think this is all a bit too cute, to be answering 'me personally'. I'm not asking you personally; I'm asking about the department.

Mr Fredericks : That's fair, and in fairness, as a consequence of the breadth of that request, I think I'm okay to take it on notice.

Senator HANSON-YOUNG: I'm happy for you to take it on notice.

Mr Fredericks : That's fair enough.

Senator HANSON-YOUNG: I don't care who you spend your lunchtime with, Mr Fredericks. I want to know what the department is doing.

Mr Fredericks : Fair enough, so we'll take it on notice.

Senator HANSON-YOUNG: Thank you. I've got some questions around Energy Australia and the Yallourn plant in Victoria. We've heard of this one, haven't we?

Mr Sullivan : Yes.

Senator HANSON-YOUNG: In the last year or two, have Energy Australia made any representations to the department about when they expect their Yallourn plant in Victoria to close?

Ms Parry : We meet with Energy Australia—the only reason I'm hesitating, Senator, is the specificity of your question. We do meet with Energy Australia on a regular basis. I don't recall ever having had a conversation with Energy Australia specifically in the last two years on any expected closure dates of Yallourn. We were certainly in touch when they made their announcement, but that's not something that they've ever come to us on specifically. Again, I will take that on notice, noting the specificity of your question.

Senator HANSON-YOUNG: Well, I would like to know if there were any warnings given to the premature closure, before 2032, and you're saying at this point you're not aware of being given a heads-up.

Ms Parry : We were given a heads-up, obviously, when the announcement was made; we were given a very short heads-up.

Senator HANSON-YOUNG: How short was that?

Ms Parry : I don't recall. I can take that on notice. But it's not as if we were in discussions with Energy Australia for weeks. We were likely given an embargoed copy of the media release, but I can take that on notice. Again, we can go to the specificity of our question around whether there were any departmental officers who had spoken to Energy Australia about Yallourn's closure, and whether or not they had canvassed that at all with any officers in the department.

Mr Sullivan : If it helps, Senator, the negotiations at a government level didn't include the Commonwealth. It was very much a bilateral discussion between Energy Australia and Victoria around the timing, and we're not aware of the details of any agreement between Victoria and Energy Australia with respect to Yallourn.

Senator HANSON-YOUNG: So the department's not aware of any specific details in relation to those arrangements. That's what you're telling me? You haven't been made aware of that?

Ms Parry : No, we have not.

Mr Sullivan : The original closure that was forecast for 2032 was a phased closure. I think we're still waiting on advice as to what the closure regime is for the 2028 closure—whether it's a hard closure or whether there's a phased closure to 2028, or whether that involves some degree of mothballing units ahead of that and beyond. So it's on our list in terms of discussions with Victoria, and they will have to think about that in terms of their own commercial-in-confidence restrictions, but it's one where we do want to get a sense of what that regime looks like. That will also be important for AEMO moving forward with respect to the next iteration of the ISP, as well as in terms of their future forecasts for energy supply.

Senator HANSON-YOUNG: So, in terms of arrangements that the state of Victoria will pay Yallourn to pay Energy Australia to keep operating and trading through the negative price period, you haven't been briefed on any arrangements in relation to how that's going to be managed, how that transition is going to go.

Mr Sullivan : I thought you would go there. We really haven't got any idea of what that negotiation entailed and where they ended up.

Senator HANSON-YOUNG: Is that something that you anticipate being briefed on?

Mr Sullivan : As I said, at some point over the coming weeks we've got a bilateral meeting set up with Victoria where we have asked to get as much detail as possible, noting their constraints—also how that fits into Senator McAllister's question before about the bilateral negotiations between Victoria and the Commonwealth. An understanding of that would be really important. But that probably will come out with respect to Victoria's input into the resource adequacy discussion under the ESB post-2025 market design paper as well.

Senator HANSON-YOUNG: What do you think the consequences and ongoing impacts of this contract will be? Are you starting to factor that into your thinking?

Mr Sullivan : Yes.

Senator HANSON-YOUNG: I understand there's this other process, but surely the department is having to think about this independently as well.

Mr Sullivan : That's right. But, to get a robust understanding of that, we need to know what those arrangements are. As I said, is that a phase closure post 2028 over a couple of years, or is that a phase closure to 2028? Is that a hard closure at 2028? We would like to know that, in terms of those details, and that's part of our discussions ongoing with Victoria.

Senator HANSON-YOUNG: Have you had any representations from other generators or even complaints per se about any sweetheart deal between the Victorian government and EnergyAustralia in terms of Yallourn? Has anyone raised this?

Mr Sullivan : No, it hasn't been raised with me, and I'm not aware of anyone else it's been raised with. I think it was kept very, very tight. So, as Ms Parry said, it came not as a shock but it came without any sort of idea that that negotiation had been in place.

Senator HANSON-YOUNG: Do you think it sets a precedent?

Mr Sullivan : It depends what the terms are. In my answer previously I was flagging that some of those issues will inevitably come out with respect to Victoria's views on resource adequacy mechanisms.

Senator HANSON-YOUNG: At this point this hasn't forced discussion or thought or briefing within the department in relation to providing compensation to other coal generators.

Mr Sullivan : No.

Ms Parry : No.

Senator HANSON-YOUNG: The minister hasn't raised that.

Mr Sullivan : In terms of using Yallourn as a precedent for coal compensation?

Senator HANSON-YOUNG: If there are other generators that think they can now have a bit better of a deal in compensation.

Mr Sullivan : I think generators will all have a view with respect to resource adequacy and what that means in a post 2025 market. On one side, inevitably the discussion around the capacity market will come up. The capacity market has been operating in Western Australia since 2006, from memory. Capacity markets are increasingly being used internationally in a period of transition, but that's not just around coal; that's around how you best manage the transition of variable renewables coming in and coming in at low cost and how you manage storage and firming and baseload in terms of that transition.

Senator HANSON-YOUNG: Just to be clear, we've obviously got the next budget only weeks away. Has there been any work done to see whether there needs to be a line item for further compensation for generators?

Mr Sullivan : I'm not going to talk about the budget and budget processes, as you would expect from me. That being said, the major point that's in the public domain now that is discussing this is around the resource adequacy mechanism for post 2025 and how we look at an ageing thermal fleet where the current 42 months notice period—is that still appropriate? Should we actually be looking at formalising mothballing arrangements of particular units, of particular plants? What does that mean in terms of investment certainty going forward, and what does that mean for the market in terms of its reliability and security? That's probably the key issue for the ESB and then for the energy minister and then for national cabinet.

Senator HANSON-YOUNG: Can I pick you up on that 42 month notice period? You're saying one of the questions is whether that's appropriate as we get closer to that 2025 date. Are you suggesting that there is a suggestion that that should be lengthened or cut?

Mr Sullivan : No. The ESB has raised a number of consultation questions around, particularly, mothballing. It was extended from 36 months to 42 months. As you see with Yallourn, that's a seven year outlook. But the discussion at the moment is really: what more needs to be done with respect to the certainty so that the market can plan ahead to manage—we know that there are going to be more and more renewables in place. How do we manage that transition and at the same time keep emissions lowering and keep a focus on consumer price so we're not getting consumer price spikes?

CHAIR: Senator Hanson-Young, do you have any more questions?

Senator HANSON-YOUNG: Just a final question. Obviously I have some others I need to come back to after this. Just to be clear, you're saying how that phasing-out transition period is managed is the crux of it. The question that I have is: who's going to fund that? You're talking about this price spike. Are we going to be confronted with more public money on the table to soften that?

Mr Sullivan : I'm not going to make any predictions around public money, but, in terms of the transition process over the next 10 to 20 years, we're going to need more investment in dispatchable generation. That's clear. So projects like Snowy 2.0 and the total investment there are things that are being looked at around the world in terms of the suite of technologies that countries have at their disposal. Who pays for that? I think the ESB view——and I share this is—is about how we keep that transition as well known, transparent and as orderly as possible. That is the way to actually minimise the price for consumers. But, on that question of who pays with respect to the issue we were talking to Senator McAllister about in terms of rooftop solar—that issue around interconnectedness, who's paying for interconnectors throughout the system and where those costs are best attributed to—is also raised in the ESB's post-2025 market paper around financial transmission rights and if there something else we can do with respect to allocating the costs in cost-benefits more equitably. It is a real challenge around who pays, how they pay and—

Senator HANSON-YOUNG: And what they're paying for.

Mr Sullivan : One of the arguments is around sunk investments. I think that's part of that issue around gas peakers being able to transition to hydrogen three to five per cent of the time. Being hydrogen ready as soon as possible is also part of that transition. How do we think about attributing cost for that? Do we put directives on that in terms of thinking about hydrogen being a prerequisite for that? All of those things will be options put to ESB and to governments about how best to manage what is knowingly a short-term issue through to 2023-24 but also through to 2027-28, when Snowy 2.0 power should be on north and south, and then longer term out to 2030. How do we keep planning for that? Think about the seven years for Yallourn. How do we make sure that we're trying to get a national energy market that is catching up with respect to the massive transition that's already underway?

Senator HANSON-YOUNG: Thanks Chair.

CHAIR: Senator McAllister are you seeking the call again, leading up to 11?

Senator McALLISTER: The two experts that I asked the department—

CHAIR: Sorry, we can hardly hear you, Senator McAllister. Your handheld mobile phone was probably the best audio we've had all morning. I think it may be the volume at our end, if Broadcasting could turn that up a little bit.

Senator McALLISTER: Is that better?

CHAIR: That's great. Thank you.

Senator McALLISTER: Two estimates ago I asked which aspects of the gas fired recovery would be handled within this committee and which parts would be handled in other committees. Characteristically, the department has given an oblique answer. It was question on notice 29—a spoken question. I just wanted to ask about what this answer actually means.

Mr Sullivan : Sorry, I don't have question on notice 29 from two estimates ago with me.

Senator McALLISTER: Surely someone does. It's a core part of what we do at estimates. We follow up on questions that were previously asked and deferred.

Mr Fredericks : I think we're just chasing it up, Senator.

Mr Sullivan : Have we got it?

Mr Fredericks : Yes, we've got it.

Senator McALLISTER: What I'm trying to do is find out what part of the gas fired recovery programs could be dealt with in this committee and which would need to be dealt with in the RRAT. I asked whether we could go through the initiatives that were included in the release and understand which ones were the responsibility of this section. Your answer reads: 'Measures that will be delivered by the Gas Taskforce division are—'. Should I assume that all of those things can be asked about during outcome 3?

Mr Sullivan : That's correct.

Mr Fredericks : Can we just pause while I have a look at that?

Senator McALLISTER: It's actually quite important—

Mr Fredericks : It is.

Senator McALLISTER: because, to be honest, I'm finding it frustrating gaining appropriate accountability from the department about this gas fired recovery. It is not necessarily the department's fault, but it would assist if I understood which matters were to be dealt with here and which ones were to be dealt with in RRAT. I just wanted to clarify that.

Mr Fredericks : We're having difficulty with this as well to be fair to you and to be fair to us. What we've actually done is to maximise our capacity to answer your questions today, in fact, to ensure that relevant staff are here across the breadth of the gas fired recovery measures. We've done our best. We might fall short. But I think I can say, as Mr Sullivan said, that in relation to the questions you've listed here and all the dot points that are underneath the Gas Taskforce division, we can take questions on all of them today, because Ms Croker is the head of that division. So you can go through anything you wish on any of those dot points, and we're here to answer them.

Senator McALLISTER: Is it correct to understand when I look at the minister's release from 15 September that the matters that are listed in answer 29 are essentially the measures that are on the second page of that release, which go to the gas transport network and the empowerment of consumers, whereas getting more gas to market are the matters that you consider should be dealt with in RRAT? Is that how you are breaking it up?

Ms Croker : Matters relating to gas transportation can be covered by myself—that's within the division, the work we're undertaking and the task force.

Mr Fredericks : So yes is the answer to that.

Ms Croker : Yes, we can do that.

Senator McALLISTER: On the release, they were grouped in three areas: 'The government will get more gas to market—', and then there are five dot points. The second page says that the government 'will boost the gas transport network', and there are three dot points. Then, there is a third matter, which says 'To better empower gas consumers, the Government will—', and there are four initiatives listed there. Is it fair to say that the transport network measures and the consumer measures are being dealt with by you and the gas to market measures are being dealt with in RRAT?

Ms Croker : The consumer measures do span across both my remit and in the Resources division to some extent. In terms of the resources side, they have responsibility for heads of agreement, they have responsibility for the strategic Basin Plan work, they have responsibility for funding that's been provided to JSERA and matters about the prospective gas reservation work, and then there's a separate area, which is dealing with the state and territory government deals.

Senator McALLISTER: Okay. That's terrific. On notice, may I ask the department to take the list of measures that were detailed in the minister's release on 15 September and provide an indication, for each measure in that release, of which committee is the appropriate place to ask questions?

Mr Fredericks : Yes, we will do that. And can I make an additional offer—we'll also provide the same advice to the other committee so that each committee has the same advice about which is which.

Senator McALLISTER: Thank you.

Mr Fredericks : Just to add, we are going to try to endeavour to have relevant officers here, in both committees, to answer questions. If on one question you're wandering off into strategic basins, in order to assist we should have a stab at having someone available to assist on that. We might end up taking it on notice, but that's our philosophy.

Senator McALLISTER: Thanks, Mr Fredericks; that is helpful. Can I just confirm who is responsible for fuel and energy security?

Mr Sullivan : That's within outcome 3. That was fuel and energy security—is that what you said, Senator?

Senator McALLISTER: Yes. The Liquid Fuel Security Review, for example, is the responsibility of—

Mr Fredericks : That's absolutely this outcome, Senator.

Senator McALLISTER: Great. So the Liquid Fuel Security Review commenced in May. The interim report was in April 2019. Why has the final report of Liquid Fuel Security Review not been released?

Mr Gaddes : This is a question that's come up on a number of occasions in this committee. Our answer remains the same: the Liquid Fuel Security Review was created for the purposes of cabinet. It has been provided to the government in the cabinet context, and it's a matter for government when the Liquid Fuel Security Review report will be released.

Senator McALLISTER: Minister, can you shed any light on that?

Senator Seselja: No, I can't, but I'm happy to check with the minister and come back if there's any additional information that I can provide you with.

Senator McALLISTER: It's been over a year. You've had more than a year to consider the report. Does the government not consider fuel security a priority?

Mr Gaddes : I might be able to help there. While we did a lot of work in the interim and the final Liquid Fuel Security Review reports, our focus in recent times has been on implementing a number of measures of reform that we've had on foot for a number of years. In recent times, we have extended significant efforts into a package that will increase our diesel storage and support our refineries. There was also an announcement by the government in the budget context last year on a process to modernise and reform our emergency management legislation. While the report has not been released, the government and the department have been pursuing a range of reforms in the liquid fuel space.

Senator McALLISTER: I see.

CHAIR: Senator McAllister, as it's 11 o'clock, could we make this your last question? I'm happy to come back to you after the break.

Senator McALLISTER: I'm happy to stop there, Chair.

CHAIR: Thank you. In that case we will now suspend.

Proceedings suspended from 10:58 to 11:14

CHAIR: Senator McAllister, you have the call.

Senator McALLISTER: I wanted to ask about the proposed site for the new gas generator in the Hunter. Do I have the right officials at the table?

CHAIR: I believe you do.

Senator McALLISTER: How many sites were investigated and reviewed for suitability for the new gas generator in the Hunter?

Mr Sullivan : Sorry, Senator, I didn't hear the second part of that question; I apologise.

Senator McALLISTER: There is a proposal to locate a new gas generator in the Hunter. I'm interested in understanding how many sites were investigated and reviewed for suitability.

Ms Parry : Senator, are you referring to Snowy Hydro's proposed Kurri Kurri site?

Senator McALLISTER: That's right. Back in September 2015, there was an announcement that Snowy Hydro Ltd was developing options to build a gas generator in the Hunter Valley. I'm trying to understand how many options were developed.

Ms Parry : I would have to take that question on notice. That would be a matter for Snowy Hydro as the lead agency for developing any proposed sites. So, as to what other sites they examined as part of a process, I would have to take that on notice and we would have to direct that to Snowy Hydro.

Senator McALLISTER: Did they not brief you?

Ms Parry : They may have, but, as that was quite a number of years ago, I would have to go back and again take that on notice to see what, if any other, sites were canvassed.

Senator McALLISTER: It wasn't quite a number of years ago; it was last year on 15 September. The Prime Minister visited the Hunter and at that time said that Snowy Hydro was developing options.

Ms Parry : Sorry, I misheard.

Mr Sullivan : Sorry, Senator. I think what we heard was, 'How many sites had Snowy looked at for feasibility of a gas fired generator or peaker in that area?' That does go back some years, because they've been looking at options in the NEM in both New South Wales and Victoria as part of their role as a GBE. In terms of the Kurri Kurri option being developed, we will have to take that on notice with respect to post 15 September, and whether they actually looked at any other sites apart from the one, and what the precursor to that was in terms of the Kurri Kurri site, if that was the only option.

Senator McALLISTER: When were you briefed the Kurri Kurri site had been selected?

Mr Sullivan : I would have to take that on notice as to the Kurri Kurri site availability. It was obviously before 15 September, but, in terms of the details of that, I would have to check.

Senator McALLISTER: The government has tasked Snowy Hydro with identifying a site and selecting options. You don't know when a single option was landed upon?

Mr Sullivan : There were two parts to that question. I was going back in time and trying to explain the response we gave first, which was, 'Were any other sites, apart from the Kurri Kurri site, investigated by Snowy, in leading up to them deciding on Kurri Kurri?' With respect to Kurri Kurri, they were asked to do a business plan to develop gas fired generation at Kurri Kurri as part of the response to the 1,000-megawatt target.

Senator McALLISTER: When was that request made?

Mr Sullivan : That request started, from memory, on 15 September.

Senator McALLISTER: So they were asked to prepare a business plan for Kurri Kurri on 15 September?

Ms Parry : We need to verify that date as to whether it was exactly at that date. We need to take that specific date on notice, please.

Mr Sullivan : The question there is the statement around how we meet the 1,000-megawatt target that came from the Liddell Taskforce report. Then it was basically a challenge to the private sector to step in, or else another option on the table would be the Kurri Kurri proposal. So that decision with respect to Kurri Kurri is a matter for government and a matter they're considering.

Senator McALLISTER: When was Snowy Hydro directed by your minister to develop the business case for Kurri Kurri?

Mr Sullivan : I would have to take that on notice. I don't have that in front of me.

Senator McALLISTER: Prior to 15 September?

Mr Sullivan : Again, I have to take it on notice with respect to the discussions because you're asking me a question of what the minister did. I would need to take that on notice and get back to you.

Senator McALLISTER: Did the department provide advice to the minister about this initiative?

Ms Parry : About the 1,000 megawatts or about Kurri Kurri?

Senator McALLISTER: About Kurri Kurri.

Ms Parry : The department has provided a number of different briefs on Kurri Kurri, but it does go to the question around—you're asking the 15 September date and, as we've said, we need to confirm on notice what the date was.

Senator McALLISTER: For clarity, it is your understanding, Ms Parry, that the minister asked Snowy Hydro to develop the business case for Kurri Kurri around the time of the 15 September announcement?

Ms Parry : No, that's not my understanding, Senator. I don't have a clear time line of events I can convey to you. As we've said, we need to take it on notice.

Senator McALLISTER: Notwithstanding your lack of knowledge about the time line, it is your understanding that the minister has requested Snowy Hydro to develop the business case for Kurri Kurri?

Mr Sullivan : It would have been the shareholder ministers.

Senator McALLISTER: It was the shareholder ministers, is that correct?

Mr Sullivan : Minister Taylor and Minister Birmingham, the finance minister, are the joint shareholders for Snowy Hydro.

Senator McALLISTER: And you're going to come back to me about the date when they made that direction?

Mr Sullivan : Yes, the best we can.

Senator McALLISTER: Is the department aware that the prospective owner of the site, Mr Jeff McCloy of McCloy Group a major Liberal Party donor?

Mr Fredericks : We're not aware of that. To be fair, Senator, that would be a matter for Snowy Hydro.

Senator McALLISTER: It might also be a question of advice to the minister. Is the department aware that Mr McCloy was found by New South Wales ICAC to have made illegal donations to Liberal Party politicians?

Mr Fredericks : We're not aware of that.

Senator McALLISTER: You have no awareness of Mr McCloy's involvement in this project?

Mr Fredericks : We're happy to take it on notice. Again, that is a matter ultimately for Snowy Hydro.

Senator McALLISTER: Minister, are you aware of Mr McCloy's involvement in this project?

Senator Seselja: No, I'm not.

Senator McALLISTER: Are you aware of whether the minister has met with Mr McCloy to discuss the project?

Senator Seselja: No, I'm not.

Senator McALLISTER: Do you know—either you, Minister, or the officials—what Snowy Hydro agreed to pay for the purchase of the land?

Senator Seselja: I don't.

Mr Fredericks : That would be, firstly, a matter for Snowy Hydro; secondly, potentially subject to cabinet in confidence; and thirdly, potentially a matter of current commercial in confidence.

Senator McALLISTER: Is the department aware of any steps that have been taken to manage a perception of conflict of interest in relation to the purchase of land following a subdivision by McCloy Group and Stevens Group?

Mr Fredericks : That would be a matter for Snowy Hydro under their probity regime.

Senator McALLISTER: The minister hasn't sought any advice from the department about managing that conflict?

Mr Fredericks : I think the answer is no.

Senator McALLISTER: Thank you very much. I'll move on. In relation more broadly to the Underwriting New Generation Investments program, the Prime Minister said in the lead-up to 2019 election that the projects will deliver around 4,000 megawatts, which is about twice the size of what we're currently talking about at stations like Liddell. How many of these projects are complete?

Ms Parry : As we've previously testified, we had completed projects in Vales Point but the proponent declined the offer of funding under the UNGI program. We are currently working very closely with the remaining 11 short-listed projects. We have key support parameters with Quinbrook for their proposed 120 megawatt gas generator and we are in very late stage discussions with AIP under the UNGI program as well. Again, we are looking to progress a number of the UNGI projects. As we have testified previously, these projects take time. They are all very bespoke in nature and are all at various stages of development.

Senator McALLISTER: Ms Parry, could you talk me through the terminology that you use, because I asked you how many projects were complete and I think you were talking about some other point in the cycle, well before completion. Could you tell me how you describe the stages of the grant program in UNGI, just so that we are talking about the same thing?

Ms Parry : I would reiterate that we offered Vales Point UNGI funding and it was declined. So that project wasn't carried through to completion. But we are working closely with other proponents. Have we finalised any programs under UNGI to date? No.

Senator McALLISTER: So no projects have started under UNGI?

Ms Parry : It depends on what you mean by 'started'. So, in essence, has an UNGI contract been executed? No. But we have certainly been working with the proponents—some of them for the better part of two years.

Senator McALLISTER: I'm talking about actual projects where construction commences on new generation capacity. So we're nowhere near anything like that and, in fact, the department hasn't concluded an agreement with any proponent under the program?

Ms Parry : As I've said, we concluded an agreement with Vales but they declined the funding.

Senator McALLISTER: So it wasn't concluded. On the 12 projects that are being negotiated, has the department received feedback about the impacts of the delayed grid reliability fund legislation?

Ms Parry : Sorry; I'm just going to repeat your question back to you to be sure that it is clear. You just broke up a little bit there. Was your question on whether we had received any inquiries in relation to UNGI about the delayed grid reliability fund legislation?

Senator McALLISTER: I will go again, Ms Parry, because I obviously wasn't clear—my apologies. The grid reliability fund legislation has been delayed. Has the department received feedback that this delay is having impacts on the ability of stakeholders to proceed with projects under the UNGI program?

Ms Parry : No, we have not.

Senator McALLISTER: The chair of the Energy Security Board, Ms Kerry Schott, has said that the government's threat for energy market intervention are—and I quote—'not helpful'. She has also said that such interference—and I quote again—'makes it much more difficult for commercial entities to make plans'. Has the department received similar commentary from commercial entities?

Ms Parry : The department receives a variety of commentary from a variety of different entities. In fairness, there are differing views. If you're referencing the UNGI program, in particular, as I previously testified, there are differing views on some proponents. Some commentators feel that the UNGI program deters investments. But we can also point to the fact that there were 66 submissions received as part of the registration of interest process through UNGI. So there was a very high level of interest in the UNGI program, and that level of interest remains. So I would say that there are varying views on this topic.

Mr Sullivan : Senator, could I ask whereabouts the quotes you just gave us from Kerry Schott were taken from?

Senator McALLISTER: I'll come back to you with the exact source. My notes don't have a source listed, and I will have to come back to you. Has the stalling of the grid reliability fund legislation had any impact on the implementation of the bilateral agreements signed between the Commonwealth and state governments?

Mr Sullivan : The reference there, I think, is to the New South Wales agreement, because the GRF, the Grid Reliability Fund, was foreshadowed to be in place sooner than it currently is. With particular reference to looking at funding for the Central West renewable energy zone, negotiations with the CEFC are continuing with respect to that renewable energy zone. For a lot of the detail around how you would underpin financing and the financing models for a renewable energy zone of that size, including transmission to and within the renewable energy zone, CEFC has been part of those discussions. It has been providing advice and options, and it is still engaged in potentially underwriting some of that funding.

Senator McALLISTER: Chair, I have a different line of questioning. I might break now, allow another senator to ask some questions and come back later. Does that sound sensible?

CHAIR: Sure, that's fine. Mr Sullivan?

Mr Sullivan : I think Ms Parry has got a couple of corrections.

Ms Parry : Yes, I have a couple of corrections to the record. One is in answer to Senator McAllister's earlier question about the frequency of COAG meetings. I do have that information, and I want to respond to you. The COAG Energy Council met on 22 November 2019. It met on 20 March 2020. It met after COAG was disbanded in May 2020, and it took on its new form as the ENCRC. It met under the auspices of the ENCRC on 17 July 2020, 18 August 2020, 29 September 2020 and 15 December 2020. That's a total of six times. As we've said, we are planning a meeting in the coming weeks.

Senator McALLISTER: Thank you.

Ms Parry : I have a correction to some testimony that I provided to Senator Van on the default market offer. The numbers that I was reading out were from the draft determination from the AER. I have the final determination numbers. The AER released its determination for the DMO, and it indicated that, again, those customers remaining on standing offers could see savings of up to $768 per year for an average residential customer and up to $3,105 per year for a small-business customer. I just wanted to correct the record, because I hadn't indicated in my previous testimony that they were from a draft determination.

Senator VAN: Thank you, Ms Parry.

CHAIR: And on the third issue for Senator Hanson-Young?

Mr Sullivan : Waratah? I've asked senior officials across the gas, electricity and resources areas of the department, and none of us are aware of contact with respect to Waratah. That's not exhaustive, obviously, across the department. We'll take it on notice in terms of trying to do a broader sweep.

Senator HANSON-YOUNG: Thank you. I appreciate you going back and checking.

CHAIR: Senator McMahon.

Senator McMAHON: My question is related to the several large solar farms that Eni has in the Northern Territory. Are there concerns that these will have an impact on the grid stability up there?

Ms Parry : I'm not aware of the specific farm that you are referring to. I'm going to see if one of my colleagues, who's in the holding area, may have some commentary on that. We might move on to another question while I just check with him.

Mr Sullivan : I can partially answer. It's a discussion that's happening at a broader level in our negotiations with the Northern Territory government around options for their grid moving forward: is it economically feasible to put a transmission line to Alice, for example, or should Alice be seen as able to operate independently? With respect to the utility-scale PV penetration, in the same way as in other places in the grid, we have to look at what the stability issue is. The Northern Territory doesn't have coal-fired power stations; it has gas peakers. So that issue is probably less of an issue in the Northern Territory. It doesn't mean that it's not an issue to manage moving forward, but, because of having gas there as a peaking capacity, as well as base-load capacity, the issue there is around how best to manage that. But, as I said, it's an issue we're talking to the Northern Territory officials about in terms of us also trying to help them with advice from other jurisdictions that have gone through very similar challenges.

Senator McMAHON: Would the fact that these large solar farms are not yet connected to the Darwin to Katherine grid be because grid stability is a concern?

Mr Sullivan : I will have to take that on notice unless Mr White can answer it. James, are there potential grid stability issues with regard to some utility-scale solar in the Northern Territory not being connected to the grid yet? Was that the right question, Senator?

Senator McMAHON: Yes. Basically, are concerns for grid stability the reason that these large solar farms of ENI are not yet connected to that grid?

Mr White : We in the department aren't aware of any specific concerns in relation to the Northern Territory system, but I think it would depend on where those solar farms are and which part of the NT system they're connecting into. The Northern Territory, as you're aware—probably the rest of the committee may not be—has an interconnected system through the Darwin-Katherine system and then small grids at Tennant Creek and Alice Springs. The rest of it is remote. To the extent that these are connected into one of those interconnected systems, I think the Northern Territory system operator would make that assessment. Because the Northern Territory operates separate grids, it's not under the auspices of AEMO, the NEM system operator. We don't have any specific information on this in the department. It's not something that's actually been brought on our attention.

Senator McMAHON: Okay. We're talking about the Darwin-Katherine grid, and these farms are located in the Darwin rule area and Katherine. Would you be able to take that on notice and get back to me?

Mr Sullivan : We'll take that on notice and find out as best we can. If we don't have it on hand, we'll try to get that through Northern Territory officials as part of our next set of discussions with them.

Senator McMAHON: Thank you.

CHAIR: Senator Hanson-Young.

Senator HANSON-YOUNG: I want to go back to the question about Mr Andrew Liveris, who, of course, was a special adviser and led the task force in relation to the government's pursuing a gas led recovery. I said that, on the ABC on 22 April, Mr Liveris made the claim that there are 850,000 Australians employed in industries that use gas as feedstock. I've given you the transcript. Do you think those figures are wrong or right?

Mr Campbell : According to this quote here, it's 850,000 employed by industries that use gas as a feedstock. I'm not aware of a figure that high that would just be using gas as a feedstock.

Senator McMAHON: In fact, I do have the report Chemical industry economic contribution analysis by ACIL Allen consulting, and they say themselves that the number of people employed full time in this industry is 9,232, which on my calculations is not even 1.1 per cent of the figure quoted by Mr Liveris.

CHAIR: Could I clarify something? Mr Campbell, you made the comment 'just using gas as a feedstock'. Senator Hanson-Young, I think you're referring to industry as though it's the gas industry. What I read in the Hansard is that Mr Liveris said 'industries that use gas as a feed stock', so that could be a wide range of industries, and it may only be one part of the feedstock that they use for their work. Both of you appear to be talking at cross-purposes to what Mr Liveris has said, but I would welcome a clarification.

Senator HANSON-YOUNG: Mr Liveris was very clear. There are 850,000 Australians employed in an industries that use gas as a feed stock. It's wrong, and yet he's the special adviser to the government on the gas led recovery. This guy doesn't even get his own figures right.

Mr Campbell : As I say, I'm not aware of a figure that high purely on gas as a feed stock. There isn't a hard number that's prepared by the ABS though. So any estimate that any organisation produces is making a range of assumptions around the degree of intensity of gas use by the various subsectors within manufacturing. I'm also aware that the APPEA group have come up with an estimate of around 225,000 jobs. But again it goes back to your point, Chair, about the language that that was for gas as a feed stock as well as for energy use. Depending on what it is you're defining as your measurement, you are going to come up with different figures. There are a wide range of estimates in the industries that do use gas within manufacturing. But we haven't produced a figure like that ourselves.

Senator HANSON-YOUNG: It doesn't seem realistic, does it, Mr Campbell? It's pretty out of whack—855,000 people employed in industries that use gas as a feed stock.

Mr Campbell : The only way you could possibly interpret that would be to think about indirect jobs, but looking at the direct quote here, using them directly as feed stock—I'm not aware of a figure that high.

Senator HANSON-YOUNG: Okay, fair enough. Thank you.

CHAIR: Thank you. Senator McAllister, do you have any further questions? There is no compunction or requirement for the committee to use the full time allocated.

Senator McALLISTER: I hear the optimism, the hopefulness in your voice, Chair.

CHAIR: I'm a very optimistic person, Senator. Having been an experimental test pilot, I'm an optimist by nature!

Senator McALLISTER: Alright. I wanted to follow up on questions which we didn't have time for in the last round of estimates around the Auditor-General's report on Shine Energy. I'm hoping someone will be able to help me with this. Minister Taylor has said that this is a grant program that's focused on delivering for the people of Queensland. Has the Collinsville feasibility study delivered the bankable feasibility study that was promised?

Ms Parry : Senator, I'll just have to get you to repeat that second half of the question, because you just cut out a bit. If I heard it correctly, the question is: has the bankable feasibility study been delivered? Is that your question?

Senator McALLISTER: Yes.

Ms Parry : Senator, as you're aware, the funding to Shine Energy is to deliver the first two stages to a feasibility study, and Shine Energy has until the end of 2022 to deliver a bankable feasibility study.

Senator McALLISTER: That announcement was two years ago. What jobs have been created in Collinsville as a consequence of that announcement?

Ms Parry : This is a feasibility study, as I've indicated, so this grant goes towards a feasibility study. Any jobs numbers would—

Senator McALLISTER: That doesn't really answer my question.

Ms Parry : There generally aren't jobs related to a feasibility study. So the answer is: probably very few.

Senator McALLISTER: Do you expect any jobs to be created before the next election?

Ms Parry : As part of a feasibility study?

Senator McALLISTER: I mean as part of this project, because this was a grant program that was focussed on delivering for the people of Queensland. I'm just wondering what's been delivered so far.

Ms Parry : In terms of what will be delivered as part of this grant, it is a feasibility study with the option then for Shine Energy to take the feasibility study further to deliver a bankable feasibility study, and it is Shine's intention to do so.

Senator McALLISTER: So, in terms of delivering for the people of Queensland, it's going to deliver a feasibility study to Shine, and we should interpret that as being for the people of Queensland?

Ms Parry : I would go back to the intention of the grant, which was to test the market and to test whether or not it is feasible for HELE coal-fired power station to be built in Collinsville. If we look at the intention of the outcome of the grant to determine whether or not that's feasible and then bankable, the ultimate outcome is to test the market to see whether or not a one-gigawatt HELE coal-fired power station could be built in Collinsville.

Senator McALLISTER: But no jobs. Minister Seselja, will this study, which is due in 2022, even be completed prior to the election?

Senator Seselja: I don't think I can answer that at this stage, or add much to what officials have had to say. Obviously, we're going through that process as we have committed to. Once the study is complete then, obviously, it will determine whether or not a HELE plant is able to be built based on some of that appraisal done as part of that feasibility study.

Senator McALLISTER: Does that sound like delivering for the people of Queensland?

Senator Seselja: Sorry, this is the feasibility study that you've been against. We believe that doing this work is critically important, because we saw a market gap there in North Queensland. This is what we committed to, to put this on the table. Obviously, there's the potential for that to lead to further investments down the track.

Senator McALLISTER: I see, but no investments so far. Just in terms of the money that government is spending on this: how much has been paid out so far?

Ms Parry : To date the department has paid $1,275,000, GST exclusive, to Shine Energy.

Senator McALLISTER: And what progress is there to show for that—is that a down payment of $1,275?

Ms Parry : No, the department has paid that amount in two payments. The first milestone payment of $700,000 was paid to Shine Energy in August 2020 on the execution of the grant agreement. The second milestone payment of $575,000, GST exclusive, was paid to Shine Energy in March of this year on acceptance of the project plan. Shine Energy is continuing to deliver against the milestones that have been set out as part of its project plan and grant agreement.

Senator McALLISTER: So it's $1.275 million in the pockets of Shine Energy and, so far, that was just to kick things off and to develop the project plan, but no actual work has been received for the department?

Ms Parry : The feasibility study and the process of the feasibility study enable Shine to work with its consultants and, again, as you would expect out of feasibility study, to start examining the engineering reports, the environmental approvals and the configuration of the plant. That's where this money gets expended; it goes into developing and testing whether or not this plant is feasible.

Senator McALLISTER: But it's only going to cover the first two stages of the feasibility study, isn't it? The rest of the feasibility study is not funded. Are you confident that there's a source of funds for the final phase to be undertaken?

Ms Parry : We're confident, and that was the basis of recommending the grant be approved—the basis of the department's recommendation to the minister was that the grant funding of $3.3 million would lead to a feasibility study. Then Shine could take that feasibility study and look for further investment to deliver it to a bankable feasibility study.

Senator McALLISTER: The table on 3.6 appears to be the assessment made by the department on the merit of the project. Can you confirm that it is the department's assessment that Shine does not seem to have any other source of income?

Ms Parry : That's right. When we evaluated the grant application we did note the financial situation of Shine at that time. That's why we made it clear in terms of the milestone payments and the project plan what the government funding could be used for. That's why we develop a project plan, why we have milestone payments and why we request audited financial statements at the end of that process, to provide an assurance process to make sure that those moneys are spent for the activities for which they were intended.

Senator McALLISTER: I see. That same table indicates that if unable to secure additional contributions then outcomes will not be achieved and it would not constitute value for money. Shine would then have to seek additional funding from the federal government. As far as you're aware, has Shine secured any additional funding to be able to complete the study and to achieve the outcomes anticipated by the grant?

Ms Parry : Again, they're in fairly early stages of the feasibility process, and I would expect that Shine would be working in parallel, once they have finished their feasibility study, and determining the outcomes of that feasibility study. They would then be able to take that as a product to leverage further financing, to carry it through to a bankable feasibility study.

Senator McALLISTER: So at this point in time you're not aware of any progress on that money by this grant recipient who's already had $1. 2 million of Commonwealth funds paid to them. No progress has been reported to you as a department.

Ms Parry : We have not specifically requested that, at this point, because our funding goes to the feasibility study. Once that feasibility study is completed, and depending on the outcomes of that feasibility study, Shine would then be able to use that feasibility study to leverage further investment.

Senator McALLISTER: So we're not even sure whether Shine can finish a feasibility study let alone secure funds to build a power station. How could this possibly be described as delivering for the people of Queensland?

Ms Parry : If you have a question about what the minister has stated, I would go back to the department's role in this. The department recommended to the minister that, given the funding that was available, given the intended outcomes of the grant, we were confident that Shine and its associated partners, who it was subcontracting to, could deliver a feasibility study with the amount of funding available, $3.3 million. They could then take that feasibility study, look to leverage that and deliver a bankable feasibility study. That was our recommendation to the minister.

Senator McALLISTER: Minister Taylor has made comments to the media where he appears to be distancing himself from the department and the decision to provide this rather large sum of money to a company with no track record whatsoever in delivering power projects. It's interesting because in recent hearings your officials have indicated that this grant was the minister's responsibility and arose as a decision of the minister. Is that still your view, that this was the minister's responsibility, or was it a decision of the department?

Mr Sullivan : I just want to go back to the premise of your question, of the minister walking away from the department on this. I'm not aware of that.

Senator McALLISTER: It would be these comments he made publicly, where he said: 'Departments always do everything they can to follow the principles. Some issues were identified by the Auditor-General and the recommendations have been accepted and the department will be making sure that those principles are followed in the future.' Do you accept that analysis of what's going on in the department?

Senator Seselja: That's a complete mischaracterisation of the—

Mr Fredericks : Can I assist on that one? In fairness, as you know, there were a couple of issues that were identified early in the ANAO process. We worked very constructively with the ANAO through that. I had previously given evidence to this committee—I think it was to one of the Greens senators—that there were a couple of issues that we as the department recognised we needed to attend to, in terms of our departmental processes, and we certainly intend to do that. If that's the reference the minister is making, then he really isn't saying anything more than what I gave in evidence.

Senator McALLISTER: The report from the Auditor says:

Its recommendation that the Shine Energy grant be made was not consistent with its assessment work which identified that some eligibility requirements and appraisal criteria had not been met.

Why did the department provide a positive recommendation to the minister when it's clear, from that report, that you had many concerns about the project?

Ms Parry : As I've indicated previously, the department, in essence, looked at a number of factors. First and foremost, again, this was an election commitment. Secondly—just to backtrack and give you a bit of context to the answer—Shine had indicated that it would cost in the order of $10 million to deliver a bankable feasibility study. The government had agreed up to $4 million would go towards the project, in terms of a bankable feasibility study. We did the assessment. The department did a proper assessment to say, 'What can be delivered that would be in keeping with the intended outcomes of the grant?'

The intended outcome of the grant was to deliver a bankable feasibility study to test the market to see whether or not a one-gigawatt HELE coal-fired power station in Collinsville was feasible. So, with funding of up to $4 million available, we worked with Shine to say what could be delivered in that envelope. They indicated that they could deliver the first two stages to deliver a feasibility study. The department took the view that then they could—

Senator McALLISTER: Ms Parry, you have to finish with this.

Ms Parry : I just want to finish this thought. The department took the view that the feasibility study could then be taken to the market to look to leverage private sector support or other forms of support to deliver it to a bankable feasibility study. So we saw, on the balance of what was in front of us, on the balance of what the grant was intended to deliver, that we still felt that this grant represented a proper use of funding. We scaled back some of the funding that we didn't think represented value for money, and the intended outcome of the grant funding is to deliver a feasibility study.

Senator McALLISTER: Does that all seem sensible to you, given what the Auditor-General has now said about that process?

Mr Fredericks : The answer to that question is I have every confidence that, in that instance, the department did absolutely the right thing. We were providing very good advice. We were acting consistently with the grants guidelines. Of course, the ANAO is entitled to take its view. It's an important institution. I have the greatest respect for it. At the end of the day, it has a view about the decision that we made. We have a different view. I'm responsible for it and I support it fully.

Senator McALLISTER: Did the minister's office request that the department leave off the value-for-money attachment to the brief?

Ms Parry : No, and I'd like to pick up that point because it is an important point. Just for the benefit of the other senators, it's a reference and footnote on page 52 of the ANAO report. In essence, again looking at the sequence of events, we provided a final brief to the minister recommending the grant. The minister requested a meeting to discuss the risk profile and the risk rating that the department had attributed to the grant. We met with the minister and followed up with a secondary brief. Keeping in mind that the initial brief never changed, we provided a supplementary briefing as a result of our meeting with the minister to address further questions that he had around the value for money and the risk. We delivered a draft of that brief to the minister's office to test whether or not we had hit the mark in terms of the concerns that the minister had had. The main body of the brief never changed, and neither did any of the recommendations ever change. There were two attachments that were removed that were considered superfluous to information because it had already been covered in the main brief. The two attachments that were removed were the list of questions that the minister had and a repeat of the information around some of the risk ratings that had already been covered in the brief.

Senator McALLISTER: The fact that the project did not represent value for money and did not, therefore, meet the Commonwealth grant guidelines, was not considered material in preparing the final brief? That's your evidence.

Ms Parry : No, it's not my evidence, Senator. I'm describing to you what the ANAO had picked out in reference to the footnote on page 52. In terms of the value-for-money proposition, we were very conscious of the value-for-money proposition and very conscious of the Commonwealth grants and rules guidelines which also do allow the government to adapt its guidelines to deliver the intended outcome, as long as the intended outcome of the grant remains the same. On balance, the department made the evaluation that delivering a feasibility study still delivered on the intended outcomes of the grant. For Shine to be able to take that feasibility study and deliver it to an end point in terms of a bankable feasibility study would be left up to the proponent to deliver. So, in terms of the Commonwealth funding to deliver the first two stages, we did in fact make that a value-for-money proposition. The auditor noted that we had removed some elements of funding. You will recall the government said it was 'up to $4 million'. We took out some of the Shine applicant's funding request as part of that and lowered the amount because we felt that there was duplication and that didn't represent value for money. So ultimately we recommended to the minister a lesser amount than $4 million.

Senator McALLISTER: So you're going back and forth to the minister trying to work out precisely how the brief that will allow the minister to sign off on this is going to be drafted?

Ms Parry : No, Senator.

Senator McALLISTER: It sounds like it.

Mr Fredericks : Just to make sure we're clear on the order of events here: a decision-making brief was provided to the minister in the first instance, in which the department included all the analysis and the recommendation that we've just described. The subsequent brief that the Auditor-General has picked up and referred to was an information brief only, and that information brief was provided because the minister asked us for more information. So, in actual fact, we, the department, having provided a decision-making brief to him, he had further questions about our advice and asked us for further information about that advice, which we subsequently provided, but the decision-making brief was never altered to any extent. Secondly, even the information brief, the material in the submission itself—that is, not the attachments but our information in the submission itself—was never altered either.

Senator McALLISTER: Are you saying that the information brief was or was not relied upon in making the decision?

Mr Fredericks : It was absolutely relied upon, and it was consistent.

Senator McALLISTER: Okay, so it is a decision brief.

Ms Parry : No.

Mr Fredericks : No, sorry. It was providing additional information in support of the minister making a decision. All of the information that was already in the decision brief, which the Auditor-General has commented very favourably on, was still in front of the minister. Additional information was provided and was in front of the minister, and the consequence was that the minister made his decision from there. So we actually were providing more information in toto, rather than less.

Ms Parry : That's right, and I can walk you through some key dates if that's helpful, Senator,

Senator McALLISTER: Excuse me, Ms Parry. There was a verbal briefing which the Auditor-General says helped inform the minister's decision towards the grant funding, but there was no record made of that verbal briefing, was there?

Ms Parry : No, and that wouldn't be unusual. We were there to answer the questions of the minister, not to take notes of the meeting, so to speak. He had questions about the brief, he had questions about our risk assessment process, and that information was then reflected in the briefing that went up the next morning.

Senator McALLISTER: The act requires the minister to document the information that was relied upon for a decision. That's correct, is it not?

Mr Fredericks : I missed the first part.

Ms Parry : I missed the first part of that too.

Mr Fredericks : Apologies. Could you repeat that.

Senator McALLISTER: The minister is required to document the information that is relied upon in decision-making. It is a core principle of administrative practice, and that's why the ANAO is raising it, isn't it?

Ms Parry : No.

Mr Fredericks : The department is required to provide him with that advice and document our advice in terms of our justification, and that's precisely what we did. There's no criticism by the ANAO of that issue. It is just worth noting that—

Senator McALLISTER: Sorry, Mr Fredericks. That's incorrect. The ANAO highlighted serious concerns about the conversation that took place between the department and the minister.

Senator Seselja: Chair, it would be helpful if officials could occasionally finish answers to their questions before being interrupted.

CHAIR: Order, Senator McAllister and Minister! When we're online, it is very difficult if people are talking over each other. Minister, your point is valid, but in this case the secretary did cede to Senator McAllister, so I will allow her to finish her question, and then the secretary can answer any subsequent questions. But I do encourage all witnesses and senators to recognise that, in an online environment, talking over each other makes it very difficult. Senator McAllister.

Senator McALLISTER: Mr Fredericks, the ANAO highlighted serious concerns with the fact that a verbal briefing was provided by the department, was not documented and was relied upon by the minister in making a decision. Why was no record made?

Mr Fredericks : I can only repeat the evidence that Ms Parry gave: that the department had provided a decision-making brief to the minister. The minister asked for a verbal briefing, to ask questions et cetera, and asked for further information to be provided, which then, of course, was all documented. In my long experience, it is not unusual at all for departmental officials in these circumstances to provide additional information in a meeting but not to document that or take records of that at that stage, but to subsequently come back and provide written advice, which is exactly what happened here. Frankly, this is the usual practice.

Senator McALLISTER: Is it usual practice to provide a recommendation that's inconsistent with your internal assessment of risks and problems with the project? Is that usual practice?

Mr Fredericks : In this instance, I just can't concede that assertion. At the end of the day, Ms Parry, on a number of occasions, has provided evidence about the rationale for our advice, as you know, and our view is that that advice is entirely consistent with the grants guidelines.

Senator McALLISTER: Well, I think that, if we have to choose between the Auditor and the advice from the department and, indeed, the minister on this question, most people will know who they will choose. I will leave it there. Thank you Chair.

CHAIR: Thank you. If there are no further questions, that will conclude today's hearings for additional estimates of 2020-21. Senators are reminded that written questions on notice should be provided to the secretariat by close of business on Monday 10 May. Witnesses should return answers to questions on notice from today's hearing by Tuesday 15 June 2021. I thank the minister and officers for their attendance. I thank committee members, secretariat staff, Broadcasting and Hansard.

Committee adjourned at 12:05