AFR Energy and Climate Summit

Delivered virtually

I first addressed this forum in 2018, shortly after I became the Minister for Energy – or the Minister for getting power prices down, as the PM put it.

I was clear then that my number one priority was refocusing government policy – and business – on delivering for customers.

As my portfolio has grown to include emissions reduction, and now industry, this focus on delivering for Australian households and businesses has remained.

Ultimately, this is about being transparent and accountable as we deliver affordable reliable energy and bring down emissions at the same time.

Transparent about government policies and their impacts on Australians, and accountable for delivering on the commitments we have made.

This is just as true of business, as it is government.

Business too has a clear responsibility to step up and be accountable – whether that’s by providing affordable reliable energy to customers, or delivering on its promises to reduce emissions.

We have made significant progress in electricity since I first addressed this forum.

We have locked in fairer retail prices through our default market offer price cap, saving households up to $780 a year and small businesses up to $3,105 a year.

Importantly, this has not impacted other offers in the market with the median market offer also continuing to decrease by up to 13.2% over the last two years.

We have introduced our Big Stick Legislation to stop anti-competitive practices. 

Following its introduction, we saw 19 straight months of wholesale price falls through to March this year. 

Thirdly, we have focused on securing dispatchable supply for the market, critical to keep the lights on and prices low.

The Government, through Snowy Hydro, is on track to deliver the largest energy storage project in the southern hemisphere in Snowy 2.0.

Last year, we set a target of 1,000 megawatts of new dispatchable capacity reaching a Final Investment Decision by the end of April 2021, to ensure sufficient capacity would be on hand to replace Liddell when it exits the market.

We supported business to step up and fill that target, like Energy Australia’s Tallawarra B gas generator - the first new dispatchable capacity being built by the private sector in NSW in more than a decade.

And when a shortfall remained, we followed through on our commitment to build a new gas generator at Kurri Kurri in the Hunter Valley. 

Our commitment to consumers has never wavered. It is resolute.

Our focus on accountability, affordability and reliability has delivered results for Australian workers, their families and businesses.

As a country, we cannot afford to become complacent however. 

We have seen what happens if policy makers and industry take reliability and affordability for granted in the energy market.

In the UK, reliance on gas imports, constrained gas supplies and a prolonged wind drought have plunged the country into an extraordinary energy crisis. A cold, dark winter beckons.

Default household energy prices have been increased by 12%, affecting up to 15 million households. 

Major energy users, including factories and steel makers have been forced to suspend production due to surging prices and a strain on electricity supply.

Buried under the mountain of statistics are terrible stories of human suffering. A worker’s despair following the loss of their job, and the anxiety of what it means for their family.

Stories of people dealing with that most gut-wrenching question – to heat or to eat?

The crisis currently unfurling in Europe comes on the back of the disaster earlier this year in Texas, where a lack of reliable back-up supply and shut down of wind contributed to around 5 million people being without power – some for many days. 

Occurring in the middle of a harsh winter, the human and economic cost was immense.

Australia has not been immune. This last fortnight marks five years since South Australia was plunged into a state-wide electricity blackout.

Around 850,000 customers lost power, some for days, with electricity not fully restored across the network for nearly two weeks.

It was acutely felt by businesses, which lost $387 million as a result.

Critical essential services like telecommunications were disrupted, and at Adelaide's Flinders Medical Centre, backup generators only operated for an hour before failing.

We are determined that these problems and this suffering not be repeated.

Accountability in energy policy means keeping the interests and wellbeing of consumers and the Australian people front and centre in everything you do.

We could take, as some of would like, a starry-eyed approach to the challenges before us, such as the integration of Australia’s record level of renewables investment.  But that would be betrayal of the people we have been elected to serve.

When it comes to renewables; the achievements are extraordinary but the challenge is every bit as significant.

Since 2017 over $35 billion has been invested in the renewable energy sector. 

While 13,300 megawatts of new renewables added to the grid in the last two years, only 235 megawatts of new dispatchable projects came online.  

A ratio of 56:1.

The Australian Energy Market Operator estimates we will need up to 19,000 megawatts of on-demand, dispatchable power by 2040 to support the increasing amount of renewables in the system.

We are a long, long way from seeing enough of the investment in firm power that we need to keep the grid affordable and secure.

National Cabinet’s decision to implement major market reforms, including the detailed design of a capacity mechanism, was a major step forward in dealing with the challenges that we face.

This necessary work includes a plan to safely integrate growing distributed energy resources, like rooftop solar, while maximising benefits for all consumers.

It includes measures to procure essential system services to keep the grid reliable and secure.

Reforms to progress cost-effective transmission development that delivers outcomes for consumers, not just generators. 

The most critical measure agreed to by all jurisdictions is to detailed design for a capacity mechanism. 

A well-designed capacity mechanism is a technology neutral way to incentivise missing private sector investment in new dispatchable generation and ensure existing generators don’t shut down early if they are still needed.

The Energy Security Board estimates this could deliver net benefits to customers of around $1.3 billion.

This won’t come at the expense of getting more renewables into the grid.  In fact, Australia is deploying new renewable capacity – particularly solar – faster than almost any other major economy in the world.

We now have the most solar per person of any country in the world, and more solar and wind than any country outside of the European Union.

But if we are going to reach the amount of on-demand, dispatchable power called for by AEMO, we have to get the market settings right.

The decision by state and territory governments to accept the ESB’s recommendations and continue work, was a welcome sign that accountability to consumers can win out over the loud, self-interested lobbying of a determined few.

Our focus on Australian consumers is likewise evident in our support for gas as a key transition fuel.

Australia’s manufacturing sector depends on gas. According to the Australian Bureau of Statistics, gas makes up 42% of manufacturing’s total energy use.  

This sector needs reliable and affordable energy to continue its growth, and gas plays this role.  

Under our government, the manufacturing sector has grown to numbers not seen in more than a decade. 

Despite the impacts of COVID-19, there are now 80,000 more jobs in manufacturing than at the start of the pandemic. This takes the sector to more than 1 million strong.  

This is why our gas-fired recovery is so critical. It is a key enabler of our sovereign capabilities and growth.  

This Government will continue to take action to ensure we do not experience the devastating impacts of a gas shortage like we have seen overseas.  

With winter approaching, there will be governments in the northern hemisphere that wish that they too had implemented a gas-fired recovery.  

Through our National Gas Infrastructure Plan, Strategic Basin Plans, and significant gas market reforms, we are working with industry to ensure Australian gas gets to where it is needed and at a competitive price.

Our commitment to transparency and accountability applies equally to reducing Australia’s emissions.

While Australia is only a little over 1% of the world’s emissions, we have a responsibility to deliver our share of emissions reductions.

Increasingly, our export customers in the region are asking us to support their emission reductions.

As you know, the government will release its long-term emissions reduction plan ahead of COP26. 

I’m certain the Financial Review was hoping today was the day, but today is an opportunity to outline our approach to long-term emissions reduction, and importantly what as a government we won’t do.

We are already committed to reaching net zero as soon as possible with a responsible plan that will support industry, create jobs and opportunities - not destroy them.

That plan will be based on our existing approach and policy suite.

Because our existing approach is delivering results. 

We’re already more than 20% of the way to net zero, and we have reduced emissions faster than any other major commodity exporting country in the world.

Faster than New Zealand and Canada, whose emissions have barely budged since 2005, faster than the US, Japan, the OECD average and faster than China whose emissions have risen by at least 70%.

Our starting point – as the world’s fourth largest energy exporter – presents a unique mix of challenges and opportunities.

Export sectors account for around 40% of our emissions. The technological solutions to reduce emissions from our agricultural, energy and manufacturing sectors are either expensive to deploy, or in many cases, still in their research phase.

And it’s important to remember that electricity is now only a third of our total emissions, and falling rapidly.

As the IEA pointed out recently, more than half of the emissions reductions required to achieve net zero globally are not yet commercially available.

But if we can get those solutions right – if we can make them cheaper and more economically productive than existing approaches – we will be able to reduce not just our own emissions, but support our customer countries’ efforts to decarbonise.

That’s why our plan focuses on deploying technology, not taxes, to reduce emissions without imposing new costs on households, businesses or the economy.

That means avoiding explicit carbon taxes, or back door pathways to a carbon tax – sneaky carbon taxes.

A substantial reduction in the safeguard mechanism is a backdoor carbon tax consumers will pay for, which is not acceptable to the government.

To deliver through technology, we need to get more horses in the race and bring a portfolio of technologies to commercial parity with higher emitting alternatives.

We need to focus on direct abatement technologies, like solar, which is continuing to advance at a phenomenal rate. 

But we also need technologies that can provide offsets, like CCUS, blue hydrogen  and healthy soil technologies.

Some in this debate think net zero means zero. It doesn’t. 

Net zero is not zero. It is not zero emissions.

For a country like Australia, this is the difference between destroying some of our greatest economic strengths versus defending and even strengthening them. 

It’s the difference between abandoning exports that underpin our regions, and supporting them.

It’s the difference between giving big parts of agriculture, heavy manufacturing and resources no future and a bright future.

Our government will always stand up for our traditional industries, and their crucial ongoing role in underpinning our economy and reducing emissions.

We won’t be listening to gratuitous and fact free criticisms of gas, soil carbon, carbon capture and storage and clean blue hydrogen. 

Our political opponents - who run hot and cold on gas and technologies like CCS and blue hydrogen - need to be clear on this issue.

Their failure to support a broader role for ARENA and the CEFC is illustrative of their ideological blindness.

We have started deploying our Technology Investment Roadmap – with clear targets to reduce the cost of key technologies – both direct abatement and offsets.

The first Low Emissions Technology Statement, released in September last year, set out our priorities. We will shortly release the second update under the Roadmap.

To achieve those cost reduction targets and reduce the cost of new energy technologies more generally, we have already committed to invest more than $20 billion over this decade.

Our investment will leverage at least $80 billion of total public and private investment in Australia by 2030, and create more than 160,000 jobs.

We recognise that large scale deployment must be driven by the underlying economics of the technologies in turn driving private sector investment. Government should be a facilitator not a heavy-handed central planner.

Because our goal is to expand customer choice, not restrict it. 

That means we won’t be mandating uptake of particular technologies, like telling Australians what sort of car they should drive. 

Customers mandate technologies, because they know what they need. Government needs to ensure the choices are available.

We will continue to serve our customers with the energy and resources they’re looking for – because the unilateral withdrawal of Australia’s energy exports wouldn’t reduce global emissions. It would only trigger investment in new higher emissions supply elsewhere.

Instead, government can serve as an enabler by:

  • Investing in promising R and D projects
  • Supporting targeted infrastructure
  • Ensuring transparency, and facilitating choice and accountability
  • Facilitating voluntary mechanisms for emissions reduction, and
  • Helping with entry into the market of technologies that are approaching parity with incentives - incentives that aren’t going to cost customers extra.

We will use existing institutions – like ARENA, the Clean Energy Finance Corporation and the Clean Energy Regulator – to invest in R and D, support customer choice and facilitate deployment of low emission technologies as they approach parity.

The CEFC already does this by demonstrating the bankability or financability of new technologies and business models.

And the Clean Energy Regulator – through programs like the Emissions Reduction Fund and the Hydrogen Guarantee of Origin scheme we are developing – provides a modest, voluntary incentive to support deployment, and a way for businesses to demonstrate environmental integrity to customers.

Voluntary incentives, not penalties, are an essential part of our plan to play our part in global efforts to reduce emissions without imposing new costs on Australian households and business.

And the biggest of these is the ERF – which is going from strength to strength.

This year, the 1,000th project was registered and the 100 millionth tonne of abatement was credited.

And thanks to reforms initiated following the King Review, we are seeing a rapid expansion of supply and voluntary demand. 

And we will be accountable for progress under our plan. Australia is already a world leader in that regard – we report emissions for every sector, every gas, every quarter. 

We update our forecasts for future emissions every year – and I look forward to releasing updated forecasts for 2030 in the near future.

The timely and comprehensive nature of our reporting is the gold standard.

We also want to ensure that if businesses make commitments, they are transparent and accountable for their progress.

It’s all well and good to be ambitious, but it’s only delivery that counts in the end.

Earlier this year, I wrote to the chief executive of every ASX200 corporation to invite them to participate in a new Corporate Emissions Reduction Transparency initiative, or the CERT.

This week, the Clean Energy Regulator will launch a final consultation on the pilot phase of the CERT.

My ambition is for the CERT to be the definitive place to track companies’ commitments and the progress they are making.

And its accountability and delivery that matters in the end.

The pilot phase of CERT will launch before the end of the year, initially open to the 415 businesses covered by the National Greenhouse and Energy Reporting scheme. These are Australia’s largest energy users and many are household names.

Next year, I hope that we can open up participation to a broader group, but in the meantime, I strongly encourage Australia’s largest energy users to step up and participate in the pilot.

While there is certainly more to be done, I have every confidence that, by working together and remaining transparent and accountable for our commitments, we can collectively deliver for all Australians.

Thank you again for this opportunity and I wish you all the best for the rest of the summit.