MPI - Energy Crisis

March 23, 2017

For two years now, Labor has been warning of a looming crisis in the eastern Australian gas market and urging the government to take action. Even that far back, as far as 2015, it was becoming clear to us, at least, that the LNG exporters that had been set up in Gladstone were using gas that was previously supplied to Australian users—Australian manufacturing companies, Australian power generators and Australian households.

At our national conference in the middle of 2015, there was a full debate on this looming gas crisis about policy options that we would consider as an opposition going into the 2016 federal election to deal with this looming crisis. As I think most people observing this debate know, we adopted at that conference, and took to the federal election, a national interest test for gas exploration—a form of gas reservation to ensure that enough of eastern Australia's gas was going to be available to Australian businesses and Australian households before starting to ship it off overseas. The response from the Prime Minister was perhaps predictable: he rubbished it. He said it was old-style leftism. He had no other ideas, of course, because he thought—and he reassured the Australia people and Australian businesses—that everything was fine in the eastern Australian gas market.

Well, everything is not fine. We are now in a full-blown gas crisis in this country, and this government has been asleep at the wheel. Without decisive action, this crisis is going to have a devastating impact on the Australian economy and on thousands and thousands of Australian jobs. It has already become apparent in the power generation sector right across the National Electricity Market on the eastern seaboard. Power generation from gas-fired power over the last 12 months has fallen by more than one-third. It is impacting reliability—as we have seen across the NEM over the course of this summer—and it is the key factor driving electricity prices up across the NEM.

But it is a particularly severe crisis in manufacturing, particularly in manufacturing sectors that rely on gas not just for reliable and affordable electricity but also as a key feedstock. These manufacturing companies have operated for decades on the basis of an historic price of around $3 or $4 per gigajoule, which was the price that was in place when we left government in 2013. Under this government, prices have spiked.

Mr Frydenberg interjecting

 I hear the minister talking about parity pricing.

Mr Frydenberg interjecting

The DEPUTY SPEAKER ( Mr Coulton ): The minister for the environment will remain silent.

Well, the spot price in Sydney is about $10 per gigajoule at the moment. Last week it was $12.40 per gigajoule. The AiG and Manufacturing Australia are talking about their members being quoted prices upwards of $22 per gigajoule, up from the historic price of $3 to $4. The minister well knows that is not parity pricing. That is scarcity pricing, because this government has mismanaged a serious supply crisis in the gas market, such that manufacturers operating overseas, in other countries, are able to purchase Australian gas at the moment at about half the price being quoted to manufacturers in Australia—an utterly outrageous outcome.

Last week the Prime Minister finally woke up and recognised a gas crisis. He called, as is his wont, a gas summit, to talk. He brought the gas companies to Sydney. Mind you, there were no manufacturers, no power generators, no state governments involved in this area—just the gas companies. True to form, he talked and he talked and he talked. Then he wagged his finger and 'Malsplained' what the problem was in the gas industry. The problem with this Prime Minister is all he could do was talk. He has this problem with the banks. He thinks if he goes to one of their birthday parties and gives them a stern talking to that they will change their behaviour. That is not how this mob works.

I will go to the communique coming out of the PMO about this summit. 'Gas producers guarantee Aust. supply: PM' is the heading. I thought that maybe there was something that came out of this summit, but the 'gas supply guarantee' is just that the gas will be available to meet peak demand periods in the NEM, such as during heatwaves. There is absolutely nothing for manufacturing, absolutely nothing for the power generation sector and absolutely nothing for all of those other days during the year other than heatwaves. Many have made the point—and did the day after—that more talk is not going to work. More talk is going to do nothing to relieve this very serious crisis. We need action. But we know that around this chamber and out in the community this government is not very good at action. They are very good at talk, particularly this Prime Minister, but not very good at action, particularly when it comes to energy policy. That is because this is a government paralysed by ideology and paralysed by their internal divisions as well as their fondness for sitting back in the cheap seats and blaming everyone else. They are taking no responsibility as the nation's government.

We know that it is not just in gas. You see this approach as well in the electricity sector, where there is a supply crisis emerging too. You ask: why is there a supply crisis? Essentially, it is for one reason. Three-quarters of our existing coal- and gas-fired generators are already operating beyond their design life. As we will see only next week, the Hazelwood power station—a 50-year-old power station—is closing.

Mr Frydenberg: Who did that?

It is 50 years old! Do you know anything about the electricity sector? The problem is, with 4,000 megawatts closing under this government, there are no replacements because there is no policy framework.

Mr Hawke interjecting

 Everyone agrees what the policy framework should be—everyone except this government. The member for Mitchell says, 'Rubbish.' Well, the Business Council of Australia, BHP Billiton, AGL Energy, EnergyAustralia, the National Farmers' Federation, Origin Energy, the Australian Energy Market Commission, CSIRO, Energy Networks Australia, the Chief Scientist, the Climate Change Authority, the Clean Energy Finance Corporation, the Prime Minister's former energy adviser Danny Price, Labor and Liberal state governments alike—we hear from the New South Wales government—and many other energy stakeholders agree. We look to find who is opposed to an emissions intensity scheme. We know this government is. We suspect, probably, One Nation is. Everyone else knows the solution to this supply crisis. It is just that this government, particularly this minister, is not able to deliver his party room.

Honourable members interjecting

Danny Price nailed it in December when this minister was overridden because of a revolution from Cory Bernardi. That worked really well. Placating Cory worked really, really well. There was a bit of a revolution from the former Prime Minister, the member for Warringah, and this minister got overridden in just 36 hours. Danny Price nailed it when he said, because of that terrible decision in December, 'This party of government will be the party of reduced electricity security and increased prices.' That is what Danny Price said.

Prices have already been an issue in this country for more than 10 years because of the gold plating of the networks that goes back to the Howard era. Gold plating of the networks, which has seen, particularly, the coal-fired states of the eastern seaboard see the largest price rises, as The Australian newspaper helpfully pointed out a couple of months ago. The largest price rises are in Queensland, then Victoria and then New South Wales. But now we see wholesale prices spiking under this government. They have doubled under this government. Wholesale prices have doubled under this government because of their inability to deal with the supply crisis.

Over the last summer period, the NEM average wholesale price was $134 per megawatt-hour—$134. That is more than twice the wholesale price in the two summers during the carbon price mechanism. In Queensland, it is almost triple the price it was during the carbon price mechanism. There was a wholesale price over the summer just finished of $200 per megawatt-hour. That is one-third higher than the South Australian wholesale price over the course of this summer.

Dick Warburton, who chaired a review for the former Prime Minister, said, 'There is a good way to put downward pressure on wholesale power prices—expand renewable energy.' But this government has done nothing but attack renewables, which is hurting prices, the ABS told us on Friday, and killing one in three jobs in the renewable energy industry. Those jobs are gone under this government. While around the world there is 45 per cent growth in renewable energy jobs, this government has lost thousands upon thousands.

To be fair, this government does have one plan, or at least the Minister for Resources and Northern Australia, Senator Canavan, has a plan: build new coal-fired power stations.

Honourable members interjecting

The Prime Minister announced it at the Press Club and waited for the clamour. There was deafening silence until one person said they would be willing to take the taxpayers' dime to build coal-fired power stations, and that was Clive Palmer. Clive Palmer said he would partner with the Minister for the Environment and Energy and build coal-fired power stations. This is the bloke whose last brilliant idea was to build Titanic II. That is the great supporter of this government's energy plan. All this government can do is rest on tired ideology framed by tired old scare campaigns.