Keynote address - Energy Week 2019 Conference Melbourne

Speech

12 June 2019

E&OE

ANGUS TAYLOR: Thank you for having me here today. It is great to be with you for Energy Week.

It is an honour for the Prime Minister to have reappointed me as Minister for Energy – and now also – for Emissions Reduction.

The election result was, among other things, an expression of trust in this Government’s ability to maintain a strong economy, to support aspiration, and to deliver effective energy policy into the future.

I would like to use my first speech since the Government was returned, to focus on the Government’s Energy and Emissions agenda in the 46th Parliament.

But to properly frame the future, I think it’s important to recognise the past.

At a macro level, I think there’s on really important lesson here, and that is that Government agendas can have massive, far reaching and often unintended consequences.

New technologies, as I’ve learnt throughout my career offer an enormous opportunity for improvement, in this case for affordable, reliable, lower emissions energy.

But successful introduction of new technologies don’t just happen – careful planning and supporting initiatives are absolutely crucial and without which we risk failure.

Now, any experienced executive will tell you, having a target without a plan usually ends badly.

And unfortunately I think the renewable energy wave is illustrative of exactly this.

We have an abundance of renewable energy investment, I’ll take issue with a point Elyse just made, which there is no shortage of investment happening in the energy sector in Australia right now. In fact, over the next 3 years including this year, there’ll be about $25 billion of more investment  in generation.

In fact so much so, that we will meet our emission reduction targets – 26% reduction on 2005 levels in the NEM nearly a decade ahead of schedule.

But we shouldn’t understate the unintended consequences of what we are seeing here in terms of reliability and affordability challenges, these polices as we face serious reliability and affordability challenges.

Now those challenges that threaten the very economic advantage that Australia has enjoyed for a generation, an advantage well understood by the ‘quiet Australians’.

We need look no further than South Australia, where a 50% renewable energy target without a comprehensive plan to make it work has resulted in amongst the highest electricity prices in the world, and serious reliability and stability challenges

And it is these challenges that the Government has been working so hard to address.

In my mind, the most pressing challenge in the energy sector today is not ‘how do we get more renewable energy into the system’ – that’s happening. But rather, ‘how do we ensure the affordability, reliability and stability of the system in the face of rapid and inevitable technological change?

I don’t think the historical highlight of the 45th parliament, when history is written with a sober mind and with the distance of time, was heated partisanship on energy policy.

Instead, I think it was the dawning recognition that new technologies offer much, but they also require constant bipartisan problem solving.

We need more problem solving, and less proselytising.

Now while I’m speaking of the past, I would like to address one policy from the past.

In particular - the NEG, or National Energy Guarantee.

It is probably the best recognised but also the least understood policy in Australia’s recent political history.

And that is no more evident than in those who have been recently calling for its resurrection.

Calling for the NEG to be revived as Government policy is akin to calling for the Government to build the Sydney Harbour Bridge. It has already been achieved.

The NEG simply had two components. The first, a Retailer Reliability Obligation – that will take effect on July 1. It was agreed with the states back in December. The second part, was a 26% emissions reduction target for National Electricity Market – something that we know will be delivered roughly eight or nine years ahead of schedule.

The NEG is the past – because everything the NEG set out to achieve, has been accomplished.

So let's talk about the future.

The future is about carefully incorporating new technologies into our energy systems whilst we maintain a balance with those older technologies.

Whether that is in electricity, transport or industry, it is not about ramming new technologies into the system with economy wrecking targets and large subsidies.

Instead, we need to take a level headed approach to balancing the new with the old, and making sure innovations fit within what is a very complex system. And no one knows that more than the people in this room.

In electricity, that means a forward-looking focus on reliability and affordability, and a careful eye to competition, the supply mix and critical infrastructure, particularly investment in transmission.

Across other areas of the economy, it means the implementation of our meaningful pathway for 26% emissions reduction target and I will talk more about that in a moment.

Now I want to focus on three key parts of the government’s energy and emissions agenda.

The first is improving affordability and driving down prices, something that the quiet Australians want from us and we’ll work with industry to achieve exactly that.

Secondly, keeping the lights on and keeping the wheels of industry turning and thirdly, pursuing a comprehensive plan to reach our emissions targets.

Improving affordability and driving down prices

Now we’ve made no secret of the fact that we are determined to deliver fair electricity prices for Australian households, small businesses and industry.

The Default Market Offer will come into force on 1 July this year. It is focused of course, on retail prices for almost 800,000 Australians, many of whom are small businesses, eliminating a loyalty tax that has crept up on unwitting consumers.

At the same time – July 1, we are implementing a reference price for all customers. That means when you ring for a better deal, all offers are referenced to a single price, eliminating much of the confusion that has traditionally characterised this market.

There is no better time than now to ‘make the call’ to get a better deal on energy.

But whilst they’re important reforms and they’ll make a real difference, particularly in retail prices, we need to do more.

Before the election we targeted a wholesale electricity price of below $70Mwh. Pointing out that if we can have targets for emissions and reliability, we can also have them for wholesale prices.

We will use our underwriting programme and our competition reforms to get us to that target.

We know that competition in the wholesale electricity market is not working as well as it should. New, smaller generators are struggling to secure finances.

Our Underwriting New Generation Investments program has the potential to provide firm electricity supply and improve wholesale market competition to drive down prices in markets where that is necessary.

In doing this we are sending a very clear signal to the market – deliver on supply and price, and we will back off.

We will continue to target policies and rule changes that put consumers in charge of their own destiny, like the elimination of sneaky late payment penalties that we have previously seen.

We’re pursuing other interventions in the market like energy efficiency communities and micro grid programmes and these are largely about facilitating natural changes in the market which new technologies are offering to consumers.

Keeping the lights on and the wheels of industry turning

Now along with affordability, we face major challenges in keeping the lights on and keeping the wheels of industry turning.

Record investments in solar and wind that I talked about, combined with ageing thermal generators and withdrawal of coal generation supply is seriously threatening the reliability of our grid.

That’s why we have putting in place the reliability obligation, which will come into effect from July 1.

That means that retailers will be accountable for reliability in a way they weren’t before, and we will be continually consulting with industry regulators and customers to make sure this reform is effective because it is an extremely important one.

It will put a premium on 24/7 reliable supply in markets where that is in short supply.

To the extent that the market is failing on this, we course have the potential to underwrite new supply into the market. But again our focus is on backing off and letting the private sector do this to the extent that those investments are naturally happening. A strong signal to the market – you get on with it and we’ll get out of the way.

We also recognise the role that transmission investment needs to play in underpinning the reliability of the system, although ultimately reliability relies on a generator being available to fill the supply gap when it emerges.

In addition to supporting private sector initiatives, we have said we’ll invest in major storage projects including Snowy 2.0 and the Tasmanian Battery of the Nation and with the interconnection that’s required through Marinus Link.

Pursuing a comprehensive plan to reach sensible emissions targets

Tangible solutions are just as important for meeting our international emissions commitments as they are for bringing down energy prices and keeping the lights on.

Our Climate Solutions Package will deliver the abatement that we need to close the remaining gap to our 26% emissions reduction target. We saw that gap was 328 million tonnes in December last year from numbers that were done by the Department.

We took this target – and our plan to achieve it – to the so called ‘climate change’ election, and the Australian people made a clear choice.

There are many who understandably have called for ‘bipartisanship’ on energy policy in recent times.

In practical terms, some of these people just arguing for a higher emissions reduction target.

Well, the election result could not have been clearer.

The Australian people have voted for a sensible and achievable approach to emissions reduction, one that keeps power prices down, keeps the lights on, and keeps our economy strong.

It is time for bipartisanship.

I intend to work very closely with my state and territory counterparts on meeting our commitments – and there are great benefits for those states and territories who choose to work with us.

However, making, and implementing, international agreements is ultimately a Commonwealth responsibility.

We have outlined an integrated energy and emissions policy that I believe has clarity of purpose, comprehensive coverage and now since the election, a clear mandate.

We also want to work with business on delivering on this policy.

Many in the business community again understandably, and I came from many years in the business community, they want to see an end to the debates across parties and jurisdictions about targets. Well I agree with them.

They can help by calling on Labor – both federal and state – to accept our targets, the detailed pathway we have outlined to get there and focus then on solving the hard problems that we face as the market invests in new technologies. Focus on the problem solving because that is what we need to do now.

Our Climate Solutions Package outlines – to the last tonne – how we are going to deliver on our emissions reduction commitment, as you can see on this waterfall slide. As an ex-consultant, I can’t help myself – it’s all got to be brought back to a good waterfall.

That plan lays out exactly how we are going to achieve our 328 million tonnes of abatement that we knew from December last year that we needed to deliver to achieve our Paris 2030 targets.

There is no Government before - 11 years ahead of the target that has laid out exactly how they plan to achieve the outcome. This is a target, with a plan.

Included in it are practical solutions through our $2b climate solutions fund, encouraging technology improvements that will lower the cost of emission reductions, implementing energy efficiency and performance measures, and we see enormous potential in energy efficiency across the economy and taking advantage of Australia’s previous over performance on Kyoto both at 2012 and 2020.

Crucially, this plan will ensure we meet our climate commitments without sending industries and jobs offshore. And that’s what the Australian people have asked us to do – meet those commitments, without sending industry and jobs offshore.

We will also play an important role in helping other countries to reduce their emissions.

Our lithium mines will produce batteries that reduce the impact on global emissions in devices across the world.

Our National Hydrogen Strategy will show us the way to create a vital economic boost through creating new jobs and a new export industry with an estimated value of $10 billion.

Domestically, our National Electric Vehicles Strategy will ensure Australia’s transition to electric vehicle technology and infrastructure happens at a pace driven by customers, not imposed on them by aggressive targets and standards.

The Climate Solutions Fund continues to be a centrepiece of our response.

With more land per person than almost any other country in the world, capturing carbon in our soils and trees is an obvious opportunity with great advantages for farmers and other land managers, including indigenous communities.

Our commitment to improving energy efficiency across Australia is helping to reduce emissions while bringing down energy bills for households and businesses.

Our starting point is strong.

As you would have seen in last week’s release of the December 2018 Quarterly Update of Australia’s National Greenhouse Gas Inventory, emissions per capita in the year to December 2018 have fallen 38.2 per cent since 1990, while the emissions intensity of the economy has fallen 61 per cent as well.

Our target for emissions reduction is achievable, balanced and responsible and it is very much in line with other countries aspirations as well.

We will meet our international commitments while keeping power prices down and keeping the lights on.

Australia is highly regarded internationally for the quality and transparency of its annual greenhouse gas reporting, going further than what is required under our international obligations.

The national greenhouse accounts are world class and a key transparency measure in our tracking of domestic policy and the identification of drivers for emissions trends in Australia. The international guidance for the estimation of greenhouse gas emissions is based on the principle of reporting emissions where they occur.

Our current reporting only tells part of the story. It does not recognise the broader contribution that Australia makes to reducing global emissions because the international guidance for estimation of greenhouse gas emissions is based on the principle of reporting emissions where they occur.

But, In emissions reduction, Australia is not operating in isolation.

Our individual actions are practically irrelevant in the absence of broader international action. Our domestic actions have global impacts and our actions to reduce emissions extend beyond our borders.

Consider Australia’s thriving LNG production industry, which contributes enormously to Australia’ economic prosperity.

Australia exported $31.5 billion of LNG in 2017–18, making it our third largest resource and energy export with forecast of $51.3 billion of exports in 2019–20.

That industry is helping to keep our country economically secure and a strong economy of course means more jobs for Australians.

The production of LNG is an emissions intensive activity, through extraction and liquefication, and these emissions can be seen in the latest reporting figures.

But Australia’s LNG exports have the potential to significantly lower emissions in importing countries, as they make the transition to new technologies, by around 148 Mt CO2-e per year, by replacing coal, which has around double the emissions of gas.

Now about 148 Mt is the equivalent of about 27% of Australia’s annual emissions. So we are making, through those exports a very substantial contribution to the global emissions effort.

In fact, if you remove our growing LNG exports from Australia’s emissions, the results are telling.

So this data tells two stories:

  • first, our domestic economy is decarbonising, particularly when you recognise the strength of our economy and population growth, and
  • second, the primary cause of our recent carbon accounting increase – our LNG exports – is responsible for a far greater decrease in emissions overseas when it is used to replace coal.

It is also important to note, the most recent OECD consumption based emissions account showed that Australia’s consumption-based emissions are declining.

Critics – and there are a few of them – are all too eager to trumpet the latest quarterly emissions data as proof that Australia’s emissions reductions efforts are not sufficient to meet our Paris targets.

They attack the Government’s policy of using Australia’s Kyoto overachievement to achieve our Paris targets – saying that we should be focussed on making a ‘meaningful contribution to reducing global emissions’.

Well if those critics are truly sincere about that, then they should celebrate the fact that Australia’s LNG exports are making a very significant impact to reducing global emissions – potentially up to 148 Mt CO2-e just for the year to December 2018 – over a quarter of Australia’s annual emissions.

Australia is going to meet its international commitments to reduce our emissions by 26-28 percent by 2030 – while our LNG export industry also makes a significant impact to reduce emissions overseas.

This underscores our ability to deliver a resilient economy, to protect our natural environment, and to contribute more than our fair share within the international community. As Minister for Energy and Emissions Reduction, I want to help build up our economy, not tear it down.

I want to talk up Australia’s contribution to reducing global emissions – and give our industries credit where credit is due for overachieving against our targets in the past – rather than beating ourselves up for not doing more.

In conclusion, in the 46th Parliament the government will deliver policies for the future – not dwell on the past.

We will work hand-in-hand with industry, with willing states and territories, and with our international partners.

But above all, with the quiet Australians in mind, we will be relentlessly focused on policies that shape the future of this great nation, and ensure the strength of our economy and the prosperity of our people for generations to come.

Minister for Energy and Emissions Reduction