Launch of the Bureau of Meteorolgy and Australian Energy Market Operator strategic partnership BOM operation centre, Melbourne
30 November 2018
ANGUS TAYLOR: Good morning. It's fantastic to be here at the Bureau of Meteorology Operation Centre with Andrew Johnson from the Bureau and Audrey Zibelman from AEMO to announce a very important strategic partnership between AEMO and the Bureau for a relationship that is crucial and a time when the National Electricity Market is changing dramatically. This partnership will ensure sharing of information, modelling, forecasting at a level and in a way that we haven't been able to do in the past because things are changing. When the National Electricity Market came together 20 years ago, 0.1 per cent of generation was coming from wind and solar. This year it is 9 per cent, and in three years’ time it will be 23 per cent - a 250 per cent increase in the solar and wind generation in our system in the course of the next three years.
At the same time, on the demand side, we've seen dramatic changes in the last 20 years. When the National Electricity Market came together 20 years ago, around 35 per cent of households in Australia had air conditioners. That number is now closer to 75 per cent - three quarters. This means that use of electricity and supply of electricity is extremely sensitive to weather changes, both in the very short term, in a matter of minutes, but also in the longer term. We need an electricity system that is sensitive to this. We need to make sure that baton changes between variable renewable energy and the dispatchable supply, we need to keep the lights on and to keep prices down are good baton changes - they work well - and that means being able to forecast and that's why this relationship is so crucial.
The focus of this Government in our electricity system is to make sure we get prices down while we keep the lights on, and we're very confident we'll meet our international obligations in that context. So this relationship is extremely important for that objective - lower prices while we keep the lights on. On that note, I'll turn to Audrey to make a few comments.
AUDREY ZIBELMAN - CEO, AUSTRALIAN ENERGY MARKET OPERATOR: Thank you Minister and I can only just reinforce what you just said. The fact is is that the energy system has always been dependent on whether, but in Australia and today and into future that dependency is just going to get greater and greater. What we're getting out of this relationship from AEMO's perspective, is the full capacity of the Bureau, and every day we're learning more and more of how we can use the Bureau to actually get better at our jobs. This is to me, really the way we have to conduct business in the future. The world is getting more complex in terms of energy, we need all the acumen that we can put to it and in particular, we need the type of information we can get from the Bureau, the tools that they can apply and the learnings that they're able to do- give for our operators. I think this is a fantastic relationship, we've all learn a lot already and it's just going to get better and better. Thank you.
ANDREW JOHNSON - CEO, BUREAU OF METEOROLOGY: Good morning. We're absolutely delighted to have the Minister and Audrey here this morning, it's a very important announcement we're making together. Like the Bureau, AEMO touches the lives of nearly every Australian, every day and so at the heart of our strategy as an organisation is around improving the impact and value we have for our country. This partnership that we're announcing today with AEMO will accelerate and amplify our capacity to deliver the full capabilities of the Bureau to a very, very important organisation, in terms of the safety, security and prosperity of our nation. We'll be able to make more of our meteorologists inside wisdom they have available to our energy market operator. We'll be able to up skill AEMO in terms of its capacity to take on board weather insight information, influence their operations. More importantly, we'll develop a much deeper understanding of the electricity business in this country and tailor our products and services into the future so that we can be standing shoulder to shoulder with Audrey and her team to ensure the safety and security and reliability of a really important piece of infrastructure for our nation.
So again, thank you to everyone. Can I thank you Minister for your support. Audrey, can I thank you and your team, you've been a pleasure to work with today. We're really looking forward to the future and I think the community should be really confident that two really great organisations in this country are working together to guarantee and underpin the safety and security of our energy systems. So thank you.
ANGUS TAYLOR: Thanks Andrew. Any questions relating to this important strategic partnership that we're announcing today?
JOURNALIST: Andrew Johnson - Ben Potter from the Australian Financial Review - I'm just thinking about the temperatures and the fire activity in Queensland in the last few days - there's been a bit of a debate about the extent of the regular temperatures - whether it's November or all time or so on - and I think there may be a bit of a discontinuity in some of the records. Can you just put that in context for us and also tell us where the Bureau sees it in the sort of context of man-made climate change?
ANDREW JOHNSON: Firstly, I just want to say on behalf of everyone at the Bureau, our thoughts go out to citizens in those affected communities in Queensland. The conditions that we've seen in Eastern Queensland, Northern Queensland are unprecedented. Ben, as you said in your question, some of those communities, the temperatures we've seen over recent days do break long term records, records that go back to 1900, 1910 for November and in some places for example -Cooktown, breaking all time records. So the anomalies that we've seen, the very high temperatures are extreme and of course, those extreme temperatures manifest into very extreme fire risks and for the first time, certainly in my knowledge, we've had catastrophic fire danger rating, catastrophic fire risk in those parts of Queensland.
But I think what I can say to those communities is that over the next couple of days, we see that risk decreasing as temperatures drop. But as we move into the start of next week there's increased risk again, so we'll be- just like we're doing with our colleagues in AEMO, we'll be standing shoulder to shoulder with our partners in the emergency services so community in Queensland, we have a fantastic team here in Melbourne and in Brisbane that's working very closely with the emergency services colleagues and the Queensland Government to provide those communities with absolutely up to date information on those risks.
JOURNALIST: Can you just put that in the context of climate change and also the weather extremes in the northern hemisphere over the northern hemisphere summer here.
ANDREW JOHNSON: I don't really want to comment at this juncture on the northern hemisphere. At the moment, we're focussed on what's going on in our neck of the woods. But there's no doubt that the risk- fire risk that we've seen that increasing over time. We'll be making some public statements about that as part of our annual- bi-annual State of the Climate Report which will be launched during December. But we know there's a very strong climate change signal in the fire risk in this country, the number of severe fire days has increased over the last couple decades and the severity of those fire danger ratings has also increased. But we'll be saying more about that then in a couple of weeks.
JOURNALIST: The temperatures we've seen in Queensland, a reminder of, I guess, how hot it can be in summer in Australia and the pressure that puts on the energy system.
ANDREW JOHNSON: Yeah we know - and Audrey might want to comment on this - we know there's a very high degree of sensitivity in the whole energy system to temperature changes, not just in terms of consumers demand on the energy system, but also has a really profound impact on supply and also transmission, which is why this partnership is so important. The earlier we can give AEMO insight into those weather conditions and also provide absolutely active, up to date updates on the changing weather situation, enables Audrey and her team to manage in the most responsive and resilient way the whole energy system. Audrey, do you want to comment on that?
AUDREY ZIBELMAN: Sure. I think that this is a perfect example of the types of relationship that we have with the BOM. So even yesterday, when we were looking at the fires in Queensland, AEMO's concern around the availability of the resources, our ability to work with the BOM and get better information, real-time information about what they're seeing in terms of weather, allows us to translate that then to a number of participants and then for us to have better information of what's going to be available in the system. On hot weather days, AEMO's worried not just about the demand, but the availability of resources. Resources can be constrained in hot weather, but also we have things like when the winds not blowing and they can tell us that we expect a front to come in. We can also anticipate on how that's going to change the dynamic of the system. These are things where their modelling capability and a combination of our modelling capability is what's going to get us the best results which is what we're all after.
JOURNALIST: And looking ahead to the summer, what's your sort of prediction or expectation about how our energy supply is going to hold up for the heat?
AUDREY ZIBELMAN: Well, we've done a lot of work going into the summer, obviously the summers the hardest time for the energy system because that's when we have the highest level of use. We've worked with all the generators, all the transmission owners. We've also procured additional resources that we needed for Victoria. As I've said, you know we've talked about this with the industry a lot of times - we're very confident that we've done all the right things to get ready for the summer. We have adequate resources, we're prepared. But it is Summer, it is hot and things can happen and so what you need to do is prepare for those events and recognise that you have to be responsive not only to the circumstances as you predict them, but some of the circumstances you can't predict and make sure you've trained and are ready for them and that's exactly what we've done.
JOURNALIST: Is there an expectation that this summer will be more challenging than last year or other previous years?
AUDREY ZIBELMAN: The summers, well we can ask the Bureau of Meteorology, but this summer is predicted to be hotter in some regions. But for us, actually all summers are complicated, it's just- that's what we do, we get ready for that, we prepare for it and then react to it.
JOURNALIST: [inaudible] question Angus.
ANGUS TAYLOR: Are there other questions?
ANGUS TAYLOR: You want to [inaudible] question? Are there any other- you've got a question related?
JOURNALIST: It's related, it's related. It's both.
ANGUS TAYLOR: Just any other questions that are purely related to this, we'll take those.
JOURNALIST: Well yes. Andrew, I think I've seen on your website there's suggestion that the chances of El Nino this summer is 79 per cent in Australia...
ANDREW JOHNSON: That's right.
JOURNALIST: ...the other day. So what? Explain what that [inaudible] mean.
ANDREW JOHNSON: Yeah, so two things that's going to colleagues questions. So I'll just draw your attention to our Summer Outlook that we've published earlier this week where we're forecasting a very warm and dry summer over most of the country, particularly in the South East and obviously, that has quite significant consequences for our colleagues in the energy sector. And it's something we're working with a range of sectors on. We know that heatwave is the biggest killer of Australians from natural hazards in this country. Our mission as an organisation is zero lives lost due to natural weather events and so it's a big focus for us in terms of our capability to predict and inform community around heat waves. Going towards the El Nino question Ben, yes, we're sitting at 70 per cent likelihood of an El Nino, that will be updated next Tuesday when we- we're continuously updating our Outlooks. We also know that the conditions in the Indian Ocean are not favourable at the moment and that just reaffirms our confidence in the Summer Outlook that we released earlier this week around the hot dry summer.
JOURNALIST: So there is still that El Nino [inaudible]?
ANDREW JOHNSON: We're reviewing that at the moment. As I said, we'll be making a public statement around that next Tuesday, but I think it's fair to say that all indications are at the moment that we're heading more towards an El Nino declaration than not.
JOURNALIST: Can I just ask as well about the partnership. You haven't explained to us in practical terms how it will work - will you have a certain amount of staff going over to the energy operator, what happens?
ANDREW JOHNSON: Yes. So at the heart of the partnership I think probably [inaudible] is firstly AEMO having greater access to the Bureau's meteorologists. We'll have more of our meteorologists embedded in AEMO's operation centres and giving AEMO real-time access to the fantastic talent we have here at the Bureau, so to help them make their decisions more rapidly and in a more responsive way. We'll also be training AEMO colleagues in meteorology and climatology so that they can improve their capability as an organisation. We'll be improving the flow of data between the two organisations - both between humans but also machines - so, to make sure that our data feeds are feeding into the AEMO network more efficiently. We'll also be uplifting our services and providing briefing capabilities into AEMO, so- and also into the energy market in general so that the whole system is more responsive to the changing weather. And I think also as we have more of our people working shoulder-to-shoulder with AEMO colleagues, we'll develop a deeper understanding of the energy market and hence in the energy system. And hence our trajectory as an organisation will shift as we learn, just as they learn. And that will influence future investment decisions we make in the bureau, just given how important our energy system is in terms of public safety and economic prosperity.
ANGUS TAYLOR: Thanks Andrew, and I'll take broader questions.
JOURNALIST: So, I was going to ask your- as we speak, your Victorian Energy Minister colleague is [inaudible]... on a five to six per cent margin and [inaudible]... and several of your Coalition colleagues - both state and federal - referred to the role of a lack of lots of what people perceive as a meaningful climate change policy on the result. Would you- is this something that could have been re-examined within the government?
ANGUS TAYLOR: Well, I congratulate Daniel Andrews for his victory and I look forward to working with Lily D'Ambrosio, who's the Energy Minister here in Victoria, to make sure that we have the system we need in place to ensure that we can keep the lights on, keep prices down. And the reliability obligation, the reliability guarantee will be coming forward to COAG in the coming weeks. And I really look forward to working with Victoria to make sure that gets into place. Because that ensures that we have the supply we need to meet demand years ahead of time, that the retailers are doing what they need to do to make the investments they have to, to ensure we have the 24/7 reliable power that keeps the lights on in those toughest times, some of the times we've just been talking about now. Now, with respect to our policies on climate change, our policies are very clear; 26 per cent reduction in emissions by 2030. We're very confident about achieving that well ahead of time in the National Electricity Market - well ahead of time. And in fact we've had credible forecasters like Wood Mackenzie telling us that we'll be well over 30 per cent in the National Electricity Market in the coming years. And more broadly our track record on achieving economy-wide emissions reductions is extremely- we beat Kyoto 1 well- as much as almost any country in the world. We're well ahead on Kyoto 2 and very, very confident that the numbers will continue to look good when it comes to Kyoto 2. And I'm very confident we'll meet our Paris obligation - 26 per cent reduction, which is one of the most aggressive reductions in the world and we should be very proud of how we're doing on this. And we should be talking up the role that Australia is playing, not talking it down as many are right now, unfortunately. But our track record is extremely good on this. And the best predictor of future performance is past performance.
JOURNALIST: On energy prices, a few companies have announced they're going to slash electricity prices. There are a couple of companies in Victoria who are looking at increasing gas prices, why is that, is that something that we could expect to see?
ANGUS TAYLOR: Well, gas plays a role in the market about 15 per cent of the time, and so it's going to have some impact. But the good news on electricity prices is we have been very firm that we expect energy companies to do the right thing. We've asked them for a down payment on that, from 1 January we're getting that. We saw another company come in with price reductions today, Snowy through Red and Lumo, its two retailer arms will be reducing prices for standing offers by 10 per cent - 10 per cent. And what we're seeing here is a reduction in standing offers - and they're the prices that are paid by small businesses and households who simply don't have the time to get out and spend hours on their phone negotiating a new contract every year. Very significant reductions coming through, AGL in Victoria, where we are today, 10 per cent reductions and so on. So, this is very good news. And we expect the pressure to stay on. Now, one of the things we need to do in the medium term is get more supply of 24/7 reliable generation into the market to drive prices down, to keep the lights on and we'll be very focused on that as we move into the new year.
JOURNALIST: Why aren't we seeing that cut in prices in gas as well?
ANGUS TAYLOR: Well, I'm focused here on electricity and getting electricity prices down. We have seen reductions in gas pricing. In fact we've seen a more than 50 per cent reduction from the peaks because of the mechanisms put in place by this government. We saw manufacturers being charged up to $20 per a gigajoule and prices for those manufacturers are now down closer to 10. That's a very significant reduction. But the pressure needs to stay on. And the truth is that we need to get the balance right, make sure that whilst exporters need to be able to get on and do what they need to do, at the same time our local manufacturers need a good deal on electricity and gas prices and we continue to focus on that.
JOURNALIST: Energy companies are warning that your new big stick legislating targeting power companies is heavy-handed, interventionists and draconian and could actually force up prices - what guarantee can you give the public that this isn't the case?
ANGUS TAYLOR: Well I'll tell you what was heavy-handed. What was heavy-handed was some of the behaviour from the energy companies over recent years. Now I'm having discussions with these energy companies regularly and saying it has to change, it's not on. We've seen that down payment on price reduction from 1 January, we've seen the companies bringing those prices down for customers who are most vulnerable, who need it most. But that was very heavy-handed behaviour we saw it in the past and we've said that whilst we would prefer the companies, the industry gets on and gives a better deal to customers, a fair deal to all customers, hardworking small businesses and families across Australia. At the same time we need to have legislation in place, a big stick, to make sure that those companies do the right thing in the future. As I say, my hope is we never have to use it. But if we have to use it we will and we're determined to make sure that the companies understand that and I look forward to working with them in the coming months to put in place those important issues that are going to get fairer prices, lower prices and more reliable 24/7 power for all Australians.
JOURNALIST: What do you say to those companies and their regulatory advisors and legal advisors who say that to divest into power [inaudible] and separately from that the underwriting mechanism: there's been a suggestion that it needs legislation, it can't just be done by executive [inaudible].
ANGUS TAYLOR: Well we take advice on those legal issues Ben, and we believe we're on very strong ground here. What matters though at the end of the day is the companies do the right thing and we expect them to. It's unfortunate that Labor seems to be positioning itself with the energy companies. They're sitting on the same side of the table as the energy companies on some of these issues. We call on them to work with us, to put in place legislation that will ensure that the energy companies do the right thing in the coming years. It's important that Labor makes a call on whether or not they're sitting on the side of those hard-working small businesses and families across Australia who expect a better deal or they sit on the side of the energy companies. Our position is clear: we sit on the side of those hard working customers.
JOURNALIST: Some industry groups are also arguing that it sets a bad precedent for intervention in other sectors. Is this a populous measure?
ANGUS TAYLOR: Well, the US and the UK have had these powers in place for many, many, many years and we haven't and we're proposing here to do this in the energy industry and the energy industry only. And the reason for that is we have some unacceptable behaviour in this industry and I look forward to making sure that that behaviour doesn't happen again in the future. Thank you.