Q&A at the AFR National Energy Summit, Sydney


9 October 2019


QUESTION:    The Minister's kindly agreed to take some questions. Minister you would have been delighted to see the front page of the Financial Review this morning with the Energy Security Board Chair Kerry Schott's questioning some of the interventions and your government’s policy. Have you got a response to that?

ANGUS TAYLOR:       Well look, I think we can all agree that we need enough dispatchability in our state and territory systems, and across the NEM. I mean, that is something we all agree on. Now, how we make sure that happens, there's work to do and I've outlined some of that work. I believe as I've said without a clear plan for replacement we need life extensions, it is as simple as that. We can't have another Hazelwood or Northern because the price paid by industry, by consumers, by small businesses is too high. But there has to be a very strong focus on balance in the system between the intermittency that is happening at an unprecedented rate, at a record rate and dispatchability.

QUESTION:    What do you say, though, to the claim though that intervention even if it is meant to be short-term with price caps or underwriting new generation does distort the market and deter private sector investors?

ANGUS TAYLOR:       These reforms have all come on the back of the ACCC report of July last year, where they said the market was distorted by anti-competitive behaviour. They said their conduct was unacceptable and unsustainable. And I believe in a [indistinct] policy. I think it's incredibly important, particularly in Australia where we do have tightly structured markets, our retail and generation markets are typically 70 per cent or more with the top three players. Now, any economist will tell you that's a concentrated market, and so competition reforms which is what we're implementing are important. But what is also important is that the industry does the right thing and when we get competitive market outcomes, government gets out of the way and they can get on with it and that is absolutely the intent.

QUESTION:    Look, there's been a bit of a common pattern here with the big stick legislation which is coming up, the price cap, underwriting new generation - we sort of got a bit of it from the speech though. Do you foresee that market intervention from government is, it's only a short-term thing?

ANGUS TAYLOR:       All the things you have named are competition reforms coming out of the ACCC's report, and so competition policy is dealing with distortions. As I said, I mean, the greatest threat to investment in industry after industry through my career has been the abuse of market power. Of course that's what we're seeking to deal with here. But does government want the industry to deliver competitive market outcomes so we can get out of the way? Absolutely, of course. That is what we want. I think we've gone through this wave of competition reforms on the back of the ACCC's recommendations and my hope now is that we can get on with some of these market design issues that I've been describing using the mechanisms we have, which is my point, let's use what we've got already on the table, and then you know, we're set for the industry to get on with it, which is what we really want.

QUESTION:    I just want to ask you, obviously you've set up Liddell Taskforce with the New South Wales Government - you've used your common theme talking that you don't want to repeat what happened at Hazelwood when it left the market quickly - grid stability, prices going up - obviously you don't want a repeat of Liddell. What's the end game for the taskforce? There is a lot of talk about like-for-like replacement. Are you talking the equivalent- like-for-like replacement is the building of a coal- and gas-fired power station?

ANGUS TAYLOR:       Its outcomes, the point of my speech is you won't get the outcomes without dispatchable generation. You've got to have that balance between intermittency and dispatchability. You know, like-for-like means it's got to be similar to affordability as well. We've been very conscious of not focusing on individual technologies, but focusing on outcomes. That is absolutely the approach we're taking with Liddell. But in the past, there's been too often we've seen the triumph of hope over reality. We're not going to see the triumph of hope over reality with Liddell. We're going to make sure the reality is a good one.

QUESTION:    So what would you like to see as a replacement for Liddell?

ANGUS TAYLOR:       Look, you know, I want prices to be coming, wholesale prices to be coming down and the lights to stay on. It's really that simple. There’s lots of ways, you know, we can model this and make sure that we know that's going to happen but that's what needs to happen. It's very, very simple and I know everyone wants this to be a choice of technologies, but for me it's just outcomes, and it always will be.

QUESTION:    On strategic reserve, you touched on it in your speech. At the moment, you have the impression the last couple of years with AEMO sort of getting ready to do it summer by summer, making sure there's enough room to get this through. You raised the prospect in your speech saying that some people believe that there should be a longer-term strategic reserve. Do you agree with that?

ANGUS TAYLOR:       Well I've just said that I think this needs consideration, that's what I said, yes. It's been raised a number of times I think. Victoria's raising it and I think quite rightly they are raising it. I mean, I've raised it. I think this is worthy of consideration, like anything you've got to work through and come to a view about whether it's going to deliver the outcomes we want. In principle, planning a few years ahead has some advantages. You can find lower cost solutions. The disadvantage is it's harder to forecast so you've got a trade-off there and we've got to make sure we get that trade-off right.  

QUESTION:    Obviously, there's been a lot of talk, nuclear is back on the agenda at the moment. Carbon capture and storage which seemed to be one of the buzz words 10 years ago, seems to have got lost in the process. What do you believe? Do you believe that it is a viable technology that could be used?

ANGUS TAYLOR:       I made points in my speech about technologies. There's still a lot we don't know about all these sorts of technologies, whether it's hydrogen, biofuels, sequestration, nuclear especially small modular reactors. These are emerging technologies, with respect to nuclear - small modular reactors which is where the activity has been more recently - there is a lot we don't know about them, there's a lot we'll learn over the next few years, and we've got to see this as a portfolio of technologies where it makes sense to be investing, understanding and deploying at the right time. That's true of all of these. Now, of all of those, where can Australia play an R&D and early deployment role? I think hydrogen is one and we're doing that - $140 million we’ve already committed. Biofuels -we've been involved for many years. Sequestration - we have throughout our mining industry and the Minerals Council used to do work in that area. Technologies don't happen overnight. New technologies don't happen overnight - they need time. We've got to allow them to mature.

QUESTION:    Can the COAG Energy Council remain an effective forum when so many states have renewable energy targets that are greater at the federal level?

ANGUS TAYLOR:       This has been the challenge and I think this is, when we had a system which could absorb a certain amount of intermittency, maybe up to 10 or 15, perhaps even up to 20 per cent, it didn't matter, we could get away with it because there was flexibility in the system that could absorb the intermittency. The challenge that we have now is we've crossed the threshold. I mean, if you look at the last month, we've been consistently above 25 per cent intermittent renewables and that's a big number. That is a big number to be absorbing in the system. Much higher than that of course in some states. This is a real challenge. Now, what I'd say to those states is we're the ones at the federal level who commit to the international obligations around emissions. We've made our commitment to our Paris obligations. 26 per cent. We've laid out in the last how we're going to achieve it. How electricity is playing an important role – it is way ahead of the charge. I think we are doing enough on that. Our challenge now is reliability and affordability, and we continue to need to work on emissions in the coming years of course, but we need a real focus now on reliability and affordability. That of course, is the focus of what I've described here. The other point I would make is if they are going to have these targets, they have a very clear responsibility to make sure there's enough dispatchability in their system. Premature closure of baseload generators is not the way to deal with it.

QUESTION:    Just one more to finish on an existential question - as you mentioned, there have been a plethora of government policy proposals, and indeed many acronyms, mainly from your Government - when will we see a stable government approach to energy policy or is Malcolm Turnbull right when he said that it's impossible for the Liberal Party to agree on climate and energy policy?

ANGUS TAYLOR:       Well we've agreed – I think there was absolute unanimity going into the last election from our side of politics on our policy. I tell you where there's no agreement though, it's on the other side. We had Joel Fitzgibbon out here today saying let's go - let's being the Labor Party - move to the Coalition's policies. Great - good on you Joel. Welcome aboard. I mean, fantastic. But in the meantime, we've got others in the Labor Party and we're still at 45 per cent, and I'm sure there are others who think it should be higher. I mean, we are clear, we are unified, we went to an election on this and we won. The other side is in complete chaos with this notion about their climate and energy policies. That's the situation.

Minister for Energy and Emissions Reduction