Josh Frydenberg (Kooyong, Liberal Party, Minister for the Environment and Energy) Share this | Hansard source

I thank the member for Indi and acknowledge her constructive contribution to this debate about energy policy in this country. As you know, it has been a political football for more than a decade now. It really has been two opposing sides taking their positions, and there has not been a lot of meeting in the middle. Now, with the Finkel review, I think we have a real opportunity to consider the recommendations of an expert panel across a whole series of areas when it comes to properly integrating energy and climate policy in the hope that we can deal effectively with that trilemma we face: energy security and energy affordability as we transition to a lower-emissions future.

The National Electricity Market, which has been the foundation of our energy system everywhere except Western Australia and the Northern Territory, has its origins in the late 1990s. It is more than 5,000 kilometres in length from Port Douglas in the north through to Port Lincoln and across the Bass Strait to Tasmania. It is a very powerful network and one of the longest interconnected networks in the world. But what we have seen in our electricity market over the last decade is retail prices, the bills that households have to meet, double. When it comes to the public's energy bill, there are a lot of different components and therefore lots of different reasons for this increase in price. Fifty per cent of the bill is made up of network costs: transmission and distribution. We have seen, particularly under the time of the Labor government, the infamous gold plating, which saw network companies make a lot of money as the network was built out in the expectation of higher demand which never eventuated.

The coalition government under Malcolm Turnbull is trying to rein in network costs by removing the rights of limited-merits review from original decisions of the Australian Energy Regulator. Just recently we saw the public in New South Wales short-changed by $3 billion as a result of the successful appeal to the Australian Competition Tribunal and then to the Federal Court on behalf of the networks against an original determination of the AER. We say that is not good enough.

Another component of the electricity bill, about 12 per cent, is retail. The Turnbull government has announced an ACCC review into the retailers, their margins and the way they operate. A recent report of the Grattan Institute said that in Victoria alone consumers could be more than $250 million better off if there were a more competitive sector in retail. In fact they found that the margins in Australia, or across Victoria, were some three times what they were for comparable businesses in the United Kingdom; or, indeed, that these margins in this retail sector of electricity were significantly higher than in the motor vehicle sector, the fuel sector or the food sector. We are determined to rein that in.

Generation costs are about a third of the bill. They have gone up dramatically over the last four to five years. There are three reasons why wholesale costs have gone up. They have gone up because gas prices have nearly tripled in the past five to six years. We are now seeing gas customers being quoted $8 to $10, or indeed $12 a gigajoule, whereas historically, in 2013-14, it was about $3 to $4 a gigajoule. As a result of coal-fired power stations closing—we have seen nine coal-fired power stations close in the last five years—we have seen gas play a much greater role in setting the price of electricity. In 2017, gas hit the price of electricity about 24 per cent of the time, which is more than double what it did back in 2004. With higher gas prices, and secondly with coal-fired power stations closing, we are also seeing higher electricity bills.

The third reason why we are seeing higher wholesale prices is because of the market uncertainty. The last coal-fired power station that was built in Australia was Kogan Creek in Queensland, in 2007. The last gas-fired power station was in Victoria, at Mortlake, in 2010. One of the factors that comes up constantly when you speak to generators is the lack of regulatory certainty, and that, they say, is making them reconsider or abandon investment decisions. That is why Dr Finkel has talked about a clean energy target as a possible solution.

When it comes to gas we have announced that we will be introducing export controls. We are also encouraging the state governments to lift their moratoriums and bans in order to get more gas out of the ground. If we can get more gas supply then that will of course lower the price. So we are dealing with generation; we are dealing with retail; we are dealing with the network costs—they are part of our plan.

At the same time we recognise there is a very significant transformation taking place in the energy system, with a greater penetration of renewables, particularly intermittent power, namely solar and wind. But, where a wind farm may generate power 35 to 40 per cent of the time and a solar farm about 20 to 25 per cent of the time, you need battery storage. You need backup power. That is why one of the recommendations out of the Finkel review is so significant: it is going to encourage the renewable players to provide their own storage. That storage could be gas, pumped hydro, batteries or, dare I say to the Greens, diesel generation.

A point about pumped hydro is it has been a real focus for Malcolm Turnbull and his team. For the first time we have a prime minister who is putting storage at the top of the energy agenda, and I think that cannot be understated.

We understand that the public are facing high electricity bills. Indeed it is the most vulnerable consumers in our economy who are doing it the toughest. As a proportion of their disposable income they spend up to five times more on energy than higher income earners. That is why what has happened in South Australia, with the whole system going black and South Australians facing the highest electricity prices across the NEM, is such a tragedy—simply because a Labor government under Jay Weatherill did not put in place sufficient planning for a 50 per cent renewable energy target. He welcomed particularly wind but also solar to his state without understanding the need to provide the frequency control and ancillary services, the inertia and the storage that is required to stabilise the system.

In Queensland we have been very critical of the Palaszczuk government because their generators, Stanwell and CS Energy, have not provided sufficient power into the system consistent with the amount of capacity that they have. There has been gaming of the system, and as a result it is the consumer who has been short-changed. Even though the balance sheets of the state Labor government have improved as a result, it has been at the consumer's expense.

We call upon the Queensland government to do more to ensure that electricity prices can be lowered in Queensland. We call on the Weatherill government to do the same. I would say to all the Labor governments that have adopted these reckless renewable energy targets: join up to a federal plan to see a consistent, national approach—a holistic approach—as opposed to lots of different schemes in lots of different states pursuing an ideological purpose.

This is where Dr Finkel I think has made a real breakthrough. He has emphasised that the focus should be not so much on the inputs but on the outputs: how do we get to a point of lower emissions consistent with our Paris target of a 26 to 28 per cent reduction by 2030 while at the same time ensure a more stable system—not a repeat of what we saw in South Australia—and of course more affordable power?

The people of Australia were short-changed by Bill Shorten, Julia Gillard and Kevin Rudd when they saw electricity prices double under the Labor Party when they were last in office from 2007 to 2013. We are determined to right the wrongs of the past and to ensure that we focus, as the Prime Minister has said, on engineering and economics to get a better, fairer, affordable and secure power system for all Australians. (Time expired)

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