RN BREAKFAST: 10/02/2017

February 10, 2017








FRAN KELLY: Energy security continues to dominate national politics after the latest in a string of South Australian blackouts. The Turnbull Government is now accusing the State Labor Government in South Australia of relying too heavily on renewable energy.


Matthew Warren from the Australian Energy Council is warning that Victoria and New South Wales could follow South Australia and be hit by electricity blackouts unless the Federal Government comes up with a bipartisan national plan to deal with energy and climate change.

“Victoria is next. If we keep just doing nothing about energy policy then gradually other generators will exit and we won’t be able to replace those and this will spread to New South Wales, and to Queensland.” - Matthew Warren


Meanwhile, the Australian Energy Market Operator (AEMO) says that current heatwave conditions are placing, “additional strain on the national grid, with a forecast potential shortfall in New South Wales this afternoon if the market doesn’t respond.” Really underscoring Matthew Warren’s warning there. 

Mark Butler is the Shadow Minister for Climate Change and Energy, he is in his home town of Adelaide this morning. Shadow Minister welcome to breakfast.  


  Hi Fran, how are you?


KELLY: I’m alright but this finger pointing is out of control. Don’t you think consumers want our politicians to stop shouting and do something to fix this?


BUTLER: They do, particularly here in South Australia which seems to be the battering point for the Federal Government. 


KELLY: Well it has had three blackouts in three months.


BUTLER: It’s had a terrible run. It had a terrible storm back in September as I’m sure all your listeners remember. It’s had other storms that have brought down power lines but the blackout on Wednesday was different to that, it wasn’t about power lines or transmission towers being ripped out of the ground. It was about generation not being switched on so there was a shortage of supply of electricity and that’s really been the debate that we had yesterday. AEMO says today you’ll see a much bigger shortage of supply in New South Wales this afternoon which may lead to some load shedding in that state as well. 


But what you have really is a Government that seeks to jump on every little and big hiccup in the electricity system and somehow shoot it home to renewable energy policy when it fact what has happened in South Australia, that has a very bad run in the last several months, on each occasion has had nothing to do with renewable energy. 


KELLY: I think people listening, especially those listening in South Australia that have had those power blackouts would not like to hear it described as little hiccups. When people lose their power —


BUTLER: Little and big hiccups.


KELLY: Yeah well any of them though, it’s serious I think. The Federal Government says the problem is that your state is too reliant on renewable energy, it just doesn’t have enough base load supply which was the problem on Wednesday, there wasn’t enough supply fed into the grid. The question is why, is it to do with renewable energy, is it to not have the coal-fired power station operating, what is it?


BUTLER: I’m not minimising what has happened over the last several months at all. I live here, I talk to businesses and there is a very serious challenge of energy policy here which maybe we can talk about at a national level. But the problem on Wednesday was actually a problem of mathematics or arithmetic. There is no question that there was enough supply built here in South Australia of gas generation to cover all of the demand of electricity on Wednesday afternoon.  The problem was the regulator did not order Pelican Point to turn on its second generator. If it had been ordered to do that and the generator had been turned on there is no question we would have been fine. 


Yesterday for example when I arrived back home from Canberra it was pretty much just as hot as it had been on Wednesday, but because Pelican Point had been ordered yesterday to turn on its generator (which it hadn’t been on Wednesday) there was no problem of electricity supply yesterday afternoon and evening in Adelaide.


KELLY: The generator says it is not its job to direct Pelican Point to turn it on unless it is directed by the government, in this case the State Government, is what the Federal Minister says. I mean can we get this straight at least?


BUTLER: The job of the market operator since the creation of the electricity market almost two decades ago has been to predict the demand for electricity needs for each jurisdiction and to ensure there is a sufficient supply. Now usually that is done on the basis that generators bid into the market, so these big multi-national companies make their own decision to turn supply on and off depending on the fact if they are going to make money. But there is a failsafe mechanism that says the market operator has a responsibility, if it thinks there is going to be a shortage of supply, it has a responsibility to order certain generators to turn on in order to cover that shortfall. That’s what it did yesterday with Pelican Point and everything was fine. It didn’t do that on Wednesday and that is why we had a problem.


KELLY: But AEMO says that under current market rules it has to be directed by the State Government under an emergency situation to direct the gas-fired power station.


BUTLER: Well that is not right. Sometimes the State Government will get involved in a discussion but AEMO is an independent operator, politicians don’t have responsibility or influence over these things anymore. As I have said a couple of times, twenty years ago when we owned our assets, when State Governments were responsible for their own electricity systems, the Minister would have simply rung the electricity commission head in South Australia and said turn your generator on. But that’s not how it works anymore. We’ve got a national electricity market with independent agencies that report to the Federal Minister, not to the State Government. 


KELLY: But the State Government does have the power to declare an emergency situation and direct AEMO.


BUTLER: Yes and that is what happened in the statewide blackout. But this was not an emergency situation, this was an extreme heat event that happens quite regularly over summer. AEMO has directed, in other jurisdictions, generators to turn on to cover a shortage of supply. It did that yesterday. I imagine it would look at doing that in New South Wales today because they are going to have a very significant shortage. This is the ordinary operation of the national electricity market, run by independent agencies during a very hot summer.


KELLY: If this is the ordinary operation then it is not good enough. 


BUTLER: That is right.


KELLY: As we saw the owner of Pelican Point generator didn’t bother to turn on its second gas plant yesterday.


BUTLER: The day before yesterday.


KELLY: The day before yesterday and AEMO told the Federal Minister last night there was nothing that prevented that Pelican Point gas plant from bidding into the market and supplying energy. So why didn’t it, is it because as the South Australian Government says Australia’s Energy Market is being run too much like a stock market?


BUTLER: I think that is exactly right. As the Grattan Institute was reported as saying this morning, either the rules are not working or on Wednesday the regulator's interpretation of the rules was wrong. This is the problem that we are facing and it is particularly a problem in South Australia which is at the end of the grid, and has always had a much higher concentration of market power than other states, except perhaps for Queensland. Instead of Josh Frydenberg, as the Federal Minister to whom all of these Federal Agencies report, asking those questions and leading a debate about whether our National Electricity Market rules are fit for purpose anymore, all he wants to do is play politics.


KELLY: Josh Frydenberg the Energy Minister says Federal Labor has the blinkers on when it comes to this lets listen.

“Now we have the Member for Port Adelaide trying to blame the operator. Next he’ll be telling us the operator killed Kennedy, Mr. Speaker. Next you’ll be telling us that the operator sunk the Titanic, Mr. Speaker. Next you’ll be telling us that the operator powered the submarine that took Harold Holt, Mr. Speaker. I would say to the Leader of the Opposition don’t ever sacrifice the jobs of blue-collar hardworking Australians form the altar of your ideology, your green ideology.”


That’s the Energy Minister Josh Frydenberg in question time yesterday. The Member for Port Adelaide is you of course. Is this political poison for Labor and if the Government says that coal is the answer and that you are coal-phobic, would you support a new coal-fired power station if that is what the market or financiers want to build?


BUTLER: Well they won’t. That’s been the unanimous response to Malcolm Turnbull’s quite bizarre announcement that they have a plan for new coal-fired power stations at the Press Club two weeks ago. The overwhelming response of all the existing coal generators, of big users like the Australian Industry Group that represents manufacturers, the Energy Council, everyone has said this is simply unrealistic. It was I think the words of the Energy Council ‘uninvestable’. This is not going to happen and instead of focusing on fantasies and bringing big lumps of coal into question time yesterday, which the Treasurer bizarrely did, they should focus on the sort of energy policy that big energy users, the electricity industry, the Energy Markets Commission, the Chief Scientist, and so on are recommending that they look at introducing, and that is an emissions intensity scheme. This is the problem we have. There is so much politics, and all parties have been involved in this, there is so much politics in energy policy and there has been for some years that investors simply haven’t been confident to start renewing our electricity infrastructure and that is why we are facing the sorts of problems that Matthew Warren talked about in your introduction.


KELLY: Finally just briefly we clearly have a national grid under pressure, the Premier of South Australia Jay Weatherill is now promising, “dramatic plans to shake up the system” in his state. Getting off the grid, cutting South Australia off the grid would seem an odd solution to make our energy market more fragmented. What should he do?


BUTLER: I think what he is doing is looking at a range of options, really some options that might have seemed very extreme only a couple of years ago.


KELLY: Like what?


BUTLER: Well we will see that roll out over the coming weeks. There have been debates about further inter-connection between South Australia and New South Wales for a while now so I imagine there would be further discussion on that. He talked about the need maybe for further gas-generation to complement renewables and the coming wave of storage technology so I am sure there will be more discussion about that. I think the point that the Premier of South Australia makes though is the one that is also increasingly being made in the Eastern States and that is the structure of the electricity market is just not fit for purpose. It doesn’t fit the emerging nature of around electricity industry which has much more distribution in its generation, is going to see more storage. These market rules really were made in a different era.


KELLY: Mark Butler thank you very much for joining us.


BUTLER: Thanks Fran.