RN Breakfast 12/07/2018

July 12, 2018




HAMISH MACDONALD: Mark Butler is the Shadow Energy Minister, welcome back to breakfast.

MARK BUTLER: Morning, Hamish.

MACDONALD: Malcolm Turnbull reportedly very supportive, we’re told, of this recommendation for the government to underwrite large-scale base generation, a proposal could go to cabinet before the end of the year. Has the ACCC in your view given the government the cover it might want to build a new coal-fired power station in Australia?

BUTLER: Well I don’t think it has, it hasn’t used the language “baseload”, I know Tony Abbott does, Barnaby Joyce, and others - but what it says is there is a bit of a market failure in the system in the sense that new generation finds it very hard to get into the market without a off-take agreement which essentially is a whip-hand held by the large retailers. So what Rod Sims and the ACCC, I think, have largely said is there might be a case for the government to underwrite some confidence in new entrants coming into the markets. The real thrust of this report is that there is too much market power held by just a few companies and what we need is more competition in the system to provide better outcomes to consumers. Unfortunately what has happened here is again the coal ideologues in the Coalition party room have effectively hijacked what is quite a serious, important recommendation and pretend that this is going to deliver new coal into the system.

MACDONALD: Let’s just stick to the ACCC report for the moment, rather than the politics of it, please because I think it’s rather important.

BUTLER: What Rod Sims said yesterday was that proponents and companies that have been talking to the ACCC over the sixteen months of the inquiry about this particular market failure had talked to him and talked to the commission about renewable energy and gas projects, but his words yesterday were that "nobody has mentioned coal to us". There is just no appetite at all within the business community to invest in coal-fired generation with or without support from the commonwealth, so the sooner that is put aside and we have a serious debate about this report rather than one that suits the coal ideologues in the Coalition party room, the better.

MACDONALD: So let’s be clear though about what the ACCC does say, I know you’re saying it’s not using the term baseload power, but that’s clearly what it’s referring to.

BUTLER: No it’s not, Hamish.

MACDONALD: Well then tell us what your interpretation of it is saying then.

BUTLER: I’m not interpreting it, the words that the ACCC uses are power "capable of providing a firm product", very different to the idea of a single base-load generator that operates 24/7, just a single generator, which is essentially the 20th century model of the coal-fired generation sector. What the industry and business is generally looking at here is the sort of suite of products you saw discussed with AGL’s replacement of the old Liddell coal-fired power station. It will almost certainly be renewable energy that is firmed up by a mix of batteries, perhaps some pumped-hydro, and some gas-fired peaking generation. That will deliver the cheapest power, about 25% cheaper for example than simply even extending the Liddell power station, let alone building a brand new coal-fired power station. And it will deliver, to use the language of the ACCC, power that is capable of providing a firm product - that’s what consumers need.

MACDONALD: So what would you say to those MPs that are now jumping on this report and pointing to it as saying that this proves you need to have a more serious conversation about coal as a part of the NEG. What would you say to them?

BUTLER: I’d say they’re dreaming. I’d say they’re dreaming and they haven’t read the report properly, and they haven’t talked to businesses who are really trying to come to grips with this challenge of getting power that provides a firm product. Rather than trying to find a 20th century solution for this challenge - which is essentially what Barnaby Joyce and Matt Canavan and Tony Abbott and others are doing, by pretending this is a way to the coal question again - they need to recognise the reality that what businesses are looking at is the sort of product I just talked about; renewable energy that is firmed up with, in some cases new technology like batteries and some cases quite old technology like pumped-hydro.

MACDONALD: I suppose the thing is that this report does point to renewables as being part of the reason why prices went up so much. In particular the ACCC describes overly generous feed-in tariffs to rooftop solar, these solar houses saved around $500 a year but they were effectively subsidised by everyone else. Again this is an interpretation that some are making but it is green schemes, whilst cleaner may not necessarily be cheaper and that seemed pretty clear from what the ACCC is saying.

BUTLER: Well I think what the ACCC is doing was to look back at a period when, around the world there were, I think, around 174 nations that essentially had schemes that were described as technology pull-through schemes. These were schemes that subsidised a technology that was very new, that needed to get to a scale where it could stand on its own two feet. I think everyone in the industry recognises that's where renewable energy is up to now, it can compete without subsidies.

MACDONALD: You must acknowledge that that had an impact on prices here.

BUTLER: I think it’s quite clear there was an impact on prices here as there was, frankly, in all of those other countries that engaged in this. But, what we’ve achieved is we now have a relatively mature technology that is able to be deployed at scale across the globe, and you see it being deployed across the globe, delivering cheaper power than new coal-fired power or even existing coal-fired power generators that have their lives extended.

MACDONALD: Do you see it as a choice, ultimately, for Australia between lower prices and getting our energy mix to a more sustainable mix?

BUTLER: No, I don’t and I don’t think that industry does. I think the industry recognises now that the cheapest form of power into the future, and in many cases right now, is going to be, as I said, that mix of primary generation coming through renewables, firmed up by batteries, gas-peaking plants and pumped hydro which will be much cleaner.

MACDONALD: Do you acknowledge that that perception exists in Australia right now for many people?

BUTLER: Well I think it does for a number of the people pushing this agenda in the Coalition party room…

MACDONALD: No, that’s not the question. I’m talking about the Australian public.

BUTLER: When I go out and talk to people in the community, I think they recognise that the future of electricity is renewable - it’s not only going to be a future that provides much less pollution but also will provide lower cost.

MACDONALD: I suppose the question is still live because clearly the government is considering it. If the government does underwrite investment in base-load through another coal-fired power station or keeping existing ones open in some way, where do you think that would leave the National Energy Guarantee, could you see any way that the states and territories would get behind it in that case?

BUTLER: I’d be amazed if they did, because I think that would absolutely put the lie to what Malcolm Turnbull continually tries to say, which is that this model is supposed to be a technology neutral one.

MACDONALD: The ACCC chairperson, Rod Simms says that if all 56 recommendations of this report are put in place it would slash power bills by as much as a quarter. Here is some of what he had to say yesterday.

ROD SIMMS, ACCC (recorded audio): Energy, of course, is an essential service for both households and for industry. Our recommendations provide them with affordable energy and the savings are considerable for households, at least $300-$400 a year, for small businesses at least $1,000 a year.

MACDONALD: Would Labor commit to implementing at least the general thrust of the report?

BUTLER: Well I think the general thrust of the report is a really important one and I think the work the ACCC has done over the last sixteen months has been excellent - because what this report confirms is that the system is fundamentally not working in the interests of consumers. It’s a system that is instead working in the interests of big power companies that were handed control over the system by a series of disastrous privatisation decisions over the last couple of decades. So the thrust of the report is a really important one. I think there is good reason to believe that, if implemented, it will deliver significant savings to consumers because it will start to break up that market power, that market dominance by a very small number of companies. Obviously we’re working through the precise recommendations, Hamish, as I think people would expect us to and I think the government is doing - but I really do welcome this report, I think it is a very strong piece of work by the ACCC.

MACDONALD: Mark Butler, thank you.

BUTLER: Thanks, Hamish.