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Doorstop - Kurri Kurri, New South Wales

19 May 2021

Interviewer: 
Doorstop

Subject: Hunter power project

E&OE

PAUL BROAD, CEO OF SNOWY HYDRO: Good morning everybody. Welcome to Kurri Kurri in the heart of the Hunter Valley, in one of the most industrialised areas in the nation. It is a great pleasure to have Minister Taylor with us today, the Minister for Energy, for what is a momentous occasion for us in the Hunter and for us in Snowy. Gas and things we do with gas are important for us for Snowy and for the wider community. It's a great pleasure, this is not unfamiliar ground with Minister Taylor, who's been here a number of times inspecting the site, understands in detail what we're proposing to do here. So it's a very warm welcome to Minister Taylor.

ANGUS TAYLOR: Thanks Paul and your team for having me here today. It's great to be here in the heart of the Hunter Valley, as you rightly put it, on what is an important day for affordable, reliable energy for people in New South Wales, but people right across the east coast. This is an important announcement of the Government's commitment to a 660-megawatt gas open-cycle generator, which will be able to keep the lights on when it's really needed and put downward pressure on prices when it's really needed. Now, this is a good day for jobs. It will create jobs during construction of course, and ongoing jobs. But importantly, the jobs of all of those workers who rely on affordable, reliable energy for their living, for their businesses. A good day for households in having affordable energy, of course, a good day for having reliable energy that is needed at a time when we're looking at the prospect in 2023 of losing 1,600 megawatts of capacity when Liddell closes down not far from here. Now, this, combined with Tallawarra, which was announced recently - a gas-fired generator, open cycle gas generator down in the Illawarra, it was announced recently by Energy Australia - will combined provide the replacement we need to ensure that we have that energy for affordability and reliability. But importantly, both of these projects, both this one and the one at Tallawarra, will help to bring down emissions. They'll be hydrogen-ready projects, but on top of that, they're projects that can ensure that the solar and wind that is being built at record rates - the highest level of household solar in the world here in Australia, can be backed up so that we have that power we need at the price we need in the evenings when the sun goes down. 

Now, there's been lots of discussion about the need for this. It is needed because we are losing a very significant chunk of capacity when Liddell closes in 2023. But importantly, we've seen a dress rehearsal for what will happen when Liddell closes in the last week. In the last week, just down the road from here, we've seen the Tomago smelter, which is the biggest electricity user in Australia, have to close three times for between two and three hours each time after the sun went down in the evening. On all three occasions, they had to take out significant parts of their capacity, their demand, to keep the grid working and to put downward pressure on prices. Despite that, the price went, yesterday afternoon, from $41 to $14,000 at the peak. This is what happens when Liddell goes out of the market, and we've just seen part of the Liddell generator go down in the last week, not the whole thing, but we have just seen exactly what will happen if we don't have replacement capacity. Now, it would have been good to have this capacity here yesterday and through the course of the last week, but the plan is to have it in place when Liddell does close for good in 2023, and this is immensely important to deliver that affordable, reliable energy that I've described.

Now, as I said, this is important for the workers at Tomago. But it's also important for all workers who rely on the energy that they need for their jobs. And there is a big question which is will Labor support those jobs? Will Labor support the workers at Tomago? Will Labor support those workers who rely on energy for their industry, for their jobs, for their businesses? This is a big question for Chris Bowen. We've seen Joel Fitzgibbon out today strongly supporting this project. Good on him. But we've also seen Chris Bowen opposing it. Labor needs to make up their minds because we want this to go ahead. We want it to be bipartisan without hiccups along the way. It must be in place by 2023 and it must be in place to ensure that we don't see that spike in prices or loss of reliability that is so important to people right across New South Wales. 

JOURNALIST: There's plenty of people lining up to disagree with you about whether this plant is needed, including the New South Wales Environment Minister. What do you say to the critics that say this is going to be a stranded asset?

ANGUS TAYLOR: Well, the New South Wales Environment Minister has just supported the Tallawarra project and he is supporting gas projects. But importantly, I'd say to anyone who is opposed to it, have a talk to Tomago. Have a talk to the workers at Tomago and ask them if they want to have affordable, reliable energy to keep them in work. And they've seen over the last week what happens. They have had to turn their smelter off. Now, if you turn a smelter off for more than three hours, it doesn't come back on. It doesn't come back on. So those workers and so many other people across this state and the east coast who rely on affordable, reliable energy, want to know that that energy is assured when Liddell closes in 2023. There are people out there who want to see the prices go up. Now that's clear. That is the nature of things. We don't. We want to see affordable, reliable energy and we'll back it in, and that's why we're backing this project 100 per cent.

JOURNALIST: This plant is going to run on diesel initially because there's no gas supply to it. Why isn't there a gas supply?

ANGUS TAYLOR: Well there will be gas supply for the first summer that counts in 2023, but I'll let Paul respond to that.

PAUL BROAD: Yeah. Thank you very much, Minister. Look, this plant will be ready to go when Liddell closes. The lateral, which supplies gas, takes a bit longer for the EIS process to be sorted because it goes around and close to houses, and we've got to go through that process. We're looking to fast-track that and, with what we've put in the marketplace is quite conservative. Our aim is to only ever use diesel as the ultimate backup. Our aim is to run this plant on gas. As more gas comes available, hopefully from Narrabri or elsewhere, the more we will use this plant, and the more and more aggressively we'll push it. If I can just support what the Minister's saying. You can't keep the lights on after dark if the sun goes down. You can't, without massive amounts of firming capacity. If a plant closes, it gets old, you've got to build new ones. You've got to take long lead times. These things can't be turned on, on a dime. You need to take long lead times and do it. This is about investing in the future for our kids. We'll keep the lights on because that's what we do. In the last week, as the Minister says, it's been an absolute dress rehearsal and 2023 is not even here yet.

JOURNALIST: Mr Broad, where's the gas coming from? Is it dependent on the Queensland to Hunter gas pipeline?

PAUL BROAD: No. No. It'll come out of the Sydney-Newcastle pipeline, and once we have is quite a long lateral which turns into storage, and we'll suck it out in the low gas demand time, particularly summer, so our lats will be full, topping it up as we go.

JOURNALIST: What's the timeline for introducing green hydrogen through the plant?

PAUL BROAD: This plant is ready for green hydrogen. As soon as it's commercially available we'll be happy to do it. The question of hydrogen, I think, will be debated at length. We would argue that the economics for hydrogen into vehicles, trucks in particular, will be probably more attractive in the first place than burning it in power stations. But we'll be ready, this plant - as is Colongra - ready to take on hydrogen.

JOURNALIST: Minister, there is a long line of people criticising the plant, saying it's not needed. Kerry Schott of the Energy Board, she says commercially it doesn't make sense. Tony Wood from Grattan says there's no justification for it. So what, what is the justification? Where’s that coming from? Is it only Tomago Aluminium? Or where else are you getting your-

ANGUS TAYLOR: Well, all customers. I'm using Tomago as an illustration. Every customer wants to know that they're going to have affordable, reliable energy. What we've seen in the last week is what happens when you lose capacity from Liddell. We haven't lost all of the Liddell, we just lost a couple of units. And we've seen the price spike, and we've seen the biggest electricity user in New South Wales have to shut and risk the whole future of that operation. Now, we are not going to stand by and risk affordable reliable electricity in this state and across the east coast. We saw it in Victoria. 

JOURNALIST: But couldn’t you get that affordability and reliability through batteries and pumped hydro?

ANGUS TAYLOR: We've seen so many - let me finish. We've seen so many - I'll come back to that. We've seen so many dress rehearsals. We saw it in Hazelwood in Victoria. Some of the experts said you don't need to replace it. We saw the wholesale price double when Hazelwood shut. We saw it in South Australia with Northern. We're not going to stand by and see that happen. Now, you talk about other technologies. We're investing big time in Snowy Hydro and Snowy 2.0 and pumped hydro. We see enormous opportunities there, it's very, very important. Much more capacity being added from that than here but the two combined are important and we need balance in the system. When it comes to batteries, we're seeing batteries getting put into the grid and that's a good thing, and they can play an important role in frequency control, and over time they can start to provide some firming and back-up. But long duration back-up and storage needs gas and hydro, and that's exactly what we're doing here.

JOURNALIST: In terms of jobs, Liddell has hundreds of workers there. This, the EIS for this project says it's only going to employ about 10 people full-time. What is the Government doing to help transition workers as the energy market changes?

ANGUS TAYLOR: Look, the jobs that really count here - the jobs on the ground are important, the jobs during construction are important - but the jobs in big numbers are all of those jobs related to the customer industries, and used the 1,000 workers at Tomago as an illustration, but there's so many others who rely on that affordable, reliable energy. Now, they're the jobs we've got to make sure, across the Hunter Valley and right across New South Wales, are intact, that we don't lose them, because we lose affordability and reliability in our energy system. Now, it's important we keep looking for great new opportunities in the Hunter Valley. This is one of them, but there's more. You know, I'm looking forward to seeing proposals coming forward on hydrogen in the Hunter Valley, and I think that, that offers, that offers great potential. But we are seeing the Valley change. We are standing here on a site where an aluminium smelter in 2012 was killed by the carbon tax. An aluminium smelter right here was killed by the carbon tax. We're replacing it with a gas generator. We want to see more of that in this region, in the Hunter Valley, and create those jobs for people right across New South Wales and Australia.

JOURNALIST: What do you say to the Climate Council that says gas is expensive? And gas peakers that rarely run actually need to drive prices up to get it to work?

ANGUS TAYLOR: Well, they're wrong. I mean, our modelling on this is very clear. We, we've seen that if we replace the capacity that's being lost from Liddell, then we'll contain prices. If we don't, we'll see prices go up by 30 per cent in the short term and substantially more in the longer term. So it's very clear that a gas generator like this can help to put prices down, and that is exactly what we want to see, of course.

JOURNALIST: And you've repeatedly said 1,000 megawatts is what's needed. Can you tease out for me exactly how you come to that figure? Because nobody else is saying that's the figure that we need.

ANGUS TAYLOR: Well, that's not right. We've made it very clear. We did work with the New South Wales Government with modelling that showed this. We're losing 1,600 megawatts so we need to replace a good chunk of that, and that's 1,000. And our modelling showed that if we don't do that, we're going to see a 30 per cent increase in the wholesale price in the short term and substantially more in the longer term. Now, we're not going to stand by-

JOURNALIST: That same modelling did say those prices would stabilise around 71 cents.

ANGUS TAYLOR: But substantially higher than they otherwise would be. Now, let's get beyond the modelling, let's look at what happened in the last week. I encourage you to all take a look. It's all publicly available information. The price last night got to $14,000. It started at 3 o'clock in the afternoon when people's solar cells were working, great, at $41. That's what happened. So let's get beyond the theory, let's go to the reality- 

JOURNALIST: I'm just going with what the analysts are telling us.

ANGUS TAYLOR: And a worker in an aluminium smelter can't sustain their jobs if they see that kind of outcome. So, let's go to the practical and the practical is we want to maintain those jobs. We're making this investment. We're committed to it. We want to see Labor go with us. We saw this site killed by a carbon tax back in 2012 by policy that was wrong. We're bringing it back to life in a way which is going to deliver affordable, reliable energy across this region and across New South Wales.

JOURNALIST: What will fossil fuel projects like this do for Australia's reputation when other countries are taking steps to meet Paris Agreement commitments?

ANGUS TAYLOR: Well, we're taking steps to meet Paris. We're 19 per cent down on our 2005 levels and that's ahead of New Zealand. That's ahead of Canada. It's ahead of Japan. It's ahead of so many countries - the United States - so many countries across the world. But the good news about this project is it will bring down emissions. We're seeing record levels of investment in solar and wind. We're got the highest level of household solar in the world, 1 in 4 houses in Australia. We've got the highest level of solar and wind combined outside of Europe, in the world. We need backup, we need firming for that, or else we won't be able to continue to see that record level of investment that we've been seeing. And if we don't have that firming, if we don't have that backup, we will not see continued investment. That's what gas projects like this can do. That's what Snowy 2.0 can do. We want to see more, not less, and we look forward to working with other project proponents like we did with Energy Australia, who is building, of course, a generator of little over 300 megawatts, down in the Illawarra. These are the projects that allow us to get more renewables into our system and ensure that we have the affordable, reliable energy that we need.

JOURNALIST: The International Energy Agency came out today with a report saying that governments need to stop investing in fossil fuels, gas included, if we are to reach those Paris targets. I mean, this is not just an Australia thing. It's a global thing that we're trying to meet. Isn't our responsibility to take that on?

ANGUS TAYLOR: Yeah, we're taking it on. We're 19 per cent down and this will help us to reduce emissions. We will meet and beat our 2030 targets just as we met and beat our 2020 targets. We're doing it in a pragmatic way that Australians do things. We get on with the job. We've seen a 5 per cent reduction in our electricity grid in the last year alone. So, we're achieving the outcomes. We're taking a pragmatic approach to it. We have to, because we've got to keep the lights on and we've got to keep prices down as we're doing it. But the runs are on the board. We're achieving the outcomes and we will keep achieving the outcomes and this is part of achieving those outcomes, just as Snowy 2.0 is, just as the Tallawarra generator being invested in by Energy Australia is down in the Illawarra. The other good news about this is we do see enormous potential for hydrogen. It's why we want to see hydrogen-ready gas generators being built and we've committed through the Budget money to make sure the gas generators that are being built are hydrogen ready.

JOURNALIST: Do you think this decision will influences Santos' decision on Narrabri, or do you think that's got more to do with the international market? 

ANGUS TAYLOR: That's more a question for Santos, but I mean, we obviously want to see that project go ahead, as does the New South Wales Government. They've gave it planning approval some time back now. You know, as I say, the International Energy Agency has been saying for many years that gas is part of the answer to get more renewables in the grid as we see our hydrogen industry develop. They've been strongly supportive of the technology, so you know, we certainly hope that we see more of these projects that can help, not just Australia continue to reduce its emissions, but Japan and Korea and China and other countries right throughout Asia.

JOURNALIST: This plant is something that private industry wants to secure, reliable energy. Why hasn't the private sector jumped on it?

ANGUS TAYLOR: Well, private sector is investing in gas generation. That's why I've mentioned the Energy Australia project. But we have a company in Snowy Hydro that is a generator, and it's well positioned to build this project. Paul approached me about it some time back and said this would be a good commercial thing to do, and they are now being funded by the Federal Government to get on and do it. And as I say, that is a good thing for consumers of energy right across the east coast.

JOURNALIST: AGL appears to be holding off on a decision on its Tomago gas plant. Why should they be competing with the Federal Government?

ANGUS TAYLOR: We gave them the opportunity to commit to it and they decided not to. We were very clear. We set a 1,000 megawatt target some time back. We said to the private sector if you fill that 1,000 megawatt target, we'll step back. Energy Australia came in with a significant chunk of it, good on them. We're delighted about that. AGL chose not to. That was their choice, but on the back of that choice, we've decided to proceed.

JOURNALIST: Is that project now dead then?

ANGUS TAYLOR: That's a question for them, but they've told us they will not be able to meet the 2023 timeline which is the timeline that counts for the closure of Liddell.

JOURNALIST: Will diesel need to be powering it for the first six months, or when will that sort of come along?

ANGUS TAYLOR: So, this is a gas generator. All gas generators have the capacity to take different fuel sources, as Paul said a moment ago. That is the nature of these things. This one in particular, we want to make sure is also ready for hydrogen. So, that's something, having backup energy sources is important. Hydrogen actually is important because it gives us the opportunity to reduce emissions, and ultimately bring the gas generators like this down to very, very low emissions levels.

JOURNALIST: Do you think the epic proposal for a floating gas terminal, import terminal in Newcastle is viable?

ANGUS TAYLOR: That's a matter for the proponents. There's a number of these import terminal projects around. I'm more familiar with some than others. This is really a question for them. 

ENDS