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Interview with Richard King and Shanna Bull, 2HD Newcastle

26 May 2021

Interviewer: 
Richard King and Shanna Bull

Subject: Hunter Power Project

E&OE

RICHARD KING: We heard last week when the Federal Government announced they would go ahead with the construction of a gas-fuelled generator at Kurri Kurri on the old former hydro aluminium smelter site - in fact when we spoke to Paul Broad, he said they'd had to turn off Tomago Aluminium to ensure that power stayed on in New South Wales when we had those cold nights a couple of weeks ago. Well, also in the news this morning, Origin Energy have announced they'll shut down the first generator of Eraring power station in 2030, signalling the beginning of the end. It's the country's largest coal-fired power generator, provides a quarter of New South Wales power needs, and it has been mooted to close for some time in 2032, but that switching off at Eraring will begin in 2030. Well, joining us now is our Energy Minister, who yesterday was talking about incentivising coal-fired power stations to stay open as long as needed. He's also responsible for greenhouse gas emissions, and that's Angus Taylor and he's on the line. Good morning, Minister.

SHANNA BULL: Good morning.

ANGUS TAYLOR: Good morning. Thank you for having me.

RICHARD KING: Look, you spoke yesterday about incentivising power stations to stay open. Exactly how would that work, Minister?

ANGUS TAYLOR: We are in an unusual situation on the east coast of Australia relative to most energy markets in the world, in that it's a market that only pays for energy. So we don't pay for having available capacity when it's needed. We just pay for the energy produced. And that means that it is becoming increasingly difficult as we have record levels of investment in solar and wind coming into the grid, to keep enough dispatchable reliable generation in the grid to keep the lights on and to keep prices down. So we have been working towards changes in the market that reward having that dispatchable capacity. And that needn't be coal, obviously coal can do that, but gas is very good at that because it's flexible. Batteries increasingly can play that role, although they're expensive if they're to be used for a longer period of time. Hydro can play that role as well and does play that role a great deal. In fact, in the last couple of weeks, it's played an enormously important role in keeping our grid going. But it does mean we've got to have a balance in our grid between that record-level of investment we're seeing in renewables - highest level of household solar in the world in Australia - and that dispatchable capacity that complements that solar and wind. That balance is what we're seeking, and the balance is what we're going to need if we're going to have affordable, reliable energy for manufacturing, jobs, and making ends meet for households and small businesses.

SHANNA BULL: Minister, you say it's going to drive down electricity prices. Can you explain for our listeners, though, this morning how though? How is it going to make our electricity prices much cheaper?

ANGUS TAYLOR: Yeah, look, what happens now if we have a shortage of electricity, which increasingly is happening once the sun goes down about 6.00pm at night, you can see a very sharp increase in the price. And when I say sharp, on 21 May last week, we had a price at 3.00pm that was about $66 a megawatt hour. That jumped to $15,000 a megawatt hour between 4:30 and 5:30pm when the solar on people's roofs came off. So you see these sharp price increases. So having a gas generator, hydro or other dispatchable capacity coming in at that time stops those price spikes from happening. And that ultimately means we can contain prices for consumers because that wholesale price, of course, gets passed through to consumers. So it's very, very important for us to be able to prevent these big price spikes, which we've been seeing in the last couple of weeks, and the fact the Tomago aluminium smelter has had to go out a number of times in the last couple of weeks ...

RICHARD KING: But just on that, Minister, yesterday, one of the senior managers at Snowy Hydro admitted that they own another gas-fired power station, which I think is near the old Lake Munmorah power station. 

ANGUS TAYLOR: It is. 

RICHARD KING: They chose not to use that because of the cost, and so it was going to be cheaper to turn off Tomago and use what power was available rather than turn on a gas-fired generator. Again, just emphasising what Shanna said, how if we're going to use these gas-fired generators does it keep prices down if it's so expensive?

ANGUS TAYLOR: Well, it's not. I mean, a gas-fired generator can come in at around a $100, or actually depending on the generator, potentially less- 

RICHARD KING: Yeah, but they chose not to.

ANGUS TAYLOR: Well, that's not true. For the 21st (21 May), the example I just gave you, they did come in and they played a very important role. It just depends on the day and the market, but gas generation can come in at around $100 or a little less depending on the circumstances. So it is very important, just as hydro is, just as other flexible generation is. Batteries can play a role and they are playing a bigger role in our grid. It's quite technical their role at the moment but that will increase over time. So, look, the key is to have a range of sources of generation, but to have a balance between that solar and wind coming into our system and the dispatchable generation. And that balance is what we risk losing if we are not careful. And it's why the government's very active on this issue.

SHANNA BULL: Minister, I believe this system is already happening in WA and overseas.

ANGUS TAYLOR: Yes, that's right. So WA has a capacity market as it's called. The UK does, most states in the US do. Indeed, Texas doesn't, and Texas has had some very serious challenges in recent months. It has an energy only market, as we do here in Australia. So, you know, we're seeing as more and more renewables are coming in, this is becoming a bigger imperative. And as I say, ultimately in common sense terms this is just about maintaining balance, which is what energy systems need.

RICHARD KING: Energy Security Board Chair Kerry Schott recently warned that coal generators were going broke and said, look, it's happening for commercial reasons because they're just not affordable. And look, we saw the outage up in Queensland only in the last couple of days. What can happen when coal-fired generators, well, have issues and go offline, and that's certainly what's happened in Queensland in the last 48, 72 hours.

ANGUS TAYLOR: Yeah, yeah. Look, the Queensland issue is slightly different. We had an explosion.

RICHARD KING: Yes.

ANGUS TAYLOR: Potentially very dangerous situation. Fortunately, we haven't had any injuries or loss of life, and that's good news. But look, all generators are subject to running into problems. And this is why we need to have a grid that's capable of dealing with these sorts of scenarios. Now, as we lose more and more dispatchable generation from our systems - and that's increasingly happening as our coal generators are getting old, they're moving out of the market - you've got to replace it with dispatchable generation. You've got to make sure you have that generation that can be flicked on when it's needed, and that means maintaining that balance in the system between intermittency and dispatchability, and making sure we've got the reliability we need. That's why gas can play a hugely important role. Over time that gas - and this is an important point - can be fed with hydrogen. That's work we're focussing on very strongly, not just here in Australia, but the Japanese, for instance, are playing an important role in pioneering how to get hydrogen into gas generators, and that will be important so that we can bring emissions down over time as we're maintaining that balance in our grid.

SHANNA BULL: Minister, a number of experts have been very critical of your Government's gas-fired power station in Kurri Kurri, labelling it an appalling waste of taxpayers' money that will only increase electricity prices and cause irreversible environmental damage. What would you say in response to this?

ANGUS TAYLOR: Oh, they're just wrong. Look, the true expert in any market is the customer. They understand how markets really work because they live and breathe having access to the supply. Now, the biggest customer in the New South Wales grid, indeed in the Australian grid, is Tomago. The chief executive of Tomago has said this is essential, this is not optional, this is essential if we're to keep the grid going and keep that thousand jobs here. But there's many other jobs across New South Wales and across Australia that are dependent on having this reliable generation. We want as much of this investment happening from the private sector as possible. It's good news that we're seeing a new generator being built by Energy Australia in the Illawarra. That's fantastic news. But we need to fill the gaps when gaps emerge. Now, look, it's true - every time a coal fired generator goes out, as we saw in South Australia and Victoria in recent years, some of the incumbent players, the energy companies who are there, big energy companies who are there now, don't want to see replacement because they know the price goes up. And of course, if you're an energy company, there's an attraction to you in seeing the price go up because your profits go up. So, those people who want to see their profits go up, it's understandable, but it's the wrong thing for consumers, it's the wrong thing for households, hardworking families and industry across the Hunter Valley and New South Wales. That's why the Government has had to step in under these circumstances.

RICHARD KING: Well, and for all those people that say politicians don't work hard, thank you very much early in the morning, for giving us some of your time this morning, Minister, much appreciated.

SHANNA BALL: Yes, thank you, indeed.

ANGUS TAYLOR: Thanks for having me.

ENDS