Interview on ABC North and West, Late Afternoons with Sarah Tomlinson
Topics: National Energy Guarantee
Sarah Tomlinson: Good afternoon, keeping the lights on. That’s the catch phrase today. Prime Minister Malcolm Turnbull has this afternoon unveiled the Coalition Government’s new energy policy. Prior to the announcement, former Prime Minister Tony Abbott let the cat out of the bag, tweeting ‘progress at today’s party room, the clean energy target has definitely dropped’, let’s find out what sort of national energy guarantee we’re getting for this deal. Liberal Senator for South Australia, Simon Birmingham is here to tell us, good afternoon.
Simon Birmingham: Good afternoon Sarah and good afternoon to your listeners.
Sarah Tomlinson: What’s the guarantee of this guarantee, and how much can we take to the bank?
Simon Birmingham: Sure, so the energy guarantee that has been recommended by essentially all of the heads of Australia’s major energy regulation bodies, is to put in place a guarantee that has two components, a reliability guarantee and an emissions guarantee. So what it seeks to do is to set Australia up so that we can meet our international emissions reductions obligations, but do it in a way that doesn’t sacrifice the reliability of the energy grid, and now of course, South Australian’s in particular I know in parts of regional SA and listeners were very much affected by the blackout last year, and since that time we have really come to learn about the impact of intermittent energy sources, wind or solar which aren’t always available versus those of despatachable energy sources be that coal or gas, but equally hydro, battery storage or otherwise that you can put into the grid at a flick of the switch. Really what this guarantee seeks to do, is say here is pathway for us to meet our emissions targets and do it without sacrificing reliability, and most importantly for listeners then you’re not only keeping the lights on, but you’re also doing it in the most cost effective manner to keep the prices down as low as possible.
Sarah Tomlinson: What did you believe didn’t work about the former cleaner energy target?
Simon Birmingham: So the clean energy target was one of 50 recommendations the Chief Scientist put forward, of those recommendations, 49 have been adopted, one of them was the clean energy target, another of them was to establish the National Energy Security Board, we’ve asked this energy security board to look at the options that were available and in the end this board has recommended an alternative approach which can be done at less cost. The problem with the clean energy target was that it didn’t address reliability directly and it came at a higher cost. The proposal we’re endorsing today is one that addresses reliability, consistency in terms of knowing you have the power when you need it, at the same time through the same mechanism, using the same energy markets, as you address your emissions targets, but also does so at a lower cost than a clean energy target would have.
Sarah Tomlinson: We heard in the news just a moment ago that this report which had been recommended by Australia’s Chief Scientist Alan Finkel, it’s the clean energy target I’m talking about here, when you know when asked about this new policy he said its fine, I wasn’t sure whether fine was through gritted teeth, or what’s his thoughts on it?
Simon Birmingham: Alan Finkel has been quite positive in terms of his reaction, acknowledging that as Chief Scientist there are often different ways to skin a cat, what he’s acknowledged is that this policy, recommended by the body that he recommended be established, has actually delivered a mechanism that can meet our emissions targets, can guarantee reliability, consistency, availability of energy, and so at least cost and of course for households, consumers, everybody, struggling with electricity bills, it’s the least cost aspect that matters most.
Sarah Tomlinson: What are you going to expect from the power companies?
Simon Birmingham: So we will be expecting under this guarantee that energy retailers will have to deliver a certain level of reliability in terms of the energy that they are purchasing. What does that mean? It means they have to guarantee a certain portion of the energy they are purchasing from energy generators or wholesalers is despatchable. That it can be there whenever it’s needed, so if the wind isn’t blowing or the sun isn’t shining, you’ve still got sufficient energy to call upon at a given point in time. Simultaneously we will be expecting them to chart a pathway towards 2030 that meets Australia’s international emissions reductions obligations. We will be doing that at the same time so that you’re not meeting emissions obligations at the expense of or sacrificing reliability, but you’re in fact attracting the generation of energy in the same way at the same time, using the type of market contracts that energy retailers already use to secure their energy.
Sarah Tomlinson: And that target for emissions is still between 26 and 28 per cent?
Simon Birmingham: The Turnbull Government’s target that was established by the Abbott Government is between 26 per cent and 28 per cent reduction. By 2030, I know the Labor party has proposals out there for a much larger reduction some 45 per cent reduction, that of course would come at a much much greater cost, an estimated $60 billion bill, whereas the target we have already put in place is the 26 per cent target, is already on a per capita basis, one of the largest targets in the world.
Sarah Tomlinson Let’s take a look at those back-ups’ that the power companies are now going to have to rely on. It will be a mixture of coal, gas, batteries and pumped hydro I believe, is that still a realistic reliance on coal given what we have experienced in South Australia?
Simon Birmingham: Well this is a very realistic proposition because firstly the companies themselves will make decisions on how much is coal, how much is gas, how much is other storage. Of course over the next few years, we’re going to see brought online in particular the snowy hydro 2.0 program which is a major new pumped hydro initiative and just to give a sense of the scale of that, that’s going to generate around or provide for around 2000 megawatts of capacity into the national electricity market, that is compared to the much vaunted battery that Jay Wetherill has talked about which is only 100 megawatts, so you’ve got 2000 megawatts versus 100 megawatts which will be a major new source of despatchable, reliable energy that can help to achieve not only the reliability part of this but also because it’s hydro it also achieves the emissions part of that. In addition, on a smaller scale, but importantly for your listeners is the Cultana project, a similar pumped hydro project, just outside Whyalla that again can provide despatchable, reliable, zero emissions energy.
Sarah Tomlinson: Senator Birmingham let’s take a look at two questions that everybody will be asking, the first is, the plan announced today will apparently save people $115 a year, where does that figure come from?
Simon Birmingham: So that is the estimation of the Australian Energy Market Commission, there will be further modelling that is undertaken in that regard. So that is there initial estimation that this will make some savings, now that is not the only saving though that is being delivered, because the Turnbull Government is already taking action in a number of ways, we’re making retailers transform the way they communicate with customers and driving people onto cleaner energy deals, we’ve taking action to drive down gas prices which has brought the gas spot price down which will flow through into lower cost energy. We’ve taken action in terms of the way network distributions works, the polls and wires, to stop those companies gaming the system and driving prices up. So there are a range of other things we’ve done to try and bring prices down as well, but importantly compared to a clean energy target, or compared to doing nothing at all, the proposal we’ve got today gives the cheapest, lowest cost pathway forward.
Sarah Tomlinson: The other one is about scrapping subsidies for renewables, so does a homeowner who was thinking of adding solar panels, will they miss out at all when it comes to these or are we talking bigger companies, bigger subsidies here?
Simon Birmingham: No, the renewable energy target that is currently in place, is in place in terms of meeting a target by 2020. 95 per cent of that target has already been met and will be clearly met well before 2020 in terms of contracted capacity to do so. There’s no expert who now seems to argue that there is a need to continue or extend that type of target but in fact if you want to get the lowest cost way to achieve our emissions targets it’s through the type of market approach that we’re taking here, with the electricity guarantee, putting in place reliability guarantee and putting in place emissions guarantee, all of which will structure the energy market, it will see continued growth in renewables but of course those renewable energy sources, those solar panels that people have put on and increasingly battery storage are all coming down dramatically in price, and as they come down in price, that of course means there is less need for any type of incentive or market distortion to enable consumers to access them.
Sarah Tomlinson Do you feel that your Government is adequately assisting with climate change?
Simon Birmingham: We are as I said before taking by global standards on a per capita basis or GDP basis, some of the toughest actions in the world in terms of our emissions reduction targets. This is a clear pathway for us to meet those targets and it will see growth in renewable energy but importantly it will see growth in renewable energy and lower emissions energy occur without it being at the expense of reliability and certainty that when you flick the switch the power comes on.
Sarah Tomlinson: Liberal Senator for South Australia, Simon Birmingham is with us, we’re talking about the national energy guarantee announced today and just finally Senator, in his speech our Prime Minister Malcolm Turnbull mentioned keeping the lights on, is that a dig at your home state by any chance?
Simon Birmingham: Looks it’s a point of reality, that of course yes SA has suffered the state wide blackout, South Australia and other states have seen some brown outs or load shedding activities and the evidence is clear that unless we have some type of action taken around reliability, there will be more of that in the future, and that’s the last thing we want to see because frankly nobody will invest in our state or our nation if they don’t have confidence that the energy is there for their businesses to operate.
Sarah Tomlinson: Senator Simon Birmingham, thanks for joining us this afternoon.
Simon Birmingham: Thanks, so much Sarah.