Business Illawarra executive forum speech

University of Wollongong

ANGUS TAYLOR: It's wonderful to be here back in Wollongong at the University of Wollongong. I came here about five years ago looking at some of the innovations that were going on here, and I'm looking forward to seeing more of it in the next little while. But I have been keeping a close eye on it in my time as Energy Minister. 

It's also particularly good to be back Wollongong – my first job out of university was at the Port Kembla steelworks. You know the first job you ever have out of university I guess has a particular meaning to you. But I am very proud that this steelworks is still going gangbusters after all that time. 

If you'd asked me back in what was then – it was around 1993, 1994, whether by 2022 the steelworks would still be here, I would have hesitated. And I think we all would have because it was a very uncertain world we've had over the last 30 years for manufacturing and industry in this country. But it's just brilliant to see that it is going from strength to strength – very clearly from the profit results we saw today. It's in very rude health, which is absolutely wonderful. And important for the workers and the industries in this region. As you rightly point out, they've been the traditional industries in this region for a long while.

Can I acknowledge Patricia Davidson, very good to have you here and the Mayor of Wollongong, Gordon, wherever you are. I know you're here somewhere, but it's good to see you. And really I appreciate the opportunity to be here to be talking with the chamber. 

Look, University of Wollongong – I don't need to tell you this, is front and centre of a manufacturing ecosystem that is much bigger than just Wollongong. I mean, I think the strength of manufacturing in Wollongong is something that is very key to people who live here, but what I also see is the connectivity and the network, the broader network, around it. Wollongong, I think, has the potential to play an enormously important role in manufacturing ecosystem in this country in the years to come. 

And I was amazed to learn that a member of the faculty here, Jerry Swiegers – I think I got the pronunciation right - spun off six companies, attracted $100 million of investment in commercializing research, which is a really strong focus for the government. 

We've just made a very significant announcement on the importance of commercializing research in recent weeks. We're backing one of those companies Hysata, through our Clean Energy Finance Corporation, focused on hydrogen. 

And the ARC Research Hub for Australian steel innovation, which is led by Dr Paul Zulli is another great example of internationally recognised research and industries coming together to push the boundaries of what's possible in traditional industries, something that I feel very strongly about. 

Having spent my career working in traditional industries and seeing the importance of evolution of those industries through the deployment of smart technologies to make us more competitive and cleaner, more sustainable, this is something that I think Wollongong has the potential to play a significant role in, not just for Australia but for the world. 

The Illawarra, of course, has for a long time been the home of the Aussie blue-collar worker, and we should be very proud of that role in Wollongong. And if we can secure our manufacturing sector's energy future it will remain so. And we're certainly determined as a government to see that happening. 

World-class steelmakers and coal miners have been in this region for almost 180 years. That's a stellar contribution. The metallurgical coal mined in this area is used in steel making here at BlueScope and exported right across the globe, has been an important part, and will remain an important part, of industry for this region and for Australia for many years to come. 

And, of course, BlueScope itself employs around 3000 people directly and 10,000 in downstream businesses. It remains a very important part of the ecosystem here. It will continue to be a critical industry for communities for many years to come. 

Now, as many of you would know, these industries are important more broadly for Australia – met coal is – we are the world's largest exporter of metallurgical coal. We're also the fourth largest energy exporter in the world. 

And this puts Australia in an extremely important position, not just for bringing down our own emissions and investing in the technologies that matter for Australia's future, but our role in that bridge between developed countries and the developing world that needs growth, that needs industrialisation, that needs development is a really crucial one and one that we should – we should take a real responsibility for that role and we should recognise that the particular role Australia is already playing in this at places like the University of Wollongong.

Now, there's many thousands of Australians who work in energy exports and energy intensive industries like steel making who are the foundation and must remain the foundation of our energy future. And make no mistake, the future of these industries in Australia and their workforces will be decided in the next couple of decades. 

We will make decisions in the next couple of decades that will determine whether or not we are able to continue as an energy powerhouse, as an energy intensive manufacturing powerhouse that we've been in the past. 

And so whether it's places like Wollongong or Newcastle or Gladstone, Whyalla, the Pilbara, all of those regions will depend on whether we get this right. 

Now, long-term goals are enormously important and our focus on net zero is important. But we also have to have a focus on the road in front of us. There's no point planning green steel and green aluminium into the future – which, as I say, are important technologies – if high energy prices decimate the industries we're in today. 

I learned as a consultant at McKinsey that you've got to have an eye to the long term as well as the short term. You've got to get the balance. You've got to get the balance right. 

And that's why the Prime Minister christened me when I first got this job as the “Minister for Getting Prices Down.” And over the last few years that's exactly what we've done. The ACCC data on electricity costs show that they are at their lowest level in eight years. Here in New South Wales electricity costs per household are more than 19 per cent lower than they were in 2013. And I'm incredibly proud that we've been able to do that, because I know how much it matters to jobs, to households where they're down 8 per cent, to small businesses where they're down 10 per cent and as well as to industry where they're down 12 per cent. 

This is excellent news particularly because it's been at the same time and to some extent it's been helped by record levels of investment in renewables. We have the highest level of household solar in the world in this country. Over one in four houses as solar on the roof. We're seeing a solar revolution in this country. And it's quite remarkable how Australia has really led the world on this, including the research. 

We'd like to see more of the manufacturing here. That's something we're absolutely working on. But we have played a lead role in the research and the deployment of solar, and we are absolutely leading the world in terms of the outcomes. 

But when it comes to electricity prices, we cannot be complacent. Complacency is what is happening in Europe or the result of complacency is what we're seeing in Europe right now. I was talking to a number of you before this. It was probably foreseeable that if you don't control your own inputs like gas, then you are at the whim of others. And in this particular case it's Russia. And they have been able to play a role not just in improving the profits of Russian gas but in driving up the price of electricity in Europe. 

That is the situation we would never want ourselves to get into – losing control of our energy security and our energy affordability. It leads to businesses shutting down, and that's particularly tough for energy intensive industries like steel making and fertiliser manufacturing. In Europe those industries have been forced to curtail production. That's what's happened. And that's what happens if you don't keep this relentless focus on affordability and reliability outcomes. 

Now many of you would have seen last week's announcement – I'm sure you've all seen last week's announcement – that Australia's largest coal-fired power station Eraring on the Central Coast will be shut down in just over three years' time. The decision is disappointing for a number of reasons, not because of closures. They happen and they will happen. But first and most importantly in this short time period workers and their families rely on Origin for their livelihoods and they need to be appropriately looked after. 

This announcement is a big blow for that region – 400 jobs will be directly affected and many more indirectly affected. 

And there is a second issue here, which is that there is, as yet, no concrete plan to replace Eraring. And that has to be a concrete plan that balances the renewable energy that's coming in, the variable renewable energy that's coming in at a record pace in our region with dispatchable capacity. Balance is key in any energy system. 

The proposed replacement – a 700 megawatt power short duration battery simply does not replace a 2800 megawatt coal-fired station. That's not a replacement. That's not a replacement. And, indeed, in the absence of a replacement we know prices will go up and people will pay the price in their bills and industry will pay the price with lost jobs and those works in particular will pay an enormous price. 

AGL's decision to bring forward the closures of Bayswater in the Hunter Valley and at Loy Yang A and Brookfield's bid to accelerate those closures even further compounds that risk. There's more time, but there must be replacement. 

I've made this point since I was first Energy Minister in the context of the Liddell closure where there is replacement. And some of that replacement, happily, is happening right here in the Illawarra with the Tallawarra B and gas generator. 

Now, the position on demanding, calling for replacement when existing generators close has not always been popular. There's plenty of those who are happy to hand wave and hide behind technicalities to claim it will all be okay. But we've seen this movie before. 

If major generators close and there's not replacement, the prices go up. That's what we saw with Hazelwood in Victoria – prices were up 85%. With Northern in South Australia, and these latest announcements vindicate the approach that we have been taking to make that replacement goes into place. 

That's why we're investing in Snowy 2 – 2000 megawatts of storage in the Snowy Mountains. And that project is progressing fast. It's an energy story project which is 125 times larger than the battery put forward as a replacement for Eraring – 125 times larger. So this is a real project with real replacement. 

All of the major priority transmission projects in the integrated system plan we are supporting. 

Three new gas generators, including Tallawarra here in the Illawarra. 

We're also committed to putting in place a capacity mechanism and major reform to ensure that pricing rewards having dispatchable capacity in the market in a technology-neutral way. And that's – we will not have industry in this country if we lose that dispatchability. 

The economic futures of workers, of Australian families and businesses, is too important to leave that to chance. 

Now back in August 2018 in my first speech as Energy Minister I said the simple truth is that if industry steps up and does the right thing on price government will step back and focus on other things. But if industry fails to accept up then we will step in. And we've made good on that promise. We've said we would and we will do it. 

Following the announcement that Liddell will close we provided support, as I said, for Tallawarra B as well as the Kurri Kurri gas generator in the Hunter Valley. Lots of people opposed us on that – they're not now. They see it will be needed. And we make these decisions because we have to get the right outcomes. 

Now, at the centre of this in any sector, but particularly in the energy sector, that customers must come first. You don't have a business model without a customer. And to keep energy companies and investors honest we'll do what's needed to keep prices low and the lights on. We'll work with the New South Wales government and the private sector to ensure that more dispatchable capacity is available when Eraring closes and together it's important reforms like the capacity mechanism and the investments that I've already outlined happen. 

These are the critical pieces in the puzzle. But there are also issues that Labor has variously hedged its bets on publicly or have, indeed, voted against them. The fact is Labor has no plan to support investment in – or replacement capacity in dispatchable needed for Eraring. In fact, their modelling released before Christmas assumed that every coal-fired generator would stay to the end of their life cycle. That's the assumption. We've never made that assumption, and that's why reforms like the capacity mechanism we put in place are so crucial. 

You cannot willfully ignore the realities of the electricity market. So we're doing all of this at the same time as we're focused on bringing emissions down. 

Australia is one of a handful of countries in the world that has laid out a detailed plan for how we're going to get to net zero by 2050. And, of course, the centrepiece of that is technology, not taxes which is why I pay such tribute to the work that is being done in places like here at the University of Wollongong. 

We have a very strong track record of meeting our international commitments. We've met and beaten our 2020 targets by a long way – almost a year's worth of emissions. We'll meet and beat our 2030 targets – in fact, we're on track now to get to 35 per cent reduction in emissions by 2030. We're already over 20 per cent down. That's ahead of Japan. That's ahead of the United States. That's ahead of New Zealand, similar commodity exporter to us. That's ahead of Canada, a similar commodity exporter to us. We are ahead of all of those countries in our emissions reductions, and we have done that as our economy has grown. 

That's because we've got an approach that's fair and balanced, that balances the short term and the longer term, balances workers and energy intensive industries with the low emissions technologies that we need to see coming through the pipeline. We won't shut down our traditional industries. Our plan relies on bringing down the cost of new technology, not raising the cost of traditional technology. And we're investing between now and 2030 over $21 billion in making – helping those technologies to come through the pipeline and to get the parity with their higher emitting alternatives. 

These priority technologies are those that are right at the heart of the Australian industrial economy – low emissions aluminium, low emissions steel, making sure we've got carbon capture and storage working. 

We've seen an amazing array of projects around the world focused on carbon capture and realisation and storage. Ultralight-plus solar, we think we can get the cost of solar down by 2030 to a cent and a half per kilowatt-hour. 

But we've got to have the capacity, the storage and the backup, which is why we're also focused on longer duration storage and focused on what our land can do through soil carbon. We see enormous potential for farmers to play a role. 

We've explicitly set economic targets for every one of those technologies. We were the first in the world to do that. We've seen the United States and the UK following suit. The IEA is following suit. We've seen countries across the globe working with us, adopting those targets and then recognising that technology outcomes are achieved through collaboration. And, you know, the wonderful thing about innovation is you only have to do it once in the world and make it work and then everyone can use it. Everyone can. 

This is the fast, effective, economically responsible way to bring down emissions. Central to our approach is supporting choices not mandates. 

We don't want to tell a customer, we don't want to tell Australians what kind of car to drive. They know what kind of car suits them. We do want to give them the full range of options. They're adopting hybrid cars at a rapid rate, hydrogen cars and electric vehicles will back a bigger part of the mix in coming years, and making sure the infrastructure and the regulation is in place to support that uptake is hugely important. This is about choice, not compulsion. And we will continue taking that approach. 

What we're not going to do is impose costs. What we're not going to do is impose costs. And what we've seen in Labor's policy – and this is important with an election is approaching – is them changing safeguard mechanism from the means of avoiding blowout emissions reduction to a carbon tax. A carbon tax on the industry. 

The aggressive targets in the safeguard mechanism, will impose costs on industry tha industry will have to pay. Now we saw that previously with the carbon tax and we saw what happened as a result of that. We're only now getting manufacturing back to the point where there's a level of employment we had when we got into government – before we got into government in 2013. 

We saw slashing of jobs back when the carbon tax and the previous Labor government was in power. It's not something we've ever seen as acceptable, but the reforms to the safeguard mechanism they are proposing, which is not our policy – which is not our policy – will impose heavy costs on Australian industry. I should point out that the safeguard mechanism that they're using as the basis for their carbon tax doesn't just cover mining resources; it includes gas networks, fuel refining, airlines, transport companies, flour mills and many more essential industries Australians rely on. 

They have indicated perhaps that some emissions intensive trading exposed industries are exempt, but if that is true, then those other industries will have to wear a much heavier burden. This is not the way to do it. 

Get the cost of low emissions technologies down and then they will be deployed. We want to see that in steel. We want to see that in aluminium. We want to see that in agriculture. And that way no-one has to pay a heavy toll in losing their job or being unable to pay their electricity or energy bill because of government policies. 

As a nation, we rely on workers in the coal and energy sectors to provide our homes, our businesses and our industries with reliable, affordable energy for decades. I know Australia will rely on these industries and their workforces for decades to come. That's why we are taking action now to protect the interests of those affected most.

We won't abandon our mining workers. We won't abandon our families or their communities. Tapping into the skills of the existing workforce, creating new supply chains, harnessing our new knowledge base and relationships with the industry and other countries will be crucial to creating new economic opportunities for all Australians. 

Our technology not taxes approach is designed to avoid imposing new costs on households or businesses. It's designed to expand choices, don't impose mandates and, importantly for the steel sector in the Illawarra and other energy intensive industries across the country, it will keep energy prices down and protect their competitiveness. 

Everyone in this room is part of the engine room for our economic future. It's an imperative that we support your development and growth by ensuring a secure and sustainable energy future. I look forward to delivering further actions that will support businesses, just like yours, to invest, to create jobs, to create long-term productivity, growth and sustainability for all Australians and for the world. Thank you very much.