Well thank you very much Mark. It’s great to be here, back in Brisbane.
I’m delighted to be here as a guest of the Queensland Media Club and I want to acknowledge Opposition Leader, Deb Frecklington and the Lord Mayor Graham Quirk, and all of my parliamentary colleagues who are here with us today.
Before I move onto energy can I just say, as I’ve conveyed to them directly today already, our congratulations, our admiration to the Australian divers, doctors, who played such an important role in rescuing those boys from the cave in Thailand.
It's one of the most heroic and inspiring episodes of our times really.
It's hard to imagine anything more frightening than being trapped underground in the dark, let alone having your children trapped underground in the dark.
And the courage of those men and women who affected that rescue, the Thai Navy SEALs, the British divers, the Australian divers and doctors - of course, we acknowledge Dr Richard Harris from Adelaide who played such an important role - but the whole team from the AFP, Department of Foreign Affairs and Trade, from the Australian Defence Force. They worked together with their international partners in a way that is an inspiration, an inspiration to all of us.
So I want to thank them on behalf of a very, very grateful nation.
Now, my single clear-eyed focus is to reduce the cost of energy for Australians.
Too much ideology and even idiocy has taken the place of engineering and economics and energy consumers have suffered accordingly.
Corners were cut in the process of injecting competition in what used to be state-run enterprises, undermining the long-term benefits that competition could bring.
Electricity networks were encouraged by government regulation to be gold-plated and so they were, and the consumer had to pay.
Interventions in the national energy market - most significantly force-feeding of renewables into the market without any thought for firming or storage - distorted price signals.
Federal and Queensland Labor governments allowed gas to be exported from the east coast and despite warnings that this would result in gas shortages for domestic customers, did nothing to protect the domestic market.
Retailers created confusing and opaque pricing. Discounts were concocted off inflated standing offers. With one mistake, a pay-on-time discount turned into a punitive, unfair late penalty.
Consumers and businesses suffered.
Now, my approach has been to bring a businessman's hard-headed attitude to problem-solving. And here the problem is clear. Energy is too expensive. And the measure of any proposed solution is equally clear - will it help reduce energy prices?
So the answer is not one fuel type or another, and those who place some sort of moral or magical quality on a particular type of machine miss the point.
The answer does not lie in mandating a wind turbine on every corner, a solar farm in every suburb or a new coal-fired power station in every region tomorrow.
The starting point for lower prices today is a competitive consumer-focused market.
Dispatchable energy, firmed energy, can be delivered by a wider range of technologies than ever before.
Let them compete. And may the cheapest solutions win. As they will if we let the market work.
We want the consumers to win. They must be the winners. That's whose interests we're looking after.
Now, the market will find the most efficient price using the different features of different types of generation - baseload or flexible, centralised or distributed and so on.
We don't have to make a technological choice. We must create the framework to deliver the cheapest mix of power.
Now, prices are starting to fall. Energy companies are having to work harder to attract and retain their customers and the uncertainty over investment is dissipating.
Over the past year there have been a million sessions on the energy-made-easy.gov.au comparator site and through this and our other actions with retailers, over 400,000 families and small businesses have switched plans and saved hundreds of dollars a year.
Last year, I told the story of Christine DaCosta, a single mother with four children living in Brisbane. She used the EnergyMadeEasy website of the federal government, she found a better deal that'll save her $300 a year.
According to the Australian Energy Markets Commission, a residential customer in Southeast Queensland can knock $504 off their power bill by moving from a median standing offer to the cheapest market offer.
On top of that, here in Queensland, reductions in prices that came into effect from the beginning of the month mean a family takeaway shop owner can now save between $400 and $770 depending on their supplier; a hairdresser between $129 and $243; a real estate agent between $137 and $258.
Now, we’ve acted to increase gas supply, as you know. Some of the gas companies in the room will know, in a fairly heavy handed way – particularly for a Liberal Prime Minister.
But we’ve done that, we’ve helped accelerate gas projects and reform the regulation of pipelines.
Wholesale gas prices have halved over the last eighteen months.
Between 2007 and 17, electricity prices, on the other hand, had a compound annual growth rate of eight per cent - even with the fall in prices after we repealed the carbon tax.
Now, electricity charges are made up chiefly of the cost of generating power from coal, gas, wind, solar, hydro, also known as wholesale costs, the cost of the poles and wires that deliver electricity across the nation, or network costs, ‘green’ schemes of various types and there are quite a few, and the cost of the retailer who sells the power, the retail costs. The contribution of those drivers differ from state to state.
But according to the ACCC, across the National Electricity Market over the last decade increases in network costs, that's the poles and wires, have contributed 38 per cent to those price increases, followed by wholesale generation costs, another 27 per cent.
And that element was felt most recently with the hasty closure of large baseload generators, particularly Northern in South Australia and Hazelwood in Victoria.
Wholesale prices in 2016-17 increased dramatically with tighter supply.
Reliability suffered, most noticeably in South Australia, where their reckless reliance on renewables without storage or firming capacity left their system vulnerable.
What were they thinking? What was that Labor Government thinking? Had it not occurred to them that the sun doesn't shine all the time and the wind doesn't blow all the time?
Apparently no thought at all, except a long extension cord to the Latrobe Valley.
The sudden exit of large thermal generators heightened the risk of costly blackouts and we saw that on 28 September 2016, where electricity supply in South Australia was lost - for hours in the east of the state and weeks in the west, where strong export industries including fishing, agriculture, mining were left stranded.
And at the heart of the problem was a failure to integrate energy and climate policy - a failure we are correcting with the National Energy Guarantee and, at a ministerial level, for example, by combining energy and environment in the same portfolio. So Josh Frydenberg is the Minister for Energy and Environment.
Now, the structure of the Renewable Energy Target imposed a subsidy separate to the price signals of the energy market. Prices went up but new investments in reliability did not. Labor ignored reliability and the importance of dispatchable power. And so, price volatility drove outcomes. The system was compromised as investment signals were distorted.
There was also an increase in the size of firms that both generated and sold electricity - vertical integration. And to be blunt, some in the sector took advantage of their strong positions using the cover of uncertainty to take advantage of consumers.
Now, last year, as you know, I secured agreement from the energy retailers on measures to put downward pressure on electricity prices including contacting nearly 1.6 million households to offer a better, cheaper deal on their power bills.
Now, as part of this consumer-first approach, putting the customer first, all the business people here in the room will understand the wisdom of that. In March 2017, we commissioned the ACCC to conduct a thorough root and branch review into retail energy markets to examine the behaviour of the sector and find the solutions that would lead to lower prices.
That's what this is all about - lower electricity prices. That's what we're seeking to achieve.
Now, we received the report on June 30, and it's been released today. I want to thank the Chairman, Rod Sims, and his team for their characteristically comprehensive and careful analysis.
Their assessment is blunt - markets have not worked well for consumers. The National Electricity Market needs to be reset, and essential to that reset is the implementation of the National Energy Guarantee.
Unnecessary costs need to be removed; a greater focus is needed on low-income households; competition is needed to combat market concentration, and more direct policing is required to prevent market manipulation.
The National Electricity Market can be restored to an efficient, fair and competitive market that works in the interests of consumers.
The ACCC does recognise there is positive progress in the electricity market leading to lower prices - recognition that our policies are working.
It estimates that if its recommendations are adopted, savings for residential customers could be, by 2020-21, up to an average of 24 per cent and for commercial and industrial customers, 26 per cent. They're savings, they are forecast.
Now, the ACCC finds that while consumers who regularly review or switch plans have benefitted from competition, many have been trapped by a market that is complex, opaque and unfair. Inertia and complexity have worked to advantage the retailers at the expense of their customers.
Discounts, the report says, have become misleading. There is no benchmark for consumers to judge what they're really getting, because retailers set their own inflated standing prices. The ACCC recommends the creation of a new benchmark or default price, set by the Australian Energy Regulator. That would provide a clear reference point for consumers.
Discounts are offered in return for consumer behaviour, such as paying on time. But conditions that see consumers lose all of their discount for a late payment are effectively a brutal late penalty disproportionate to the cost to the retailer and they recommend that practice should change too.
The ACCC would also like to see more transparency from the private price comparator sites, so that customers know what commissions are paid. Consumers have a right to know. Again putting the customer first.
In wholesale markets, the ACCC finds that vertically integrated companies have been applying an additional internal premium on generation prices of between 26 and 42 per cent on average, which they have passed directly onto their retail prices.
They go on to recommend a cap on further acquisitions and mergers of 20 per cent of generation capacity across any National Electricity Market region; the separation of the two Queensland Government-owned generators into three independently operating competitors; and, greater powers for the Australian Energy Regulator to investigate market manipulation and increased fines.
In gathering evidence, the ACCC found the financing of new generation assets outside the big vertically integrated gen-tailers was inhibited, because either commercial and industrial users were not prepared to enter into sufficiently long-term power purchase agreements, or when they were, banks were not prepared to recognise their credit beyond five years or so.
So the ACCC has made a very interesting suggestion - that where a new firmed or dispatchable generation project, which could obviously consist of several assets, has commercial and industrial customers secured for say the first five years, the Australian government agree to acquire power at a low price - say $45 a megawatt hour - for years 6-15. Now, such a put, to use a financial term, would secure bank finance, and as the ACCC says, and I quote, "Encourage new entry, promote competition and enable commercial and industrial customers to access low cost new generation." Remember, commercial and industrial customers are two thirds of the demand on NEM.
Now we'll look further at this proposal over the coming months as we consult with the Energy Security Board, AEMO, AEMC, other jurisdictions, industry and consumer groups about the ACCC's recommendations. But this recommendation has the distinct advantage of being thoroughly technology-agnostic, and well designed, should serve to support our goal of cheaper and reliable energy.
Now, the National Energy Guarantee brings together energy and climate policy by maintaining system reliability. It requires retailers to purchase a minimum level of electricity generation that can be sent out continually or on demand. And at the same time, meet an emissions intensity that enables us to meet our international commitments.
As John Pierce, the chair of the Australian Energy Markets Commission remarked last year: “We’re not pricing carbon. What we’re pricing is reliability.”
The Guarantee will ensure investment in whatever technology the energy market needs – solar, wind, coal, gas, batteries, pumped hydro and others. It’s not pro-coal or anti-coal, pro-renewables or anti-renewables.
Renewables do not need to be subsidised any longer. The latest long-term contracts are coming in at less than $65 a megawatt hour. It's below the average market price today.
Coal is forecast to remain 60 per cent of our generation mix in 2030. Portraying the future as an either-or is simply wrong.
The National Energy Guarantee, designed by the experts, reinvigorating markets and competition, and already contributing to lower prices by restoring confidence about the future, and is strongly recommended by the ACCC.
Energy Security Board modelling says the Guarantee will deliver savings of $120 on average across the next decade, the cornerstone of an estimated expected reduction of $400. It estimates the wholesale generation price, which is where its impact will most keenly be felt, will be 23 per cent lower.
And its greatest strength is that it's focused on delivering for consumers, not arguing about technologies.
Now, Andrew Richards from the Energy Users' Association of Australia said it very well last month, and I quote him, "We observe that there are those who criticise the Guarantee because it doesn't include explicit support for renewable energy, while others criticise it because it doesn't include explicit support for fossil fuels. It would appear that everyone is seeking a consumer-funded free lunch and because the NEG doesn’t provide it, they're critical. From an energy perspective, we see this as a significant positive of the National Energy Guarantee as it seeks to be technology neutral, ensuring all technologies can both play to their strengths, but also requires them to manage their weaknesses”.
On the other hand, Bill Shorten and Labor have no plan at all, other than higher prices and less reliable energy.
Labor's 50 per cent Renewable Energy Target repeats the mistakes of the past by making technology, rather than price, the focus of policy.
Continuing to force-feed renewables into the market through subsidies guarantees higher prices and less reliable energy.
And you don't have to take my word for it, Just look to South Australia where the households and businesses of that state suffered under a reckless renewable target that delivered blackouts, volatility, and to rub salt into the wound - the most expensive energy in Australia.
Now Bill Shorten has adopted this as Labor's national policy.
So the choice is going to be very clear, at the by-elections and indeed, at the general election next year, lower prices under our technology neutral customer focused National Energy Guarantee, or higher prices under Labor's reckless renewable energy subsidies.
As ACCC Chairman Rod Sims said just this morning, “Only a technology neutral approach will get prices down. Whenever Governments prescribe that the technology should be one thing or another, that’s when you get higher prices.”
Now, repairing the mistakes of the past means, obviously, planning to ensure that renewables are reliable, and clearly that was the huge oversight neglected in South Australia.
Now, Snowy Hydro 2.0 will help lay the foundation for the future of our more flexible energy system, providing a grid scale, 2,000 megawatt battery in the heart of the system; improving reliability and security across the grid; enabling new technologies to be safely integrated.
I've seen criticisms of the Snowy 2.0 project because it's Government owned, coupled with suggestions it's subsidised. Some commentators have discovered that you'll need more energy to pump water uphill than it will generate downhill - you lose about 25 per cent on the round trip. What a revelation.
Snowy Hydro, I hasten to add, has always belonged to government – always - and there are not many places in our flat, dry continent where you have two existing large bodies of water near each other, and 700 metres difference in elevation.
The price of electricity varies from hour-to-hour. For example, it has a very low value in the middle of the night, and a very high value indeed on a hot summer's afternoon. So as it does now, for its existing pumped hydro, Snowy 2.0 will buy when power is abundant and has a low economic value and sell when it is in high demand, and thus more valuable. These trades will reduce volatility and price spikes, and thus, contribute to lower overall energy costs.
The project is financially strong. With conservative assumptions it shows an internal rate of return of at least 8 per cent, and Snowy Hydro expects to fund it from its own operations and borrowings.
Here in Queensland, Genex is finalising its preparations for an expansion of its existing Kidston solar project with the addition of pumped hydro, using the pit of a retired gold mine for water storage. It is a clever combination of 270 megawatts of solar, 150 of wind and 250 of pumped hydro.
And among other places, there is pumped hydro being developed at Cultana in South Australia, as well as enormous opportunities in Tasmania where there is a powerful combination of highly efficient wind assets and a large hydro scheme with 14 sites already identified.
So that's what delivers lower prices - a mix of generation with a mix of qualities in a truly competitive marketplace.
Now, cheap energy goes to the heart of our economic competitiveness. And that's where the simplistic economics of Labor's harsh carbon taxes or trading schemes are laid bare. You cannot adjust to the future if you cannot compete now.
If you listen to our opponents, their view is apparently we have to shutter industries because of their emissions and drive them out of business by raising their energy prices.
Labor has not learned the lessons of the past.
When it rushed to impose the highest economy-wide carbon tax in the world, which drove up prices, as they intended it would. As I said in Paris in 2015, "It is innovation and technology which will drive stronger growth and a cleaner environment, not heavy-handed taxes or the force feeding of one technology or another”.
Now, we promised that we would take action on energy price rises. We promised that we would do everything we could to bring prices down.
We have turned the corner on energy prices.
Now, it is time to lock in that progress with the National Energy Guarantee.
Thank you very much.
Press Office of Prime Minister Malcolm Turnbull, Canberra