7 August 2019
LEON BYNER: Let’s talk to Federal Energy Minister Angus Taylor. Angus, thank you for joining us today.
ANGUS TAYLOR: Thanks for having me, Leon.
LEON BYNER: Look, I just wanted to go back to a bit of recent history. You would remember – the whole country does, but particularly SA – that terrible blackout we had in September of 2016.
ANGUS TAYLOR: Yeah.
LEON BYNER: It is now out there that the AER, the Australian Energy Regulator is taking four wind farms to court. Now you're across this, what are we going to achieve by doing that if in fact what is being alleged is found to be so?
ANGUS TAYLOR: Look, I'm not going to go into the details of the litigation obviously, but what I will say Leon is 850,000 South Australians were in darkness as a result of that event - most of your listeners I'm sure will remember it well.
LEON BYNER: Yes.
ANGUS TAYLOR: Part of the reason it happened, we know, is that the wind farms weren't generating as they should have. Now, you know, if people are going to bring wind and solar farms into the system - no problem with that, that is fine - but they have to be properly integrated and that means they've got to be backed up so that when the wind doesn't blow and the sun doesn't shine, we have the power we need to keep the lights on, to keep the wheels of industry turning, and they have to perform. They are standards that we now expect. We've actually set rules now up in the National Electricity Market to require these things and we expect those rules to be kept. The AER's job is to make sure the rules are kept, and that's of course what they're doing here. I mean, this is absolutely essential for South Australians and all Australians that we have a reliable affordable electricity grid, and that's why those rules are in place.
LEON BYNER: A lot of that depends on a supply of gas at a price that's affordable. Now, I notice that there has been a lot of to-ing and fro-ing about having a reservation policy but my understanding is that this review into whether there should be a domestic reservation is not due until 2021?
ANGUS TAYLOR: That's one of many initiatives though. Look, what we what we have to do is make sure there is enough gas for domestic users, households and hard-working small businesses and industry that provides so many jobs to Australians, particularly in regional areas, Leon. This package of initiatives we announced yesterday is all about making sure we have enough gas available at an appropriate price for Australians. We're reviewing the mechanism we put in place a short while ago, a couple of years ago, which did have a noticeable impact on the wholesale price. The last time we intervened it made a difference. We're doing the same here, but we're also looking at a forward looking reservation policy so if someone wants to develop a new gas reserve they've got to make sure enough of that gas is available for the domestic market. We're reviewing pipeline regulation because pipeline costs are a big factor, including for people in Adelaide, and we're bolstering, strengthening, and lengthening the ACCC’s role in making sure that pricing is fair and appropriate.
LEON BYNER: I just make one comment on that, and you would surely understand, Minister, that the public would find it very hard to conceive that we're now the number one gas exporter, and yet in order to get it, we have to reimport what we exported too much of. The logic and cost of that is very hard to rationalise. You would understand that.
ANGUS TAYLOR: Well it should never have happened.
LEON BYNER: Absolutely.
ANGUS TAYLOR: I mean, I agree. Look we had, you know, years ago Julia Gillard opening those Curtis Island export terminals, massive export terminals up.
LEON BYNER: Did we not put enough rules on them? What happened?
ANGUS TAYLOR: No, no absolutely right, and that's exactly why we're doing this. We're saying we should not be opening new export capacity without making sure there's enough available, enough gas available for domestic users. You know, this is not just important for gas users, households and small businesses and industry that uses gas, it's also important for our electricity generators, because if we're going to have more solar and wind in the system – and we've got record levels of solar and wind going into the system – gas is the best way to back it up.
LEON BYNER: Yes.
ANGUS TAYLOR: We've got to have affordable gas. This is absolutely crucial. You know, the industry, I think now has come to realise that mistakes were made in the past. We can't afford to make those again, and we've got to now make sure there is enough gas available at an affordable price for all Australians.
LEON BYNER: Want to talk about fuel - well, liquid fuels because we've already experienced situations, I think we said this in the beginning, that there's been diesel shortages just from late ships already, but are we now going to address this by ensuring that we don't lose any more refining capacity? Because one of Caltex’s former executives was public recently and saying look, we need to do something about making sure we don't lose our refining capacity - do you agree with that?
ANGUS TAYLOR: Yeah, absolutely 100 per cent. I mean the refining capacity is important because having at least a fair portion of our fuel refined in Australia does give us much more security. Look, the rules went into place originally back in the 1970s and I'm old enough remember the oil shocks that happened then and the rationing - many of your listeners will remember the rationing that happened back in the ‘70s - so rules were put in place globally back in the ‘70s as a result of that to make sure we have enough stocks. Now, it's got harder over time for a whole variety of reasons which is why we're working now with the Americans to establish a joint strategic reserve which we can access very quickly, making sure that we do have the stocks available, but you’re dead right, Leon, refineries are an important part of it and we’ve been very careful-
LEON BYNER: So are we going to bolster refining or what are we going to do?
ANGUS TAYLOR: Well, we certainly want to keep the ones we’ve got - there's no doubt about that - and you know, it's a tough industry. Refineries around the world have been moving to places like Singapore and China, and you know, that is a problem for fuel security. What we're not going to do is impose bad regulation on the refineries that would push them offshore. That's the biggest risk for us. Government regulation that would push those refineries offshore.
LEON BYNER: Well we don’t, we’ve only got four left.
ANGUS TAYLOR: Yeah, that’s correct.
LEON BYNER: And we’re relying a lot on the big crackers at Singapore, but of course we’ve got the seaways which are also – depending on what day it is – can be under threat. So these are all things, surely, that would focus the mind of the government. When will we resolve this, finally?
ANGUS TAYLOR: Well look we began working on this, we put a review into place last year - that's happening now - but we're doing things as we go, and you know, negotiating with the Americans now on having a joint strategic reserve. I mean this is a good thing for us to do with the Americans. It's a strong and important relationship. We can solve the problem jointly in a way given our proximity across the ocean as well, which I think can make a real difference. But we do have to keep our refineries, there’s no question about that.
LEON BYNER: Now we know in Victoria, across the border from our state, there are two very large coal fired generators that are offline because they need repair, and I don't think either is going to be with us before the really hot start to the summer or later. Danny Price from Frontier Economics has said a couple of times on our show: ‘I can't see how you're going to get by without blackouts’. What contingency plans are there from your point of view to try and minimise this?
ANGUS TAYLOR: Well first can I say I think this summer in Victoria is going to be a real challenge - make no mistake about it - and that could be contagious to other states. We know we've had problems in South Australia in recent years. At the heart of this is pushing too much solar and wind in too fast. It's not, as I say, there's no problem with bringing solar and wind into the system but it has to be properly backed up. You have to be in a position where when the sun doesn't shine and the wind doesn't blow you've actually got capacity there, and we have to keep our existing coal and gas fired generators in the market for as long as possible. I mean, we’re really delighted that AGL – who we’ve been working with very closely – has extended the life of Torrens A in South Australia. That's going to make a real difference this summer.
LEON BYNER: So you’re somewhat agreeing with Danny Price that it’s very much touch and go
ANGUS TAYLOR: Yes.
LEON BYNER: Because we share, we could be generating electricity into Victoria, which we’re now doing, especially on windy days but it’d be horrible to think that on a really hot day everything goes bloop.
ANGUS TAYLOR: You can't assume that it's going to be windy on a very hot day. I mean that's the problem. That's the fundamental problem.
LEON BYNER: Well, what are we going to do with it like that?
ANGUS TAYLOR: Our point to the Victorian Government – and I've been very upfront with the Victorian Government on this – is you've got to get- your coal and gas fired generators in the market for as long as possible, going flat out. This is absolutely crucial.
LEON BYNER: Yeah, okay, but right now there are two unserviceable and we are facing only a short time away this in front of us. This situation, won't be enough electricity. So what I'm asking is what contingency plans are there?
ANGUS TAYLOR: AEMO is doing that contingency planning - they're doing that now. What I'm saying, and they do it every summer and they work out how much is going to be needed and where we're going to get it from. But what I would say, Leon, is every summer if the Victorian Government continues going down the path it is which is shutting its coal fired power stations as we saw with Hazelwood, banning gas, I mean they’ve got a moratorium on all onshore gas, pouring solar and wind into the system without back-up.
LEON BYNER: Is the Federal Government going to override the states on this?
ANGUS TAYLOR: Frankly, the problem we've got is they are going headlong down this path without us being able to stop them, and that's why I will call them out every day of the week.
LEON BYNER: Yeah, but apart from calling them out what else can you do?
ANGUS TAYLOR: We've got an underwriting new generation program. We're building new transmission. We're supporting new firm, reliable generation into the market. But if the Victorian Government doesn't want to cooperate, then they'll keep creating problems each summer, and sadly that's where we're at. We are doing everything we can in our power but it's very hard to work with a state that doesn't want to work with us. Now fortunately in South Australia we have got a government that is being collaborative. We're working very hard with the Torrens A power station. As I say, the life of that's being extended. We’re looking at new power stations in, which will be reliable, dispatchable power in South Australia as well. So there's good work going on in South Australia. We need that kind of collaborative relationship.
LEON BYNER: We've got to build up a gas generator or facilitate it?
ANGUS TAYLOR: There's a whole series of pumped hydro and gas projects that are on the books in South Australia. We're working through those now and we're going to make sure enough of those happen to keep your grid reliable.
LEON BYNER: Alright.
ANGUS TAYLOR: You've got a state government that's doing the right thing there now.
LEON BYNER: I'm hoping that I'll get you on again soon and you can announce that we’ve now secured our fuel supply.
ANGUS TAYLOR: Yes, good on you. I understand.
LEON BYNER: Because seriously, well, people worry about this stuff don’t they?
ANGUS TAYLOR: They do. Look I'm a farmer. I farm, you know, I’m from a fifth-generation farming family. Let me tell you, if you run out of diesel at the wrong time of year it is a serious problem Leon, so I understand why they worry about it.
LEON BYNER: Okay. Angus Taylor, Energy Minister thank you.