E & OE
Well, thank you very much for that very kind and generous introduction.
It’s great to be here today and I want to acknowledge Steve Blume, your President, and the work of the Smart Energy Council.
Don, I want to thank you for a great address. You are part of a great Liberal Government, here in New South Wales, led by our mutual friend Gladys Berejiklian. The strength of the New South Wales economy is the envy of the nation and your energy policies, integrating energy and climate, based as you said, on engineering and economics will ensure reliable and affordable power, bring down power prices and deliver that clean energy transition that we are all focussed on, as you state, as is your goal, to reach net zero emissions by 2050.
Now, for all of my time in public life, as far as energy is concerned, I have sought to resolve the trilemma; How do you reduce greenhouse gas emissions while at the same time ensuring that energy is affordable and reliable? That’s the problem we all have to grapple with. Right now, we are in the midst of an energy transition, from a centralised coal fired generation to a far more distributed, intermittent renewable generation backed by storage. From a dumb one-way grid to a smart interactive grid, from a system where retail customers, from a system we have today where it’s all one way where the retail customers become both consumers and suppliers. Providers of megawatts and indeed negawatts.
So there has truly never been a more exciting time to be in the Australian energy industry!
The challenge of this transition is now, how do we get from where we are today - from vastly dependent on fossil fuels to a clean and renewable energy future. As I said, as Don said, keeping the lights on and making sure we can all afford to pay our bills.
Now about two years ago, as we went into the summer of 2016, I spent a lot of time reflecting on this problem, I spent a lot of time researching energy storage and I really benefited from Andy Blakers’ work, not sure whether you are familiar with it from the ANU, he’s done a huge mapping study on pumped hydro opportunities in Australia. So, I spent a lot of time reading about pumped hydro over the summer and I gave a speech in the beginning of 2017 in which I think for the first time as Prime Minister, as any Prime Minister, I addressed the issue directly of the vital importance of energy storage and energy storage on a large scale.
It’s a well born observation and it's occasionally parody I know, but you do in fact need something to keep the lights on when the wind isn’t blowing and the sun isn’t shining, that’s just a fact of life. It seems to me that for rather a long time this breezy assumption that gas heaters would always fill in the gap. This failed to account for the rapid increase in gas prices, the consequence of policy mistakes, I have to say by Labor governments in both Brisbane and in Canberra, the massive increase of gas prices on the east coast. Now I was able to address that as Prime Minister and it was one of the significant energy achievements of my time in government by being able to ensure that we got more gas supply on the east coast and you saw wholesale prices come down by nearly 50 per cent.
Now the great news of course is the technological advancement and in particular a reduction in cost in both solar PV, number one, batteries number two and of course wind as well. Wind is a more mature technology so the reductions in cost are not as dramatic as they have been in photovoltaic where for example, in just eight years, the cost of a solar PV module has declined from nearly two dollars per watt to around 20 cents and there is more to go. The extraordinary work that is being done at the University of New South Wales here in Sydney is going to see the efficiency of a solar panel increase by 50 percent - so what that will mean is that you will have a solar panel that is currently for example, I am sure there are plenty of people here who make them, say it cost $40, is going to go from say a 330 watt panel and it will be a 500 watt panel and you imagine what that does to the cost of solar generation.
Now the practical consequence of all of this. The combination of storage and cheaper renewable regeneration can be seen in the recent tender by Snowy Hydro which sought to acquire up to 880 megawatts from solar and wind operators, they were massively oversubscribed. There’s about 50 percent wind and solar and in total they expect to have delivered up to 3 terrawatt hours of electricity a year, equivalent to 500,000 homes. Snowy is able with its existing pump hydro facility which is of course a tiny fraction of the capability that will be delivered by Snowy 2. They will be able to firm this intermittent energy and make a commercial return by selling firm dispatchable power for less than $ 70 a mega watt hour, and although we’ve consistently achieved higher prices than that at times of peak demand.
So you see at the moment, the cost of intermittent renewable generation coming down dramatically with improvements in technology as indeed in the cost of battery storage. So it’s hardly surprising that new coal fired power generation simply cannot compete and this is the point that Don was making. You’ve got 63 percent of the coal fired generated in New South Wales between now and 2040 because the plants are old, you know they’ve reached the end of their life. You’ve got to be able to make that up, the new coal fired generation cannot compete with the cost of renewables plus storage. However, there are a couple of practical problems arising with storage. If you have the necessary permits and approvals you can build a substantial solar farm in a year and of course getting connected to the grid and again, I want to commend Don and his government for the work they are doing on expanding transmission facilities in New South Wales.
You could argue, it would be a slight exaggeration, that you could build a solar farm with and Allen key, a posthole digger and a cement mixer, it is largely modularised. On the other hand, pumped hydro invariably involves larger lead times, the civil works take years to complete, we are talking about tunnels, concrete and steel, the work on Snowy 2.0 for example will be over 40 kilometres of tunnel. They expect to be operational by 2025, many people say that’s ambitious but I am confident that they will be able to complete it by then, but it is a huge engineering work. And even a smaller projects, I was talking to the operators or the proponents of the Bulkar project, even the smaller projects require civil works and all of that requires permits and can often be contentious and so forth. So that is why is absolutely vital to get cracking on large scale storage because we have got the cheaper and cheaper renewable generation coming through rapidly and on the other hand we have got to make sure that the storage catches up with it, is there to meet it. That is why Snowy 2 is so important and that is why Tasmania’s ‘Battery of the Nation’ project is vitally important.
Now both those projects arose out of a speech I gave at the Press Club early in 2017, in fact I must tell you a story about the Snowy 2 project which is rather touching. So I gave this speech and talked about the importance of pumped hydro and my Chief of Staff at the time, Drew Clarke, who many of you would have known in the energy industry, rang both Snowy and Hydro Tasmania and said, well, the PM’s given this speech about pumped hydro and we’d like to have a talk to you about it. Paul Broad, of Snowy Hydro said delightedly; ‘ yes we’ve seen the speech, we’ll just knock the cobwebs off an old cabinet and got a crow bar to open it and we’ve got the plans, we’ve got the plans'. The last time they were touched by human hands was 1990 but we are all ready to go with Snowy 2, well we didn’t even call it Snowy 2 at that time. That was amazing, so that whole project, the Snowy 2 project was first conceived in the 60s and substantially designed in the 70s and 80s and was sort of put away as being too hard, so that is the last time the plans were touched as far as we can tell, was about 1990.
So the critical thing is engineering and economics and its exactly, Don and I are entirely on the same wave length there and I know Simon has defended the South Australian experience, I won’t get into an argument with him about this but I will just say that I think the fact that South Australia is so rapidly putting in so much storage and so much firming power, rather do proves the point that a number of us have made that it may have been better to have a good investment in coordination with the huge investment in wind power. One of the faults I guess of the renewable energy target is that it wasn’t linked to any requirement for maintaining any regional reliability. I mean you can build a wind farm anywhere you like regardless of whether that was actually what was needed or suitable given the market characteristics of that particular area.
But there is enormous work going on there. I'm thrilled that the project at Cultana is another one of the pumped hydro projects that I enthusiastically back to ensure ARENA backed. I think as some of you know that is on an escarpment above the Spencer Gulf and will involve building a big turkey’s nest dam and then pumping sea water uphill when the wind farms are blowing and then running it downhill when they're not. Pretty straight forward. It is on defence land and I think the hardest part of that will be persuading the Department of Defence to part with a chunk of their real estate, they’re very jealous of it. But it's going to be really important and there’s a lot of places in South Australia where you get that characteristic. So I just make this final observation about pumped hydro and again I commend Don for the work he's doing - I know Amy Kean is going to be speaking later today – and he and his team are getting expressions of interest and respect of using New South Wales dams for pump hydro. Obviously every project is obviously a spike because it depends on the topography.
I mean in an ideal world you would have a very large dam right next door to another large dam and you know, 800 metres of elevation difference and you’d just have to connect it, it doesn't normally work like that. With Talbingo and Tantangara and Snowy 2.0 there’s seven hundred metres difference in elevation but there is regrettably over 20 kilometres of mountain in between them, so there's quite a bit of tunnelling, as I said.
Now in terms of the Snowy 2.0 project I just make one observation about there, the significance of it. What Paul Broad has demonstrated with his recent tender is that you can acquire very substantial amounts of renewable energy at very low prices. You know between 30 and 40 dollars a megawatt hour. And there's every reason to believe that we'll get lower. You lose about 25 per cent on the round trip, so if you can use 100 megawatt hours to pump a volume of water uphill that volume of water will generate seventy five megawatt hours coming down hill. The spread between the price of electricity at one time of the day and another is so enormous as we all understand, that it makes for such a valuable, it’s a valuable economic opportunity but it is a mechanism that will enable much of the volatility and much of the high price peaks in the electricity market to be evened out.
So I cannot overstate the significance of these pumped hydro projects. I give great credit to the batteries of course, I can perhaps talk about that in questions, that if you want really large scale, if you want to be able to generate, deliver stored electricity for days, not just a few hours, you really need the scale at the moment and pumped hydro.
Now Don addressed the National Energy Guarantee, look it has been abandoned by the federal government. I regret that – naturally, as indeed does I think just about everyone in the federal government. It did have the overwhelming support of the party room and indeed the cabinet. There was a minority of coalition MP’s who effectively torpedoed what was fundamentally a very good technology agnostic energy policy which united climate and energy policy and would enable us to bring down prices and keep the lights on.
I just want to note that I did not abandon the NEG as our policy but in fact it remained, but in the frantic last week of my prime ministership and the insurgency which of course undermined it and ultimately brought it to an end, the Cabinet resolved not to introduce the legislation until we were confident we could secure its passage. Anxious to keep the government together, I didn't want to see an important piece of economic legislation being defeated on the floor of the house.
Anyway that was very disappointing and you know I want to give great credit to Josh Frydenberg – he did a huge amount of work with his state colleagues to put it in place. The NEG, there's never been a national energy policy I think that has had more universal support than the national energy guarantee. And like Julie Bishop, and many others, I would encourage the risk of being criticised for speaking about politics – which apparently former prime ministers aren't allowed to do, according to some of the media.
I’ve strongly encouraged my colleagues to work together to revive the national energy guarantee. It was a vital piece of economic policy and has strong support. None stronger, I might say, than that of the current Prime Minister and the current Treasurer.
Let me simply conclude by saying that while the abandonment of the National Energy guarantee obviously creates a vacuum in terms of energy policy at the federal level and of course that provides the opportunity for states to get on and lead and that is what New South Wales is doing. It's important to recognise the other very considerable achievements in energy that have been made by the coalition government including during the time I was prime minister.
We ensured that we had set up an ACCC inquiry into the electricity and the retail sector - retail electricity prices and out of that comes some very valuable recommendations including a cheap, by comparable, default offer for consumers, underwriting firm generation on a technology agnostic basis for commercial and industrial users. We've advanced almost all of the recommendations of the Finkel Review, we secured agreement from energy retailers to get a better deal for two million households.
We were able to abolish the limited merits review process which had allowed network companies to game the system at the expense of Australian consumers. Had it been done earlier consumers would have been over six billion dollars better off, and that was controversial in some areas, but nonetheless it was a very important reform. And I've talked about Snowy 2.0, I've talked about the battery of the nation and of course the rather, what would I say, it was a rather blunt intervention I had to make in the gas market - which I felt a bit uncomfortable as a Liberal prime minister threatening to limit exports, but it worked and we were able to secure more gas on the East Coast. And that obviously has been very significant both for industry and for households.
So I want to thank you all for your work. I look forward to working with all of you in the future. I'm passionate about this sector, passionate about the goal of this transition to a cleaner energy future, to a zero emission energy future. That's got to be our goal. The challenge is how we get there and smart energy and smart energy people like you are the way we will get there. Thank you.