ADDRESS TO THE NATIONAL ENERGY EFFICENCY COUNCIL CONFERENCE
AUSTRALIAN TECHNOLOGY PARK
WEDNESDAY, 16 NOVEMBER 2016
I’m going to speak in a fairly old fashioned way about this area of disruption.
It’s a great pleasure to be with the council at this conference because there could not be a better time to talk about disruption. We’ve obviously been going through these sorts of things that Rosemary, Andrew, and Matthew talked about over the last hour or so for some time.
But over the last couple of months we have seen the outage in South Australia and the impending closure of Hazelwood, on top of the closure of the Pt Augusta stations earlier this year in South Australia, really bring this debate to much more where it should be, at the forefront of national policy and discussion.
To top it all off, we have the Donald, and I think those poor people in Marrakech are sort of vacillating between a deep sense of trauma and a deep sense of resolve about what this means for international climate and energy policy.
To my mind I’m not particularly of the view that Trump is going to see a reversal of the sort of momentum we’ve seen building around the world. But perhaps that is something we can explore in question and answer if people are interested.
The US elections aside, I think we all agree – and we certainly do in Canberra – that there is a revolution underway in the energy sector.
It’s not happening overnight, it will be with us for quite a substantial period of time. But there is no question in my mind that it has reached a tipping point.
In many ways last year was the tipping point. For the first time ever the IEA tells us investment in renewable energy was larger in dollar terms across the globe, then the combined investment in coal, gas, nuclear, and hydro power.
Given the projections that we see around the world, it’s hard to see that ever changing back,
As is the case in so many areas of the international economy, China is very much leading that investment boom.
Last year, they invested more than the combined investment in the EU and the United States, adding in two successive years 50gw of new renewable energy capacity each year in 2014-2015.
That’s about the equivalent of our entire capacity here in Australia.
Their 13th five-year plan (they still do five-year plans its very nostalgic, very retro) has some extraordinary targets; including the installation of 280gw of wind power, and 200gw of solar power by 2020.
It’s not just China. You also see some very ambitious targets coming out of India, particularly around the installation of solar power under Prime Minister Modi.
But even in economies more like ours there is also an extraordinary transition underway.
Since 2010, about 240 of America’s 520 or so coal-fired power stations have either closed or have closure dates announced by their operators.
Last week, even after the election in the US, the British Tory Government announced their implementation plan to close the last of their coal-fired power stations in the early part of the next decade. The home of coal-fired power will have ended any reliance on coal-fired power within only a few years.
This transition in the UK is proceeding at quite an extraordinary pace.
Over a six-month period around what they still describe as summer in the UK, coal-fired power contributed to less than 5 per cent of total generation.
It was dwarfed by solar powered generation in the UK, a country where the sun shines about 3 days per year, as best as I can understand it.
Last year, they installed 4 times as much solar capacity as Australia did; a country as wide as ours, with the levels of solar radiation that we have here.
It’s not as Matthew and others have talked about, it’s not just about the source of generation, moving from fossil-fuels to more renewable sources.
It’s also the increasing distribution of energy generation, and the cunning wave of storage technology that is continuing to gather another wave of momentum around this revolution.
Australia as you know, and particularly as Matthew talked about, is very much a world leader in that distributor generation.
The IEA’s recent Renewable Energy Report confirmed that we have more households in Australia with rooftop solar, than America does - a country with 320 million people.
That is why so many of those global companies, like Tesla and others who are looking to household storage see Australia as the obvious early adopter as a jurisdiction.
You can almost walk down and cold call houses in Adelaide and in Brisbane, where you will find in suburbs almost every second house has rooftop solar.
The same story is unfortunately no longer the case in Australia around large scale investment.
Although we were one of the four top-rated investment destinations for renewable energy - rated by Ernst and Young in 2013 – along with China, the US, and Germany.
We no longer rate in the top 10.
Because of the attack on the renewable energy target in 2014 we saw large scale investment collapse by 88 per cent.
Coincidentally, it increased by 88 per cent in Canada and in extraordinary amounts all around the world.
Jurisdictions added tens and tens of thousands of jobs in clean energy while Australia shed thousands of jobs over the same period of time.
As Andrew talked about, investment confidence has certainly bounced back to a degree but we still have very, very flat investment in renewable energy for a country that has some of the best renewable energy sources anywhere on the face of the earth.
We have also this renewable energy revolution problem in Australia that my previous speakers talked about, which is a very serious lack of clear enduring long-term policy frameworks around this energy transition.
We see that very much in the closure of Northern and Playford in South Australia and the impending closure of Hazelwood.
Instead of this being an orderly process. Where communities that were largely built up around coal-fired power and the emissions intensive manufacturing that often comes allocated with it; instead of those communities being confident that they will get support and proper periods of notice from their Government, with an orderly process of transitioning out of the oldest, dirtiest coal-fired power stations. We all end up waiting by the phone to be informed by a board of French company on when one of our most important electricity assets is going to close.
If the experience of the Pt Augusta community is any guide, the Latrobe Valley community is going to be very seriously challenged in getting that support from their government.
We also have going, in addition to a very serious lack of enduring policy framework is a very serious toxicity around the politics of energy transition.
That really drives from the sort of ideological culture wars around climate change that seems to bedevil particularly the Anglosphere countries, like Australia, America and to a degree Canada.
We saw this with the South Australian power outage; we saw it earlier in July with the price spike that was largely caused by some maintenance issues on the interconnector and also by a very big price spike in Gas prices. We saw it earlier in November with the interruption to the FCAT services that Matthew talked about.
Frankly, you could imagine how overjoyed South Australians were while the storm was still going on, while we had emergency services workers in the field, we had ADF personnel keeping our community safe, to listen to Barnaby Joyce give us his deep insights into meteorology and electrical engineering about what it was that actually did cause the power outage in South Australia.
It’s been some time for us to get back to a rational discussion about quite what happened on that day in September, but also what some of the longer term challenges are for a jurisdiction that is very much at the forefront in this energy transition.
To that extent the Opposition has very much welcomed the Finkel review and we think that might be a very good opportunity to get this debate back onto something more of an even keel.
But in all of this heat, energy productivity or demand management whatever you would like to call it, keeps getting lost. And this is not something new.
I was looking back at some of the older attempts that tried to get climate and energy policy going that grew out of the Toronto conference back in 1998. The Hawke Government and all of the states put together very ambitious plans for decarbonising the electricity sector and the SCCV back then in Victoria, was very much the leader.
It had a plan to close Hazelwood in stages between 1995 and 2004. It was the countries leader in energy efficiently and demand management programs.
Australia looked to be on the right path to implement pretty ambitious targets that flowed from the Toronto conference and into the Rio Earth Summit of 1992, but all that was lost.
It was all lost in Australia because of a push back on climate change policy, but also because of a very significant change in the dynamics of electricity policy as state governments looked to come in, corporatise their assets and fatten the pig if you like for privatisation that occurred through the 1990’s, including in Victoria.
Traditionally, this reflects the rather blaze approach we seem to have about energy productivity. Or the bang we get for every megawatt out of the buck.
It seems to reflect an assumption that we would always be a country of cheap energy, with cheap electricity and cheap gas.
As previous speakers have said, that is certainly not the case anymore.
I’m not going to go back into that story but I want to recognise particularly what Andrew has said that those big increases in network costs, 80 or 90 per cent in many jurisdictions really did effect and infect all of those discussions around climate change and energy policy around that critical period of time, the latter part of the last decade, and the early part of this one.
Energy now, largely because of those increases in electricity network costs, but also you would agree the increase of gas prices that we are seeing, now accounts for significantly more than 8 per cent of the GDP.
That is a very big part of our economy, much bigger than we have been used to in the past.
Poor energy productivity is now an essential component to the broader discussion we’re having about broader economic productivity.
And if you segment all of the areas of productivity, energy productivity has been the lagging performer for many, many, many years. We’ve lagged for far too long in this area.
We are in the bottom quartile for the OECD on energy productivity, and we just keep on dropping further and further down that table.
Our energy productivity performance over the last couple of decades has lagged really any county within the G20 that we usually compare ourselves to.
We’ve lagged all of Europe, except Italy. We’ve lagged North America, we’ve lagged Japan. Our performance has been worse than China’s and India’s, at an average of about 1.1 per cent per year improvement. Over the course of those two decades we are at about 0.6 per cent below the G20 every single year.
A gap, if you’re thinking in the 15 year time frame the council is thinking between now and 2030, is a productivity gap in compound terms of about 11 per cent.
We simply have to do better for economic reasons, if for no other.
Energy productivity, efficiency, and demand management is also a critical part of the decarbonisation object that others have talked about.
The IEA and others remind us that across the globe we are not going to be able to achieve the sort of objectives we have on carbon in electricity without a very aggressive approach to demand management.
You cannot imagine a country for one that is a more critical question than Australia.
Our emissions intensity as an electricity sector is almost twice the OECD average, and it is even higher than China’s.
We have to clean up our electricity system and demand management is going to be a big, big part of that answer.
All of this is of course why the Energy Efficiency Council’s, 9-point plan is so timely, and so important.
Labor included a pretty ambitious agenda for energy productivity in our Climate Change Action plan at the last election.
But in the nature of these things, there wasn’t much of a debate about energy productivity in an election campaign that was dominated by many other issues.
The Government’s National Electricity Productivity plan, the NEP, we think is a good start.
We think it is a little bit modest in terms of its overall objectives, but seeing detailed implementation plans will be something we will be very interested to do.
Can I say just in closing the advocacy of your organisation and all of the businesses you represent are utterly critical.
But you shouldn’t expect, as much as I’d like to say otherwise, you shouldn’t expect a smooth rise over the next year or two.
I think the last several months have shown us that climate change and energy policy is still a very highly contested area of national politics.
Perhaps the most highly contested area of national politics that we currently have.
But I look forward, as the Opposition spokesperson for the area, to continue to have a good, open discussion with the council and I thank you for the invitation to be here.