Excerpt from Question Time transcript 28 February 2017
Mr MARSHALL ( Dunstan—Leader of the Opposition) (14:20:04): My question is to the Minister for Mineral Resources and Energy. Does the minister stand by his claims made on 9 February, and repeated elsewhere, that ENGIE’s second unit at its Pelican Point plant had gas and was able to enter the National Electricity Market?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:20:18): On Wednesday, the day of the load shedding, ENGIE wasn’t directed on.
The Hon. A. KOUTSANTONIS: The next day, they were directed on and they had gas and they were available and they produced electricity. Members came into this house and asked me questions about whether I supported my statement that they could be ready within an hour, instead of the four hours that ENGIE had claimed, yet the transcripts, and of course in the AEMO evidence that they released, showed that ENGIE could start within an hour.
Everyone knows that ENGIE owns the Hazelwood coal-fired power station. Everyone knows that ENGIE are closing that power station in Victoria. Everyone in the industry also knows that ENGIE are making preparations for the possible return of that second unit. They are in negotiations for gas. They are in negotiations. There are engineers working on making sure that plant could operate. In fact, the evidence that that plant could operate wasn’t directed on. It was members opposite trying to play games and play tricks, quite frankly—
Mr GARDNER: Standing order 98: the question was direct. The minister is not answering it: he is debating.
The SPEAKER: As a matter of fact, the minister did answer the question early on and his remarks now are superfluous.
Mr MARSHALL ( Dunstan—Leader of the Opposition) (14:21:49): To clarify, can the minister explain to this house how he reconciles his commitment to his statements on 9 February with the representation made by ENGIE executives at the Senate inquiry which state:
ENGIE in Australia is not able to make the capacity of the second unit available to the market given there are no firm gas supply arrangements in place to operate this unit. Under t he National Electricity Market r ules, generators cannot bring a plant into the market if supply cannot be guaranteed. In the case of the events at the start of the week of 6 February, the second Pelican Point unit has no gas contracts in place which means E NGIE in Australia is unable to guarantee supply to the market.
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:22:43): That just shows you how broken the NEM is because as—
Mr Marshall interjecting:
The Hon. A. KOUTSANTONIS: I have said two words, sir—two words—and the Leader of the Opposition immediately interjects and you watch him do it, sir. I have to say that I just got up to make a point—that that just goes to show you how broken the NEM is that you have a generator that says it can’t turn on, yet the evidence shows that it did turn on. We are working in a system that says that, unless you have gas contracts across—
The SPEAKER: The minister will be heard in silence. The leader has been warned that his next utterance will see him ejected.
The Hon. A. KOUTSANTONIS: We are witnessing a national market that runs through this farce, where they say that you can’t bid into the market unless you have these other things operational, but we can direct you on, and all of a sudden those things that you need to be operational are ready to go. It is a farce. The national market is broken. We had spare capacity that could have been directed on to avoid load shedding and the national operator decided not to turn that on, yet the following day they were able to do so. What does that tell you about the preparation of the national operator? What does that tell you about the management of the National Electricity Market? It’s broken and, in fact, it’s so broken—
The SPEAKER: The member for Chaffey is on a full set of warnings.
The Hon. A. KOUTSANTONIS: It’s so broken that 90,000 people were shed who didn’t need to be shed. They shed more than they needed to. The private operators of our own networks here had a software glitch that took more people off than were necessary, yet members opposite are trying to blame us. This is becoming a farce. The national market is broken. It needs to be reformed.
The SPEAKER: The member for Adelaide is called to order.
The Hon. A. KOUTSANTONIS: People are passing around lumps of coal as if it’s a solution. This needs serious reform. This needs things like an energy intensity scheme. It needs rule changes. It needs engineering solutions.
The Hon. A. KOUTSANTONIS: This needs a complex debate—
The SPEAKER: The member for Adelaide is warned.
The Hon. A. KOUTSANTONIS: —not slogans and shouting by members opposite, who didn’t even take a resources and energy policy to the last election. So, don’t lecture us.
Mr MARSHALL ( Dunstan—Leader of the Opposition) (14:25:00): That’s right, sir. We will stand by you. My question is to the Minister for Mineral Resources and Energy. Does the government agree with comments made by prominent Australian entrepreneur Dick Smith when he publicly stated this morning in the media that, as a businessman, ‘the only reason I can see why we can’t compete with France is the very high power costs in South Australia’?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:25:23): I will go further than that. The AI report today is showing that prices across the country are becoming unmanageable.
An honourable member: He didn’t talk about across the country.
The Hon. A. KOUTSANTONIS: I’m going further. Basically, the AI Group—Innes Willox, not exactly a great friend of the Labor movement—has put out a report saying that wholesale prices are going up nearly 47 per cent in New South Wales. Safe, base load coal generation, cheap and affordable, has a 47 per cent increase. The NEM is broken. In Victoria, the increase is 52 per cent for brown coal base load. The NEM is broken. Prices are increasing, yet members opposite want to blame renewable energy. They want to blame the wind and the sun.
The SPEAKER: I think the Treasurer has fully canvassed that line of argument.
The Hon. A. KOUTSANTONIS: Thank you for your advice and help, sir; it is greatly useful. I think what industry is saying across the country is that the NEM is so fractured and so broken that prices are increasing in Queensland, they are increasing in New South Wales, they are increasing in Victoria and they are increasing here. They are too high. They need to come down, and it needs national leadership because this is not a state issue: this is a national issue. Why is it that, after coal has been championed for so long, we are seeing price increases of 47 per cent in New South Wales? If coal is so cheap and so reliable, why has its price increased by 47 per cent?
An honourable member interjecting:
The Hon. A. KOUTSANTONIS: Exactly. If it’s so reliable, why was one of the largest employers, the largest load user in New South Wales, shed? This is a national issue that needs a national response. In the absence of national leadership, we will act.
Mr MARSHALL ( Dunstan—Leader of the Opposition) (14:27:19): My question is to the Minister for Mineral Resources and Energy. Following BHP and Adelaide Brighton Cement’s announcements last week that they have lost $137 million and $13 million respectively from electricity outages in South Australia, can the minister advise the house of the total economic loss to South Australia from the six major power outages we have experienced since May last year?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:27:44): It is very hard to know what insurance levels a lot of these companies have and what they are claiming back from their insurer, so it is very hard to quantify the economic loss.
Mr van Holst Pellekaan interjecting:
The SPEAKER: The member for Stuart is warned for the second and final time.
The Hon. A. KOUTSANTONIS: All the interruptions to power, bar the load shedding, which is also indirectly a result of this, have been related to weather. That is the inconvenient fact nobody wishes to acknowledge. Whether it’s storms, whether it’s wind, whether it’s lightning, whether it’s trees taking down powerlines, whether it’s inaccessible land to restore power quickly or it is a lack of available supply being directed on in times of high demand because of heat, it is weather. It is not intrinsically a problem of generation.
The problem we have in the National Electricity Market is that there is an oversupply of generation. That oversupply of generation is not coming on when we need it. We have an oversupply of gas-fired generation to meet our average demand. We have an oversupply of other forms of generation.
Mr MARSHALL: Point of order, sir: I ask you to bring the minister back to the substance of the question, which is the total economic loss to South Australia.
The Hon. A. KOUTSANTONIS: I’m getting to that. When you have this imbalance in the NEM, you get perverse outcomes. The perverse outcomes are these: price spikes. Those price spikes cause harm to a lot of our manufacturers, and that is occurring across the country.
Mr MARSHALL: Point of order, sir: I ask you to bring the minister back to the substance of the question, which was economic loss from the intermittency. It had nothing to do with high prices.
The SPEAKER: I think talking about the cost to business—
Mr MARSHALL: But this was talking about economic loss from the intermittency issues, not the high cost issues.
The SPEAKER: I think that’s enough interruption. We will let the minister go for the remaining time.
The Hon. A. KOUTSANTONIS: It’s gone now from interruptions to intermittency. Apparently, intermittency is causing blackouts. Well, please show me an example of where intermittency has caused a blackout in South Australia. Again, the Leader of the Opposition needs to get a briefing, actually understand the language that we are using, instead of sitting there—
The SPEAKER: The minister will return to the economic cost of interruptions.
The Hon. A. KOUTSANTONIS: There have been no intermittency issues with electricity in South Australia. The issues that we have—
Mr Marshall: What do you call them?
The Hon. A. KOUTSANTONIS: Well, what do I call it when a tornado rips down a powerline? I call it an act of weather. What else is it? Did the wind farms get out and rip down the powerlines?
Mr Marshall interjecting:
The Hon. A. KOUTSANTONIS: Those blackouts—
The SPEAKER: Leader!
The Hon. A. KOUTSANTONIS: Those blackouts—
Mr Marshall interjecting:
The SPEAKER: Leader!
The Hon. A. KOUTSANTONIS: No government can guarantee that you can predict the weather to a point where you can build infrastructure that will never ever take away supply from industry. It is impossible. There is no jurisdiction in the world that operates in that way. If members opposite are talking about requiring our infrastructure to be at a level where power is guaranteed at 100 per cent, the cost of business will drive them out of the country.
Mr VAN HOLST PELLEKAAN: Point of order: I ask you to bring the minister back to the substance: what was the cost to the economy of the blackouts?
The SPEAKER: The minister appears to have finished.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:40 :03 ): My question is for the Minister for Mineral Resources and Energy. Does the minister stand by his claim that we have sufficient electricity generation capacity within South Australia? With your leave and that of the house I will explain.
The SPEAKER: No, we have an understanding, in order to maximise the number of opposition questions, that there won’t be explanations. Minister.
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:40:24): I do stand by the remarks that I have made in this place and in many other places that the problem with the National Electricity Market is not available generation; it is its dispatch. There is an oversupply of generation in this state for average demand. There are times of peak demand across the country when places like New South Wales are short, Victoria can be short, South Australia can be short, and the reason they are short is that these types of high demand come around maybe once or twice at most five times a year.
The idea that you would have 3,000 megawatts continually operating in that kind of marketplace wouldn’t be economical. The question is: how much generation do you have sitting idle in those periods when you don’t have that peak demand? Again, this is a complex matter for the National Electricity Market. How will investors invest in peaking generators and other forms of generation like battery and other things that come on and are there to meet peak demands that come along rarely? That is the problem with the National Electricity Market: it does not incentivise it.
The way that it attempts to incentivise it is through its pricing. You can have a price of up to negative $1,000 where you pay to take electricity up to $14,000 a megawatt hour, so you send price signals out into the market and those price signals are there to try to help recoup some of the holding costs of those generators that are sitting in the NEM. But in any one day there is sufficient supply of electricity to meet our demands. The problem we have is the way that the NEM is being run is not optimal for the profitability of our local generators. It is not conducive to their making money.
We need to change the system. The question fundamentally is this: do you prefer South Australian gas or Victorian coal? On this side of the house, we support South Australian gas. I know members opposite have an aversion to gas. They have an aversion to South Australian gas. They would much prefer to support coalmines in Victoria—
The SPEAKER: Point of order, member for Morialta.
Mr GARDNER: The minister is debating: standing order 98.
The SPEAKER: He is. I uphold the point of order.
The Hon. A. KOUTSANTONIS: We make no apology for doing everything we can to incentivise local generation, whether it be wind, solar, other forms of renewable energy and gas. The reason we incentivise that is so that we can have as much available thermal generation and renewable generation as possible to help us transition to a completely carbon-free future. The only way that you are going to transition to a carbon-free future is to have gas as that transitional fuel, and the only way that you can have gas as the transitional fuel is through a liquid market. Moratoriums and bans do not work, and members opposite have finally got a mining policy: they are going to ban gas. The member is nodding.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:43 :23 ): My question again is for the Minister for Mineral Resources and Energy. What action is the minister taking to prevent further blackouts in our state, given that AEMO has reported that South Australia is at risk of separation from the rest of the NEM 10 times in the next nine months?
The Hon. J.W. WEATHERILL ( Cheltenham—Premier) (14:43:42): We have at a national level been advocating for a number of years —for the policy initiative which will, on any view of it, provide the solution to South Australia’s and indeed the nation’s economic security issues. It will provide for cleaner, more affordable —more secure power and all it requires those opposite to do is to wean themselves off their addiction to the coal industry and the money that flows into Liberal Party coffers, which is essentially driving—
Mr GARDNER: Point of order, sir: it’s debate and imputing improper motive.
The SPEAKER: I’m sorry, what’s the improper motive? I missed it.
Mr GARDNER: Talking about funding to political parties, sir.
The Hon. A. Koutsantonis interjecting:
The SPEAKER: The Treasurer is called to order. The Premier will address the substance of the question.
The Hon. J.W. WEATHERILL: The substance of the question is to have a functioning National Electricity Market, not a broken electricity market where private sector operators can game the market and decide to withdraw capacity to provide power and cause blackouts. Is anybody seriously suggesting that a system that can permit a generator, which is actually available to provide power, to withhold that power and cause a blackout is anything other than a dysfunctional National Electricity Market?
That is what we are dealing with here in South Australia, and it is extraordinary that those opposite defend that state of affairs. The reason we have that situation—
Mr Marshall: We’re not defending it. You said you were going to come up with a solution. Where is it?
The Hon. J.W. WEATHERILL: Let me tell you. The reason—
Ms CHAPMAN: Point of order: the question was, very simply: what action is the government going to take?
The SPEAKER: Yes. Premier.
The Hon. J.W. WEATHERILL: Advocating at a national level for energy intensity schemes that will ensure we have a price on carbon, to make sure that we have the best—
Mr Pisoni interjecting:
The SPEAKER: The member for Unley is warned.
The Hon. J.W. WEATHERILL: —scheme necessary for those people to invest in cleaner generation, driving competition into the South Australian energy market, firming up our supply, driving down prices and, in the process, cleaning up our energy generation. All those things are available. Don’t take my word for it: take the Chief Scientist’s word for it—
Mr Treloar interjecting:
The SPEAKER: The member for Flinders is called to order.
The Hon. J.W. WEATHERILL: This is precisely the scheme that he recommended to the Turnbull government. It is precisely the scheme that the minister, Josh Frydenberg, publicly floated before he had that cut down when the coal industry interests grabbed hold of Queensland federal MPs, reached into the heart of the Liberal Party and got this Prime Minister, who believes that renewable energy is the future for this country, to turn his back on that.
What does this Prime Minister now stand for? He has sacrificed everything he has ever believed in, and for the most venal of reasons: his own political survival. It is as simple as that. The answer is absolutely clear, the answer that we have been advocating for at a national level is absolutely clear.
Mr VAN HOLST PELLEKAAN: Point of order: the Premier is debating the substance—
The SPEAKER: The Premier was debating the matter. He now seems to be returning to the substance.
The Hon. J.W. WEATHERILL: Precisely, sir. This issue—
Mr Pengilly: Keep the lights on, Jay.
The Hon. J.W. WEATHERILL: We are attempting to do that, and we would be grateful for your assistance. The great difficulty, to quote a headline from today, is that we are witnessing the end of the Liberal Party. We are seeing the disintegration of the Liberal Party at a national level. They cannot work together in the national interest.
Mr MARSHALL ( Dunstan—Leader of the Opposition) (14:47:48): A supplementary: can the Premier outline to this house exactly how his proposed energy intensity scheme is going to operate, what modelling he has done to see the impact upon costs for ordinary consumers here in South Australia and what prospect is there that this is going to be taken up and implemented immediately?
The Hon. J.W. WEATHERILL ( Cheltenham—Premier) (14:48:09): There are three questions there. I was a little anxious to get up because I am so pleased to be able to answer that question. I won’t offer my modelling; I will offer the modelling of the Australian Energy Market Operator, the Australian Energy Market Commission, because they have, in fact, modelled the operation of the emissions intensity scheme. This is the—
Mr Marshall interjecting:
The SPEAKER: If the leader interjects outside standing orders once more, I shall have to remove him under the sessional orders.
The Hon. J.W. WEATHERILL: The first, best position is for there to be a form of the National Electricity Market. It is unlikely that will be achieved because of the various reasons I have explained earlier about the Liberal Party being utterly dominated by coal interests. Nevertheless, to answer the leader’s question, because it is an important question, this is the first, best policy position.
The way in which the emissions intensity scheme works is this. It ensures that the rank order of the dispatch of, essentially, bids in the National Electricity Market means that more often a gas‑fired generator will be given the opportunity to bid into the market. At the moment, they are always outbid by coal because they can come in at a cheaper price, yet we know that coal is dirtier and more emissions-producing.
So, it means that, on every occasion when we want to try to clean up, in a sense, our power electricity system, the very fuel that will allow us to do that—gas—is being excluded because of the way in which the National Electricity Market works. It actually conducts itself as though all forms of generation are equal. It does not consider the various emissions intensity of each of the schemes.
An emissions intensity scheme would shift the rank ordering between coal and gas and mean that gas would come on more often. What that would do is drive more generation into South Australia and indeed around the nation, and it would also ensure that we have more competition. More competition would drive down prices, firm up our supply and, in the process, clean up our energy generation system.
It also has the other benefit, and the other benefit is for coal. It actually sends a very clear price signal into the market so that coal-fired operators can work out whether they should reinvest in their clunky old coal-fired power stations. This is precisely what is happening in Hazelwood. Hazelwood is going to close on 22 March, and one of the reasons it is going to close is that it needs $400 million worth of investment. The reason its owners won’t invest in the $400 million is that they don’t know the rules of the game. They cannot take a long-term position in relation to this market because they know a price on carbon is coming; they just don’t know what it is or when it’s going to come.
Until we do that, you do not get the investment certainty necessary for existing coal-fired generators to make a judgement about how long they should operate, and so you get the unplanned closure of coal-fired power stations around the nation, devastating communities, putting pressure on the National Electricity Market and fundamentally ensuring that the system is broken. That is why all the sensible commentators in the National Electricity Market debate are advocating for an emissions intensity scheme. The only reason why those opposite, cheering on their federal colleagues, are opposed to it is because they are dominated by political interests that are tearing the federal Liberal Party apart. We are seeing it being played out in Canberra as we speak.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:51 :58 ): My question again is for the Minister for Mineral Resources and Energy. Has the minister convinced COAG to allow South Australia to retake control of our power network, as he told this house that he would in his statement of 16 February? If not, will he introduce legislation in our parliament to do so without COAG support?
The Hon. J.W. WEATHERILL ( Cheltenham—Premier) (14:52:18): We are determined, because of the stalemate that has occurred at a national level because we don’t see national leadership in relation to the National Electricity Market, to take control of our energy future. People believe that the supply of electricity is a public good. They believe it belongs in public hands, and that’s why they are so angry with the Liberal Party for privatising the Electricity Trust of South Australia.
The Hon. J.W. WEATHERILL: You may not like it, but you only need to ask the community about this, and this is what they will say. Of course, it is a very difficult matter to unscramble a privatisation of an electricity market, but we are seriously examining that option because it is something that we are duty-bound to examine. We need to be able to explain to the South Australian community all the options for taking control of our energy future. We are absolutely determined to ensure that we can warrant to the people of South Australia, and also the businesses of South Australia, that they have a secure energy future.
We believe, on this side of the house, that climate change is real. We believe that renewable energy represents our energy future. We believe that investment in new technologies will assist us to provide a secure energy future for ourselves here in South Australia. We are not looking to the past. We are looking to the future, and we are going to take control of our future in South Australia’s interests.