Anne Stanley (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

It's my pleasure to rise and support the findings and recommendations of the House of Representatives Standing Committee on the Environment and Energy report titled Powering our future: inquiry into modernising Australia's electricity grid. For most of 2017, the committee looked at Australia's electricity grid, centred on the eastern states. In line with the terms of reference, the committee gave particular consideration to the means by which a modern electricity transmission and distribution network can be expected to ensure a secure and sustainable supply of electricity at the lowest possible cost; current and future technological, economic and regulatory opportunities to achieve a modern grid; and the experiences of international jurisdictions and how they can be used to inform planning in Australia. We were looking to provide recommendations that will serve the consumers of energy well into the future and address issues of the ageing fleet, new technologies and price pressures.

The committee was particularly aware that it was important to find a consensus position, and I thank my colleagues on the committee for their willingness to embrace this position, despite there being a large divergence of views about how electricity should be generated and supplied. I especially acknowledge the member for Mallee and the member for Shortland, as the chair and deputy chair, for their leadership and assistance during the committee hearings and deliberations to ensure the effectiveness and usefulness of the report. I also acknowledge the member for Petrie, who is currently in the chair, and the member for Brisbane, who were part of this consensus and worked very hard to get there. I also recognise the work of the committee secretariat, Penny Deane, Emma Matthews and Ashley Stephens, for their professionalism, knowledge and support, which kept the committee focused and prepared to speak to well over 60 experts in public hearings. The committee was pleased to accept the contributions of over 58 written submissions as well as more than 2½ thousand online submissions.

Interestingly, it was clear from the work the committee did, both in Australia and in examining the experiences in the several markets we visited in Germany and the United States, that a well-functioning grid needs policy certainty. Policy certainty will address pricing and supply. This requires all parts of the political spectrum to come together to ensure that there is agreement on policy direction. The committee heard evidence that the inability of this place to provide certainty in energy policy over the last 10 years has placed the equivalent of a $50-a-tonne carbon price on electricity generation. Why is certainty required? Certainty will provide the stimulus for investments in both plant and innovation to supply Australian businesses and consumers with affordable, accessible power. It is clear that this place needs to lead and provide that certainty, and I encourage all of us to do that as soon as possible.

Australia has always been at the forefront of embracing new technologies—from mobile phones to computers and televisions—and electricity is no exception. The take-up of alternative generation sources such as rooftop solar has risen exponentially in the last decade. Some of this growth was increased by subsidies from previous federal and state governments, but the growth has continued after subsidies have disappeared. It seems there are many reasons for this continued trend, bill reduction always being a primary concern, with a wish to provide cleaner energy and a lower carbon footprint being other determining factors. The amount of generation behind the meter needs to be assessed, modelled and then incorporated into planning for the grid and for future production to ensure stability. Further, we heard that innovation of behind-the-meter generation can negate the need to build as much extra power generation.

It is important when decisions are made about how power is generated that consideration is given to ensuring that there is equity in this system and that consumers, particularly those on low incomes or renters, are not left to shoulder grid costs as those more able to afford rooftop solar and other options leave the grid. For the Australian public and industry, the most important function of an electricity grid is to provide dependable power when they need it. This report and its recommendations can provide the basis of a proper and robust energy future for Australia, with a secure, reliable, affordable grid with lower emissions. I commend the report to the House.

Trevor Evans (Brisbane, Liberal Party) Share this | Link to this | Hansard source

This report,Powering our future: inquiry into modernising Australia’s electricity grid, is a significant contribution to this parliament's work on the very important topic of energy. It's significant for a number of reasons. This report is, indeed, bipartisan. It's worth reflecting for a moment on what it means when members with diverse world views, such as the member for Melbourne and the member for Hughes, stand together for what is essentially a consensus on energy policy. The point is that this report is bipartisan, and it contains very sensible work that will help take some of the ideology and politics out of the energy debate, hopefully, and help to restore that important certainty that the member for Werriwa just spoke to—the certainty that is critically needed in the energy industry to attract future investment and, ultimately, to put downward pressure on prices.

The first recommendation of this report makes that very clear—the importance of policy certainty. The report goes on to make a number of very other important recommendations, 23 all up, that underscore the importance of some of the other key planks of this government's energy policies. They are an increased focus on dispatchability, the flexibility of the energy grid going forward and the need to promote stability in both a technical and an economic sense.

I want to outline some of the significant recommendations of this report. The first ones relate to grid planning. The recommendations about better future planning of transmission investments and those testings of the business cases for new interconnectors or other transmission assets, for example, I think will prove to be critically important for the future operation of the National Electricity Market. The recommendations around changing the market rules, speeding up that process, are also quite significant. When the industry is undergoing such rapid change, it's very important that the regulatory framework and, indeed, the bureaucracy don't move slower than the technology. We don't want to block sensible, efficient innovation from occurring.

Some other very notable recommendations relate to the search for efficiencies in industrial and business customers. The recommendations to help industrial users to audit their processes, plus updated resources for small and medium businesses, should be welcomed, especially by those small business operators who are often so busy in their businesses that it becomes very difficult for them to find the time to work on their businesses by researching and considering some of their other energy options. In many cases, the options available to those small businesses will have moved on; the costs and the benefits may have changed significantly since they last considered the state of play, possibly some years ago.

It's also important to understand where this report fits into the broader energy debate. Obviously, the energy grid is but one important part of our energy system. That's why there are a number of other key planks to the government's energy policy suite. Separate to the grid and the area of generation for wholesale markets, the government's National Energy Guarantee is the mechanism that will help settle that energy trifecta of affordability, reliability and emissions reduction. The reliability guarantee in the National Energy Guarantee helps deliver that right level of dispatchable energy when it's needed by customers, while the emissions guarantee will ensure that Australia simultaneously meets its international environmental commitments. This two-part guarantee designed by the experts and, indeed, by the Energy Security Board will help deliver that affordable and reliable energy supply we want to see by creating the future policy certainty that all members of this committee have strongly sought to endorse—that certainty that we need for our investment and our wholesale markets.

Another key plank of our energy plan, reflecting the need for storage relating to intermittent electricity from some new and emerging technologies, is Snowy Hydro 2.0. I visited the Snowy Hydro scheme last week to see the opportunities it presents, given that pumped hydro is the more mature, proven storage solution that's been both technologically feasible and commercially feasible for years now. The one thing that struck me more than anything else, I think, was probably the sheer scale of the project in terms of its relativities to the size of our entire energy system. To put it into perspective, Snowy Hydro 2.0. is the equivalent of 35 million household batteries—35 million household units. It provides up to 350,000 megawatt hours of supply. To put that number into perspective, the Tesla battery plant that's recently been installed in South Australia provides 129 megawatt hours of supply—129 compared to 350,000 megawatt hours of supply for Snowy Hydro 2.0. In other words, Snowy Hydro 2.0 is essentially the equivalent of 2,700 of those South Australian Tesla battery installations lined up one against the other. That's not to denigrate or to choose between the two; it's to give an explanation of the scale of the solution that we're talking about here.

There are some other key planks in our suite of energy policies. One is supporting those very important trials and the research and development that's needed to ensure that some of those new and emerging technologies can continue to come down the cost curve and become more financially and commercially viable alternatives. Another key plank, obviously, is the pressure that we're putting on gas markets to ensure that the price of gas is kept down by ensuring that our abundant local supplies of gas meet our own domestic demand. That's important because gas power plants are now so often setting the spot price in wholesale electricity markets.

On top of that, the government has also removed the ability of energy companies to use limited merits review—that's a form of lawfare, essentially—in tribunals to potentially undermine the pricing decisions of the regulator. That should help to keep downward pressure on prices from that aspect of our energy system. And at the retail end of the industry, we have also obviously done a lot of work to ensure that customers can take advantage of whatever better deals there might be for them out there in the marketplace amongst various energy retailers.

I wanted to spend the time going through that checklist just to reinforce the point that there are all of these planks to our energy policy. I wanted to make the point very firmly that the energy policy debate has moved on in the last 18 months. Less and less is it about the politics, and more and more it's about the competence in managing and delivering the transition currently occurring in our energy industry. That transition is being managed and delivered by this government. That transition does include the transition for a modernising electricity grid. This report, focusing as it does on that transition in the grid, is therefore one more plank of that certain energy policy future that we all want to see.

I want to give some very quick thank yous, first of all, to all of those stakeholders who gave evidence to the committee as it did its very important work; a very big thank you to the secretariat for their work; and also a very big thank you to my other committee members for all of their bipartisan efforts. It was important work.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I will concur with the member for Melbourne on that point. If we can agree on some of these issues, that shows there is true hope in this parliament for bipartisan support. There are a few comments I'd like to make on the report, firstly on the introduction:

Like many countries around the world, the electricity system in Australia is undergoing a period of significant transition, driven by the changing mix of electricity generation, the emergence of a range of new technologies, and government policies for emissions reduction.

I think the very important point to make is that this so-called transition is not driven by market principles. It is not driven by ensuring we get the lowest cost electricity. It is being driven by government policies that we mandate unreliable and intermittent electricity into the grid. And we see what that actually does to the electricity system. We have to understand that all electrons aren't equal. When you force intermittent and unreliably generated electricity into the grid—and you force it in through government mandates—it's like infecting the grid with a computer virus. It completely skews the normal workings of the market. It undermines the economic case of the existing generators. That is what we've seen. We've seen that happen here, and we have seen that result in possibly the fastest increasing electricity prices anywhere in the world. Other nations have had big increases in their electricity prices, but I don't think anywhere else in the world has experienced electricity price rises to the same degree as Australia.

We were very fortunate that the committee was able to make a trip to Germany to discuss the German energy policy with German politicians and many experts in their energy generation and distribution sectors. At the beginning, the German policy, Energiewende, was seen to be a bipartisan policy. Everyone in Germany seemed to be onboard with that policy. But now they are starting to see the results of this policy—pushing tens of thousands, if not hundreds of thousands, of German households into energy poverty.

Only recently there's been pushback. Some German politicians are starting to speak out about this. As recently as a week ago, Sandra Weeser from, Germany's Free Democratic Party, gave a speech about the growing green energy capacity being installed—that the effort to reduce CO2 had failed, and what was left was an unpredictable power grid that often produced energy when it's not needed, thus costing Germans unnecessarily hundreds of millions of dollars annually. She went on to say:

…that the expansion of the green energies is totally out of proportion with the existing power infrastructure, and that even the most perfect grid will not be able to handle the volatile wind and solar energies.

There is one big difference between ourselves and Germany. In Germany, they have interconnectors to almost all their surrounding countries. When the wind is not blowing in Germany, they can tap into the nuclear power plants over in France. They can tap into the coal fired generators in Poland. They can tap into the hydrogenerators in Norway and Sweden. We can't do that. We, as a nation, are an island. We're an electricity island; we cannot tap into other countries' electricity supplies. The difficulties we have are far greater than the difficulties the Germans have.

Another recent speech was given by Dr Rainer Kraft, a German politician who is a former doctor of chemistry. He described Germany's Energiewende policy as the policy of 'a fool'. He called it 'eco-populist voodoo' designed to bring about 'an eco-socialist centrally planned economy.' The tide appears to have turned in Germany. Our feel-good policies are coming up against the hard engineering realities of the real world. That is why we must be so careful about what we do here, in this nation, to our electricity policy.

We have conducted an experiment. There's nothing wrong, at times, with conducting experiments, because small-scale experiments are how we advance as a civilisation. It's how businesses advance. They innovate and try something new, and they test the water. They test the market to see if it works or not.

That's what we've seen in South Australia. I often criticise them, but they went out there and they tested the water with a 50 per cent renewable energy target. They described it themselves as a big experiment. The results of that experiment are in. It has been nothing other than an unmitigated failure, a complete disaster, which has seen that state have not only the highest electricity prices in the nation but the highest electricity prices in the entire world. On top of that, in a state with a population of only 1.7 million people, they've had to take half a billion dollars—which could have been invested in schools, hospitals, aged care, kids with disabilities, drug rehabilitation and all the things we like to see money spent on—and put that into diesel generators. It's the big stunt of the big battery, nothing other than a complete stunt. We've seen that in the results over the past month. Half a billion dollars has been spent just to try and keep the lights on.

We've seen the comparisons between the cost of electricity in Australia and in the USA. One of the things we have to be very careful about in this nation is that we remain internationally competitive in everything we do. One of the most important things that we need to be internationally competitive with is the cost of our energy compared to the cost of other nations' energy, especially the USA, which is still the largest economy in the world. We have seen that the cost of electricity in many states in the USA ranges from US10c to US12c a kilowatt hour. That is the equivalent of A13c, A14c or A15c. So our electricity prices are not double those of the USA; they are in many cases triple those of the USA. We cannot continue to grow the wealth of this country if the cost of energy in Australia is double and triple what it is in the USA, when only a decade ago the cost of energy in Australia almost had parity with that in the United States of America. If we look forward, the USA projects that by the year 2050, the middle of this century, its energy costs will still be around the same as current costs.

We have to really think as a nation about what we are going to do. We need to set targets to ensure that our electricity supply price is comparable to that of the USA. Otherwise, how can industry compete? How can we create the wealth that we have in the past with our aluminium industry, our glass industry, our food-processing industry? How can those high-energy-intensive industries compete if the cost of energy in this nation is so much higher than it is elsewhere in the world?

We also need to look at the cost of the transmission lines. Our electricity generators are free-riding. We see that AGL is closing down Liddell power station. There is at least a billion dollars in sunk costs in those transmission lines. If AGL closes down Liddell, that cost is written off, and it's a cost to the national economy. (Time expired)

Meryl Swanson (Paterson, Australian Labor Party) Share this | Link to this | Hansard source

While he is in the chamber, I would like to acknowledge the member for Hughes, who is a member of the Standing Committee on the Environment and Energy, which produced the report Powering our future: inquiry into modernising Australia’s electricity grid. That committee is chaired by Mr Broad. I would recommend the report to all those who are interested in electricity, and I think many people are interested because of the escalating cost of electricity. I welcome the committee's latest report, which deals with a topic that affects every facet of Australian society. It impacts every home, business and industry in my electorate of Paterson.

It is all about energy. As I've said before, energy is the oxygen of our economy. With this report we should celebrate the fact that members of this standing committee from different areas in this political arena came together to create a document that charts a path forward. That's right, a consensus was achieved across four parties, and that is no mean feat in an area that has seen so much division—and derision, I might add.

I congratulate the committee on its 135-page document. I urge the Prime Minister, his government and his cabinet to look at this report and treat it as a roadmap that can lead to some energy sustainability in this country, a roadmap towards a national energy policy, which we are so desperately in need of, a roadmap to investment in energy, lower pollution and lower electricity prices, which my constituents and the people of Australia genuinely are calling out for, and, importantly, a path to energy security.

Today much of my electorate of Paterson swelters in 40-degree temperatures. That's right. I know we don't get that in Canberra, but there are many places where the temperature at this time is over 40 degrees. But in spite of the heat I'm sure there are shivers down the spine of many people in my electorate, because almost precisely one year ago this week another heatwave wracked the Hunter. The effect of that was particularly devastating but could have been so much worse. We all know that high temperatures and fossil fuel energy generation are a pretty unhappy marriage—and we're certainly accustomed to those in this place—although I would like to say that I am the recipient of some wonderful roses on this Valentine's Day. The hotter it gets, the more unreliable our coal- and gas-fired generators become. We know that. At the same time, demand peaks as people seek relief from the extreme heat and turn on their air conditioning.

When this perfect storm struck in 2017, the mighty Tomago Aluminium smelter, in my electorate of Paterson, was forced to cut back production so the lights and air conditioners could stay on in New South Wales. Tomago supplies about a quarter of the country's primary aluminium. It draws 12 per cent of the state's power, the equivalent of one million homes. It also directly supports nearly a thousand families in my electorate through jobs, and almost 2,000 when you take the contractors into account. So, as you can appreciate, the fortunes of Tomago Aluminium are closely linked to the fortunes of many of my constituents. When the heatwave hit on 10 February Tomago had no choice but to cut production by 30 per cent. This was no small matter. Curtailing production at an aluminium smelter is dangerous. It's dangerous to the smelter and its workings. It's dangerous for the workers, who are dealing with 900-degree molten aluminium and working on a potline where the mercury stands at 55 degrees Celsius. Yes, they go in with sapling trees to break the seal that forms when you cut down power at an aluminium smelter. If the power is off too long, the potlines freeze and the aluminium solidifies. I will read from the report, which says:

The Committee visited Tomago and heard about the consequences to the plant during peak usage shut downs. The Committee also heard from the Energy Efficiency Council that requiring a very large aluminium smelter to reduce its demand is a very bad idea because it can cause setting of the pots in that industrial facility.

That came from Mr Robert Murray-Leach, the Head of Policy at the Energy Efficiency Council. The committee heard that it is a very bad idea—indeed, it is a very bad idea. Once the potlines freeze it's not just a matter of saying, 'We'll just move out the solid aluminium and start it up again.' That doesn't happen, as we have witnessed in other places across Australia. I've already lost one aluminium smelter in my electorate, not because of a freeze. It happened in Kurri Kurri. Hydro Aluminium was shut down because of worldwide aluminium prices as well as electricity prices. I don't want to see another one go.

Since that day—10 February last year—I have fought to encourage this government to craft and commit to a national energy policy. I have highlighted the plight of Tomago Aluminium and I've worked to help the chief executive officer, Matt Howell, obtain some certainty and security around the provision of energy. I've also worked to get Matt's expertise in front of this committee, that's done some really great work. I am absolutely delighted to say that I know that this interaction between Mr Howell and the committee was of particular use. I refer to recommendations 18 and 19, where the committee says that we need to look at the rules surrounding the energy market in Australia and we need to look at the re-bidding practices of last year and particularly the gaming of the system in New South Wales during 2017.

It's not just about manufacturing, however. The Powering our future report refers to findings of the energy council which say that this country's ongoing energy debate and inability to agree on national energy policy has cost us the equivalent of a $50 per tonne carbon price since 2009. That is a mighty expensive dose of paralysis through policy indecision. And it hits every one of us.

I have spoken in parliament before about this and I have begged this government to stop its squabbling and take a good look at the Finkel recommendations. My Labor colleagues and I have repeatedly said that we are open to a bipartisan approach, because Australians deserve better. They do deserve better electricity prices. When you think about the fact that we are an island nation, it is clear that we should be an energy efficient hub. We should be able to what they do in Europe; they draw on power from other countries. We should be able to do that within the states. As this report says, we should be able to use wind power from Tasmania, wave power from Western Australia, and the sunshine from Queensland and New South Wales. We should all be working together across this mighty continent to make sure that energy isn't something that we have a problem with.

Let me tell you, the bill shock that is impacting Australians across our country now is real. People are making terrible decisions. On hot days like it is today in the Hunter—it is over 40 degrees—I know people who are thinking, 'Can I actually afford to turn on the air-conditioner?' I'm not just using hubris. I went for a blood test during the break, and the pathology operator and nurse said: 'Meryl, I live on my own. It's going to be over 45 tomorrow and I'm actually seriously thinking I'm not sure if I can afford to turn on the air-conditioner.' How have we gotten to this in Australia? I'll tell you how: through 10 years of squabbling about energy.

We need to stop that squabble and we need to really look at this report. Again, I say in all seriousness and fairness, four parties came together in a multipartisan way to come up with the recommendations in this report. Please, let's not turn our backs on the people of Australia and, more importantly, on the future generations of Australia who will look back on this epoch in political history, shake their heads and say: 'What were they thinking? Were they thinking? Why weren't they getting on and doing the job that they should have been doing?' Please let us not waste a moment longer in this place when we could be moving towards the exciting advances that are being made in energy.

The member for Newcastle sits in the Deputy Speaker's chair today. The CSIRO, who operates out of her electorate, are doing some magnificent work in photovoltaics. It is important and it is exciting, and we can't stand here and take home the remuneration that we do as politicians without seriously thinking about the hard-earned money of Australians that is being spent so unnecessarily on electricity.

Peter Khalil (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I'm pleased to be able to speak to the Powering our future report by the Standing Committee on the Environment and Energy on modernising Australia's electricity grid. Firstly I'd like to echo the sentiments of my Labor colleague the member for Shortland, Mr Conroy, and commend the committee on the report and for the non-partisan way we worked towards this report. We worked very effectively together. In fact, there were members from four different political parties, and we came to enjoy that process greatly, given that there tends to be quite a lot of partisanship in this place.

I'd also like to acknowledge our chair, the member for Mallee, Andrew Broad, on that front. His chairmanship was a catalyst in ensuring that we worked in a very constructive and non-partisan fashion. In fact, one of our first meetings was all about making sure that we could add something constructive and worthwhile in the policy debate and to make a contribution to that policy in the national interest. I'd also like to thank the secretariat for their wonderful work throughout the whole process.

The energy debate is something that, obviously, we cannot allow petty partisanship to impede. Clearly, energy is something that modern society cannot do without, due to the advances in technology and the vast amount of information that is being exchanged every second. Just as we need energy to power the modern world, Australia cannot afford to leave itself behind by not modernising its electricity grid.

Partisanship is impeding progress in the energy debate that we're currently having—not in our committee, but outside of it. Indeed, the very first recommendation of this report speaks to this problem: that to truly thrive and progress in any industry there must be some relative stability. The toing and froing in the energy debate has led the Energy Council, the peak body for generators, to express that the Australian parliament has been unable to agree or settle on a policy since 2009, and that is shameful. I hope with this report we have made some progress towards eliminating the stalemate or stasis that we're currently in.

A lack of policy certainty leads to a lack of industry and market certainty, which has an adverse impact on investment and innovation. The report states:

The policy certainty required relates to a mechanism to achieve emissions reduction in the electricity sector. The electricity sector is capital intensive and a lack of policy certainty has undermined investment in the sector.

This simply cannot continue. An enduring and stable mechanism can fuel investment whilst being able to address the issues that Australia's electricity grid faces, namely those of security, reliability and affordability.

I would also like to make note of recommendation 16, which recommends that the AEMO consider establishing renewable energy zones. In my view, this is absolutely vital if Australia is serious about tackling climate change and reducing its carbon emissions. This recommendation is linked to the first recommendation insofar as the uncertainty around energy policy—particularly around renewable energy—has really inhibited meaningful investment in renewable energy. Serious investment is needed in renewable energy zones to take advantage of some of the most significant solar radiation in the world and of our great wind resources. These are natural resources that Australia has an abundance of, and it would be foolish not to take advantage of those. However, to achieve this there needs to be carefully thought-out planning and sufficient investment in the grid.

Other recommendations worth noting are recommendation 4, which talks about speeding up rule-making, and recommendation 5, which talks about greater parliamentary oversight of the recommendations from the Finkel report. These are recommendations referring to industry demands and responses as regards energy efficiency—vital to reducing sector demand, whilst providing a revenue stream for manufacturers.

I won't go through all the recommendations but I'd like to touch on some of the energy grid security needed. Australia's energy grid requires security around frequency control, ancillary services and inertia responses. The review found that renewable energy can provide all the security services—provided there is adequate planning and sufficient investment. This has been one of the criticisms around renewable energy—that it couldn't adequately provide this security. Our review finds that it can, obviously with the important caveat that there is sufficient investment and planning in place. Renewable energy is relatively new. Those who wish to politicise it have made it a contentious issue. As such, in the renewable energy sector's short life span it's not been called upon to provide these particular services. Once a good and stable regulatory framework is in place, the sector will be able to provide such services.

Lastly, we must understand that the traditional resources—coal, gas and the like—are not the only resources at Australia's disposal. Australia has been referred to as the lucky country. It certainly is in many respects, although I've always argued we're the lucky ones to be Australian—to be blessed to be part of this country. But we are blessed with great natural resources in Australia. And the technology has now advanced to the point where we can harness those new resources, which was not really possible in days gone by, and we can convert those resources into energy.

Australia's riches lie in its vastness, its geographic diversity, and, if we are shrewd and we shrewdly invest in renewable energy, Australia can have multiple and diverse sources of renewable energy scattered across the country powering the grid—solar, wind and wave generated electricity powering Australia. This is not just an investment for the energy grid; the report really looks at an investment for future generations of Australians. Just as this is a reality in other countries, it can be a reality in Australia if we get our act together. On that basis, I commend the report to the House and encourage all people to get a copy and read it.

Debate adjourned.