Does Australia have enough energy?

Ross Greenwood speaks to Deputy Chair of the Independent Energy Security Board, Claire Savage, about a report which answers whether residents and businesses will have reliable power and how much our bills will cost in 2018.

Ross Greenwood:  Great to have your company here on money news right around the country. Late this afternoon, a really important paper on your energy bill and also the reliability of the energy coming into your house was released. This is the so called first public consultation paper for the National Energy Guarantee. It’s being released by the Independent Energy Security Board. Just to explain a bit of background here. This is being created by government, The National Energy Guarantee to make certain Australia has enough electricity in the right place at the right time which can also involve having enough gas in the right place at the right time.

Now, this Energy Security Board is chaired by Dr. Kerry Schott. It also includes the deputy chair Clare Savage: Savage, the Australian Energy Market Commissions chair, John Pierce, the Australian Energy Market Operator chief executive Audrey Zibelman who we’ve had on the program a few times and also the Australian Energy Regulator of the chair, Paula Conboy. Let’s go through some of the keys here, because the idea of this particular organization is body, is to try to make certain and give recommendations to government to ensure that you when you turn the lights on, that there is electricity.

That’s one. Number two, that when you turn on that electricity, that it’s at the lowest possible price. That’s the other one. Controversially, it’s also about trying to deliver lower emissions. That’s the interesting side, because you wonder sometimes, whether lower emissions, and the lowest possible price go hand in glove. Let’s now go to the deputy chair of this body. Clare Savage is on the line. Many thanks for your time Clare.

Interview with: Clair Savage, Deputy Chair, Energy Security Board

Clare Savage:: Hi Rus. Many thanks.

Ross Greenwood:  Tell me about what you found in terms of the National Energy Guarantee and whether we have, first off, sufficient electricity in the grid for all of the needs of Australia right now?

Clare Savage:: Right now we do have sufficient energy to meet our demand and our needs. We are finding that we’re seeing record days with big temperatures, and the drawing on the system is quite a lot. What we’re hoping to achieve with the guarantee is to bring together energy and climate policy for the very first time and after a decade of failed attempts.

Ross Greenwood:  You bring together the energy needs, and also you bring together the other side of this as well. Now, I was going to ask you about this, because the emissions side of it is controversial, because people say, that if we try to have the cheapest form of electricity in Australia, that should come from coal fired power stations. Is that not necessarily what you discover when you’re doing your reports?

Clare Savage:: Well, the thing we think we really need is to give some confidence to new investors. If we don’t get the new investment that we need in the system, that’s the only way we’re going to be able to bring down power prices.

Ross Greenwood:  Then where does confidence to those new investors come from? One controversial aspect of this is, if you want to have more wind power, or more solar power as you work out what price that electricity might be. Do you actually take into account the fact that tax payers might be shelling out subsidies to those who are putting those types of plants in place?

Clare Savage:: Absolutely. The guarantee is not about subsidies. The guarantee is about making sure we’ve got really clear investment signals, so that we get the cleanest, cheapest, and most reliable generation in the right place at the right time.

Ross Greenwood:  Then you come to the next phase of this, because clearly what a consumer want, what business would want is too much electricity capacity or gas capacity in the market at any time, because that is the thing that would bring down prices. If I was a generator of electricity, or a creator of gas, I would be trying to, well should I say, make certain it’s enough but not too much, because I don’t want those prices to come down. How do you properly keep an eye as a part of this body on those electricity generators, plus also those gas supplies to make certain that they don’t, well let’s call it, manipulate the market to their own financial ends?

Clare Savage:: What we’re going to do under the guarantee is make retailers who are the ones that contract the generators on behalf of their customers. Get retailers to do two things with their everyday contracting. We want to make sure retailers purchase enough dispatchable capacity or demand response to meet their share of their energy needs, and make sure they also ensure that the energy they’re buying is in step with our emissions reduction target to the electricity sector.

Ross Greenwood:  Then the next phase of it, the obvious question to ask from there is, what happens when the generator is also a retailer? Isn’t there a fundamental conflict of interest which could lead to the wrong answers being given at the wrong times?

Clare Savage:: We’ve looked at models for those sorts of generators, and retailers, those are the one business. We’ve also looked at models that will work for their own businesses that are just retailers. What we’re doing through this consultation process is talking to all stakeholders so that we can make sure we have the right way to structure this ,so that it works for everybody.

Ross Greenwood:  I’m going back to the initial thing, and that is the very first thing that people wanted is when they turn on the lights, when they turn on their aluminium smelter, that there is enough electricity to guarantee it is going to work, but also, at the cheapest possible price is important. Then when you make this report, who do you send this report to?

Clare Savage:: We were originally asked to give some advice from the central government, but the Energy Security Board works for all governments. Our job as a board now, over the next few months is to work with all the stakeholders, but to also work with all the ministers. To make sure we understand what their needs are, and to deliver something that will be reliable, affordable, and lower emission for our electricity system across Australia.

Ross Greenwood:  Given the fact that you’re reporting to government I presume, not only are you giving them a factual report on whether Australia has enough cheap electricity, sufficient electricity, and electricity being generated with lower emissions to be in accordance with whatever emissions target the government comes up with. The fact is also, I guess, if you find that there is something wrong in the system, you’ll also send signals to government, the policy needs to be changed to make certain that those three criteria are met?

Clare Savage:: Absolutely. That’s our job. Our job is to work with governments to make sure we have a secure, reliable, and affordable system that meets our emission reduction target.

Ross Greenwood:  If you were giving Australia’s energy policy or our energy system, let’s call it that, a rating out of 10 at the moment, given the fact that we aren’t the cheapest in the world, given the fact that our emissions aren’t the lowest in the world, and given the closure of some coal fired power stations, the question of enough electricity has been raised to the question, what score out of 10 would you give us?

Clare Savage:: The Energy Security Board actually did a report for governments just like that last year. We called it the health. We didn’t just give one overall score for the system but we went through each part of it and we gave it a rating. Is it healthy or is it in critical condition or are we monitoring its health? It was a bit of a mixed score card Rus, but we’re hoping and we believe that with this guarantee we’ll be able to restore the health of the National Electricity Market.

Ross Greenwood:  I did mention also that I’ve had on the program several times, and in fact I went out to their control room in North West Sydney, which was impressive to see. That was the chief executive of the Australian Energy Market Operator, AEMO, Audrey Zibelman. I was so impressed by what I saw there. It is an incredible operation. There’s no doubt, but the one thing that realy struck me, is that once electricity is generated, they really don’t care where it comes from.

Be it from wind or solar or hydro, or whether it comes from gas fired, power stations, or whether it comes from coal fired power stations. Once it’s generated, its generated and all they’re seeking is to have the cheapest electricity going to the grid in the right place at the right time. That’s their priority.

Clare Savage:: Absolutely, and that’s the priority of the guarantee as well. We call that being fuel, and technology neutral. We’re basically saying we just want to make sure we get the cleanest, cheapest, and most reliable generation built in the right place at the right time. By putting this obligation on retailers to make sure that they’re buying the right energy in the right place at the right time for their customers, we believe this will deliver that.

Ross Greenwood:  How often will you report to government?

Clare Savage:: We’re going to government in April with a high level design of the guarantee, and that’s what we’re consulting on right now. If all governments give us the go ahead to keep doing further work on this, which we absolutely hope they will, then we’ll be working with stakeholders for another two to three months from the really detailed design work that needs to be done, and back again to COAG Energy Council later at this year for their final approval.

Ross Greenwood:  Apart from, say, recommendations, and let’s say for example, the Victorian government then the state government has a moratorium on the production of on shore gas which a lot of people are highly critical of. There’s not much you can really do about it if a state government decides to put in place that type of moratorium.

Clare Savage:: Look, that’s why it’s absolutely fundamental that the board works with state, and territory governments to make sure we get the right outcomes for electricity, and gas users.

Ross Greenwood:  I’ll tell you what, great to have you in the program. Really interesting report this one, out late this afternoon, and the deputy chair of that body, The Energy Security Board, is Clare Savage: Savage. Many thanks for your time on the program tonight Clare Savage:.

Clare Savage: Thanks so much for having me Rus.

 

 

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