David Van (Victoria, Independent) Share this | Link to this | Hansard source

In respect of the final report of the Senate Select Committee into Energy Planning and Regulation in Australia, I move:

That the Senate take note of the report.

I'm pleased to share the findings of the energy committee, which was established on 16 December last year to examine the governance, planning and regulation of Australia's energy system. The final report was tabled immediately prior to Christmas on 20 December.

The committee's objective was straightforward—that is, to inquire whether our energy frameworks are generally fit for purpose, capable of hitting decarbonisation targets, while continuing to deliver reliable and affordable electricity. Despite the very tight time limit it was given, just three short months, the committee managed to examine one of the most technical and complex parts of our economy and certainly one of the most important. This was possible because the committee enjoyed intense expert interest and participation, and I thank everyone for their time.

The inquiry received more than 80 submissions, with testimony from over 35 expert witnesses drawn from academia; industry bodies; market bodies; and government, energy and environmental think tanks. I thank all the participants, the secretariat and my fellow committee members for their support.

Our energy system, the national electricity market, as an engine that is simultaneously the largest contributor to our nation's productivity and to our carbon emissions. Through the inquiry, it became evident that the governance and planning of our system are not keeping pace with that system and particularly with the rapid technological shifts that are going on, industry energy needs, consumer cost-of-living pressures and our urgent decarbonisation goals. The inquiry revealed that Australia's energy market has critical weaknesses in governance, which have allowed planning ineffectiveness and economic inefficiency and have meant that the market has not kept pace with our needs. Those weaknesses are historical in origin—that is, what may have been sufficient in a largely coal fuelled system is completely inadequate for the revolutionary transition we need to achieve to power our economy and honour our international agreements.

The energy committee report highlights the disconnect between what is needed to decarbonise swiftly and cost-effectively and what is actually happening in practice. It underscores how our historical frameworks cannot adequately deliver a modern, clean energy system. It has been broadly acknowledged that the inquiry was neither created nor conducted in order to seek or find fault or to score political points. Instead, it provided an opportunity to kickstart genuine reform. Unless it is ignored for paltry political reasons, it should serve as a catalyst to drive important governance and planning change that will set up our economy to be strong, clean and efficient for decades.

The report lays out 22 practical recommendations for reform that address the gulf between what is needed for a swift economic transition and what is actually happening. It underscores how our historical coal focused frameworks cannot adequately deliver a modern, clean energy system. The inquiry found that the development of that energy system has only a gossamer-thin cloak of governance, with only an appearance of oversight and little genuine accountability. This is particularly true of the Australian Energy Market Operator, AEMO, the organisation that has been given enormous powers for the energy transition via its biennial Integrated System Plan, the ISP. That thin veneer of governance gives those charged with the transition just enough cover to maintain the status quo, leading to change at a glacial pace but with accompanying galloping costs—costs that are not borne by governments but passed straight through to energy consumers. By the echoing of the myth that true governance exists, Australians are being asked to keep believing that we are rapidly transitioning to green electricity generation, which, if true, is, I believe, due to households democratising energy, separate from what's happening in the NEM—that is, by making their own choices and installing rooftop solar at world-beating rates.

Governance is not just a word; it is a recognised system of checks and balances to identify, manage and mitigate risks. Why? Simple: to ensure that what should occur is actually what is being done. The argument that governance of our energy system is adequate simply because AEMO says so is a nonsense. The private sector has learnt this the hard way through many failures, numerous royal commissions and government policy eventually catching up. We see the planning phase persist because there is no effective oversight, leaving AEMO effectively unaccountable and given a kind of papal infallibility on what they put in the ISP. AEMO wields considerable authority to plan the enormous amount of capital needed to transition our system, and surely it should be subjected to far more rigorous scrutiny, not less.

It is noteworthy that, after four ISPs since 2018, there is little to show for it. Instead the ISP has, in effect, delivered very little of what AEMO has said was required. While they may have started out under different names, megaprojects such as VNI West, HumeLink and Marinus Link have not even started. Even Project EnergyConnect has only been built to the South Australian border, leaving most of the line yet to be built through New South Wales.

Questioning of these projects has got louder and louder as the capital costs and timelines continue to grow exponentially. We all know that megaprojects of all types have a poor track record of both timeline and budget. Current ISP project cost forecasts have blown out to such an extent that surely, at some point, the projects should be withdrawn or alternatives sought. Instead, each ISP argues the case for them to proceed, regardless of whether they still make economic sense. At some point, sense should prevail and alternatives developed. That point may have already passed. But without appropriate oversight and accountability it is not possible to know.

If the increased costs are deemed acceptable by those guiding the NEM, perhaps they should be transferred to government's balance sheet and be subject to the scrutiny and oversight that budgetary processes in parliament require. Greater oversight would mean that transmission and other decarbonisation projects would undergo transparent evaluation using consistent and reliable economic methodology.

I want to be very clear. I'm not against building transmission. We will need a great deal of it. However, the current focus on interregional interconnectors brings significant opportunity costs. It incorrectly frames the problem as geographic—that is, moving power from one state to another—when the real challenge is a temporal mismatch, a mismatch between midday supply peaks and late-day demand surges. Expensive interconnectors do not solve that timing mismatch. For example, one of the simplest ways to make better use of our existing energy generation is by shifting electric hot-water heating to the middle of the day, when we've got a surplus of solar power. But only one or two states have even sought to address that.

The first recommendation of the committee was for a comprehensive review by the Productivity Commission. The Productivity Commission last did a review in 2013, so it's very much time that it did one again. It could rectify misplaced priorities and re-energise investment signals in areas such as storage and demand management. A more equitable model would drive innovation in storage and demand-side management, spurring faster decarbonisation while controlling costs.

In conclusion, I look forward to the government's response, where we see a genuine acknowledgement of the problem, a genuine desire to resolve Australia's energy market challenges and real action taken to develop a relevant and futureproof energy system. I seek leave to continue my remarks later.

Leave granted.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

At the outset I want to congratulate Senator Van for pursuing this initiative. It's a very timely review. I think Australians want answers as to why they are paying so much for electricity in a land blessed with so many energy resources. We should have if not the lowest then some of the lowest energy prices in the world, given the high-quality coal, the gas, the hydro in some parts of our country, and the solar and wind assets we have, too. We have all this stuff, but we now suffer some of the highest power prices in the world, certainly much, much higher than in like countries, like the United States and Canada, who have similar resources to our own. I didn't mention uranium. I will mention uranium later. We've got lots of that, too.

So, I congratulate Senator Van. It's a shame the inquiry was not done earlier in this parliament's time. It's a shame it did not go for longer. I think we could have asked more questions and had more hearings on this—lots of follow-up questions. While, as I said, I think Australians want answers on this topic, I'm not so sure we got the answer about why we're paying so much for energy in this country from those who are running the system today.

I support the recommendations Senator Van has gone through in his report. It's timely to do some more reviews on this. Certainly the so-called integrated system plan needs some reform, and I want to add further to that. I had some additional comments in the report that cover a range of topics, but I would sayat the outset that the integrated system plan—the ISP, as it's become known—is broken. It is broken, and either it needs to be radically fixed or we scrap it all and start again.

The ISP is a relatively new phenomenon. It's not something that's been with us from time immemorial. It effectively came out of what became known as the Finkel review, which followed the statewide blackout—the 'black event'—that occurred in South Australia in 2016. The Finkel review recommended some kind of coordinated planning document. We've done stuff like this before, but the idea was to plan our transmission network in a coordinated way to reduce costs for Australians. Well, on that measure of reducing costs, the ISP certainly hasn't done that.

Of course, we're getting up to nearly 10 years since 2016 and the South Australian blackout, and all that's happened is that our power prices keep going up and up, and every summer—and winter too—we seem to have an increasing number of blackout warnings. Sometimes there is loss of power to people. We do not have a reliable or an affordable system, and it's not working for Australians.

One of the reasons why the ISP, or this planning process, is failing is that it has been corrupted and co-opted by politicians. It was meant to be somewhat independent, with just a bunch of engineers—boffins—running the numbers and presenting them to their political masters. Instead, what's happened is that the ISP now operates under a number of severe constraints imposed on them by the politicians, which effectively makes their results useless in comparison to other policies.

If you follow the public energy debate, you'll now quite often see and hear people like Minister Bowen and even some of the energy regulators, who seem to have drunk the Kool-Aid, saying that the ISP shows that the current proposal, to move to an almost exclusively wind and solar renewable system, is the 'least cost pathway'. They often use that exact term: the 'least cost pathway'. The average Australians listening to that, along with senators from all the sides involved in this debate, seem to operate under the confused belief that somehow that means the pathway the regulators have chosen, the ISP that the politicians have decided to pursue, is the least costly of all options—that it actually has the lowest costs of all the options. In my report, I quote Minister Bowen in his press releases where he baldly says, 'The ISP shows that my plan for wind and solar is the least cost pathway.' That's not what it means at all. If you read the footnotes of the report—and as all the regulators admitted to Senator Van's inquiry—that's not what they do at all.

What they do is assume that in 2030 we'll have 82 per cent of our grid powered by renewable energy. They shoot first and then go back to ask questions about how to get to that 82 per cent. It would be right and correct for Minister Bowen to say, 'It's the least cost pathway to get to my target of 82 per cent.' That's what they're trying to show. It's not right or correct to leave off those words, to say 'it's the least cost pathway' and leave it there and put a full stop after it—as Minister Bowen and Mr Westerman, the head of the Energy Market Operator, regularly do in our nation's media.

I didn't make it a formal recommendation, but my first finding was that it would be good if those in positions of authority in our energy debate accurately described to the Australian people what they do. These are misleading statements at best. They are misleading to the Australian people, and what is clear from the evidence to our committee is that people like Mr Westerman know they are misleading, yet they continue to put out there the idea that somehow the work they are doing shows that 82 per cent renewables by 2030 is the right idea and that net zero emissions by 2050 is lower cost than coal. It does not show that at all.

My second recommendation is that we do a proper report. Let's do it. Let's change the ISP, so that we do evaluate what it would look like if we removed the 82 per cent renewables by 2030 target. What would the costs be if we did that? What transmission lines would need to be built? What trees would need to be bulldozed? What people's properties would have to be run through? Let's look at that, and then we can have a proper comparison between two different alternatives. Let's run a scenario with nuclear. That's not done under the ISP. The CSIRO does not do that. They do not do a total system cost analysis of nuclear power. Let's do that in the ISP. What is the government afraid of? If they're so confident in what they say regularly in this place and out in the media—that nuclear's so expensive—then run the numbers. What have you got to be afraid of? Let's make that reform.

On that, we should remove the nuclear ban. I've only got a few minutes left, but it is absolutely nonsensical for the country with the largest uranium reserves in the world to continue to ban a form of power that the rest of the world is rushing towards. They're rushing towards it, so why are we banning it?

Murray Watt (Queensland, Australian Labor Party, Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

But you said it was a political tactic!

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

Minister Watt, I'll take that interjection. I just want everything, mate. I want everything. I'm one of the few voices in this debate to say that I support solar and wind. Let's build some of that. Let's build coal. Let's build uranium. Let's build nuclear. Let's build gas. Build it all! If you want lower energy prices, let's have it all. We've got it all; let's use it all. We're happy to export it to other countries. We export our uranium to other countries, but we ban it for ourselves. We export our coal to other countries; let's use it ourselves.

The other thing I'll say in response to Minister Watt's objection is that we need to get over the idea that one form of power is going to solve every problem. This idea that it's one and nothing else—that it's renewables and nothing else or that it's nuclear and nothing else—is ridiculous. We have a complex, detailed industrial economy. We still have one—just! And different types of industry need different types of power. Some need coal-fired power. Those aluminium smelters up at Gladstone that Minister Watt and his government are trying to subsidise, when we just used to run them without subsidies, need a certain type of power. If you want to have data centres—data centres are not even in the ISP; that's another thing that needs to change—then data centres need a very reliable form of power. They're not going to be run on solar and wind. We can have different horses for different courses. We do not have to tie our star to just one naive set of power solutions.

We should get rid of the target of 82 per cent renewables in 2030. That is a constraint that we're not even going to meet, and, clearly, that's coming out now in the public domain, so let's remove that constraint. We should move to a technologically neutral capacity investment scheme, which goes to what I was just saying. That was the recommendation of the Energy Security Board a number of years ago, but, again, it was co-opted by the political process through the ministerial council on energy. Ministers have removed the ability for us to use our coal and gas to firm up the system because they're ideologically opposed to this, and that is making everything more expensive. That's the core reason why we're all paying more for power—we're removing parts of our electricity system which are cheap, which are reliable and which can serve a purpose, for those varied demands that people have, and we're left with something that doesn't work. And, when things don't work, things start to break. It starts to become more costly to try and gaffer tape things together. People have to run diesel gen sets all over the place now. It is absolutely absurd for a country like us to do that.

Finally, we should have a proper review of the net zero emissions goal. Why haven't we done that? New Zealand did it. They actually published it. They still went with it for some reason. They published it. Their own studies, as a New Zealand government who supported net zero, showed that wages would fall in New Zealand by eight to 28 per cent. If that were in Australia, that would be $7,000 to $28,000 a year. That's the cost of net zero. That's their figure. We've never done it. Why don't we do it? Again, what have people got to be afraid of? If you really support this stuff, do these reviews and show the Australian people the figures, and they might be able to understand why we're suffering under high power prices. I seek leave to continue my remarks later.

Leave granted; debate adjourned.