Interview with Fran Kelly ABC Radio National Breakfast
6 September 2018
FRAN KELLY: Well the Federal Government's drive to cheaper energy costs has been undermined this morning by revelations that Cabinet rejected a billion-dollar plan to help struggling households pay their power bills. Fairfax is reporting that Cabinet knocked back a proposal last month by the former prime minister Malcolm Turnbull for a one-off bonus worth up to $125 for pensioners and other low-income earners. Just a couple of weeks later Malcolm Turnbull was dumped as leader. The National Energy Guarantee was all but killed off and the new Morrison Government had torpedoed any strategy to cut greenhouse gas emissions.
Angus Taylor is the new Energy Minister or as his PM likes to describe it, the Minister for reducing electricity prices. Angus Taylor joins us in our Parliament House studios. Minister, welcome back to Breakfast.
ANGUS TAYLOR: Thanks for having me, Fran.
FRAN KELLY: If the Morrison Government is so keen to help households deal with bill shock why was this proposal for an energy bonus rejected by Cabinet?
ANGUS TAYLOR: Well Fran I'm not going to comment on Cabinet leaks and I wasn't in Cabinet at the time anyway. But look, the point I would make is our primary focus is and should be on reducing prices. Welfare payments, whatever their merits, are a band aid on a much more fundamental problem and it's the structural solution we want which is lower electricity prices for small businesses, larger energy-using businesses that employ so many Australians and households, and that means electricity prices need to come down and that is our unambiguous, unapologetic focus. That's my job, Fran, I've got a very simple goal which I've been given by the Prime Minister and that's what I'll focus on.
FRAN KELLY: Okay, well someone within the current government is very happy to leak details of this Cabinet submission from Malcolm Turnbull. He presented it to Cabinet at the very time that some in the party room were in revolt over the National Energy Guarantee. If ministers had accepted the price relief that Malcolm Turnbull had come up with he might still be in the job. I mean you were an early supporter of Peter Dutton's leadership push. If you'd known, would it have affected your support for Malcolm Turnbull?
ANGUS TAYLOR: Well Fran, what you're talking about there is a welfare payment proposal which is leaked and as I say and I'm not going [indistinct]…
FRAN KELLY: [Over talks] It's talking about support for people [indistinct]…
ANGUS TAYLOR: But at the end of the day there's a whole series of problems that are created by higher electricity prices Fran. One of those is that people like single pensioners are really stretched. But remember we've got many, many jobs in this country that are dependent on lower electricity prices, whether you're in the aluminium smelting business or refineries or you're in the cement industry or you're even just a butcher that's dealing with rising refrigeration costs. There are a whole range of issues that are created by higher electricity prices and the answer is to get those down.
Now, there's a whole range of ways we can do that. We've got to stop the rip-offs by the big energy companies, we've got to back investment in reliable generation. We do have to provide customers with a price safety net, a fair price, a default price they get even in the absence of haggling each year with their energy retailer. That's how we're [indistinct]…
FRAN KELLY: [Talks over] Okay, well that's exactly of course the blueprint that Malcolm Turnbull outlined before he was dumped. But you are now the Energy Minister and you've declared your first and only priority, you've said it again is to reduce power prices. When will they start to fall and by how much?
ANGUS TAYLOR: Well Fran the bill changes start happening next year and we're going to work hard to make sure that Australians get a fair deal. It's not going to happen overnight, it will happen over time. But…
FRAN KELLY: [Interrupts] How do we judge? I mean you said you compared it to the efforts that Scott Morrison made to stop the asylum boats. It was easy to work out that when mission accomplished with the boats. How will we know when mission is accomplished and you've hit the benchmark?
ANGUS TAYLOR: I think Australians know when their electricity bills are too high and when they're getting ripped off and there's no question at the moment that they believe that is the case. Look we've seen this in a number of instances, Fran. When Hazelwood shut, we saw the energy generators, the biggest ones in this country, increase their bids into the market by almost double. No change in their cost structures, none at all, almost double. That is unacceptable behaviour. The Australian public understand - without understanding all the detail - that sort of thing is going on. They saw the network companies investing huge amounts, particularly in New South Wales and Queensland, almost double their investment and yet they knew they had to pay for it. And these are the things that have got to stop. We've already put some initiatives in place to do it. We've announced more in recent weeks and we'll announce more in the future.
FRAN KELLY: Are you sure the initiatives you've put in place are the right ones though? Let's talk about default pricing. Retailers will be forced to offer a retail price cap by the regulator which is lower than current standing offers. Now Energy Australia is worried about that. It says 70 per cent of its customers would be worse off under a default mechanism because there could be a reduced capacity to offer discounts. I'm sure you've been talking with the power companies. Is that what they're telling you?
ANGUS TAYLOR: Well the assumption they're making is that their margins stay the same. And remember that the margins retailers are getting in this country are amongst the highest in the world, Fran. You know, the point the ACCC made - and Rod Sims has made this point again yesterday - is that competition will provide a better outcome for customers, and customers need to be able to judge whether they're getting a good deal or if they aren't. If they don't have the time to haggle, they should be getting a fair deal anyway. That's what the default market offer provides. I'm confident that it will provide more competition in the market which will provide on average a significantly better deal for customers. That's one of a number of initiatives we've announced, and we'll be pursuing, but it's an important one because most people get their electricity bills and struggle to work out whether they're getting a fair deal or not, Fran. We need to make it easy for them to work out whether they're getting a fair deal and we need to make sure that you don't need to spend hours and hours on the phone to get a fair deal.
FRAN KELLY: Well one thing that does seem to be pretty clear and the market regulator, AEMO, has said it too, is that more renewables in the mix will bring prices down. AEMO says the lowest cost replacement for the retiring capacity of ageing coal plants will be a portfolio of resources including solar, wind and storage complemented by gas. And last week here on the program we spoke with billionaire industrialist Sanjeev Gupta.
SANJEEV GUPTA: Whichever is the most competitive form of energy should be supported and, in our view, very strongly that is they will want to do analysis properly in terms of a new project, not an existing project, renewables will win. That's the main reason why we are pursuing that [indistinct]. I mean actually it's almost [indistinct] because it is cheaper anyway.
[End of excerpt]
FRAN KELLY: That's Sanjeev Gupta, renewables will win every time. Do you accept that renewables are the lowest cost power source now?
ANGUS TAYLOR: Well that's a decision made by investors, Fran. He has a view. Other investors have different views who I've spoken to in recent days. Frankly, what we want is more affordable power while we keep the lights on. Now, coal has an important role to play. One of the things that's happened as renewables have come in is we've seen withdrawal of big baseload generators like Hazelwood and there's no question that withdrawal drives the price up. We saw it back in 2017. We have to make sure we get the mix right here where we continue to have competitive, affordable baseload power. We need to keep enough in the system or else we won't get affordable prices [indistinct].
FRAN KELLY: [Interrupts] Sure, no one's suggesting coal coming out of the system, but it's what goes into it, I suppose, and the government is going to be an investor. You've indicated that you're going to take up recommendation four of the ACCC and look at underwriting new low-cost generation for commercial and industrial customers.
ANGUS TAYLOR: Sure.
FRAN KELLY: It's likely, isn't it, according to what Sanjeev Gupta said, that the most cost-effective of those is going to involve solar and wind.
ANGUS TAYLOR: Well, you know, that'll be for the market to determine, Fran, but we need enough affordable baseload power in the system. Look, Labor's policy of a 50 per cent Renewable Energy Target, which is pouring renewables in, will push the baseload out at a rate of knots. We saw what happened when you do that in Hazelwood. We've seen South Australia…
FRAN KELLY: [Talks over] It's already occurring though because of market forces, Minister.
ANGUS TAYLOR: Well, we have a real life experiment with a 50 per cent Renewable Energy Target in South Australia, which has amongst the highest prices in the world. You'd reckon for that you'd get a good service, but they're struggling to keep the lights on at peak times, Fran. So that policy hasn't worked. It's simply…
FRAN KELLY: [Interrupts] There was a storm two years ago. There's been a lot of adjustments since then. Don't we need to upgrade the narrative here?
ANGUS TAYLOR: Well, I'm not an apologist for what's happened there because I have seen…
FRAN KELLY: [Interrupts] Well I'm not an apologist either. I'm just trying to get some…
ANGUS TAYLOR: Well, I'm glad to hear that but I have seen when you pour intermittent generation into the system at a rate faster than the natural improvement in technology and economics, and this is the key point. There is a natural improvement in technology and economics of technologies like solar, which the market determines. When you try to run ahead of that you get yourself into trouble. That's what's happened in South Australia and we're not going to fall for that sort of policy.
FRAN KELLY: I understand what you're saying, so when you said, as you did in your initial speech to the small business sector, that the government is looking at extending the life of existing coal-fired generators, does that fall under recommendation four of the ACCC? Because I've had a look at it and ACCC was recommending appropriate new generation projects which meet certain criteria and do not involve any existing retail or wholesale market participant with a significant market share.
ANGUS TAYLOR: Sure.
FRAN KELLY: So that would rule out something like, you know, taking over Liddell for instance, wouldn't it?
ANGUS TAYLOR: Well, it depends who owns it. I mean, we've also said we're prepared to exercise divestment or establish divestment powers if necessary, Fran, and that would mean that a new player or a different player would have access to those assets. Now again, these are significant interventions and I said in that speech, we'd prefer not to have to make them. We've got to make sure we keep enough affordable baseload power in the system, fair dinkum power generation is the [indistinct] we have to keep that.
FRAN KELLY: [Talks over] But can I just clear here, fair dinkum power, does that in your mind mean coal?
ANGUS TAYLOR: Well of course it includes coal. Of course it does. I mean…
FRAN KELLY: [Interrupts] Yeah, but does it mean coal, when you say fair dinkum power?
ANGUS TAYLOR: Well, it includes coal. There's lots of other ways of achieving that outcome. But of course it includes coal. Look, if you took all the coal out of the system rapidly over the next couple of years, Fran, I tell you what, you'd have the highest electricity prices in the world and [indistinct].
FRAN KELLY: [Interrupts] No, but no one's talking about doing that - taking all the coal out of the system.
ANGUS TAYLOR: Well, the point I'm making is we've got to keep enough of that baseload, reliable power in the system and that has in this country traditionally been coal. There's no question about it. And that will ensure that we can keep prices at a level where consumers and businesses can afford it and we can keep the lights on and of course that's the priority of this government.
FRAN KELLY: Emissions are no longer in your portfolio. They're the job of the Environment Minister to look out for. But the Prime Minister says that Australia will meet our Paris commitments without an emissions reduction policy. He says we'll get there in a canter, but that's not what the figures show. I mean, they show that we'll get close to within the electricity sector, but not as the economy as a whole. Do you accept that we need a plan to meet our Paris commitments and we don't have one at the moment?
ANGUS TAYLOR: We need to know that we're going to be able to reach the target. I'll make a couple of points here, I'm confident in the electricity sector that we will get there. I mean, the ESB has told us we'll be within cooee by the early 2020s and they were very conservative assumptions…
FRAN KELLY: [Talks over] But what about the others sectors - agriculture and energy efficiency?
ANGUS TAYLOR: Well, as you rightly pointed out, I'm not the minister for those other sectors, but I would point out, Fran, we're going to beat our Kyoto 2020 targets by about 294 million tonnes. Now that is very, very significant…
FRAN KELLY: [Interrupts] Yeah but that's not our Paris commitment.
ANGUS TAYLOR: Well, it tells you that both the 2020 commitment and the earlier commitment, which we achieved with a significant carryover, that we achieved those things …
FRAN KELLY: [Interrupts] Yeah, but we had a price on carbon for some years there and we had your Direct Action Plan. What's the plan now?
ANGUS TAYLOR: Well, if you look at countries around the world, Fran, the way those that have achieved targets – it’s not some grand centralised sort of 20-year plan that does it. It's actually a whole lot of things happening in each individual sector where technology in particular is used sensibly. You don't try and front run it by creating some scheme that's 20 years ahead of the technology that's available. That's how it's been achieved. That's how we've done it in this country. We've done it before that way and I'm confident we can do it again.
FRAN KELLY: Angus Taylor, thank you very much for joining us.
ANGUS TAYLOR: Thanks, Fran.
FRAN KELLY: Angus Taylor is Australia's new Federal Energy Minister.