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Interview with Peter Stefanovic, First Edition, Sky News

10 June 2020

Interviewer: 
Peter Stefanovic

Subject: Big Stick energy laws coming into effect, investment in renewable energy, and the US-Australia Strategic Petroleum Reserve Lease Agreement

E&OE

PETER STEFANOVIC: The Government's so-called ‘Big Stick’ energy powers come into effect today. That's designed to put downward pressure on power prices. Changes ensure reductions in wholesale energy costs are passed on to consumers with tough penalties for anti-competitive behaviour. The competition watchdog, the ACCC will enforce the law. Energy retailers could be fined up to $126,000, and as a last resort the Treasurer also has the power to force a retailer to divest an asset. Joining me live now from Canberra is the Energy Minister Angus Taylor. Minister, good morning to you. Thanks so much for joining us. So how much do you expect prices to go down as a result of this?

ANGUS TAYLOR: Well Pete, we were very clear before the last election that we wanted to see wholesale prices moving towards $70 a megawatt hour. We're actually beyond that now. Indeed, we were, even before the COVID crisis hit. We've seen wholesale prices close to half of where they were, which is really good news. And remember, that's essentially the price that big factories, machines that are powered by electricity in heavy industry, that's the price that they get, and that's incredibly important for jobs and manufacturing in this country. So those prices are around half of where they were and we want to see that being passed on to customers as contracts rollover. They obviously - every customer is different, the timing of the rollover - but we do want to see that pass through. That's extremely important for jobs in this country, it's extremely important for coming out and recovering well, and it's extremely important for ensuring we have a strong economy.

PETER STEFANOVIC: So if those wholesale prices have halved, then technically, should the ordinary person's power bill halve?

ANGUS TAYLOR: No, the ordinary person's power bill, wholesale prices are about a third of the total. But for heavy industry, it's the vast majority of the total, and that's a crucial point as we want to see job recovery happening on the other side of COVID-19. This is a big lever. Energy costs are extremely important to manufacturing in this country.

PETER STEFANOVIC: I'm just wondering, you know, just that person at home, say my mum at home, wondering how much you might have knocked off her power bill. What's the expectation there? Have you got a ballpark?

ANGUS TAYLOR: Typically wholesale prices are around a third or a half depending on the state of the retail power bill. We don't expect to see prices down at that very low level they are now during the COVID crisis, but we have seen, even before COVID hit, a significant reduction in wholesale prices. And this legislation says quite clearly that a substantial and sustained drop in wholesale price needs to be passed through. The ACCC Chairman Rod Sims is looking at this very, very carefully. He wants to see the pass through, as do we.

PETER STEFANOVIC: How much of those reductions, Minister, is a result of these threats against power companies when compared to, you know, the huge uptake in the amount of solar panels that people are taking up? But what's the comparison there?

ANGUS TAYLOR: There's a range of factors at work here, Pete. First of all, there's no doubt we're seeing extra supply coming into the market. It's a mix of different fuel sources that we're seeing, but we have seen enormous amount of new supply coming into the market in the last couple of years. But on top of that, we haven't seen the big exits. We saw a huge exit of Hazelwood, for instance, in Victoria a few years back. We haven't seen those big exits. 

PETER STEFANOVIC: But renewable energy investment has dropped by 50 per cent hasn't it?

ANGUS TAYLOR: No, that's not right. We've seen extraordinary investment. Last year we saw $9 billion of investment, 6.3 gigawatts, 6300 megawatts - unprecedented level of investment happening. So there's some misinformation running around on this. We're continuing to see those high levels of investment. So that supply coming in is having a very, very big impact. But importantly, we've seen less supply leaving. It's putting downward pressure on prices, it was happening before COVID hit. We want to see that pass through happening. The Big Stick legislation requires that to occur.

PETER STEFANOVIC: Okay. Just onto fuel, I know that you signed a big deal in the United States or with the US last week. $100 million worth of fuel. It's being kept, as I understand, in the US, right, because we don't have storage capabilities here? So what sort of plans are in place to have storage capabilities here in Australia? Because if there is a supply issue, how are we going to get it?

ANGUS TAYLOR: There's many different scenarios and there's certainly scenarios where having it in the US works absolutely fine. There's obviously extreme scenarios where you want to have it locally, which is why we've said very clearly we want more local storage. That's been a challenge in recent times. In fact, globally, there's been very little spare storage. The US is one of the few places where there's accessible storage which is why we've bought at these record low prices, we're buying at these record low prices and critically, we have a place to store it for now. But we do want more local storage and now that is all tied up with ensuring we have a clear strategy forward for our refineries. We're working closely with those refineries, Pete. This is crucial work to do to ensure that we have that fuel security we need for this country for many years to come.

PETER STEFANOVIC: But what good is it if there is a supply issue? Let's say a war takes off, it could happen at any time, we know that. But it takes four weeks, right, to get fuel from the US over to Australia? And then we don't even have the capabilities to refine it.

ANGUS TAYLOR: Well that's not correct - it's substantially less than that, depending on where you're taking it from. But look, the point here is that there are many, many scenarios where having fuel in the US is extremely helpful to dealing with a disruption. There's obviously extreme scenarios where that's not the case, which is why we've made it very clear we want to see more local storage. We're working through with refineries and others the process to make sure we get that into place, and of course, that positions us well to deal with what is an issue that's emerged because we've seen a rundown of our own crude oil production in Bass Strait and that needs to be replaced. We're looking for a longer-term replacement in the Northern Territory. The Beetaloo Basin offers enormously prospective reserves of oil and gas. But in the meantime, we do have to enhance our storage.

PETER STEFANOVIC: So how many days’ worth of supply do we have now in Australia?

ANGUS TAYLOR: Depending on your type of fuel, whether it is diesel petrol or aviation, avgas, it's in the 20s. And then an additional, in the 20s, for crude oil on top of that, which is often left out of these numbers. And in fact, we sit on a total, including in the supply chain coming to Australia, in the 80s. 

PETER STEFANOVIC: [TALKS OVER] But here in Australia?

ANGUS TAYLOR: So that is a substantial amount there but it is less than we would like.

PETER STEFANOVIC: Yeah. 

ANGUS TAYLOR: And we've made no bones about the fact that we want to see more storage, more fuel. We want to make sure we have control over our own sovereignty. Fuel security is an important issue in dealing with it.

PETER STEFANOVIC: So what's that, 40 odd days which is well short of 90 days that we've got to have, right? 

ANGUS TAYLOR: No, no, that's not correct. So, if you want to go into the detail, we have in fact IEA days between 55 and 80 depending on your definition, and of course, that includes both crude oil, which is usually left out when those on the opposite side of politics talk about this. We have diesel, avgas and petrol which is the finished product and we also have fuel on water either in our ports or approaching Australia, and that total comes between 50 and indeed, it's around 80, 85 when you include the on water fuel that's coming to Australia.

PETER STEFANOVIC: Okay. Alright. Energy Minister Angus Taylor, appreciate your time this morning. Thanks for joining us. 

ANGUS TAYLOR: Thanks for having me, Pete.

ENDS