AFR Energy and Climate Summit
I’m joining you from the land of the Gadigal people of the Eora nation, and I pay my respects to their elders past, present and emerging.
As the AFR writes on the Summit website, “after a decade of policy inaction and division, the energy crisis is continuing in 2021 without a settled national climate and energy policy”.
Unfortunately, this dire prognosis as the Coalition enters its ninth year in office is just a sober statement of fact.
We are now just three weeks from the long-awaited COP26 conference.
COP26 was designed to the be the opportunity for nations to update and improve on their commitment to emissions reductions in order to meet the promise made at the Paris COP to hold global warming to 2 degrees, and ideally to 1.5 degrees.
This is the fundamental point that the Morrison Government misses. As a party to the Paris Agreement, we are meant to be going to Glasgow with concrete improvements to our emissions reduction schedule.
But while the rest of the world debates and implements concrete plans to get to net zero by 2050, we in Australia are engaged in a deeply frustrating argument about even committing to it.
The fact that the Morrison Government is still engaged in this toxic internal debate and has members who still, in 2021, question the science of human-induced climate change is a terrible indictment of the state of our governance.
Despite the Government’s hand-wringing, the rest of Australia is getting on with the drive to net zero emissions.
Every state and territory. Most of our major businesses. Notably, the BCA. Our agricultural peak groups. The Minerals Council. APPEA. Labor.
All these groups know that well designed climate policy is good jobs policy.
We all know that net zero is not just an environmental imperative, but an investment framework – to guide decisions by business, and policy from governments.
But without national leadership from the Government, we have a hotch-potch of efforts, as well intentioned and important as they all are.
And as important as net zero by 2050 is as a destination, it is how we get there that is actually more important.
For the world, the next decade will determine whether warming can be kept to 1.5 or 2 degrees.
And for Australia, the next decade will determine whether we become a renewable energy superpower – or lose the global race that is already underway.
I’ve said before that Australia’s current medium-term targets are too low.
26-28 per cent by 2030 now pales in comparison to similar countries like Canada at 40-45 per cent, Japan at 46 per cent, and the United States at 50 per cent.
26 to 28 per cent was designed to match the United States’ ambition at the time. The United States has left us in their wake.
And so, let me make it crystal clear.
The Morrison Government must:
- Commit to net zero emissions by 2050
- Legislate that commitment
- Significantly improve its medium-term targets for emissions reductions.
Anything less will be a cop-out at COP.
In the absence of a logical framework, the Government’s so-called energy “policy” has been a series of ad hoc, uneconomic interventions in the market.
The market gets the importance of the transition to renewables.
But the supposed free enterprise side of politics is intent in getting in the way of the market - and in the faces of businesses who dare to ensure their shareholders are not unduly exposed to climate risks.
When the market makes clear it won’t build another coal-fired power station in Australia – the Government claims it will build one at Collinsville.
A Government Senator even turned up to an alleged sod-turning for this alleged coal-fired power station a few weeks ago.
For any Government to even contemplate investing in a new coal-fired power station in Australia is to engage in environmental and fiscal recklessness.
When the market and experts judge New South Wales doesn’t need another gas plant – the Government commits $600 million of taxpayer money to Kurri Kurri.
The Government hasn’t even bothered to release the business case for this boondoggle, despite having committed to do so many months ago.
Last week Monash University expert Ross Gawler predicted the Kurri Kurri power station would deliver a $150 million loss each year for 20 years, totalling $3 billion.
And LNP dares lecture anyone about fiscal rectitude!
When banks integrate climate risks into their lending decisions – the Government runs a parliamentary inquiry to berate them as woke greenies.
Let me crystal clear. Boards of banks and financial institutions that factor climate risk into their decisions are not engaging in a woke green agenda. On the contrary, they are fulfilling their legal obligation to act in the best interest of their shareholders.
They deserve support from Government, not to be hauled before a kangaroo court to justify their decisions to George Christensen.
This inquiry is made worse by the fact that it is not merely the frolic of a misguided backbencher like Christensen. It was actively supported by the Treasurer.
Josh Frydenberg gives mealy-mouthed speeches about net zero by 2050, but actively supports this undermining of the market.
And last week saw a new nadir of bizarre proposed market interventions by Government members.
The former Resources Minister reckoned it would be just fine for hard working families to have pay higher interest rates on their mortgages if banks were forced to undertake loans to fossil fuel companies, while the current Resources Minister (a minister, not a backbencher) thought up a $250 billion fund in which the Government would take the risk of lending to stranded assets. That is, $10,000 of risk for every man, woman and child in Australia.
Are these guys members of an Australian conservative government or the Venezuelan administration?
Any one of those decisions would be an unusual intervention – particularly for a party that purports to be pro-market.
Taken together they represent a dangerous risk of chilling private sector investment in energy generation and a perpetuation of the climate culture wars and a prejudice against renewables.
Indeed, the quarterly average of newly added capacity is down 70% since Morrison became PM.
The Clean Energy Council pulls no punches – this is due to ‘ongoing unpredictable and unhelpful government policy interventions and market reforms’.
What steps we have seen toward better energy policy have been mired in incompetence.
To his credit, Malcolm Turnbull committed to Snowy 2.0. It’s a good project. It has and retains our support.
But Scott Morrison has not taken the necessary steps to connect Snowy 2.0 to the grid.
It’s possible Snowy 2.0 will be finished in 2025 but won’t be connected until 2027.
The Government lectures us about the need for more reliable energy and looming alleged shortages. But it has been so incompetent it hasn’t taken steps to connect this massive new project to grid.
Can you imagine the scene at the opening ceremony? The ribbon is cut. Everyone is happy. And then someone says “Is it plugged in? Is it delivering any actual, you know, electricity to the grid?” Embarrassed silence ensues.
Australia’s offshore wind industry, which promises huge capacity and thousands of jobs, was also supposed to be unleashed this year.
But the Government has delayed the regulatory framework that would make that possible.
And other vital projects like Tasmania’s ‘Battery of the Nation’, which we fully support, remain mired in delays under Scott Morrison – literally nothing has happened.
And so I put it to you that Labor is the only party that stands ready to work with investors and business on the energy transition.
To provide the stable and encouraging policy framework for the private sector to get on with the job of transitioning Australia to be a renewable economy.
Labor knows that global markets are leading the greatest economic transformation since the Industrial Revolution, and that Australia deserves better than a Government pretending that it isn’t happening.
We know that the real risk is inaction – whether from environmental risks like bushfires, or transition risks like carbon tariffs.
But we also know that the world’s climate emergency is Australia’s jobs opportunity – the best chance to grow investment and employment in our lifetimes.
Now, none of this is to say that the transition will be quick or easy.
Those who say that we could end coal and gas generation tomorrow, for example, are doing a disservice to the energy market, and to workers in those industries. More particularly, they are doing a disservice to the reliability of our electricity supply as we undertake this massive transformation.
Gas in particular will continue to firm and peak electricity for the foreseeable future, while battery storage and hydrogen mature, and the barriers to pumped hydro are overcome.
I hope it is clear from my words today that I am an optimist about Australia’s future as a renewable economy and a country which exports renewable energy.
But it is unquestionably the case that we need to work hard to ensure the reliability of our energy supply as we do so.
Batteries are excellent for short term shortage.
We also need to deal with longer-term storage and reliability for prolonged periods of still, cloudy weather.
What the Germans call Dunkelflaute.
This of course is the task recently undertaken by the Energy Security Board with their suggestion of a reliability mechanism.
The ESB was chaired by Kerry Schott, for whom I have the utmost respect. Accordingly, I have taken the recommendation seriously.
But the renewable energy industry is right to fear that, in Minister Taylor’s hands, a capacity mechanism could become another intervention in the market for purely ideological and political reasons.
Labor understands the importance of reliability in our energy system.
That's why we offered bipartisan support for the National Energy Guarantee, which would have improved reliability as well as reduced emissions.
The reintroduction of a different reliability scheme in the Government’s ninth year is an admission of its failures on energy.
The detailed development of the mechanism will take some years.
It is now down to Energy Ministers and officials to work through detailed design.
Today, I’d like to announce the tests which Labor will apply to a detailed reliability and capacity proposal.
Firstly, it must be consistent with our emissions reductions ambitions, including net zero by 2050 and a strong roadmap to get there.
Secondly, it must encourage investment in renewable energy, rather than chilling it as many fear.
Third, it must be a bridge to dispatchable technologies like hydrogen, batteries and pumped hydro, not an indefinite subsidy for old technologies.
And fourth, it must actually ensure that generators dispatch when needed.
Let me just explain that last point. Bear in mind that the Government’s own Snowy Hydro Corporation has refused to dispatch electricity from its Colongra gas plant below the market price cap of $15,000.
I find that reprehensible. But what I would find more reprehensible is paying Snowy Hydro for that capacity without any requirement for them to dispatch it when sensibly required in the market.
We think it’s possible for a detailed capacity mechanism to meet these tests – ensuring reliability while supporting the energy transition.
But let me make it very clear, anything less will be met with Labor’s full-throated opposition, as the alternative Government.
As well as holding the Government to account, Labor has begun to announce our own climate and energy policies for the next election.
We have already announced a significant policy offering in climate change and energy. But we have much more to do and much more to say.
We’re taking a tailored approach to each sector – to decarbonise existing output, and to encourage new investment and employment in each sector.
In electricity, we’ve announced our $20 billion plan to Rewire the Nation.
That will allow more renewables into the grid, and deliver AEMO’s Integrated System Plan at lowest cost to consumers.
In electricity, we’ve also announced a commitment to 400 community batteries around Australia – allowing more solar homes to enjoy the benefits of storage.
In transport, our abolition of inefficient taxes on low-emissions vehicles will put them within reach of more Australians – without ending the weekend.
For industry, we’ve announced a $15 billion National Reconstruction Fund to create jobs, develop regions, boost our sovereign capability, and diversify our economy.
And for workers, we’ve announced $100 million for New Energy Apprenticeships, so that more Australians are trained in the jobs of the future.
That’s already a substantial offering.
But Anthony and I will have much more to say before the next election.
It’ll be guided by our commitment to work with business to get the transition right.
And by conversations like this one – so I look forward to your questions.