House debates

Monday, 4 September 2017

Bills

Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017; Second Reading

6:59 pm

Photo of Pat ConroyPat Conroy (Shortland, Australian Labor Party) Share this | Hansard source

I rise to speak on the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017. What a pathetic contribution from the member for Goldstein. It makes me yearn for the days of Andrew Robb; seriously, it does. I have some news for you, Sunshine: you have been in power for four years and you have done diddly squat. What is the sum total of the announcements of those opposite on energy policy? Study after study; hot air after hot air. I have news for you: the Snowy River announcement is a study, nothing more. You are not cutting rock; it's a study. On top of that, you have to sit down with some retailers; if you hit them over the head with a piece of wet lettuce, nothing changes. There have been four years of talk, but suddenly it's government by dictate.

Let's look at the facts: wholesale energy prices have doubled in the last four years, and that is flowing through to retail electricity prices. Why have wholesale energy prices doubled in the last four years? For two reasons. First, because there is a failure to invest in the next generation of capacity in the market, the next electricity generation. Why aren't people investing? Because there's massive uncertainty around energy and climate change policy caused by this government's dillydallying and the ideological warfare within their own ranks about what their climate change policy will be. This was the fatal flaw in the member for Goldstein's contribution.

It's not about lower prices versus emissions policy. You can't lower prices until you have clarity about emissions policy and you have a serious and credible pathway to reducing emissions. The cost of uncertainty has been estimated by the Energy Council—the peak body for all the generators in the country, not hippies and not mad greenies. This is Origin, AGL, EnergyAustralia, Pacific Hydro, Snowy Hydro—all the big guys that produce the power this country depends on. They've estimated that the cost of the uncertainty caused because the government can't manage energy policy is equivalent to a $50 carbon price. That price hangs around the necks of the minister for energy and the Prime Minister because they can't get the dinosaurs in their party room to agree to a credible energy policy.

The second driver of electricity prices growing in this country is gas. Gas is the marginal generator, so, if we see gas prices go up, we will see energy prices go up. This government have done nothing for four years. Suddenly, they discovered a problem, called in the gas companies and hit them over the wrist, but nothing has happened. Labor, on the other hand, have had a policy around a national interest test for some time that will increase gas supply in this country. All we get from this government is talk and review, not concrete action. There's been one review that has made sense, the Finkel review, and they're whiffing the big recommendation. The 49 other recommendations, like the ones that go to generator reliability obligations and AEMO's role in planning, are really important and will make a contribution, but they don't mean much without the central recommendation, which is about ending the uncertainty about carbon pricing and climate change policy in this country—the Clean Energy Target—and this government can't resolve it because they're fighting amongst themselves.

I'm convinced that Prime Minister Turnbull and the minister know where they need to go, but they can't take their party room with them. We see the member for Hughes, the member for Warringah and the member for Menzies driving this policy debate because they hold the whip hand. We've got constant uncertainty that's impacting on generation right now. On top of that, we've got more talk around the Snowy River scheme, an announcement that's already blown up. The government promised that, if the study came forward with a recommendation, it would be for a $2 billion investment. We had testimony from the department of energy in estimates that it's actually going to be $4 billion, not $2 billion, so it's already doubled in cost in six months, and the time lines have blown out from four years to seven years. So a study came up with something decent to recommend and the time to implement has already blown out from four years to seven years. It's no wonder this government can't manage a chook raffle in a pub; they can't even manage to get a study right. What's the end result of all this? My constituents suffer. With due respect to the member of Goldstein, I'm sure his electorate is a lovely part of Melbourne, but it's very prosperous; it's very middle class. That's great, but I've got the poorest town in all of New South Wales, Windale, in my electorate, and the people of Windale suffer the most. Energy prices disproportionally hit working-class people and pensioners. It's the people in my electorate who suffer the most. That's why urgent action is needed.

I will turn to the legislation, which is around the abolition of the limited merits review. We do need to look at how we treat the transmission and distribution networks in this country. It's undoubtedly true that gold-plating has occurred in the past, and the limited merits review needs to be looked at and abolished. But we've got deeper issues around the rules that govern investment by transmission and distribution companies—the networks, to use a shorthand term.

The rules disproportionally favour capital expenditure over operational expenditure. That's been demonstrated in testimony before the committee I'm deputy chair of, the House's Standing Committee on the Environment and Energy. The incentives are wrong. The incentives favour capital expenditure because it gives them a guaranteed rate of return that is practically risk free, whereas we can make real advancements around investment in operational expenditure using things like demand management to reduce the need for investment in new generation and new transmission infrastructure that will make a real impact in this country. But the rules aren't right for it, so that's why we need genuine review in this area. We do have to be careful in all this that it doesn't lead to policies that disproportionately impact the workers in that sector. We have to be very cognisant that things that tackle capital expenditure have real merit, but if we unintentionally affect operational expenditure that leads to cost cutting and reducing workers to below a safe ratio, that is of real concern. Investment in the transmission distribution network needs to be looked at with a hard eye.

If I can return to my main thesis that, if we're serious about tackling energy prices in this country, we need to solve the climate change and energy dilemma. We need to solve it. We need to put in place concrete policies that will drive the next wave of investment, because we need a new wave of investment. Our generation fleet in this country is very old. The average age of the power stations in Victoria is 44 years, and in my home state of New South Wales it's 35 years. This generation is old and needs to be replaced quite soon.

The Liddell Power Station in the Hunter Valley will close in 2022; Vales Point Power Station will reach its 50-year anniversary in 2028; Eraring Power Station—the biggest power station in the country, proudly on the shores of Lake Macquarie—is due to close, at the latest, in 2034; and Bayswater, up the Hunter Valley, in 2035. Fully a third of our coal fired power stations, which provide 9,000 megawatts of capacity—completely overshadowing the contribution Hazelwood was making in my region—are due to retire in the next 18 years.

The debate should not be whether we need to replace them—because we do need to replace that capacity—but what we replace it with. We can replace it with the most economical generation that also, quite fortunately, happens to be the least emissions intensive. We're actually in a happy position, if we get our policies right, where we can satisfy an environmental goal of decarbonising the energy sector and also get the cheapest possible generation. That's because the economics of the power sector have changed. They've changed over the last few years, and almost everyone recognises that except for the dinosaurs in the Liberal party room.

It is economic fact—and you just have to talk to the generators themselves or the energy analysts or Bloomberg New Energy Finance—and incontrovertible fact that renewable energy is now the cheapest source of new generation in the world, particularly in Australia. It's still the cheapest source when you combine it with firming capacity, whether it's storage or gas-fired peakers. Even when combined with that additional investment, it is still cheaper than new coal-fired power. You can now get a wind farm with contracts being written for a levelised cost of energy at $55 a megawatt hour. Solar farms have been written for as cheaply as $75 to $80 a megawatt hour—and that's the unsubsidised cost of energy. ARENA has testified that you should add in about $20 a megawatt hour for storage to firm up that capacity. You can get new wind farms built in this country with matching storage or dispatchability for $75 a megawatt hour.

What will new coal cost? It will be $150 a megawatt hour. They're not my figures; they're the figures from the industry. Bloomberg New Energy Finance go out and talk to the financiers and say, 'How much will it cost you to build a new coal-fired power station in this country?' They're saying, '$150 a megawatt hour.'

Look at other more advanced technologies that, so far, aren't mature. For example, concentrated solar thermal, which is solar thermal that is purely dispatchable because it has storage with it. The South Australian government has written a contract for $78 a megawatt hour. It's unclear whether that's the true levelised cost of energy, but industry experts say it's not far off. If you're genuinely going use the concept of baseload and you're getting baseload solar for less than $100 a megawatt hour, coal can't compete with that at $150 a megawatt hour.

We need to have a fair dinkum debate in this country. We need to talk about what are the most economical sources of new generation in this country and we need to have an honest conversation with the Australian people. Those on the other side aren't having that conversation. The worst and most disrespectful thing you can do to workers is lie to them, and that is what the government is doing right now when it says, 'You don't have to change,' and that, somehow, the best way of getting cheaper electricity in this country is to build a new coal-fired power station in northern Queensland or in New South Wales. That is economic lunacy. That is not me talking as some sort of environmentalist; it is the market talking. The private sector is not interested in building a new coal-fired power station in this country, because it's not economical. The only reason anyone would even contemplate it would be if this government did something incredibly silly like provide billions of dollars of subsidies or indemnify against a carbon risk for 40 years—a whole list of economically irresponsible actions—to make coal competitive with renewable energy that can be made dispatchable.

What this debate should truly be about is what is the cheapest source of new power in this country. Happily, it is also the most environmentally responsible. I think it is a sad indictment of the modern Liberal Party that it is not embracing market mechanisms to decarbonise our economy and to get investment in this sector. That is what the clean energy target is, a market mechanism. It's not my preferred market mechanism. I would prefer an emissions intensity scheme or another form of emissions trading scheme because I believe, and I think most reputable economists would say, it's more economically efficient. But because the fossils in the Liberals' party room have stood over the Minister for the Environment and Energy and forced him to retreat within 12 hours—as we saw happen in December last year when the draft report of the Finkel review came down—we can't have an EIS and we have to go to a clean energy target. Nevertheless, it is a market mechanism that will help to decarbonise our economy, which we need to do if we are to fulfil our Paris commitments and compete in the next industrial revolution, which will be around clean energy technologies.

But those on the other side just don't get it. They are really no longer the Liberal Party of Mr Menzies. They are truly the modern Democratic Labor Party. They are full of reactionaries who are completely suspicious of markets, who don't understand markets and who are opposed to markets. That is what they are. When they talk about massive new subsidies for coal, when they talk about using NAIF loans, they are about distorting the market. When they reject a carbon price, which internalises a negative environmental externality, which is what greenhouse gas emissions are, they are rejecting the market for Soviet-style command and control. That is truly what it is, and that is the great tragedy of the Liberal Party. It is no longer the Liberal Party; it is the DLP. BA Santamaria would be very proud of them; Bob Menzies would be ashamed of them.

That would be fine if this were an esoteric debate, but it's my constituents who suffer, it's the working class people of Windale who suffer and it's my energy workers at Vales Point Power Station and Eraring Power Station who suffer because of the false hope and the lack of reality that those on the opposite side peddle. That's why we need to have a rational debate in this parliament, but we're not getting it from the government. I am not the only one who is saying it. Every serious actor in the energy sector, if you talk to them, on or off the record, will say that this government is a disgrace and is failing the Australian people because it is chaotic and divided and those in it are interested only in looking after their own jobs.

Comments

Andrew JACKSON
Posted on 22 Feb 2018 8:39 am (Report this comment)

Menzies would eb ashamed of the current Libweral Party but not because they are like the DLP. Menzies admitted to voting for DLP in his latter years. HE was ashamed of Liberal Party long before he died.

Liberal Party rejected Liberalism and became neo-liberal with not just a respect for markets but a near worship of markets.

We need a political system that respects markets when they work and smashes markets to pieces when they do not work.


It should never become necessary to smash a market because we all know well in advance when the market will work and when it will fail. Therefore intervention is needed long before smashing is required.

Retail Duopoly is now in need of smashing but thirty years ago when the Duopoly was being gradually formed it could have been regulated into a free market.

It has now gone too far and Major Deconstruction is required.

A start would be for State Premiers to get Management of Duopoly in and state "Reduce your footprint to no more than 20% in any market in Australia for any product or we will do to you what Roosevelt did to Standard Oil and in addition we will bar all those involved in management of the existing duopoly from ever having a management role in a Public Company again.

Andrew Jackson
apjackson@hotkey.net.au

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