Transcript

Legislative Council

GOVERNMENT BILL: Electricity Supply Emergencies

April 11th, 2017

On the 11th of April, Mark supported the Emergency Management (Electricity Supply Emergencies) Amendment Bill 2017.

The Hon. M.C. PARNELL: The Greens are pleased to support the second reading of this bill. After a year of mudslinging and some of the most appalling public debate and misinformation on a topic of national and global importance, it is good to finally have something concrete before us in the form of this bill. What has characterised the energy debate over the last year has been a convenient amnesia that invites us to forget why we need to change the way our economy functions. It invites us to forget why the world community agreed in Paris to slow our carbon dioxide emissions and move to decarbonise our economies, especially in the energy sector.

In its place we have seen grinning federal ministers passing around lumps of coal in parliament. Anyone who happens to agree with the consensus of the world's climate scientists is pilloried for being ideological. When a state like South Australia decides to take that consensus seriously, we are attacked for being reckless and irresponsible.

I have no doubt who will be judged by history as reckless and ideological. It is those who deny the reality of climate change. They are kidding themselves if they think propping up fossil fuels for a few more decades or longer is good public policy. It is not. It is disastrous for the environment, it is bad for the economy and it is certainly irresponsible for future generations.

The earth's atmosphere is not a rubbish dump for carbon emitted by burning fossil fuels: it is actually our planet's survival blanket, and we need to maintain it in a stable state if we are to have a stable climate, rather than the alternative, which is runaway global warming which will have irreversible impacts on all species, including us. That brings us to this bill, which is part of the state's new energy plan.

I have some serious reservations about some parts of the plan, but other aspects of the plan are deserving of support, and this bill reflects one of those aspects. The bill seeks to reassert a level of state control over a broken electricity market. It will not fix the market but it will provide an emergency power so that incidents such as the 8 February load-shedding incident will not happen again.

The ability for a state government to intervene in the market in emergency situations makes a lot of sense. It is not foolproof and it is not a fail-safe mechanism, but it is a sensible back to the future device. I say it is a back to the future device because back in the day the government owned all the generators, transmission, distribution and retail operations, therefore directing part of that network to behave in a certain manner was as simple as giving a direction.

Privatisation, on the other hand, has given the whip hand to large energy companies whose only objective is to maximise the return to its shareholders. It is not their objective to look after the interests of South Australia. Unless they are going to make a profit from us, they owe us nothing. We have seen that principle in operation with the owners of gas generators refusing to switch on even when it was clear that the power was needed. Unnecessary blackouts or load shedding was the outcome.

I would like to make a few remarks about the South Australian government's energy plan. I will start by saying that it is important to have a plan. It is important to have a state plan, but it is just as important, or even more important, to have a national plan. But we have seen on this issue that the federal government is absolutely hopeless. Their lack of a plan has resulted in a halt to new development, in particular, new electricity generation.

The Hon. K.J. Maher interjecting: 

The PRESIDENT: Order! The Hon. Mr Parnell has the floor.
 
The Hon. M.C. PARNELL: If you do not know where government policy is heading, it is much harder to get finance. The federal national Liberal government has been incredibly dishonest in its repeated claims that just about everything that ever goes wrong in the energy field must be the fault of renewable energy. But it is not all bad news because in spite of the policy vacuum at the national level, the economics of renewable energy is changing at such a rapid rate that new projects are being advanced, including new solar, wind and storage projects.

Recent domestic solar installations have broken records in many parts of Australia and this is happening in spite of the fact that the feed-in tariffs are no longer available. People are putting up panels on their roofs because it makes economic sense to do so. At the grid level, we have seen the announcement from the Lyon Group of a $700 million battery and solar farm at Morgan in the Riverland, and that is on top of their smaller $250 million Kingfisher project in the state's Far North. The Riverland project would provide 330 megawatts of solar PV and 100 megawatts of battery, which would store 400 megawatt hours of energy.

Even as recently as today, the online news service InDaily is reporting that renewable energy generators are racing to get large-scale projects financed and built in time to fill the supply gap created by the closure of coal-fired power stations around the nation. Apparently, just today construction began on the 300-megawatt Bungala solar farm just outside of Port Augusta.

It is also reported today that a new 59-turbine, 212-megawatt wind farm, also just outside Port Augusta, is very close to financing and construction. There were six components in the state's energy plan. The first component was in relation to battery storage and a renewable technology fund. The government is promising to build a grid-connected battery of 100 megawatts—that is a good announcement. That is a good use of public funds.

There is also $150 million, half in grants and half in loans, to help support future renewable energy and storage projects. It is my sincere hope that one of the successful bidders for that money will be the solar thermal plant at Port Augusta. That is a project whose time has well and truly come. It is quite advanced. It has overwhelming support in the local community and it would be a brilliant project that would demonstrate to South Australians that renewable energy can generate electricity day and night.

The second component of the state's energy plan relates to government contracts for electricity used by government agencies. The government intends to use that buying power to attract new electricity generation to increase competition. According to the government's announcement, 75 per cent of that contract will go to a new generator and 25 per cent will go to dispatchable, renewable energy initiatives. I am not sure of the exact details of the tender arrangements, but projects like solar thermal at Port Augusta are crying out for government support.

The third component of the state energy plan, the state-owned gas power plant, is dubious at best. According to the announcement, this incredibly expensive $350 million or $360 million plant will only operate during emergencies and therefore it will not compete in the market with other generators. That begs the question of whether we are talking about a white elephant.

Having said that, we do need to acknowledge that there are other services that need to be provided to the electricity network, including inertia and grid stabilisation. The question remains, and I think I am in agreement with the government on this, the market is broken because the market does not properly value those services. The government, instead, is stepping in and using taxpayers' money to provide those services.

My feeling is that there is a better way of doing it. All of the states involved in the National Electricity Market should look at pairing contracts for supply of energy with secondary contracts for grid stabilisation, attach them to each other and make the generators provide these additional services as well, rather than taxpayers having to build a gas-fired power plant that will not generate a lot of electricity.

While we are waiting for that plant to be built, the government has talked about bringing in temporary generators, up to 200 megawatts worth. The talk has been around diesel-fired generators, such as the ones used in Tasmania. Again, I think the government could have looked at other options, especially when you had people like Elon Musk promising that he was going to get the batteries in within 100 days or it would be free. He was promising, I think, 100 megawatts, which is half of what the government is proposing to bring in in the form of temporary generation.

The fourth aspect of the state energy plan, gas exploration incentives, is probably the one part of the plan that I am most critical of. It is completely unnecessary. It is a complete waste of money. The government is giving $24 million of taxpayers' money to gas companies to help them explore for gas, and this is on top of the original PACE grant of $24 million—$48 million of taxpayers' money handed over to some of the biggest fossil fuel companies in Australia. We are giving the big end of town a huge amount of money to help them make extraordinary profits for their shareholders.

The question is: who got this money? When you look at the recipient list it is the big end of town, it is the big donors to the old political parties, in particular. Santos has received most of the money: $5.82 million for the Senex Santos Cooper Basin pipeline project; $3.96 million for the Santos Cooper Basin refracture stimulation project; $6 million for the Santos Cooper Basin under-balanced drilling project; and $2 million for the first phase of the Strike Energy Cooper Basin deep coal project. On top of that, and one which is likely to be incredibly unpopular, is the $6 million for Beach Energy's Otway Basin exploration project, targeting conventional reservoirs.

The reason they have referred to conventional reservoirs is because they know that fracking is a dirty word in the South-East. I think the government is going to get a bit of a shock, because as people are looking at the gas industry in general, they are realising that it is not just fracking that is bad for their community, it is the whole of the gas industry. That $6 million—when you look at the Beach Energy statement to the stock exchange, they are hoping to get a 33 per cent or 32 per cent chance of success—a one-third chance of success. We have a two-thirds chance of blowing all of our money on a project that the people of the South-East do not want and are sure to object to in strong terms.
 
The Hon. R.L. Brokenshire: No social licence.
 
The Hon. M.C. PARNELL: The Hon. Robert Brokenshire interjects that they have no social licence, and that was the finding of the Natural Resources Committee. The point that I think all people in the South-East are well aware of is that just because the government says that any well is not going to be fracture stimulated does not mean that that is not going to happen. You think about it, Mr President: you drill a hole 3½ kilometres underground, and the gas, after a while, stops flowing, are you going to abandon that well or are you going to bring in Halliburton, with their fracking machines, and start fracture stimulating that well? Of course that is what you are going to do. You have sunk so much money into digging one of the deepest holes around, you are not going to abandon it just because the low hanging fruit has disappeared.

However, what is most remarkable about this aspect of the government's energy policy is that when you look at the government's own review of the PACE project—the PACE project is the one under which this money has been granted—they looked at it as recently as 2014, the review found that there was no evidence of market failure in oil and gas exploration and, therefore, no need to give taxpayer money to this industry. The review found that there was no evidence of market failure in conventional oil and gas exploration and it was considered that the funds available would not have changed company priorities.

The review found that exploration investment was already at high levels and companies reported that there were already 12 drilling rigs operating in the Cooper Basin and, therefore, funding was allocated to other projects and not to drilling. So, we have come a long way from a review of the government's funding of mining exploration projects deciding that there was no point putting money into oil and gas, to just a few years later giving them, in the most recent case, $24 million on top of the $24 million previously allocated.

The fifth government energy policy item was the energy security target, and this will force retailers to source a percentage of their energy from local generators rather than from interstate through the connector. We have no particular objection to that. That brings us to the sixth and final component, which is what this bill is all about. This bill provides the energy minister with emergency powers to intervene in the market in the manner described just a few minutes ago by the minister. I think most of us hope that this power will never need to be used. We hope that the participating jurisdictions in the National Electricity Market will get together and fix that market.

We hope that the federal government, either of this persuasion or the next, will develop a national policy that focuses on reducing carbon emissions in the economy and focuses on renewable energy and storage, and I hope that we get better state policies, ones that grasp the nettle and are not just half-hearted in relation to renewable energy but fully supportive of the energy revolution, which is going to be renewables plus storage. You only have to look at the expert commentary from think tanks around the country: the future is in renewable energy plus storage. The only people who are saying that fossil fuels have a long-term future are those who are wedded to it through investment or through obligation.

With those brief remarks, the Greens are happy to be supporting the second reading of this bill. We look forward to the committee stage and I will have some questions to ask at that stage, as I am sure other members will, not the least of which will be how likely it might be that South Australia going it alone does not trigger other states deciding that they want to do the same thing. We could end up—if our Victorian and New South Wales colleagues had similar emergency powers - with an unholy tug of war over the interconnector.

It is very unclear who is going to win that battle, especially since, as I understand it, the interconnector is jointly owned by the transmission operators in South Australia, ElectraNet, and the transmission operators in Victoria. That is my understanding. I will certainly be asking the minister, when we get to that part of the debate, how this particular stand-alone state mechanism is going to fit into the national system. It is not a reason to not vote for it—in fact, it is a good measure and we will be voting for it—but I think there are some serious questions that mean that this should be probably a short-term measure rather than being seen as a long-term solution to the country's energy problems and the failings of the National Electricity Market.

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