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Interview with Chris Smith, Sky News Live

5 January 2021

Interviewer: 
Chris Smith

Subject: Energy Security Board's Post 2025 Market Design Directions Paper and the Health of the NEM assessment report

E&OE

CHRIS SMITH: The nation's top energy adviser, Kerry Schott, has today stirred up the energy wars, calling on all governments to rewrite the rules of a power system she says is no longer fit for purpose. Now the Energy Security Board Chair has warned that our traditional baseload power source, coal-fired stations, will close at a rapid rate. More rapidly than we think. And renewables, she says, will play a bigger role but that could also lead to higher prices and an unreliable national power grid. Think blackouts. Are Australians prepared for that do you think? I caught up with Federal Energy Minister Angus Taylor late this afternoon.
 
Kerry Schott says that the electricity market is in desperate need of reform. Is this code for we need to replace coal with renewables?

ANGUS TAYLOR: No, it's not. It's, we need a balance in the system, Chris. So the reports that came out today, I think, send a very clear message. Number one is we are seeing good progress on prices coming down. We need to see that flowing through to all consumers. That hasn't been the case, but we've seen it for many. And that push needs to continue onwards. But it's also telling us we're losing balance in the system. We need that disptachable generation, that reliable generation that flicks on when people flick on their light switch. That's there night and day when the wind is blowing or not. And that balance is what's absolutely crucial to making sure the system keeps going. And it's not that you necessarily run out of power. You have all sorts of technical problems if you don't have enough of that reliable, dispatchable generation in the system. That could be coal. That can be gas. That can be hydro. That can even, for short periods, be batteries. Although, you know, the costs have got to come down significantly before they can play a really significant role. But that balance in the system is the key. That's Kerry Schott's point. I agree wholeheartedly with it. There's much we are doing on this front. And much of the recent gains we've seen is we haven't been seeing that big loss of coal-fired generators like we saw in Victoria with Hazelwood. But there are many dangers ahead, and we have to really manage those dangers very carefully.

CHRIS SMITH: And she points that out. She says that coal-fired power stations will close quicker than what we think they will. So you've got to somehow encourage the market to take up gas, don't you?

ANGUS TAYLOR: Well, absolutely. There's no doubt about that. There needs to be balance in the system. If a coal-fired generator is getting to the point where it can't keep going, it needs to be replaced with like-for-like generation. We've said that all along. The next in line to close just because of its age and it is running into serious problems, is Liddell in the Hunter Valley. 

CHRIS SMITH: Yep. 

ANGUS TAYLOR: And we've said we will replace that with a gas generator if the private sector doesn't. We'd prefer the private sector to step up. If they do step up, we'll step back, but otherwise we'll step in. And you need to have that balance in the system. There's a whole series of things we've already done to drive that. There's more that needs to be done, and this is the point that the ESB, who put out this report today has made and Kerry Schott has made, is there's a lot more work to do, but this has to be the top priority.

CHRIS SMITH: I want to go back to what New South Wales did prior to Christmas. Came up with its own energy plan without even discussing it with you or the Prime Minister or anyone from the Federal Government. She talks about - Kerry Schott that is - she talks about a patchwork series of reforms. She's absolutely right. If we've got one state going it alone and not talking to the feds about what's ahead in the future.

ANGUS TAYLOR: Well, and of course, that's not the first time it's happened. We've seen over recent years, over many years that Queenslanders, Victorians, ACT of course, has set its own 100 per cent Renewable Energy Target and this has been the pattern of state and territory governments for a long, long time.

CHRIS SMITH: But we're on a national grid. We're on a national grid.

ANGUS TAYLOR: Well, that's absolutely right, Chris. And so the point of the work that the ESB is doing is to say: ‘Look, let's all rally around a common set of reforms, an agreed set of reforms that means you don't wander off on your own and do your own thing.’ And that is absolutely crucial. That's why we're behind this work. We very strongly believe it needs to be done right. What's gone out today is a directions paper laying out the areas that need to a focus. Alongside that of course, we are doing things like investing in generation ourselves as the Federal Government, and we'll continue to do that. But ultimately, the balance in the system is the key here and we need state governments working with us through National Cabinet - this is where it's being run from now - to make sure we keep that balance in the system and we don't have states running off doing things which are at odds with this overriding framework.

CHRIS SMITH: Because the more we see of that - correct me if I'm wrong - the more we see of that, the more chances we have of prices increasing yet again despite what we've been able to achieve recently, and also a future full of blackouts.

ANGUS TAYLOR: No, exactly right. The lights don't stay on, and of course prices go up. We've seen this. Look, the report that came out today made the point that in the last 12 months we've seen over 250 interventions by the market operator where they've had to override the market. 

CHRIS SMITH: Yep. 

ANGUS TAYLOR: So that would be, for instance, saying to a South Australian wind generator you've just got to switch off because we can't handle your power in the grid, it's too much of a surge. And that's happening time and time again. Four years ago, that barely happened at all. So we do have a problem. That's why we're doing what we're doing as a Federal Government. That's why we're making sure that when Liddell closes, it's properly replaced with like-for-like capacity. And it's why we are focussed on ensuring that these reforms that the ESB is putting forward are driven to keep that balance in the system.

CHRIS SMITH: And do you think the process we've been through with a National Cabinet will assist this idea of coming together as one? 

ANGUS TAYLOR: I do. I mean, we had a meeting just before Christmas and very good outcomes from that. We looked at this directions paper and there was strong agreement from all ministers that this is the direction we need to go in, and we'll continue to lead that and push that. But it does mean that we have to coordinate around this approach. 

CHRIS SMITH: Yep. 

ANGUS TAYLOR: Your point you made earlier is absolutely right. And look, people's lives and jobs depend on this, Chris. We're not playing games here. I mean, if you look at the heavy manufacturing sector in this country - aluminium smelters, steel mills, petroleum refineries - they depend on affordable energy and if we don't get this right, we're putting these people out of work. To me, that is absolutely unacceptable. As well as just helping small businesses and households to make ends meet. You know, right now, it's been a very tough year last year. It's not over yet for small businesses and many households and we have to make sure that they can make ends meet. 

CHRIS SMITH: Yep. 

ANGUS TAYLOR: This work is enormously important to those very important jobs and those very important needs. 

CHRIS SMITH: Which is why I thought it was important talking to you about this tonight. Thank you so much for your time.

ANGUS TAYLOR: Thanks for having me, Chris.

ENDS

Media contact:

Minister Taylor's office: 02 6277 7120