Adam Bandt (Melbourne, Australian Greens) Share this | Hansard source

It's a pleasure to rise to speak to a report into Australia's electricity grid. It's been a long time in the making, but it was a very timely report. It's really the first opportunity that parliament has had to sit back, look and ask: 'What has been the effect of a decade or two of privatisation and deregulation and turning our electricity grid into a market system? Has it worked for people? Also, is it working to help us make the clean energy transition we need to make?' We know from submissions to other Senate inquiries that to meet the targets that were set in the Paris agreements, Australia is going to need to close the equivalent of one coal-fired power station a year between now and 2030 and switch over to renewables. So we've got a big job ahead of us. This was an opportunity to do a bit of a health check and work out whether or not the way we run our electricity system was working. The inquiry didn't look at the generation side of it, how electricity is made, and it didn't look at the retail side of it—how it's sold to us. It looked at all those bits in the middle—the poles and wires and transmission lines that get the electricity to us.

When you think about it, there are not that many times you get a report agreed to by the National, Liberal, Labor and Greens parties, but this report was. What's crystal clear from the report is that all the rules that were set up when the National Electricity Market was established back in the late nineties aren't really fit for purpose any more and haven't delivered us the grid that we need. The inquiry turned up a number of things that I think would probably shock a lot of people in Australia. Most people would probably think that the electricity grid is there as a public good; it's there to get electricity from the generators to us in our homes. They would think that someone is sitting at the top of it and planning to make sure that we're building the infrastructure that we need. And, given that we as consumers have to pay for it in the end, people would probably think you don't get a new piece of electricity equipment being built without someone, from an engineering point of view, having first of all made the decision that it is needed.

It turns out that, in our attempt to turn this natural monopoly into a market, we've actually stuffed things up. The committee found that the process does not work as it is does in the United States, for example, where you have a not-for-profit planner who sits at the top of the electricity system and says: 'Here's where we need to build a new transmission line. Let's go out to the market and find the cheapest way of doing that.' Instead, we have a system in Australia that works the other way around. The big companies that own the electricity networks are the ones that drive the process. They front up to the regulator and say, 'We'd like to build X billion dollars worth of new transmission lines or substations or poles and wires.' The regulator then looks at it and says, 'That seems reasonable; we'll tick it off.' Not only do they tick it off, but they say, 'You've got the right to charge customers to recover the cost of that.' They usually get rates of return up in the order of seven per cent. What we found during the committee's inquiry was that the government could do it at, say, 2½ or three per cent. But what's been happening is that companies come up and say, 'I want to build this piece of kit.' The regulator says, 'Yep, and you can charge twice as much as it would cost for the government to do it, and consumers have to pay the bill.'

So, it's all been driven by these companies who just want to make money—whose interest isn't in the public good or making sure that the electricity system works—and during this inquiry the regulator told us some pretty scary facts. They said, for example, that over a five-year period in recent times we spent about a billion dollars a year on building electricity infrastructure that's only used for about two or three days a year. The regulator also told us that there'd been a massive, massive overspend, and some experts came along and told us that somewhere in the order of $20 billion of unnecessary spending on poles and wires and infrastructure has gone on because of the way that we've set this system up.

Then other witnesses came and told us that so bizarre is this system that, although on the one hand you can get the tick off for spending $20 billion on unnecessary infrastructure, on the other hand, if someone came up now and said, 'I want to build a big transmission line out to Central Queensland to where the sun is shining the brightest; I want to build it out there because I know that, in time, a lot of new companies would like to build renewable energy,' you couldn't get that past the regulator because it wouldn't pass the test.

So, on the one hand, we have a test that encourages people to build unnecessary infrastructure. On the other hand, you can't pass that test if you want to build for the infrastructure of the future, because that doesn't meet the rules. So, we got the rules wrong. We're treating this natural monopoly that should be there as a public good as a market, and we're introducing all these artificialities into it like letting big companies come along and put forward what's in their best interests, not what's in the public's best interests, and then we all have to pay for it. And, secondly, we don't have an independent planner sitting at the top of it.

That's why I think recommendation 16 of this report is so crucial. I remind the parliament that this was a cross-parliamentary recommendation. The committee has said, after looking into how this is working, that what we need to do is looking at giving the operator who runs the energy grid in this country:

… a distribution planning role that enables planning along the National Electricty Market.

Most people would probably think it already exists, but, for the reasons I've already said, it actually doesn't. It is all being driven by companies, not an independent planner acting in the public interest. We said, 'Let's give the operator that power':

In the alternative, the Committee recommends the establishment of a new independent planning body for the National Electricity Market.

This is really fundamental. This is, I would suggest, an admission that the market based approach has not worked and that the committee has recognised that it's time to do what they do in the United States, where electricity is much cheaper than it is here. That is to say that we should be building our electricity infrastructure, our grid, because a central planner has said, based on engineering, 'This is what we need to do,' rather than because a company has come along and said, 'This is how we can make a profit.' If we did that and nothing else, we would do two things. One is that we would massively reduce people's power bills.

The second is—and this is noted in recommendation 16—that we would speed up the transition to renewables. As the recommendation says:

… Australian Energy Market Operator, utilising its current transmission planning functions, consider the establishment of renewable energy zones.

If we had this centralised planning role, we could plan those transmission lines out to Central Queensland and Central New South Wales, out to those places where the sun shines the brightest and the wind blows the hardest. At the moment, our transmission system is essentially a series of copper and aluminium lines out to coalmines. That's just the way it's been built up. What we need to do is shift to make sure we bring on more renewables. If we've got the situation at the moment where building a line out to build more renewable energy wouldn't pass the regulatory test; we need to change the rules.

I want to finish on that point about changing the rules. There was an extraordinary attack on the network operator from Frontier Economics recently, a consultant regularly used by the rule-maker, the AEMC, and various other various political parties. They said the network operator is not doing its job. Well, can I say, that's not borne out by this committee's report.

The committee, I think it is fair to say on any fair reading of this report, can see that the network operator, especially under the new CEO, is doing its best to make this transition happen and is forward-thinking. The committee has made a great deal of implicit criticism, though, of the rule-maker, the very one that often engages Frontier Economics. The rule-maker has been told to lift its game. It has been told—this is the AEMC—that it is not acting speedily enough and that its responsiveness is not up to scratch. If I were the rule-maker sitting down looking at this, I'd take it very seriously. When pretty much every political party in the parliament comes together to say, 'Lift your game', it's a sign something is wrong.

Lastly, I want to express my thanks to the secretariat for their great work and also to the chair. The chair, in particular, went to a great deal of effort to ensure that this was a report that canvassed a wide range of opinions and represented a consensus view. I think, to that extent, that the chair should be commended. I thank my colleagues who participated with me on the committee as well. When you have people from diametrically opposed positions agreeing on some sensible reforms, it is something everyone should take notice of.

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