Excerpts from Question Time July 4 2017
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 15:04 :03 ): My question is to the Minister for Energy. After more than 15 years in government, and nearly six years as the minister responsible for energy, does the minister take responsibility for South Australia having the highest electricity prices in the world?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (15:04:22): My office asked Mr Bruce Mountain for his modelling, asked him for the way his assumptions were made to get to the recommendations that he claimed in his report and he refused. He refused to release all of them. I am saying he’s wrong. So then we asked Danny Price from Frontier Economics to check the assumption that we have the highest prices in the world, and again it was false.
From my reading of the Bruce Mountain report, he is claiming that we are paying on average 50¢ a kilowatt hour for our electricity. That’s not accurate. It is no great secret to say that electricity prices in Australia and South Australia are too high and governments need to do more, including us.
An honourable member: Why is that?
The Hon. A. KOUTSANTONIS: Well, they are high because the commonwealth government refuses to have—
The Hon. A. KOUTSANTONIS: No—including the Prime Minister says this. The Prime Minister commissioned the Finkel report. The Finkel inquiry has come up with a series of recommendations—50 of them. The commonwealth government has said it accepts 49 of them, but there is one that it is still debating, the most important one: the mechanism, the mechanism to incentivise new generation.
What has occurred across the national electricity market, since the abolition of the carbon tax, has been that retailers and generators have created scarcity by pulling supply out of the market in a disorderly way—in fact, over 5,000 megawatts—trying to create more value for the electrons they produce. That is what is occurring. This country, under government ownership of our electricity assets, had a policy of oversupply. We deliberately built more generation than we needed to keep costs down. It’s a very simple formula.
Then successive governments across the country have been privatising these assets. Some have done it differently from others, but by and large, to maximise the sale price of these assets, they have sold them to monopolies and those monopolies have done everything they can to get the highest regulated return they can or, with a non-regulated asset, to try to create as much scarcity in the market to try to get the highest price.
For example, when Jeff Kennett privatised the transmission network in Victoria, then treasurer Stockdale put a very important amendment in that privatisation—that every new piece of infrastructure in Victoria must be contestable for the monopoly owners. Of course, that lowered the sale price of the transmission assets. There was no such clause in the South Australian sales because members opposite wanted to maximise the sale price of our transmission networks with no interconnector.
Governments are at fault, absolutely, and there is a solution: it is a market mechanism. What we need to do is to put the hysteria of a mechanism to one side, come together as a country and adopt the Finkel recommendations in full, not 49 out of 50—all 50. We have designed our energy security target to fold directly into any national mechanism.
We want our clean energy target that Dr Finkel has developed to succeed, but there are some members of the Coalition backbench who will not accept it. That is of grave concern to the entire country because, without a mechanism, there will be no reinvestment and the only investment we will get is more and more reduction in generation and introduction of unscheduled forms of renewable energy that cannot be scheduled. That is why batteries and firming are very important to make sure that we can make up that shortfall, and that is exactly what this government is doing through its energy plan, by incentivising the Southern Hemisphere’s largest battery, bringing in more base load—
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 15:09 :50 ): My question is again for the Minister for Energy. Does the minister still intend to spend $360 million of taxpayers’ money on a new gas-fired electricity generator, given that since his announcement industry has confirmed that it will build one at Torrens Island and two more are proposed near Mallala and Mannum?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (15:10:09): Replacement generation is not new generation. There will be a temporary time when the new generation at AGL will be excessive. I also point out to the shadow minister that there are a number of sites that have development preapproval for the construction of new generation, but those generators have not been built. As I said, again, there is market failure. There is market failure not because of ideology: there is market failure because there is no price signal.
Without a price signal, the market will not build new generation. If members scoff about what this price signal is, I will tell you what the price signal is right now. The only price signal in the Australian National Electricity Market right now is the commonwealth government’s renewable energy target. It is the only market mechanism out there paying people to put generation in—the only one. What we are saying is that you need a market mechanism to incentivise new gas-fired generation. That is what we want. I know that members opposite have an ideological aversion to gas because they are now the party that blocks budgets and is anti-gas and socialises with the Greens—
An honourable member: Greens-inspired anti-gas policies.
The Hon. A. KOUTSANTONIS: Greens-inspired anti-gas policies—but that is what the country needs. So, yes, we are committed to Our Energy Plan. The costs of that new generator will be announced once the procurement is over, but we are spending over half a billion dollars—no more bandaid measures. What we are doing is attempting to fix the problem and, in the absence of an alternative policy, I think the opposition would be better off just to sit quietly and watch, or—here’s an idea—release an alternative policy and let’s debate it. First it was, ‘Wait for Finkel.’ Finkel came out and now it’s, ‘Wait for Josh.’ We now have the Finkel inquiry and still no policy from members opposite. In the absence of any alternative policy, how about the opposition just sit quietly or release their policy and let’s debate it? It’s pretty simple.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 15:12 :23 ): Supplementary: can the minister guarantee that his energy plan will bring down electricity prices in South Australia and, if so, when?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (15:12:34): Any politician who promises they can lower energy prices when they don’t own all the assets is simply not being fair. Members opposite—
The Hon. A. KOUTSANTONIS: We believe that the national reforms and Our Energy Plan will lower prices, but in the absence of a coherent national policy, in the absence of a market mechanism, in the absence of scarcity being—
Mr Marshall: Double Victoria.
The Hon. A. KOUTSANTONIS: Double Victoria—can the Leader of the Opposition back that up?
Mr Marshall: Yes. Plenty of people down in the South-East—
The Hon. A. KOUTSANTONIS: ‘Plenty of people,’ anecdotal: ‘I spoke to some guy yesterday who told me.’ How about the Leader of the Opposition back that up? Don’t change the subject: back it up.
Excerpts from Question Time July 6 2017
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:16 :23 ): My question is to the Minister for Energy. Why did the minister tell this house on Tuesday this week that ‘any politician who promises they can lower energy prices when they don’t own all the assets is simply not being fair’ when the minister did do exactly that in this house once on 20 June and twice on 21 June?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:16:47): One of the reasons electricity prices across this country are going up dramatically, as they have in Queensland, New South Wales, Victoria and South Australia, is because there is a scarcity of supply. People are deliberately withdrawing electrons out of the National Electricity Market in an attempt to add value to the scarce electrons that are left, trying to make more money.
One of the reasons they are doing that is because we are in the middle of a transition between traditional very highly polluting types of energy and a renewable future. That transition needs a transitional fuel; we believe that is gas. We are big supporters of it being gas. Members opposite don’t like gas, despite South Australia being gas rich. They propose to actually ban, in some parts of our state, unconventional gas. They actually propose to ban unconventional gas.
Mr Bell: Conventional gas extraction is happening in the Coonawarra now.
The Hon. A. KOUTSANTONIS: So they are saying it’s false. I have just heard the member for Mount Gambier say that they are not attempting to ban unconventional gas in the South-East.
The Hon. A. KOUTSANTONIS: No, I said ‘unconventional gas’. They actually attempted to ban parts of this state for unconventional gas, a practice we have conducted in South Australia since the 1960s.
The SPEAKER: I did hear the member for Mount Gambier very clearly and he was talking about conventional extraction of gas in the Coonawarra. I do listen to interjections.
The Hon. A. KOUTSANTONIS: I am very glad you are paying attention, sir. Perhaps you haven’t got the kerchief blocking your view anymore. The important thing about the National Electricity Market is that it is being pushed to the edge of its limits. We are seeing, I think, some very, very dangerous days ahead. I spoke to Dr Finkel yesterday about the upcoming COAG where he has a list of recommendations he hopes to be unanimously adopted by the COAG. He rang me again, advocating on our behalf, because he thinks his reforms, like our reforms, can put downward pressure on prices.
Mr VAN HOLST PELLEKAAN: Point of order, sir: standing order 98. I ask you to bring the minister back to the substance of the question, which is: why has he made conflicting remarks in this house?
The SPEAKER: Well, presumably the Treasurer is explaining to us that he didn’t make conflicting remarks.
Mr van Holst Pellekaan: But it’s on the record.
The SPEAKER: Well, it may be, but it’s his answer.
The Hon. A. KOUTSANTONIS: My remarks are completely consistent. There is a series of events that we need to have in the National Electricity Market to lower prices, and Dr Finkel was advocating quite passionately to me on the phone his hope and aspiration that all 50 recommendations of the Finkel inquiry are adopted. Unfortunately, one is being blocked by the federal government’s caucus, which is the clean energy target. The clean energy target in effect is a mechanism. It is a mechanism that incentivises traditional forms of energy to be available in the market and to have a price signal.
Why is this important? It is important because the commonwealth government has a price signal in the market, and that price signal is for renewable energy. What Dr Finkel is saying is you need to have another mechanism in place to incentivise other forms of generation. You set your clean energy target on the basis of the Paris Agreement targets that the Prime Minister himself has signed. You apply an incentive to have generation in the market that can offer you synchronous energy, base load energy and meet those emission targets. Unfortunately, that mechanism is being opposed, and until you have a whole series of events occur, no one politician can lower prices.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:21 :12 ): Supplementary question, sir: given the minister’s answer, including reference to the Finkel report, why did he say after the Finkel report was released three times comments that ‘it will lower prices’, ‘our plan will lower prices’ and ‘will ultimately lower prices’? Is the minister walking away from his commitment to lower electricity prices in South Australia?
The Hon. A. KOUTSANTONIS: The face of the Liberal Party. The idea that complex solutions can be boiled down to a seven-second grab, the government is well aware that with our plan, the Finkel plan, the idea of more renewables being able to firm each other—whether it is batteries and wind, solar and wind, solar thermal, other forms of energy—you will get a much lower cost into the system. But the only way you will get these types of new investments in the South Australian and National Electricity Market is with a policy overlay.
We have done our bit in South Australia. On the day when the Premier announced Our Energy Plan, he made it very clear that our energy security target is designed to be folded in to a national mechanism. We want there to be a national mechanism for new investment. All these plans working together will lower prices, but in the absence of the commonwealth government adopting the Finkel inquiry, it will be very difficult. You need to have a national plan, you need to have national coordination of new investment, but members opposite just want— —to howl at the moon. These are complex issues that take a long time to explain and they are not suitable to be explained in sound bites. This is a difficult issue. That is why Dr Finkel has come up with a 50-point recommendation for a very complex issue. The point that I make is when politicians just get up and say, ‘Vote for me. I will lower prices,’ it doesn’t work that way. It is not that simple. What you do is you have a plan. You integrate that plan nationally with national plans and you work with companies, and what you are seeing is a coordinated approach. We want more gas explored, not less. Why do we want more gas? Because we have an abundance of gas. A more liquid gas market— —means cheaper prices because there is more gas available. Members opposite want to ban gas.
They want to ban the exploration of unconventional gas in some parts of the state, which will limit the amount of gas we have in South Australia, which will push prices up. We also want to have more renewable energy, and they want less. We also want to have more batteries, but they don’t believe in that technology.
Plans are complex and they take a long time to explain and they take a long time to implement. What we are attempting is a very simple method. It is the same thing Dr Finkel is attempting to do, it is the same thing that the New South Wales minister wants to do, it is the same thing that the Victorian minister wants to do: we want to go back to a period of oversupply. We want to create a national electricity market where there is an oversupply of electrons, lowering prices.
That was the model that Tom Playford developed and that was the model we had under ETSA. We built more capacity than we needed, and we overproduced and we maintained cheaper prices. When those assets were sold—by members opposite—the market did what the market does best and got a return for their shareholders. How? They did it by having a monopoly market that was captive to the purchase of their product. They withdrew supply, made less of them, and they increased the prices—and now they blame us for it.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:27 :02 ): A supplementary, sir: given the minister’s answer why, within the last fortnight, did he unconditionally say that his energy plan would reduce electricity prices in South Australia, yet today he places conditions on that commitment?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:27:20): I place no conditions on it. With the Finkel inquiry, our reforms, and if there is a national reform prices will be lower. I have to say again that, in the absence of an alternative policy from members opposite, I think it is a bit rich that they have been asking us any questions on this. I want to have a debate with the member opposite, I would love to have a debate with the member opposite on his energy plan; I think that would be an excellent idea. When I say, ‘Let’s debate the idea,’ he says, ‘Get back to my question. Don’t talk about my plan,’ because there isn’t one. There isn’t an alternative option.
I think it is important that this nation has a debate about energy policy. What Dr Finkel has done on behalf of COAG is travel around the world visiting many jurisdictions that are undergoing this transition. He has visited two contrasting jurisdictions that I think resemble our situation quite interestingly. He visited Denmark, he visited Europe, Germany and he visited Texas. There are two similarities to Texas and Europe. Europe is an interconnected market that has a very large mix of energy: it has nuclear power, it has hydropower, it has wind, it has some tidal, I think, and it has a very large interface with a lot of gas generation.
Texas, unlike the rest of the US grid, is largely not interconnected to the rest of the US grid. It has very small interconnection points. They have integrated vast amounts of renewable energy into their grid. What Dr Finkel is saying is that these jurisdictions that have integrated cheaper renewable energy to transition away from coal have done so in a thoughtful process. What he has found is that we are the only country in the world that has signed the Paris Agreement to lower carbon emissions, but has no road map to do so. We are the only ones.
What he is saying, in effect, is that the commonwealth parliament have chosen the most expensive path to decarbonisation, rather than the cheapest. What he said was, ‘Here is a road map that I have prepared for the commonwealth government that can get you decarbonisation, a transition to renewable energy and to maintain base load power, if you implement these recommendations.’
Mr van Holst Pellekaan: You are walking away from your commitment.
The Hon. A. KOUTSANTONIS: I don’t know how that is me walking away from my commitment. What we have said is that our plan largely mirrors everything Dr Finkel has said he would do. A clean energy target and an energy security target—there is not much difference. We want more reserve generation in place. The Prime Minister is talking about building Snowy 2.0. We have made a government investment in generation to secure up the system. He is making the same investments. He wants to buy it off the Victorian government. The taxpayer already owns this asset. He wants more generation as well. What you are seeing is governments grappling with the private ownership of our electricity assets because of decisions made by members opposite— —last century and they are still impacting today. I think we are not even 20 per cent into the term of the privatisation—
Mr van Holst Pellekaan: You are walking away.
The Hon. A. KOUTSANTONIS: We are not walking away from our commitment. What I would like to have is a debate. Let’s debate it. Let’s debate our plan and let’s debate the opposition’s plan. I will meet the opposition shadow spokesman anywhere, anytime and any place to debate our policy. When he eventually has the courage to release one and cost it, we will have a debate.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:32 :24 ): My question again is to the Minister for Energy. Why has the government budgeted to increase carbon emissions from electricity generation in South Australia this financial year?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:32:43): We don’t budget for it. Carbon is not priced, so the question is foolish. I think what he is attempting to try to trick me into saying is that the renewable energy target, which has no mechanism, which doesn’t pay renewable energy to operate, despite what members opposite say to people—we don’t pay a cent to renewable energy to operate—is paid by the commonwealth government. What he is saying is that he has taken into account, I think, the AEMO forecast for the amount of wind and sun we will have next financial year and claims that that’s the target we have set. I think that is what he is doing. I am not quite sure where he is getting his question from, but given that carbon isn’t priced in this country and, given that he doesn’t support a carbon price, I am not sure how we can budget for a carbon price reduction.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:33 :30 ): Supplementary, and to help the minister: Volume 4, Budget Paper 3, page 178 said that the government’s budget for the share of renewable energy in South Australia last year was 55.1 per cent and the budget paper says that the target share of renewable energy this financial year is 43.5 per cent. That is a reduction in the Treasurer’s own budget and I am asking him why he is reducing his budget.
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:34:07): AEMO now have regulations in place that could either (1) constrain the amount of renewable energy available in the system or (2) have more than two generators on at any one time. They make factors for what they think will be in terms of wind and solar that will be available. The Bureau of Meteorology is planning to make assumptions about what they think we will generate. It is on that basis that these assumptions are made, I am advised, so it’s not so much a matter that we are budgeting for any of these things.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:34 :57 ): Why has the government continually said that it is steering South Australia towards lower emissions when it is actually steering South Australia towards higher emissions?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:35:23): What the opposition are attempting to say is that, because there will be less sun or less wind over the next 12 months because of the forecast, somehow we are budgeting for a decrease. We don’t receive revenue on the basis of how much renewable energy is in there. This is a forecast.
Mr VAN HOLST PELLEKAAN: Point of order, sir: this is debate. When the minister says ‘What the opposition is trying to say,’ that is debate.
The SPEAKER: I agree with the member for Stuart. I uphold the point of order. Would the minister supply us with some information about something other than the opposition’s policies?
The Hon. A. KOUTSANTONIS: If you were listening, sir, what I was saying—
The SPEAKER: I am always listening.
The Hon. A. KOUTSANTONIS: I am glad you are, sir, and I will explain to you why—because what I said is that the opposition are making assumptions about how these measures are put in the budget and they are making false assumptions. It is very, very clear that they are assuming that our renewable energy target is a market mechanism: it is not. It is a false assumption.
Mr Pederick: It’s called diesel, Tom. It’s diesel.
The Hon. A. KOUTSANTONIS: Diesel? It’s diesel, is it?
Mr Pederick: Yes, diesel generators.
The Hon. A. KOUTSANTONIS: I think I now understand what the opposition is saying. They are trying to assume that, because there will be more synchronous energy in the system, there will be less wind and solar. I think that’s the point they are trying to make—falsely again. It really is embarrassing the level of literacy about this matter that members opposite have. It is not how the renewable energy target works.
The SPEAKER: The Treasurer will be seated. The Treasurer will not insult the opposition about their literacy and, instead of deconstructing the opposition’s question, he should either answer or finish. Treasurer.
The Hon. A. KOUTSANTONIS: That’s true. I know how you feel. The renewable energy target is a measure that we have set. We have no mechanism behind it. We get forecasts from AEMO about the levels of generation that will be available over the next 12 months and we put forecasts in and it is that simple.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:38 :11 ): Supplementary, sir: the question was not about the renewable energy target. My question again is about the budget on page 178, which is about AEMO’s forecast. Why has the government said that it is steering South Australia toward lower emissions when it is actually steering South Australia toward higher emissions?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:38:37): Not true, sir. Our emissions target is the commonwealth’s emissions target. South Australia is leading the nation in emissions reduction. South Australia’s renewable energy footprint is much larger than any other jurisdiction in the country. These are forecasts from AEMO about wind and solar. They go up and they go down and, of course, there are security mechanisms that AEMO have put in place meaning that there will be more gas-fired generation on, but I have to say that members opposite are asking questions but aren’t being entirely honest about the way that they are asking them.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:39 :23 ): How much will the government’s plan to introduce and operate diesel generators in South Australia contribute to its plan to increase emissions in South Australia?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:39:35): Again, there are no plans to increase emissions, despite the standing orders not allowing loaded questions in question time. I also note that we have said all along that if we can have gas-fired generation rather than diesel, we will. If we can have hybrid generators rather than diesel, we will. But what we are saying is that the market cannot provide the sufficient generation that we need over summer, so the government is stepping in to make sure we have sufficient capacity.
Our generators will not be operating all the time. Our generators will only operate in lieu of load shedding. The member opposite I thought knew that. So we plan, hopefully, to not run these generators. They are there in case the market falls short so we don’t load shed South Australians. We are not operating these generators as competitors in the market. We are not operating these generators on a commercial basis, and interjecting and screaming are no substitute for a question. If members opposite want questions about how the generators will work, they will work this way: if AEMO advise the government that there would be a load shed— If AEMO have load shedding, if they forecast load shedding because for whatever reason the market can’t provide the sufficient electrons we need to maintain stability, we will offer our generation in lieu of load shedding. Now, this could be for an hour; it could be for half an hour. We don’t expect to run these generators as competitive offers in the market, so the idea that this will somehow increase emissions dramatically is ridiculous, let alone the massive offsets that we have in the South Australian electricity market through our massive amounts of renewable energy—over 1,700 megawatts of wind and over 700 megawatts of solar energy.
Members opposite have called on us to abandon our renewable energy target and said we have gone too fast, too quickly, and now today they are complaining that we’ve got too much or it’s not enough. I have to say that it is a confused position by members opposite.
Mr VAN HOLST PELLEKAAN ( Stuart ) ( 14:42 :02 ): Supplementary: would the Treasurer advise the house how much taxpayers’ money he plans to spend on these diesel generators that he plans to rarely operate?
The Hon. A. KOUTSANTONIS ( West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:42:14): First of all, Business SA made an assumption that the statewide blackout cost the state over $400 million. Our Energy Plan has allocated $550 million towards it. If our temporary generation and our permanent generation—which is the total $360 million envelope, which we have said many times—stops one blackout, it has paid for itself.