Tuesday, 7 February 2017
Questions without Notice
My question is for the Minister for Education and Training, representing the Minister for the Environment and Energy, Senator Birmingham. Could the minister please explain how the closure of the Hazelwood power station in my home state of Victoria will affect energy security and affordability?
I thank Senator Paterson, a fierce advocate for energy security and market efficiency, for his question. Mr President, through you to Senator Paterson, the retirement of Hazelwood will lead to higher wholesale electricity costs. The Australian Energy Market Commission estimates this closure will increase household costs across the national electricity market by $78. In my home state of South Australia, prices are expected to rise by $150 as a result of this. The closure of Hazelwood could also further worsen energy security in South Australia, because in 2015-16 Victoria provided some 14 per cent of South Australia's operational consumption.
After Hazelwood closes in March of this year, Victoria will be inhibited not only from its own production efficiently for its state but also from helping South Australia manage peak demands over the summer as Victoria potentially becomes an importer of power itself. This is a risk that South Australia can ill afford, having experienced a statewide blackout on 28 September affecting some 1.7 million people, many for several days. There was a further blackout on 1 December affecting 200,000 customers, and further subsequent to that.
The closure of Hazelwood will make Australia more reliant on intermittent powers as well, which poses two significant challenges for energy security. One of the challenges is it does not generate electricity consistently. Of course, wind and renewables vary in their generation. Wind, for example, in South Australia supplied up to 80 per cent of demand on one day last year and less than one per cent on another. Equally, unlike hydro gas or coal, intermittent energy does not generate a consistent quality of generation. All of these factors create problems for the reliability as well as the affordability of the market—problems we must honestly confront as a nation to have energy security in the future. (Time expired)
I touched on some of those risks in my answer to Senator Lambie earlier. There are real risks. There are risks from different state and territory governments as states like South Australia, Victoria and Queensland—Labor state governments—pursue erratic, poorly considered renewable energy targets of their own as the alternative government in Australia pursues an equally erratic and poorly considered renewable energy target of some 50 per cent, with no costings and no plans.
We do know that Bloomberg New Energy Finance estimated that Labor's plan would cost $48 billion. That is $2,000 for every man, woman and child in Australia or around $5,000 per household. The Grattan Institute estimated Labor's plan would require some 10,000 new wind turbines over the decade. We can see real risks, of course, with the costs, as well as those risks on whether it actually contributes to a secure, stable and reliable energy market, which clearly their policies do not.
Ensuring energy security is one of our top priorities—making sure the lights stay on and that prices are affordable. In the wake of the South Australian blackout, which was estimated to cost some $367 million in lost economic activity and the like, the Commonwealth called an extraordinary meeting of the COAG Energy Council and got agreement to the expert Finkel review that is being undertaken. We also got agreement to a range of emergency measures, including requiring two gas-generating units to be on at all times, constraining the Heywood interconnector at certain times and stricter controls in relation to wind farms.
But unfortunately these measures which might improve reliability come at additional cost, so we are dead keen to make sure we work on measures to drive down costs in the future as well. That is why we have an agreement to abolish the limited merits review process. It will save consumers money. There is already in New South Wales a threat to a $300 reduction in household bills as a result of the gaming of that by some electricity networks. There is also our reform to improve— (Time expired)