Interview with Patricia Karvelas, ABC Radio National

Patricia Karvelas
Energy supply and prices

PATRICIA KARVELAS: So, we’re only at the start of winter and millions of households in Queensland and New South Wales are being urged to conserve power amid fears of electricity blackouts in coming days. The Energy Market Operator has been forced to intervene in both States to keep the lights on after wholesale prices skyrocketed over the last week. The crisis is far from over with electricity supplies expected to be tight along the eastern seaboard for days to come. Chris Bowen is the Federal Energy Minister, the man of the moment. Welcome to the program. 

CHRIS BOWEN: Good morning, PK, and, yeah, a four-day weekend to celebrate the Socceroos’ win I think is something we can all get behind and, you know, I represent Socceroo central. Matthew Ryan, the captain, started his career at the Marconi Stallions; a lot of the players started at Bonnyrigg White Eagles. We’re very proud of them. It’s a great day for Australia.

PATRICIA KARVELAS: Excellent. So, you will be lobbying Anthony Albanese for a public holiday, so we all celebrate the Socceroos through to the World Cup final? 

CHRIS BOWEN: Well, it’s a Prime Ministerial tradition, isn’t there, any boss who sacks their worker for turning up late today is a bum. That’s what a Prime Minister should say on a day like this, and I think we’d all agree.

PATRICIA KARVELAS: I can totally agree. All right. Let’s move to the serious issues, which are less rosy at the moment. Electricity shortfalls have been forecast today for Queensland, New South Wales and Victoria. Are we facing load shedding and blackouts up and down the eastern States? 

CHRIS BOWEN: Look, certainly that’s what we’re working to avoid, and we did avoid yesterday. AEMO, the market operator, worked deciduously yesterday, I can assure you, PK, to avoid that situation and they’ve advised me and they’re advising State Ministers that we can avoid that situation today and in coming days. 

Basically, we’re faced with a situation, as you said, that prices have been very high. A cumulative price cap was automatically triggered. That meant then the generators didn’t bid to enter into the market because they were covered by a price cap. AEMO instructed them to enter the market. They used their powers very strongly yesterday; 1,700 gigawatts were brought into the system by AEMO yesterday, which meant that we could avoid that load shedding yesterday in Queensland, and certainly AEMO tells me they believe – obviously there can be unexpected outages, which can put more pressure on, but at this point they believe we can avoid that in coming days.

PATRICIA KARVELAS: Households and businesses, though, are being urged to turn off any unnecessary lighting and appliances. Is that the only way to keep supply running ahead of demand? 

CHRIS BOWEN: Well, I mean, no. There’s a number of things that we can do and are doing. And certainly, nobody is being asked to turn off anything that they need, but, obviously, if there are any excess uses – I wouldn’t have thought many people have many at the moment considering the prices but swimming pool filters and heaters and the like, those sorts of things that don’t really need to be on at the moment, there’s a general request. But certainly no-one should be turning their heating off or anything that’s essential – absolutely not. 

But, as I said, there’s a range of things that AEMO is doing, and that demand management is just one part of it and the State systems obviously apply that demand management as well. AEMO is actually working pretty hard to keep the generators putting into the system and using their powers where necessary, as they did yesterday. I have no doubt that they will again, to ensure that we can avoid that load shedding wherever possible and, as I said, based on the advice I’m confident we can.

PATRICIA KARVELAS: Given that intervention you mentioned, how long will the price controls remain in place and what kind of compensation will that mean for power companies running at big losses? 

CHRIS BOWEN: So, the cap is a cumulative cap, and it applies for a period of time, you know, days at a time. In relation to compensation, you know, just to be frank about it, what’s happened here is the generators are waiting to be instructed because they know that they can then access compensation from the States. That is just the way the system works. That is not a perfect system. It’s something that State and Territory Ministers, together with myself, will need to look at in due course, but at the moment that’s the system in operation; where a price cap comes in, then many generators are waiting to be instructed by AEMO before they then bid into the market.

PATRICIA KARVELAS: With sky high wholesale prices, the electricity sector is facing real stress with many energy companies hit with liquidity problems. Is there a chance some generators could go under, which might spark contagion through the market? 

CHRIS BOWEN: Look, all I’m going to say about that, Patricia, is that I’m in very close contact with the Australian Energy Regulator, Clare Savage, who is monitoring that situation very closely. Obviously, that’s something that we continue to look at very closely. I’m not going to speculate on any particular market outcomes. Frankly, that would be an irresponsible thing to do.

PATRICIA KARVELAS: Are you worried about this? 

CHRIS BOWEN: It would be irresponsible of me to speculate on the viability of any particular type of operator, other than to say the Government is fully aware of the market movements and we are watching them very closely.

PATRICIA KARVELAS: Given we’re still in this cold snap and many coal plants are still offline, how often do you expect the operator to intervene to keep the lights on and the heaters running? 

CHRIS BOWEN: Well, as often as they need to, Patricia. You’re right that coal-fired power is really under huge pressure at the moment. We’ve had a big chunk of Queensland’s coal-fired power out, some of it planned, some of it unplanned; that has led to pressure on the system, and some of the price rises, which has then led to the price caps, which has then led to the AEMO having to intervene. So, this is, if you like, a cycle of events, some of which are predictable. We know some of the outages that are coming. Some of them are unpredictable. Particularly with an ageing fleet, you can’t predict when a coal-fired power station is going to go out. That’s just part of my point about the broader mismanagement here – that we’ve had an ill-managed transition. We all know we have to transition to new forms of energy and that’s been ill-managed over the last decade and we’re paying the price for that. 

So, there’s the long term – the medium and long term where the transition and the plans that we took to the election are even more important than ever. The transmission, the storage, the renewables that’s even more important than ever to get that transition right. That remains my 100 per cent focus. And then we’ve got the short term, ensuring that we can avoid that load shedding. That’s obviously my focus together with AEMO yesterday and with Minister de Brenni in Queensland, it will be the focus of the State Ministers in jurisdictions today.

PATRICIA KARVELAS: Doesn’t the current crisis mean that, ultimately, we’re going to see gas and perhaps coal included in the capacity mechanism? 

CHRIS BOWEN: Well, as you know, Patricia, the States and Territories joined with me in endorsing a capacity mechanism last week. I’ve asked the Energy Security Board to get their latest piece of work out as quickly as possible. We said – I said, and the States and Territories agreed with me, it’s got to emphasise new technologies: renewables and storage. I expect, also, it to be consistent with the Government’s policies of transitioning to 82 per cent renewables, but I also expect there will be some flexibility about how it gets implemented. So, that will be a further discussion for me and States and Territories as soon as the ESB puts out its latest round. Ultimately, it’s a decision of governments, to be clear. The ESB won’t make decisions, but I want Ministers, State and Federal, to be guided by the best expert advice, and that’s the Energy Security Board.

PATRICIA KARVELAS: There’s a few proposals that have been raised. I’m going to put a few to you. The big pressure point is gas. Malcolm Turnbull, the former Prime Minister, told us yesterday that the Government, you, should impose temporary export and price controls to free up cheaper gas for the domestic market. He says a 90-day period, and it is about shocking the market. Is that something you should consider, because Matt Kean, the New South Wales Treasurer, has also told me it should be on the table? 

CHRIS BOWEN: With due respect to Malcolm, that’s not something we have legislative basis to do at the moment.

PATRICIA KARVELAS: But you could seek it. 

CHRIS BOWEN: But what we have said is the trigger, the so called trigger, the ADGSM, which was the previous Government’s policy, introduced by the Turnbull Government, isn’t, in our view, effective enough. It is – I used the term as blunt as a basketball. It takes a long time – 

PATRICIA KARVELAS: He says it was for a different problem at a different time. In fact, that language also used that – that language was also used by the Grattan Institute this morning. Tony Wood said different time – 

CHRIS BOWEN: And that’s my point, exactly my point, Patricia, that some in the Opposition have been running around saying, “The Government should pull the trigger, the Government should pull the trigger". The trigger wouldn’t work in this situation. It is a blunt instrument not effective for this situation. That’s why Madeleine King and I announced last week that we would look to reform the trigger. We will engage in some consultation about that, but we will look at all our options to improve the Government’s weaponry, if you like, in a situation like this, because at the moment it’s simply not fit for purpose.

PATRICIA KARVELAS: Okay. So, this proposal, 90 days of a temporary export and price control, will you consider it? 

CHRIS BOWEN: Well, as Madeleine King said last week, everything is on the table as we look at reform options but then we would need to take that through Parliament. This is not a short-term fix. There’s no legislative basis at the moment. We would need to look very carefully. One thing this Government doesn’t do, Patricia, is engage in knee-jerk ad hoc reactions. We’ve had too much of that over nine years. We’ve been very clear while this is a very serious situation, we’ll deal with it calmly and methodically. That’s what I’ve done. That’s what Madeleine is doing, the entire Cabinet is doing because we’ve had enough of this sort of knee-jerk reaction, this ad hocery, this sort of blaming other people, blaming companies, blaming states. Enough. It won’t happen under us. There are real challenges. We’ll work them through when we have a reform proposal, we’ll explain it. We’ll take it to the Parliament, and we’ll seek to implement it. That’s the way we do business.

PATRICIA KARVELAS: Okay, but that idea – as you say, you have to get a legislative basis, but you’d think you’d get quite a bit of support at this stage given what’s happening – 

CHRIS BOWEN: Having announced last week – sorry, to cut you off, Patricia, but having announced last week that we are engaging in a reform process, we will look at options and options are on the table. I’m not in a position this morning where I’m going to start saying that’s a good idea or that is a bad idea. Madeleine has said, and I have said, that all sensible ideas are on the table in relation to managing gas. 

As you know, last week, States and Territories agreed that we would have AEMO – give AEMO the powers to buy gas and store it so they could release it in the system. That’s a material step forward. That hasn’t happened before. In the Government’s first weeks, that’s a big step forward, a material step forward. We’ve got a lot more to do and, as I said, the so called trigger that some people have run around saying the Government must pull – from the Opposition – isn’t fit for purpose for these circumstances so we need to find reforms that do make it fit for purpose for circumstances like this, because we will be in a tight situation for some time to come.

PATRICIA KARVELAS: And there are reports today that energy companies are forcing manufacturers onto 12 month contracts at incredibly ridiculous prices. This has prompted complaints of price gouging and cartel like behaviour. Is this for the ACCC to sort out? 

CHRIS BOWEN: Yeah. As you know, Jim Chalmers, the Treasurer, wrote to the ACCC last week asking them to take a range of actions, and I met with the chairman of the ACCC and Jim has been in regular contact with them and, as I said, also with the Australian Energy Regulator, Clare Savage and, you know, if there is any untoward behaviour, I’m sure it will be dealt with.

PATRICIA KARVELAS: One more proposal, and this is Tony Wood from the Grattan Institute who says you should look at a short-term windfall profit tax. Is that something that you’ll consider? 

CHRIS BOWEN: No, as Jim has said, that’s not a road we’re going down. We don’t believe that a tax is the answer in this particular circumstance. We believe that there are other management tools that we can have and should have in addition to the ones we have had and used, like the gas supply guarantee and the caps that are in place. But a windfall profit tax is not something that we’re looking at this point.

PATRICIA KARVELAS: Chris Bowen, everyone is willing you to succeed, I’ve got to say, because there’s a lot of nerves across the country. 

CHRIS BOWEN: I appreciate the willingness. I appreciate the willingness and certainly, as I said Patricia, the well-managed transition to renewable storage and transmission is more important than ever before. That’s what we took to the election, and that’s what we’ll implement in the longer term, in the medium term. In the short term, we have some immediate challenges, which are being very actively handled.

PATRICIA KARVELAS: Thank you so much. That’s Chris Bowen, the Minister for Climate Change and Energy.