7 August 2019
PATRICIA KARVELAS: Energy has been the big topic this week. Day after day we've been reporting on different changes that the Government's announced in relation to energy, gas, and nuclear. I'm joined now by the Energy Minister Angus Taylor. Thank you for joining us this afternoon.
ANGUS TAYLOR: Thanks for having me Patricia.
PATRICIA KARVELAS: Can you outline the rationale for the Australian Energy Regulator's case against these wind farm operators?
ANGUS TAYLOR: I'm not going to go into the details of a case which will go before the courts - that's an issue for the independent regular - but, look, the important point here is that all our generators, and particularly the new generators coming into the system, we're seeing record levels of investment in our electricity market, they need to perform. They need to perform to the rules, and those rules are clearly set in the National Electricity Rules, and they need to be able to deliver on that worst possible day, the system needs to be able to deliver on the worst possible day. As we see more and more record levels of investment happening in solar and wind, that solar and wind needs to be appropriately backed up so we've got the power we need on that worst possible day. Now, when Australians flick the switch, they can reasonably expect that the lights go on. That's what they expect of their national electricity system, and that's a reasonable expectation. That's what the rules are designed to do, and if there's a breach of the rules, the regulator needs to enforce that. It's a tough cop on the beat, it needs to make sure those rules are complied with.
PATRICIA KARVELAS: I'm going to read you a quote: “To have a complete about face on its comprehensive compliance report conducted just eight months ago, where it concluded that it would not take any formal enforcement actions suggests some outside intervention”. That's the Australian Institute, so I have to ask you have they been lent on - have you lent on them?
ANGUS TAYLOR: No, absolutely not. They're an independent regulator. They said back eight months ago when they wrote their report, there was an ongoing investigation, and they would continue on with that investigation. They make their own decisions, they're an enforcer, and that's their job. The key issue here, Patricia, is 850,000 consumers in South Australia lost their power - small businesses, households, and industry. It was a disaster for South Australia, we don't want to see a repeat of it. We need to see all the players in the market complying with the rules, and the job of the regulator is to make sure that they are complying with those rules, just as our job is to make sure the right rules are in place. One important rule we've brought into the system just this year, on 2 July it came into place, is the Retailer Reliability Obligation, which means retailers have got to have enough firm capacity in the market to ensure they can meet their customers' needs years ahead of time on the worst possible day. They're important rules, and it's important that the players in the industry comply with them.
PATRICIA KARVELAS: The energy regulator says the failure of the wind farm operators to keep AEMO properly informed contributed to the blackout event. Will legal action be taken against anyone else?
ANGUS TAYLOR: That's a matter for the regulator, not for me.
PATRICIA KARVELAS: But should it be given what we've seen?
ANGUS TAYLOR: That's a matter for the regulator. This is the whole point. We have a regulator whose job it is to enforce the rules. We want to see the right rules in place. We do have major change happening in our energy system, as I said, 2018 we had the highest level of investment per capita in the world in solar and wind. Now, that changes the way the system works, the rules have got to adapt to that, and then the AER needs to enforce those rules. Look, Australians need to know when they flick the switch, the lights go on, and they want to have affordable power, not just for households and small businesses, that's crucial of course, but also for industry that provides so many jobs, particularly in regional areas.
PATRICIA KARVELAS: The Energy Regulator wants to send a message about the importance of compliance with performance standards but part of the problem in the blackouts was the grid's inability to handle intermittent energy. Isn't that ultimately the government's responsibility?
ANGUS TAYLOR: It is our responsibility to make sure that the right rules are in place, there's no doubt about that, and that's why we've brought forward the Retailer Reliability Obligation. From 2 July, as I said, the big energy companies, all the energy companies, the retailers have got to have the capacity to meet their customers' needs. It seems like an obvious thing for them to have to do. We've had to change the rules to make sure they do, and that means if they've got solar and the sun goes down, they've got to have something that can come in to replace that, and can meet the needs of their customers. It's a very simple rule, but a very, very important one. The job of the regulator is to enforce those rules. It's an independent role, and they're playing that role with what they've announced this morning.
PATRICIA KARVELAS: What kind of penalties is the energy regulator seeking?
ANGUS TAYLOR: That's a matter for them, as I say they're an independent regulator, Patricia.
PATRICIA KARVELAS: But you know how it works, and there are so many questions on this. What could happen here?
ANGUS TAYLOR: Well then you should ask them that question. They are the regulator. They are the enforcer. Our job is to set the rules and make sure that they're the right rules for this system. As I say, we're doing that, as well as other policies. So, you know, we're making sure that there's enough firm generation in the market, and that's why we are underwriting projects. We've got a shortlist of 12 right now - mostly gas and pumped hydro projects, including in South Australia, where this event happened, Patricia. That policy is very, very important to make sure we do have that firm, reliable, affordable power in the system for households, businesses and industry that they have come to rely on and they should be able to rely on.
PATRICIA KARVELAS: The Government is bringing forward a review of the gas industry. What conditions would have to be present for you to establish a domestic reservation scheme?
ANGUS TAYLOR: It's a good question, and this has been a real issue for us - we need to have enough supply available for the domestic market. We're seeing record levels of growth in gas exports. That's good for the economy. It's been great for regional areas, in Queensland in particular. We've seen very significant investment in job creation. So that's terrific, but we've got to have enough gas available for domestic use. We saw, back a number of years ago, these big gas export trains, as they're called, at Gladstone, Curtis Island, where they export the gas, being opened without having enough gas put aside to meet the domestic market. Now, we don't want to see a repeat of that. We are only looking at forward-looking projects. That's new projects and making sure that they provide that gas necessary. We already have a mechanism in place to deal with the existing gas in the system - the Australian Domestic Gas Security Mechanism - and we've seen real success when that came into the marketplace, but making sure there's enough gas is crucial. The other thing that needs to happen here, Patricia, is that state governments need to lift their unnecessary restrictions on gas.
PATRICIA KARVELAS: Okay, I wanted to go to that. I want to go to that because tomorrow is COAG, and I know that's going to be an issue. So, is this kind of a condition on the states? How can you force their hand? Because clearly they don't want to lift those moratoriums.
ANGUS TAYLOR: Victoria of course has had the most draconian moratorium and the one that's had the biggest impact. They've gone from gas that cost $3 a gigajoule to gas that's costing over $10. They're paying 30 per cent of their, the cost of gas now is in the transport cost down from Queensland because they haven't got enough gas to supply their own needs anymore. Now, the first and most important thing we can do is call it out and make clear to the people of Victoria that their government has put policies in place that is costing them. It's costing them as households, as small businesses, and of course it's costing jobs. Victoria, traditionally, was the manufacturing centre of Australia because it had access to low-cost gas and low-cost electricity. What we've seen from this government in Victoria is a complete reversal of that situation, where the cost of gas and electricity are three times what they were - in wholesale terms - and it's because they've simply put in place policies, on the gas side in particular, where they've got a moratorium on on-shore gas exploration and development, and we need to call it out.
PATRICIA KARVELAS: But you can't force their hand, can you? You can't force them.
ANGUS TAYLOR: Well we don't, you know, at the end of the day they're the ones who have put the moratorium in place. But the people of Victoria need to understand what this policy is costing them. It also means, Patricia, importantly in the electricity grid, as they push their coal-fired power stations out - and we saw that with Hazelwood - and see record levels of investment in solar and wind, there isn't the backup for the solar and wind when the wind doesn't blow and the sun doesn't shine. Now, gas is the obvious backup, but the Victorian Government has banned exploration and development. So, they are in a very bad situation. I'm worried about the electricity situation going into this summer in Victoria, and we do want to see a change in policy and we will keep calling out the Victorian Government for the impacts of their policies.
PATRICIA KARVELAS: Minister, I know you've got to go. Thanks for joining us.
ANGUS TAYLOR: Thanks for having me, Patricia.