E&OE
It is really great to be here and what terrific speeches. Pat, thank you so much, Audrey, Matt, really great contributions. Audrey Zibelman, by the way, is one of the greatest imports we've had from the United States, she provides phenomenal leadership and insight. Really, there are so many great women in the energy sector, Kerry Schott, Clare Savage, so many, Chloe, so many really outstanding people, that's just in the public sector I'm talking about, providing us with great advice over so long. I think the Energy Security Board is 80 percent female, isn't it? Three out of four. Seventy five percent. Well, there you go, that's an aspirational target.
As you know, I've got a great passion for this issue. I'm not going to traverse things that have already been covered by the previous speakers because I'd like to leave some time for questions.
It was only in 2007, not very long ago, when Rupert Murdoch said we should give the planet the benefit of the doubt.
John Howard, the leader of the Liberal Party, my party, announced the government was committed to introducing an emissions trading scheme, which I started, in fact, introduced and passed the first legislation for that as his Environment Minister. He called it, and he was right, one of the most important economic decisions this country will take in the next decade. So in the 2007 election, if you want to play some sort of fantasy football, sliding door questions in politics, if John Howard had won the 2007 election, I think we would have had an emissions trading scheme. And it would now be about as controversial a part of our fiscal furniture as the GST.
So it's worth contemplating that, missed opportunities.
As we head into 2020 we don't have an emissions trading scheme, and regrettably, as Matt was describing earlier, we do not have at the federal or national level any other coherent or integrated policy to combine the needs of the transition to a clean energy system, in terms of reliability and affordability, with the need to reduce emissions because of the inability to get the National Energy Guarantee through the Coalition party room and the - well ultimately, we get it through the coalition and the insurgency that we face within the coalition, within the liberal and national parties from a minority of destructive climate change deniers.
Now, the tragedy is that climate change has become a political battlefield and an issue of belief and religion, whereas in fact, it should just be about physics and science.
The earth's average surface temperature has risen about .9 degrees Celsius since the late 19th century. Most of the warming has occurred in the last 35 years with the five warmest years on record taking place since 2010.
The IPCC has concluded there's a more than 95 per cent probability, in other words, extremely likely that global warming is the result of human activity over the past 50 years. We know that the only reason we are not a frozen lump of ice travelling through the universe is because of our atmosphere. So we understand the greenhouse effect and benefit from it, and we understand the impact of increasing greenhouse gas levels in the atmosphere. All of that is fact.
What we have been doing as a human race, as a human civilisation, is conducting a massive and increasingly dangerous science experiment with the only planet we've got.
So those people on the right who claim to be conservatives and hold up climate change denialism as one of their marks of identity, a political identity, are not conservatives at all. They are reckless, they are reactionary, and they are putting our future and that of our children and grandchildren at risk.
Ken Haine, the former High Court Judge and Royal Commissioner of the Banking Royal Commission, summed it up very well just a couple of days ago when he made this very point. That this issue, which should be one based on fact and risk assessment, as QBE understands, as we all should understand, has been turned, particularly in Australia and the United States, more so I think than anywhere else in the world, into an issue of politics and belief and values and almost religion. As I said last night on Q and A, this is just nuts. There is no other way to describe it, it is so irrational but that is what we're grappling with and that has been the great challenge, particularly on our side of politics.
Now, let me just put that aside, that political problem we have to one side, and then look at the economics and I want to just endorse what Matt was saying and what Audrey was saying. The reality is that the economics of the energy transition have dramatically changed.
When I was Howard's Environment Minister in 2007, renewables were vastly more expensive than conventional forms of generation and the argument in favour of subsidising them - and there have been many schemes, many subsidies, some of them better designed and more effective than others. But the argument in favour of subsidising them was not really to reduce emissions, it was to provide some economic pull through so that there would be more demand for the relevant renewable technologies, more research, more development of learning through doing, economies of scale, all of those things.
Whether this was the cause or it was coincidental, the reality is here and now the cost of new generation has - the relative costs of new generation have shifted in favour of renewables plus storage. There's no question about that. Regardless of the carbon issue, no one in their right mind would build a new coal fired power station here today on the grounds of economics.
The problem with the coal lobby today is that they are basically arguing for higher emissions and higher electricity prices. I can say to you, that is an absolute loser. That is an absolute loser and that has to be prosecuted. The road to cheaper power, to more affordable power is through renewables and storage.
Now we talk about renewables, it's very important to understand what I think is the most significant economic fact about renewable energy, I'm talking really about photovoltaics and wind. We look at a lot of assessments of relative costs and you'll see the long term cost of electricity, and I think the latest figures that I saw recently from Audrey's organisation and the CSIRO estimated, for example, a new black coal fired power station would reduce power to a levelised cost of $82-$111 a megawatt hour, say $96 is a midpoint.
On the other hand, the levelised cost for wind is between $51 and $64 or $57.80 as midpoint and it's actually a little bit lower for solar. Particularly with solar, the trend is just going down dramatically. The cost of a photovoltaic module today per watt is less than 10 per cent of what it was eight years ago, I mean that is phenomenal. This is dramatic change at a pace, I can tell you I was a pretty enthusiastic environment minister in 2007, I never anticipated the improvements in technology would be as rapid as they are and I'm a hopelessly optimistic person in terms of technology. The industry, the scientists, including those of UNSW, have surpassed even their greatest admirers.
The key element with renewables is not what their LCOE is, their long term cost of electricity use, but the fact that they are a zero marginal cost generators, this is the most important point.
What that means is that at any given time they will dispatch and would take one cent a megawatt hour because their cost of generation, their marginal cost of generating that extra megawatt hour is zero because they have no fuel cost. So what that means is that we have times of the day, this will only increase, where there will be a massive oversupply of energy relative to demand and times of the day, of course, particularly a windless night, for example, where there will be a big undersupply of renewable generation. So hence you have the centrality of storage.
Now this is the big penny that dropped with me in 2016 as I worked through these issues and that was how you got Snowy Hydro 2.0, Tasmania's battery of the nation and the whole pumped hydro agenda that I got going at the beginning of 2017.
The reason why governments need to plan for storage ahead is just a very fundamental one. You can build a solar farm once you've got your planning commission and you've ticked all the administrative boxes, you can actually physically build that in well under 12 months.
I was talking to a solar developer the other day and I said, people tell me what you need is an allen key, a post hole digger and a cement mixer to put one up, it's a bit like IKEA. He said to me "No, no, that's wrong.", he said, "You don't need the post hole digger or the cement mixer. We've got these great hydraulic rams that just hammer the footings for the racks into the ground, you don't have to actually dig them out or cement them in.".
So it's pretty straightforward. So the problem, however, is that if you are building storage on a large scale, which the current technology really means pumped hydro, that takes more time.
Snowy Hydro 2.0 is 40 kilometres of tunnels, obviously you don't have to build any new dams there, that's helpful. But all of that takes time, a lot of steel, a lot of concrete, a lot of environmental approvals.
If you're doing small scale pumped hydro of the kind many people are talking about at the moment, following the great work of Andy Blakers at the ANU, that again will take time. Anything involving water, land use, pushing dirt around takes time. So that's why we've got to make sure the storage gets built quickly and in advance.
Finally, I just conclude here, because I'm really riffing off what has been said before and what you well understand. All of this provides us with an enormous economic opportunity.
We can become a clean energy powerhouse, and we're not the only place in the world where there are great wind resources or great solar resources, but there is nowhere in the world with better ones and of course, we have a lot of real estate.
We've got plenty of locations where we can set these new plants up. That is why, and I commend the work of Alan Finkel and COAG and state governments on the national hydrogen strategy. Green hydrogen is going to be a huge opportunity.
You can see the inexorable reduction in costs in every stage of that process to the point where hydrogen itself will become another means of storing electricity and of course, exporting energy, exporting green energy from Australia.
So this is a jobs story, as Matt said it is a jobs and growth story. We've got enormous opportunities, but we have to take the debate out of the realm of ideology and politics.
We've got to treat this as a challenge, yes, we need to decarbonise. We critically need to do that. I mean, how in heaven's name can people work, and this is particularly the case for the News Corporation tabloids or the Murdoch, all of his papers in fact, whether a tabloid or not.
You've only got to look at their papers any day and you'll see on one side pages of shocking, shocking pictures of frightening bushfires and terrible drought and on the other page, articles and opinion pieces and commentators saying that climate change is a myth, denouncing warmists like Matt Kean and Malcolm Turnbull and others, other dangerous left wing personalities.. And that is holding us back.
That is basically the only thing that is holding us back is politics and what we need to do is to be able to beat that with the facts. I've been battling that within my own side of politics for a long time, as you know, and I'm glad the Matt is doing so in New South Wales.
But we are now in a position where because of improvements in technology you can combine low emissions, affordable and reliable energy all at once.
Now, that sounds too good to be true, but you get to a zero or near zero emission electricity sector, you add to that the electrification of the economy so that transport, for example, moves to electric vehicles and again, you can see that is coming inexorably, then you start to see a massive reduction in emissions.
Maria Atkinson, of course, has had a long experience in the built environment and understands how much of our emissions are created from our buildings and the importance of better building design and LendLease has been such a leader in that in the past and what a difference that makes. But imagine if all of the energy going into those buildings is green. I'm not saying it doesn't then matter whether you are energy efficient or not, but energy efficient energy efficiency becomes more of an economic issue than an environmental issue if you can green your electricity sector.
So we've got everything to play for, everything to be optimistic about.
Our challenges are essentially political on the one hand, and then one's of planning on the other. I get back to what I used to say when I asked Prime Minister about this, we have got to base our work on engineering and economics rather than ideology and idiocy.
Planning is so important that is why, as Audrey remembers, when AEMO came out with a report which said when Liddell closes as it must, you know it's one of the oldest of the old clunkers left and will close in 2022, there was a risk of being a big gap in dispatchable energy in New South Wales. We talked to AGL about keeping it going for a few more years, and that wasn't because I liked particularly liked Liddell or had some kind of arcane interest in ancient coal fired power stations. But I knew that Snowy 2.0 was going to be online in 2025, and I didn't want us to have a hiatus between 2022 and 2025.
So this requires a lot of planning, the point that Audrey made about the impact of a thousand megawatt coal fired power station, however polluting, closing down and the gap that it creates is a very valid one. All of this transition has to be planned.
There's so many improvements to the rules following Alan Finkel's review and great work from AEMO and AEMC that have mitigated those risks but you need to plan and above all, you need to plan ahead for storage.
I just conclude on this point, zero marginal cost renewables are increasingly easy to build and quick to build. The storage that backs them up is not particularly hard to build that it takes a lot more time. So given that you need the two of them to go together we have to get to cracking with the latter with the storage as quickly as possible and in an ideal world, you'd be building it ahead of the renewables.
So thank you very much. I look forward to some questions and I just want to congratulate you all on the leadership you're showing to our smart energy, clean energy transition.
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