Keynote address at the Generation 2.0 Summit
ANGUS TAYLOR: Thank you for the opportunity to speak today at this conference. Unfortunately it couldn't be live, but we do have the opportunity to provide this recorded speech.
I'll focus particularly on the evolution of our energy system and the focus we need in our energy system on customers as we bring our emissions down.
Now, there's enormous focus in the ESG world on making sure energy delivers to many different stakeholder groups.
But the one that's often forgotten is the customer.
Customers need reliability, they need affordability as we bring our emissions down. And they need to be at the centre of our energy system.
Now, the good news is we are seeing real progress on this.
We've seen very significant reductions in prices in recent times. We've seen progressive reductions in wholesale prices, more than half - or less than half of what they were if you go back a little over a year.
And that's flowing through into retail pricing.
Indeed, we've seen in the last year alone a reduction of over nine per cent across Australia in retail electricity prices.
That's great news for customers.
At the same time, some of the challenges with reliability we've seen in states like South Australia are in a much better position than they were.
And it's good news as we look forward that there's continuing investment happening in the sector, adding supply, putting downward pressure on prices.
But many challenges will remain, and I'll come back to those in a moment.
At the same time, we are seeing very dramatic reductions in emissions associated with rapid investment in extra supply, particularly intermittent renewables.
Indeed, in the last year, 2020, we saw 7GW of investment in renewables. 6.3 GW the year before.
These are extraordinary levels.
Roughly, four big power stations, coal-fired power stations, a year in investments.
And of course, those investments are contributing to the very significant reductions we're seeing in prices.
Alongside that, the reduction in emissions, five per cent in the last year alone. And those reductions in emissions will continue in the years to come.
We're seeing great progress here, but there are challenges that remain, as I said, and maintaining a balance in our energy system that can continue to deliver that affordability, that reliability as we bring down our emissions is a very big challenge.
Alongside the very significant investment we've seen, particularly in household solar, but also large scale solar and wind, we do need investment in the coming years in dispatchable generation.
Whether it is gas, whether it is batteries, whether it is pumped hydro like the Snowy 2.0 project - we need flexible dispensability that can complement those very significant investments in intermittent renewables that I described earlier.
That investment is necessary to make sure we get the affordability and reliability we need and that we can accommodate those renewables that are driving the reductions in emissions.
Now, our plan is all about making sure we maintain and strengthen that balance in the system.
We're investing in Snowy 2.0. This is an important project that acts as a big battery for our electricity system. It will be able to store energy that's produced in large quantities increasingly now during the middle of the day.
Household solar, the highest levels of household solar investment in the world in Australia. Snowy 2.0 will be able to store that during the day and then supply it back when the sun goes down in the evening.
And of course, over the course of a year, we see big movements in the supply and demand of energy, and storage is crucial to be able to stabilise that system.
The Grid Reliability Fund - $1 billion fund - is all about making sure we have that dispatchability and reliability downward pressure on prices in our system.
That's going through the Parliament as we speak.
A crucial initiative to allow the CEFC to invest more than it already has been in shoring up our system with a particular focus on dispatchable generation and transmission.
We're making very significant investments in transmission, whether it's in the Marinus Link over Bass Strait between Tasmania and Victoria. Whether it's the Hume Link or the VNI West. These are critical transmission investments that bring new generation into the system, but also shore up the reliability and affordability of the system across state borders.
Those plans are absolutely crucial and central to ensuring that we have the system we need. But alongside that, we know that there's a fundamental evolution in the market institutions in our energy systems that need continual refinement. And the 2025 market of design work, being led by the ESB is all about doing exactly that.
Now there's a particular issue we're facing in the short term with dispensability, which is the closure of the Liddell power station.
We estimate that around 1000 megawatts of effective capacity will be taken out of the system with impacts, obviously, if it's not replaced, on affordability and reliability.
We've made it very clear we want the private sector to be providing that replacement investment, if at all possible.
But in the absence of that, we will step in.
We've been doing work on the Kurri Kurri gas generation project.
The economic assessment is very strong.
It tells us that a bigger generator will deliver even higher returns than a smaller generator, and this will be an attractive investment if we choose to make it.
We will make it if the private sector isn't in a position to step up.
We will always prefer the private sector to step up, but Government can't sit on its hands in the face of a real risk to affordability and reliability.
As I say, these are challenging times for our energy system, but the results coming out, the outcomes we're achieving are all heading in the right direction.
There's an enormous amount more work to do.
I look forward to working with industry, my state colleagues, the ESB on the 2025 market design. The Retailer Reliability Obligation that we put into place some time back will need to evolve as part of that 2025 market design, and so will other important initiatives as our energy system continues to evolve, continues to bring down emissions.
Maintaining that affordability and reliability will be a priority of the Government. Maintaining the balance in the system, of course, is always a priority of this Government.
We look forward to continuing to work with you, industry participants, on making sure we can deliver those outcomes, maintaining that balance in the system, and putting the customer back at the centre of our energy systems, our electricity networks.
That's the key.
That's how we'll deliver what everyone wants out of our energy systems in the years to come.
Again, thank you for having me here today.
Minister Taylor's office: 02 6277 7120