DAVID SPEERS:
Treasurer Scott Morrison, thank you very much for you time this afternoon. You would be relieved to hear Alan Finkel say that?
TREASURER:
Absolutely. I am not surprised by it because I think what we announced today in response to the Independent Energy Security Board’s recommendation, which let’s not forget, they were set up on the recommendation of Alan Finkel and they have worked through the issues that he raised, particularly the reliability issue, and they found a very good way to achieve that and everything else that he spoke of. I am not surprised by that and frankly now Labor don’t have a leg to stand on. They have no reason not to join with the Government today and support the investment certainty that we know this provides, that has already been endorsed by the Business Council of Australia, with the Australian Chamber of Commerce and Industry, with the Australian Industry Group, this is the certainty that we need.
SPEERS:
Labor wants to see the detailed modelling. If you were in opposition you would be saying the same about something as big as this.
TREASURER:
There is no reason why Labor cannot commit in principle to this right now. There is no reason they can’t do this. Alan Finkel has just removed the last possible feather they had to fly with on this and it is important now that they just do what the Australian people need. What this delivers is what the Australian people want: more reliable power, for less cost and to meet our environmental commitments. It does all three.
SPEERS:
But to be sure that it does all three, over the last decade we have seen so many different policy approaches. We normally do get the modelling. We get the detail. We get a White Paper. We get something. Why can’t we see the modelling on this?
TREASURER:
Well, there will be further work done, as was said today, by the Energy Security Board and that was announced in the press conference. There was initial estimates that put the savings at $115.
SPEERS:
How confident are you about that saving?
TREASURER:
Well, I am as confident as the Energy Security Board is and they are one of the most esteemed group of people looking at energy market issues and they’re economists and professionals that you can assemble in the country.
SPEERS:
Have you had a look at the modelling Treasurer?
TREASURER:
What it is, is an analysis. There is further modelling to come and that is what they have been tasked with and that is what was said at the press conference today. But they are looking at…
SPEERS:
So, is there modelling at the moment?
TREASURER:
…what they have said in their analysis is that wholesale prices could be 8 – 10 per cent lower, 8 – 10 per cent lower, than they would under a CET under the National Energy Guarantee. So, that is their professional view at this point. They will do more work, as they should, because the point now is to take this forward as a proposal to COAG. Because remember, the Energy Security Board was set up by COAG and now they can put that recommendation to them.
SPEERS:
But this is important, you keep stressing, the Prime Minister, everyone, these savings but it is based on what? Analysis or modelling?
TREASURER:
It is exactly what was said at the press conference by the Energy Security Board today. They have looked at a whole range of previous schemes and have looked at how that plays out and they have come up with that estimate and they have indicated they will be conducting further analysis…but if you take out the subsidies David, remember this is what is happening. The subsidies are being stripped out from this. So, you are removing an entire cost within the system. So, they are obviously going to be lower, they have to be lower because you are pulling out the subsidies that Australians no longer have to pay. And you are having greater certainty so there is more investment in supply, in all forms of supply - renewable energy, intermittent and importantly in reliable renewables and on top of that in traditional sources particularly gas. I would also stress that this is not the only thing we are doing. The energy retailers, the gas security, the regulation review, all of this…
SPEERS:
But on this, sorry I keep coming back to this modelling, but this is the thing that most people will be worried about, the price impact here. One of the members of the Energy Security Board, John Pearce, from AEMC has told my colleague Sam Maiden that they did a number of models and one of them showed it would have, only in the first year a $25 saving. It would then ramp up.
TREASURER:
I have the Energy Security Board’s letter to the Government here today and this is what it says. It says it is expected that following the guarantee it could lead to reduction of residential builds in the order of $100 to $115 per annum and that is what it says. That is the advice.
SPEERS:
That is over a decade so what would it be in the first year or two?
TREASURER:
I can only tell you what it says in this letter because that is the information that the Government has.
SPEERS:
Have you asked them about this? Are you aware that it might only be $25 a year?
TREASURER:
I think the further work will provide for that but the one thing you can’t walk away from is that under this plan prices will be lower. They can’t be higher.
SPEERS:
You can guarantee that?
TREASURER:
They have to be, David.
SPEERS:
So, you guarantee they will be lower?
TREASURER:
Of course they will be lower than what they could otherwise be and they will be lower than what they are paying because the subsidies aren’t there. If I sell you something and there is a $15 subsidy in there that you are paying, and I pull the $15 out, well it is going to be cheaper. That is what we are doing.
SPEERS:
But the Renewable Energy Target, as legislated, continues.
TREASURER:
That goes to 2020 and as the Energy Minister said today, as Josh said today, that is pretty much almost fully subscribed and the cost of those certificates then plateau off. That is the forward curve on the cost of those certificates going out beyond 2020. The Parliament will not remove the RET so that is not an option and so this ensures that all sources of power stand on their own two feet and Labor wants to cling to a renewables industry policy with no regard for affordability or reliability…
SPEERS:
Those renewables subsidised under the renewable energy target are still subsidised through until 2030, aren’t they?
TREASURER:
They’re still in the scheme, of course they are.
SPEERS:
So the subsidies are still there?
TREASURER:
Not under the plan that will replace them. If we could move that forward than of course we would, but that’s not an option that is before the Government.
SPEERS:
The subsidies don’t stop at 2020?
TREASURER:
The cost of them in the system actually declines. The forward curve on the cost of the certificates actually falls away from 2020 and beyond.
SPEERS:
What happens…
TREASURER:
You don’t add to them. That’s the point.
SPEERS:
What happens if the energy retailers don’t meet their emissions reduction? What’s the penalty?
TREASURER:
It’s done over an averaging process and so, if they’re behind in one period, they can make it up in subsequent periods and it’s looked at over a period of time and that will come down to the design of the scheme. Now, for serial offenders who do miss many, many periods then the ultimate sanction can be deregistration from the energy market. What happens if they don’t meet their reliable energy target? What happens in those circumstances is what happens now, is AEMO has to go and tell someone to turn on a gas-fired power station or somewhere else and they get the bill at the spot prices which is very high. So there’s a strong financial penalty there and that’s the reason why under this plan it will be cheaper, because more of the energy in the system will be contracted. It won’t fall when the wind doesn’t blow and the sun doesn’t shine, until a massive bill falls on consumers because no one planned ahead.
SPEERS:
So the whole idea is essentially the energy retailers have to work out for themselves how to reach their emissions and their reliability the regulators set?
TREASURER:
Which is what the Australian customers want.
SPEERS:
So what then happens with AGL and its Liddell coal-fired power plant? Do they still have the right to work it out themselves?
TREASURER:
They’ll have to go back and they’ll have to look through how the portfolio of energy they’re selling to you as a customer or any other business meets those two standards, those two guarantees. Now, they might have excess in a particular area and others might need something else in another retailer…
SPEERS:
But you’re happy to leave it to them?
TREASURER:
And they will work it out, and these businesses will find the lowest cost form of meeting those commitments and that’s why this guarantees that prices are less.
SPEERS:
Will any new coal-fired power plants be built?
TREASURER:
It’s very possible under this scheme because for once now, coal will not be penalised. Under Labor’s scheme, they’re penalised. They’re penalised out of existence, they’ve cheered the closer of coal-fired power stations and they’ve blown them up like they did at Northern. I mean, literally, they blew it up. The stack fell over and the whole thing went to the ground. Now, that pushed up power prices. That’s what Rod Sims found in his report that I tasked him to do.
SPEERS:
Now, this finally is just for the energy sector, it’s to get emissions down by 26 per cent in the energy sector, but we’ve committed to reducing overall emissions, energy makes up a third, so how will we get the rest?
TREASURER:
That’s part of the broader emissions reduction scheme that the Government already has policies in place for. What this does is deals with what the electricity sector’s component it is. But just think about this for a second, 45 per cent emissions reduction target, the difference between that and 26 per cent is the entire generation emissions of all of electricity in this country. That is the difference between Labor’s policy and ours, and that’s why they’ve got a $66 billion electricity bill from Bill Shorten.
SPEERS:
But what about the farming sector? The transport sector? Will you have to come up with some way of getting emissions down then?
TREASURER:
Well, we’re on track, we’re on track and so the policies that we already have show that we’re on track and one of the really interesting things about this process – having been quite involved and I commend Josh for his great work on this and the Prime Minister and Barnaby as he’s worked closely on this – is the world’s changing, these technologies are getting cheaper and has already been remarked, that will accelerate particularly in the back-end toward 2030. And so, this delivers on the emissions on our environmental commitments, but it does so without charging the customer subsidies that only ideology can demand now.
SPEERS:
Treasurer Scott Morrison, thanks very much for joining us.
TREASURER:
Thanks, David.