Ministers for the Department of Industry, Science,
Energy and Resources

8 April 2015

Subject: Energy White Paper

E&OE

MINISTER: The Commonwealth Government takes energy very seriously because it is a driver of our economy and if you get your energy policy right, then you’re well on the way to getting your economic policies right.

This White Paper is a paper that not only sets out to solve some of the problems – as many as possible, in fact, that we face now – but also creates a framework for the solution of problems that we would face in the future.

It is about ensuring that in the energy market there is strong competition, that there is productivity as a result of that competition and policy, and finally, that there is investment – investment with confidence – in the energy networks that drive the Australian economy.

This is a policy about now and about the future. It’s been developed by the Government over the last 18 months. It’s a policy that lays out a complete framework and also addresses, as I say, the issues that we are currently facing. And it’s a policy which will give the energy industry in Australia the confidence they need to invest.

So I’ll take some questions.

JOURNALIST: The, where it talks about price signals and a greater need for tariffs so that customers can respond to price signals, can you talk briefly about that?

MINISTER: Well, we support the introduction of smart meters, that is meters which will allow consumers not only to tell how much electricity they’re consuming at any point in time, but also what it’s costing them. And with that then comes the technology which allows them to be flexible about when they use that appliance.

Now, in the case of refrigerators it’s a non-optional appliance. You run your refrigerator all the time. But in terms of when you do your washing, when you do your ironing, when you run the pool pump, how you cycle your air conditioning – those are options which can be managed through a smart meter.

We believe that consumers will benefit from the roll out of smart meters and we are continuing to encourage States to do that.

There are lessons to be learnt. Victoria’s roll out was certainly problematic.

But the opportunity, particularly for high energy households to save money through the use of smart meters and technology, time of use charging, and varying the times they use their significant consumers of electricity in their appliances, will allow households to manage their demand better and also then enable the networks to be built and maintained in a way that keeps the capital costs down.

JOURNALIST:  Isn’t that putting the onus back on all of us, as opposed to producing something that benefits us through regulation?

MINISTER: Well, in terms of energy consumption, consumers can use energy whenever they like, however they like, as long as they’re prepared to pay for it.

What we are doing, or what we have done, in Australia over recent years is literally ‘gold plate’ the distribution network, which consumers will end up paying for. If you look at the cost of electricity, whilst the cost at the power station has basically remained static for over a decade, the cost to consumers has doubled. And a lot of that cost increase has come from the distribution network.

Now, we can either manage our demand better and also manage the time we use the energy, therefore affecting both the network and the generation, or we simply pay more and more for electricity. And if we are going to achieve the productivity growth that we’re driving for and the efficiency growth that we’re driving for, then we do need to use the technology.

So, in the end, even with the smart meter a consumer can use electricity whenever they feel like it. But they will pay more at certain times and less at certain times, and on the swings and roundabouts, they’ll pay less overall.

JOURNALIST:  But what are you actually doing to bring down the overall cost of electricity?

MINISTER: Well, we’re introducing competition into the market and the Commonwealth will continue to support privatisation and will continue to support things like the asset recycling fund. Competition and privatisation breed lower electricity prices and that’s been demonstrated in Victoria and, to a lesser extent, in South Australia.

But also through things like better technology and time of use charging, we will decrease the price of energy.

In specifically the gas market, we will be announcing next week an ACCC inquiry into the gas market in Australia. We want to see that market operate transparently. We want consumers to be able to see how gas is being priced, where it’s available, what stocks are held and we’ll have more transparency in that market than we have currently.

So the ACCC will be running that inquiry over the coming six months. Small Business Minister Bruce Billson and I have already met with Rod Sims and he is preparing the framework for that inquiry. That will also drive down prices through better transparency and better competition.

JOURNALIST:  The report outlines that Australia’s oil reserves are below international standards. What steps are we going to see to make sure that they’re up to scratch in the future?

MINISTER: Well, we’ve given the International Energy Agency a commitment that we will address the issue of our non-compliance with the IEA 90 day stockholding rule. That is not a fuel security issue for Australia, it’s an international obligation in relation to our ability to react to an international crisis somewhere in the world and we currently are non-compliant, as you say, we’re down around 54 days, 52 days depending on how you do the sums.

We are committed to addressing that this year. But, if we are to return to 90 days stock, either by using tickets or by storing oil and fuel here, it comes at a very, very significant cost. We’re talking billions of dollars and that cost will almost undoubtedly be borne particularly by industry and motorists.

JOURNALIST: Labor’s agreed to a new Renewable Energy Target of 33,500 gigawatt hours which is closer to yours.

MINISTER: That’s news to me.

JOURNALIST: It’s coming from my Canberra office, they wouldn’t lie to me.

MINISTER: No, no, I’m not doubting you! It would be nice if they told me.

JOURNALIST:  They’re agreeing to 33,500, which is down from their last offer and closer to your offer, of 32,000. Will you consider negotiations of a deal?

MINISTER: Well, let’s be clear about this. If the report is correct, then it is Labor’s first offer. It’s their starting point.

Secondly, our current position is our final position. We started at 26,000 gigawatt hours. The Renewable Energy Target is now as high as we can possibly put it without putting in jeopardy the stability of the scheme. We would prefer the target was closer to 30, but we, as a way of trying to resolve this issue, have taken it to the very top limit that we can have any confidence in the scheme being stable over the long term.

We have a target, which is 45,000 gigawatt hours, which is actually now 23 per cent of energy consumption in Australia by 2020, and we’re not prepared to take it above that because it will put in jeopardy the stability of the scheme and end up causing the scheme to default.

JOURNALIST:  But they’ve come a lot closer from their, I think, initial offer of 44, or something, thousand, this is getting closer. Can we not get a deal out of this? It could bring prices down.

MINISTER: We can get a deal the day they agree to 32,000 gigawatt hours and in the meantime I’m continuing my negotiations with the Senate crossbench, which I’m very confident that I’ll conclude in the next two or three weeks.

JOURNALIST: This White Paper you’ve released, what happens with it? What’s the next step?

MINISTER: Well, it sets a policy framework and the actions that come out of it are things like, as I’ve announced the implementation of an ACCC inquiry, further push towards privatisation of energy assets in Australia, ensuring that we do have the framework which encourages investment and that’s a policy position that runs right across Government.

That we do address issues such as how we ensure that the CSG industry in Australia develops and that’s an issue which we’ll not only drive through COAG, but we’ll also look at using the science that surrounds a lot of the work that’s been done in CSG particularly here in Queensland. So getting the CSIRO more involved, getting Geoscience Australia more involved.

In this document is both policy and action. We want to ensure that we continue the confidence in the industry that will drive that investment and that further expansion.

JOURNALIST:  There are several new State Governments including here in Queensland. Are you going to meet with them to discuss the value of smart meters and tariffs, the merits of privatisation, to make the case?

MINISTER: Well I’ve already had a preliminary meeting with Minister Lynham in Queensland here and, in terms of other new Ministers, I’ll certainly be meeting them. There will be a COAG meeting towards the middle of the year, in terms of energy ministers, and I’m looking forward to the opportunity there.

But, I do make the point of going and talking to Ministers and hopefully they too will make a point of coming and seeing me.

JOURNALIST:  So when you discuss the gold plating issue, I mean, are you basically saying, we need the smart meters and so forth across all of Australia, we need consumers to change the way they, you know, do their housework, potentially, you know, don’t put the washing on Saturday mornings because, you know, we do need to look at bringing costs down by addressing the gold plating issue and so forth?

MINISTER: Well if you look at the breakfast table conversation it’s moved from petrol prices to electricity prices and literally the bill shock that people have when their electricity bill arrives.

Now, as a Government, the Commonwealth’s removed the carbon tax, we’ve removed the mining tax, we’ve streamlined regulation in Australia and we’ll further do that, but householders and industry consumers have a role to play, and as I say, they’ve got the choice to continue as they are and continue to see the network upgraded to cover spikes in the demand which are less than five per cent of the hours in the year. We’re building this massive overcapacity.

So if consumers react to that opportunity and use technology, they can lower their power bills. So, it’s a consumer choice issue.

JOURNALIST: So, just following on from that question, are you saying to want to try and make people in this country change the way they do stuff?

MINISTER: I’m saying I’m giving them the option of changing the way they do stuff.

JOURNALIST: But you’re going to try and educate them?

MINISTER: Well, we can educate them. And we can show them how they can save money, but in the end, it’s their choice. They can either continue as they are, or they can have a smart meter installed and lower the household electricity bill.

JOURNALIST: Do you think people will take to it? They will opt to get the smart meter?

MINISTER: Well, I hope so. And one of the things that’s been holding us back in Queensland has been lack of time of use charging, but each State is moving to that set of tariffs. Once that’s in place, the consumer has a choice of making that decision.

So, COAG are continuing to discuss that, so all the State and Commonwealth Ministers for energy are continuing to talk in terms of rolling out of the smart meters and we do need to do that to give consumers the opportunity.

JOURNALIST: Why doesn’t the report discuss climate change as a driver of energy policy?

MINISTER: Well, climate change is going to be discussed as part of our submission to the Paris conference at the end of this year. The paper is flexible enough to accommodate a range of options and, in terms of the specifics of that discussion, that will take place within a Cabinet working group, which I am a member of, as we work our way through the preparation for that Paris conference at the end of this year.

Media contacts: Mr Macfarlane's office 02 6277 7070