Interview with David Speers, Sky News


9 October 2019


DAVID SPEERS: Right now it is up to the Government to deliver on the commitment it has made and to find a way to encourage badly needed investment in dispatchable energy in Australia. The Minister for Energy and Emissions Reduction Angus Taylor, gave a speech to industry players today, making this point: there's been plenty of investment in renewables, he says, not enough when it comes to dispatchable power. That's the gap in the market. He's laid out today what the Government is doing - certainly not going to go back to the National Energy Guarantee despite the helpful advice from Malcolm Turnbull. Instead, it's intervening in the market on a few fronts, with plans to underwrite new energy investments, ensure ageing coal plants aren't shut down prematurely, and of course, threaten power companies with a big stick if they do the wrong thing. I spoke to Angus Taylor about all this a little earlier.

ANGUS TAYLOR: Well, they're all at different stages of development. We're in advanced negotiations with a number of those. I've personally been to the sites. Big new projects don't happen overnight, David. We've seen that with Snowy 2.0 of course, which we've now approved and invested. We've got a track record in investing in these important projects. But we're going to make sure they're right. In the meantime, what is absolutely crucial is we retain our big baseload generators in the marketplace, premature closure of those or insufficient fuel sources-

DAVID SPEERS: And I'll come to that.

ANGUS TAYLOR: Gas in Victoria. That is the biggest threat we've got in the next couple the years.

DAVID SPEERS: I'll come that. The 12 projects, are they definitely going ahead?

ANGUS TAYLOR: Well, some of them will, yes - 100 per cent, of course they will. Just as Snowy 2.0, we invested in. It took us time to work through the business case.

DAVID SPEERS: Okay, so only some?

ANGUS TAYLOR: Well, we've always said we will pick the ones where the business case is strong and the market needs it, that’s the focus. There is no, you know, we're not handing out blank cheques here.

DAVID SPEERS: What I'm getting to is where is that at now? Are you able to give us a sense how many are going to go ahead and how many won't?

ANGUS TAYLOR: Enough to ensure that the prices get to a sensible level in the marketplace, David. That's the only measure that counts, is the price outcome that is fair for Australian households and businesses. We're completely outcome-focused with this program as we are with all other things. It is true that in some markets, there's more need for supply than others. South Australia, for instance, there's been dire need for new supply. Victoria is creating a huge problem with the premature closure of Hazelwood and the policies that the Labor Government in Victoria is pursuing. So, some markets are in more need than others. But the answer is: we will support enough supply to get the outcomes we need. We'll take into account if players who aren't supported by this program, bring new supply into the market. We just need that affordable, reliable supply, which needs to have a heavy dose of gas, coal and hydro alongside the record levels of investment we're seeing in variable renewables at the moment.

DAVID SPEERS: Let's turn to the other point you raised there - that's keeping, extending the life of the ageing coal fired power plants that are, you know, facing closure over the coming years. Tell me what exactly you can do here beyond, I guess, asking nicely the power companies to keep these running.

ANGUS TAYLOR: Well, let's be clear here, David - you can't have a plan for closure without a plan for a replacement. It doesn't work. It's very simple. And that's what we saw with Northern in South Australia, and it's what we saw with Hazelwood in Victoria. So that's the starting point. It is very, very important and we've sent that message clearly to the industry. We've implemented a notice period, so that if they're intending to close they need to give at least three years notice. In fact, most of them are thinking about much longer timeframes than that. In the case of Liddell, which is the one that's closest, the biggest threat right now, we have set up a taskforce with the New South Wales Government to ensure we either have life extension or like-for-like replacement. There's no in between. Of course, we have levers available. We've just talked about some of them - the Retailer Reliability Obligation, the Underwriting New Generation Investments program - these are crucial initiatives to ensure we do have enough supply in the marketplace, but the important point is you can't have a plan for closure without a plan for replacement.

DAVID SPEERS: Look, Kerry Schott, the head of the Energy Security Board, the Government's main advisor in this field, has today been pretty critical of this idea. She says: “The ongoing and costly efforts to keep aged coal plants running for extended periods is ill-advised, discourages firms from giving adequate notice of closure and discourages new investment in firm and flexible plants”. Is she wrong?

ANGUS TAYLOR: Kerry has just given a speech which I listened to at the conference and she made very clear that we have to have enough dispatchable, reliable, affordable power in the system to keep the lights on and keep prices down. We are all in furious agreement on this. Obviously, in each case, you got to deal with the situation as it is. Life extension isn’t always-

DAVID SPEERS: Yeah, but her point is it's ill-advised to keep aged coal plants running for extended periods.

ANGUS TAYLOR: I tell you, David, what we can't afford is to have a closure plan without a replacement plan. That's what we can't afford. I think everyone can agree on that. So that is the crucial issue we need to focus on and I've laid that out very clearly in the speech I gave earlier today.

DAVID SPEERS: So to be clear, you're not opposed to seeing these coal plants closed, even if it is earlier than scheduled, as long as there is adequate replacement?

ANGUS TAYLOR: Like-for-like replacement that is going to deliver a better outcome in terms of affordability and reliability. I mean, look, we are relentlessly focused on the outcomes in these policies, David. This is not an ideological debate. It's an outcome-driven, pragmatic focus that we will continue to have, and in every one of these issues that's where we are coming from.

DAVID SPEERS: Look, Kerry Schott also does seem to be critical of underwriting new generation as well. She said: “Government interventions to both cap prices and effectively subsidise certain generation projects will not encourage the considerable new investment innovation that's needed”.

ANGUS TAYLOR: Well, it is investment - underwriting is actually ensuring that private sector investment happens. That's the purpose of the exercise, is to give as little support as is necessary.

DAVID SPEERS: It's not scaring off private investors, you don't think?

ANGUS TAYLOR: Well, it is private investment. I mean, the underwriting program is about private investment. That's what it is about David. Now, let's be clear here we are seeing record levels-

DAVID SPEERS: With taxpayer help.

ANGUS TAYLOR: It's about private investment coming into the market with a minimal role played by the government to ensure that investment happens. That's the purpose of the exercise. But we are seeing, in this market, record levels of investment. There's not been a lack of investment. The problem with the investment is it needs to be balanced. We need to have enough dispatchable power – that is power that's available when nature isn't kind, when the sun goes down and when the wind is not blowing, to ensure that we can keep the lights on and keep prices down. It's that balance that's crucial and that means you do need a mix, not just of the record levels of investment in variable renewables coming into the system, but gas, hydro, coal all need to play an important role and will do for many years to come.

DAVID SPEERS: What about what about large scale batteries? Kerry Schott also pointed to the experience in South Australia. Would you say that is a good model?

ANGUS TAYLOR: Yeah, so, it can play a role in the very short term in frequency control, and it's done a good job in some markets in doing that. What it can't do is provide that longer-

DAVID SPEERS: In South Australia? Good job there?

ANGUS TAYLOR: Well, it's helped, there's no question that it's helped with frequency control in the short term because it can turn on very quickly. But you need to have that longer duration, baseload generation or storage that can provide what you need to get through a night without the sun shining, for instance. I mean, that is necessary, and batteries can't do that. They simply can't at an affordable level. The cost would be uneconomic. So there is a role, as is so often the case, for that technology. But we shouldn't overstate that role. We need to have enough dispatchable, as I say, generation affordable reliable supply in the marketplace to ensure we can keep the lights on and keep prices down.

DAVID SPEERS: There's the big stick legislation as well. I just want to ask you about this. There's some signs today Labor's opposition to this is softening now, they might come on board. Can I just clarify one aspect of this legislation, it's one that the sector is pretty concerned about - to give the Treasurer of the day the power to compel power companies, to supply electricity at whatever terms and conditions he or she sees fit, and that could include price, quantity, and so on, for up to three years. It does sound like a pretty extraordinary power. How would it be used?

ANGUS TAYLOR: Let's be clear about this legislation. I mean, it's come from the ACCC's observation that there's conduct in the market that is unacceptable and unsustainable, and their recommendation that a whole series of reforms are required in order to deal with that. One of those was the lack of contracting in the marketplace. So if you're a new independent generator or a new independent retailer coming into the market, it's very difficult to establish yourself because you have to do contracts with others in that market to get yourself up and running. So if you're a little generator, you need to find customers, and you've got to you've got to do contracts with retailers. So that unwillingness to contract, particularly in South Australia, is a very serious issue and one that was raised by the ACCC as a major concern. So that's what we're dealing with in the legislation. This industry needs to deal with these competitive issues, and deliver competitive outcomes - which hasn't been happening. That's what middle Australia wants. That's what corporate social responsibility is all about, David. Then we can move on and focus on these other issues.

DAVID SPEERS: But to be clear, it's not going to see, for example, the Treasurer saying ‘this is the price you should charge for electricity in this market and that's the law of the land’.

ANGUS TAYLOR: No - the observation that the ACCC made very clearly was that there isn't sufficient ability for a new entrant in some markets to develop contracts to get themselves up and running, and that's shutting off investment and shutting off competition. That was their observation, and that's the ill that we are dealing with in this legislation, alongside a number of other things. Look, we just need competitive market reforms, we need Labor to support us to get this through the Parliament as quickly as possible. I think the industry is recognising that it needs to deliver competitive market outcomes, it's time to focus on that aspect of corporate social responsibility which is what the customers want, and I think we can then get on with life. That's the focus.

DAVID SPEERS: Now, emissions. Labor's Joel Fitzgibbon today says he wants what he's calling a ‘sensible settlement’ on climate change, by Labor supporting the higher end of the government's target, 2030 target, that's 28 per cent emissions reduction rather than, of course, the 45 per cent Labor's taken to the last two elections. I'm sure you like the sound of that.

ANGUS TAYLOR: I welcome the fact that there's people in Labor who are making sensible suggestions about dropping their policies from the last election, because what we saw happen there was Labor went to the election with policies - the 45 per cent emission reduction target, 50 per cent renewable energy target - where they weren't able to or willing to detail the costs and impacts of those policies. We know from independent modelling they were going to trash jobs, trash incomes, trash the economy and crucial industries. So it's good news that we're seeing sensible heads in the Labor Party recognising that it's time to drop that policy. But let's be clear, there's still a lot of chaos within Labor on this issue. Every day you hear another proposal. We would like to see Labor move to sensible bipartisan targets. That's what we have. A clear pathway to reach our emission reduction obligations. Strong targets, clear plan to get there down to the last tonne. Fully costed, $3.5 billion Climate Solutions Package. I think this is a very sensible package which balances the economy, jobs and incomes with, of course, the need to meet our international emission reduction obligations.

DAVID SPEERS: Final one. When it comes to emissions reduction, at the recent Pacific Islands Forum, Australia committed to: “Formulate and communicate mid-century, long term, lower greenhouse gas emission development strategies by 2020”. Is that still the Government's intention, to announce something by the end of this year?

ANGUS TAYLOR: Look, our primary focus is on our 2030 obligations. And of course, our 2020 obligations which are still a year off. We know we're going to over achieve those and at last count that was 367 million tonnes. It's also true that we need to keep working on longer term emission reduction technologies. We're investing a great deal in hydrogen, for instance, $140 million, and this offers great potential in particularly hard sectors, sectors where it's very difficult to reduce emissions like steel and aluminium. There's real potential for these new technologies, and that has to be a focus, David, and it will continue to be. I mean, I'm very focused on the R&D, and very significant investments that Australian universities, the CSIRO, ARENA, are making in these investments in longer term technologies. So that will continue to be our focus over the longer-term.

DAVID SPEERS: Okay, but on the question around 2050 target, you won’t - just to be clear - you won't do that before the end of this year?

ANGUS TAYLOR: Well, we're focused on outcomes, David. We always have been, and we've over delivered. Look, we're the envy of the world in terms of the outcomes we've achieved, both in the first Kyoto obligations, the 2020 obligations. So yeah, we'll continue to focus on outcomes, and the key to outcomes is-

DAVID SPEERS: Okay, just to be clear, you're not going to announce a 2050 target-

ANGUS TAYLOR: Well, let me answer your question - the key to longer term outcomes is R&D, new emerging technologies, a clear R&D pathway, deployment pathway, working with partners across the world. That will be the focus, and should be the focus over the longer term, because that delivers.

DAVID SPEERS: Okay - not actually naming a 2050 target though? Just to be clear.

ANGUS TAYLOR: Well, as I say, what matters here is delivering outcomes. Our focus initially and primarily at the moment is on 2030, that's within my lifetime and your lifetime, David, but longer term, of course, R&D is absolutely crucial.

DAVID SPEERS: You never know, Angus Taylor. We might make it to 2050.

ANGUS TAYLOR: It'd be nice. [Laughs]

DAVID SPEERS: Alright. Minister for Energy and Emissions Reduction, thanks very much for your time today.

ANGUS TAYLOR: Thanks David.

Minister for Energy and Emissions Reduction