MPI - Energy Security

February 14, 2017

As we heard from the member for Paterson earlier in question time, last Friday power was cut in load shedding arrangements to the Tomago Aluminium smelter. This is a smelter that uses 10 to 12 per cent of New South Wales' power—equivalent to around a million households. Power was also cut on that day—not in load shedding arrangements—to households in the electorates that I mentioned in question time and also in my personal explanation.

It is important to point out that this is not a jurisdiction even connected directly to South Australia. This is a jurisdiction with one of the highest penetrations of coal fired power in the nation, if not the world—well over 80 per cent—and one of the lowest penetrations of renewable energy in the country. It has vast interconnection capacity with Queensland and, to the south, with Victoria. On the same Friday, more than 1,000 megawatts of power was imported from Queensland, hundreds of megawatts of power was imported from Victoria to New South Wales, but still Tomago had to shut down. The CEO of Tomago, as the member for Paterson pointed out earlier today, said:

It's fair to say the way the energy system is working at the moment, it is dysfunctional. What we saw on Friday was a genuine system security risk ...

The Prime Minister would have Australians understand that every problem in the energy system—whether it is load shedding to the biggest aluminium smelter in the country, power cuts in one part of the country or price spikes in Queensland that are several times more frequent than in South Australia—is because of wind farms in South Australia. This fatuous, mendacious approach to energy policy—which, to be fair to the minister, way predates his time in this portfolio—jumped the shark last week when the Treasurer of one of the biggest economies in the world thought it was a good idea to bring a big lump of coal into question time.

The fact is that there is a crisis in energy policy. There is a crisis and it is national and it is touching every element of our electricity system. As The Australian very helpfully pointed out yesterday, there have been massive price increases in electricity over the last 10 years. The Australian also pointed out that the biggest price increases over that period of a decade have taken place, in order: in Queensland by 135 per cent, in Victoria by 117 per cent, and in New South Wales by 108 per cent—again, the three states in the national electricity market with the highest penetrations of coal fired power and the lowest penetrations of renewable energy.

The Leader of the Opposition also pointed to the price spikes, the extreme price events we have seen over the course of 2016 in Queensland. There were 23 times the number of extreme price events we have seen in South Australia. In New South Wales there were several times the number of extreme price events we have seen in South Australia. Again, those jurisdictions have very high levels of coal and very low levels of renewable energy. The market rules, everyone agrees, are simply not fit for purpose.

Tony Wood from the Grattan Institute—often a very deep critic of Labor policy—has said that either the rules are not working or AEMO, the federal regulator, is misinterpreting them. We saw that over the course of last week in a very stark way. AEMO decided, wrongly—I think it admitted at the Senate inquiry that it got the demand projections wrong for Wednesday afternoon in South Australia—not to order Pelican Point to turn its second unit on. If it had, there would have been no need for load shedding. There would have been more than sufficient capacity from fossil fuel generation, gas fired generation, in that state to cover what was a record level of demand in South Australia during that extreme heat event on Wednesday.

Pollution is going up. That is not a matter often alluded to by the minister for the environment, but under this government, after coming down by several percentage points under the Labor government, pollution, unsurprisingly, has started to rise again across the economy, but particularly in the electricity sector. All of this is happening while the electricity industry tells us that as much as three quarters of our existing generators are operating beyond their design life and are shutting. Whether or not this minister likes it, whether or not state ministers like it, these privatised companies are taking decisions to shut their generators and investors are paralysed by a lack of energy policy on the part of this government to be able to build replacement plant.

The minister on Lateline last night was asked, reasonably: 'What's the government's plan?' That is quite reasonable given that this government is now well into its fourth year in power, and he could say nothing. All he could do is outline the elements of Labor policy that he is opposed to. He is opposed to a framework around the way in which those old plants close. Instead, he wants to continue a situation where the nation waits for an announcement by a board of directors, usually on the other side of the world—multinational companies that are operating this essential electricity infrastructure—to tell us, 'No, we're done. We're going to close the plant'—no planning or arrangements for the impact on the electricity system; no planning for the impact on the local economies, the workers in the communities. But when AGL, for example, says, 'We want to plan a framework for the closure of ageing assets so that it is an orderly replacement process, not a disorderly process,' the minister says, 'Labor supports that, so we can't.' There is no plan for an alternative way of approaching closure, but they are opposed.

They oppose a price signal to underpin the investment—the renewal of our electricity infrastructure. This is perhaps the sorriest episode because, to his credit, the minister had done the work to develop an emissions intensity scheme proposal for COAG at its meeting in December. He went out on the Monday morning and said, 'Of course we'd consider it,' because everyone in the industry wanted it. It was an Energy Market Commission model supported by the CSIRO; supported by the Climate Change Authority; supported by the Chief Scientist; supported by the electricity industry, from the renewable sector to the coal fired sector; supported by state governments, Labor and Liberal alike; but not supported by Senator Cory Bernardi. So when Senator Cory Bernardi came out—

Honourable members interjecting

Yes, that was a great judgement on the Prime Minister's part. Let's placate Senator Bernardi and everything will be fine. How did that work out for you? Danny Price, the Prime Minister's old energy adviser, said that decision alone has made the Liberal Party 'the party of increasing electricity prices and reduced energy security'. Of course, they are opposed to all of those things and they are opposed to renewable energy. They have no policy beyond 2020. There will not be a project built beyond 2020 under this government's policy framework. They have this pathological thing about renewable energy. They are happy to come in and stroke a black rock, but have a pathological hatred of renewable energy. They have not yet started talking about the health impacts that the former Prime Minister was so worried about when he rode past that wind farm on Rottnest Island, but I would not be surprised anymore if this Prime Minister started talking about those things as well.

They run the prices scare campaign. In spite of the fact that the Warburton panel—a panel certainly led by climate sceptics—said that the expansion of renewable energy puts downward pressure on wholesale prices and in spite of modelling across the world that increasingly says that new solar and new wind are the cheapest forms of new generation, they still run this. They do not care about the jobs impact. There were 3,000 jobs lost in renewable energy since this government came to power. If we had kept pace with jobs growth around the world in this industry, we would be 11,000 jobs better off in this industry than we are under the Liberal government. As I said, and it is a small point: renewable energy is the only way we are going to achieve the Paris targets that the Prime Minister signed us up to.

They do have one policy of course—the only policy they have come up with in more than three years in government—and that is to build new coal generators. To be fair, it is not the Prime Minister's policy; it is the member for Warringah's policy. No-one had talked about this for years until the member for Warringah penned an op-ed a few weeks ago. Then, lo and behold, playing the Prime Minister like a violin, it ends up as the centrepiece of the National Press Club speech from this Prime Minister. Never mind that the industry says, put simply: 'You cannot finance coal.' Never mind that the Climate Institute says it would require at least $26 billion in taxpayer subsidies. Never mind that the Clean Energy Finance Corporation, a government owned corporation—which is apparently going to underwrite this—said they would not support that and that it would be massively risky for taxpayers. But he has placated Senator Bernardi and he has placated the member for Warringah—and that, apparently, is the only driver for energy policy at a time of crisis for this government.

This government is presiding over a crisis that is spreading across the nation. Well into its fourth year in power, this government still has no answers to the question: how do you deliver affordable, reliable supply that will start to cut our pollution? This minister unfortunately is very long on opposition but utterly bereft of an answer to deal with this crisis.