Interview with David Speers, ABC Insiders

DAVID SPEERS: Chris Bowen, welcome to the program.

CHRIS BOWEN: Thanks, David, good morning.

DAVID SPEERS: So this is a major change using an undisclosed amount of taxpayers' dollars to underwrite the transition to renewables. Why weren't your previous policies adequate; why did you need to do this?

CHRIS BOWEN: I think it's a reflection, David, of what I've been saying for some time, that we were doing well, but not well enough, and both parties supported a Capacity Investment Scheme at the last election, the Liberal Party couldn't deliver one, we have delivered one. We ran a pilot and that pilot worked very well.

The auction I announced with Penny Sharpe, the New South Wales Minister this week added more megawatts in one option than the previous government delivered in nine years.

But in the face of the Inflation Reduction Act, the global race to capital, the global race for supply chain, infrastructure projects finding challenges all around the world, our planning systems coping in some cases not as well as they can with an increase in renewable energy applications, we did say this Capacity Investment Scheme, which has worked very well, can now be, if you like, supercharged to do an even better and more important job.

And why this is important, David, most particularly, is because as coal fired power leaves, we need to get more renewable and dispatchable energy on to replace it before it leaves, otherwise we have a big threat to reliability in the system.

The biggest threat to reliability in our energy system at the moment is unexpected outages of coal fired power stations and we need to get more energy on quicker, we need a transition which is more orderly and faster, and that's what we're delivering.

DAVID SPEERS: One of the big changes as part of this though, previously this scheme was only for dispatchable power, so that had to include some storage, batteries, pumped hydro, or whatever. Now that's not a requirement, you can now underwrite wind and solar projects alone. Why do they need taxpayer support; why can't they stand up on their own?

CHRIS BOWEN: Well, what we're doing is supplying a reliable and secure and welcoming investment environment for both dispatchable and variable renewable; we need both. Just as you need, you know, in any system, whether it's the water system or the electricity system, you need a range of capacities and availability, you need both.

We're moving to a more renewable system. You do need dispatchable power, that means renewable energy supported by batteries or pumped hydro, or some other form of support for peaking and firming.

You also need the variable renewables obviously, and the auctions will support both of those.

DAVID SPEERS: But is there a danger if the government's intervening like this that, you know, if you're supporting one wind farm and the other one doesn't have that taxpayer support, are they less likely to invest, because their competitor's got a government leg up?

CHRIS BOWEN: Well, I think if you look at the response of the industry this week, you know, whether it is energy users, energy producers, climate groups, industry groups, like the Australian Industry Group, they all strongly supported this move by the government this week.

I think that shows that we've considered and consulted very widely, we have responded to the changing international circumstance. As I said, this is necessary for emissions reduction, absolutely, it's also vital for reliability.

We saw four gigawatts of dispatchable power leave the grid under the Coalition, only one gigawatt come on, it has left Australia quite vulnerable, and we are moving to fix it.

DAVID SPEERS: Now on the cost, I know you don't want to reveal exactly what you're willing to spend here because you've got to go into, you know, an auction process with the private sector, but one energy economist has suggested this could end up costs tens of billions of dollars. Can you at least give us a hint whether it's in that ballpark?

CHRIS BOWEN: I wouldn't get carried away by some commentators here, David, but -- 

DAVID SPEERS: So not tens of millions?

CHRIS BOWEN: Well, I wouldn't get - that commentator has had no insight to -- 

DAVID SPEERS: But you do.

CHRIS BOWEN: -- our work. But just as the New South Wales support scheme, the LTESA, the Western Australian Capacity Mechanism is commercial in confidence just as the previous government's underwriting new generation policy, which was actually better termed “unfortunately no generation involved scheme", the UNGI scheme, Angus Taylor said those details were commercial in confidence, just as the vaccine deals were commercial in confidence, when a government is entering into commercial negotiations or an auction, it is quite standard budget treatment to say that we will not indicate our pricing expectations as we're about to enter an auction.

David, I think people understand that if you're conducting an auction for a house or attending an auction for a house, you don't tend to send an email saying, "Here's my bidding strategy."  What we're determined to do is maximise the benefit for the taxpayer and keep those bidders with their pencils very sharp, and the way to do that is exactly the approach we're applying.

DAVID SPEERS: Okay, but most people who go to an auction to buy a house will have, privately at least, a cap, a cost, an upper limit in mind. Can you at least tell us whether you have any sort of cap here internally as to how much you're willing to spend, or is this uncapped?

CHRIS BOWEN: Well, the advantage of an auction, David, as opposed to other options that are available to us like extending the RET is that the government is in control of the auction. We are in control of what bids we accept and what bids we decline, we're in control of how many gigawatts we call for in particular auction rounds, so that is one of the advantages.

Obviously we won't be subsidising negative prices, but we'll be calling for the investors to come forward, we will be saying in that auction process, just as we did in the first round that I announced, a very successful round, adding more than a gigawatt in New South Wales, very important for the reliability gap in New South Wales, what is your minimum price that you need guaranteed, and what is your maximum price over which you will share your profits with the taxpayer. What we're really doing --

DAVID SPEERS: But is the taxpayer cost here capped or not?

CHRIS BOWEN: Well, as I said, we're in control of the auction, you know, so we will accept the bids that we choose to accept and not accept other bids, and we will determine how many gigawatts --

DAVID SPEERS: I understand that --

CHRIS BOWEN: -- we put up for auction.

DAVID SPEERS: I'm just asking though, Minister, if there's an upper limit to what you're willing to expose taxpayers to or not.

CHRIS BOWEN: Well, David, as I said, in any corporate negotiations, commercial negotiations, you do not signal to bidders what your red lines are, what you do is say put your   

DAVID SPEERS: No, I'm not asking that, I'm asking will the government   

CHRIS BOWEN: With respect, David, you are.

DAVID SPEERS: No, I'm not asking for the figure.

CHRIS BOWEN: With respect, David, you are.

DAVID SPEERS: No, I'm just wondering whether you have capped the amount you're willing to spend.

CHRIS BOWEN: Well, of course, we have analysed how we expect these auctions to run, it will be treated in the budget statement of contingent liabilities and risks in a normal fashion, and that is - but this is the right policy for the right times to ensure emissions come down, reliability goes up.

DAVID SPEERS: It's helping to get you closer to the 43 per cent emissions target according to the modelling that you're releasing today and that will be tabled in Parliament this week. But you're not quite there, you're at 42 rather than 43 per cent. So you've still got a bit more work to do.

CHRIS BOWEN: Yes, yes, and I'm pleased with what we've done so far, but not yet satisfied, because the task is big. The targets we took to the last election were ambitious, but achievable, and I think what the figures that we're showing today, the updated projections, which show we are now on track for 42 per cent emissions reduction by 2030 underpinned by the 82 per cent renewable target plus other policy initiatives, shows that we have done well, we have more work to do, we want to get to 43 per cent, and indeed we've always said, we see that as a floor to our ambitions, but it's ambitious, you know, Australia is coming at this 2030 target starting in 2022. Australia on climate policy's like the kid that forgot about the exam and has to really come home strongly in the final period. That's what we're doing in the Albanese Government, making up for those 10 years of denial and delay and the pauses, and the 26 energy policies, and all the rest, and getting on with the job.

DAVID SPEERS: You might be doing better on reducing emissions here, but the Australian Conservation Foundation's commissioned some analysis, and it shows that by approving new coal and gas projects in Australia you're adding to global emissions, in fact it says for every tonne of pollution that you've reduced you're adding seven tonnes through the approval of new coal and gas projects.

CHRIS BOWEN: Let me make a couple of points, David. I've read through that report, and I don't agree with their analysis of many of the projects. You know, we have, under our government there have been some metallurgical coal developments, we need metallurgical coal for steel, you know, nobody can suggest that green steel isn't coming, but it's not here yet. There's been a very small gas expansion approved. 

But more broadly, let me make this point, the way I see this, David, is you can enter into a discussion with your international counterparts, as we are doing, which is us saying to them, "We will continue to be a reliable energy supplier, but we want to work with you on your decarbonisation, because we have advantages that you don't have, we can provide green hydrogen, we can provide renewable energy." 

Now that is a complicated conversation to have, but an important one. Now, frankly, the approach of others is more a slogan than a policy. We are managing the biggest economic transformation in our country's history, and that involves both domestic policies and very strong engagement internationally, as I'll be doing in the next couple of weeks, as we've been doing all the way through, and it's not as simple as a blanket slogan which I hear from the Greens, frankly, about their approach.

We take a much more considered approach to policy development, and that   

DAVID SPEERS: Which involves opening up new coal and gas.

CHRIS BOWEN: Well, I mean, look, take the Greens' position on the Gas Code which will come up for a vote tomorrow in Parliament. They want to rip up the one regulation on the gas industry, and they want to rip up the one thing which ensures that new supply comes domestically.

What the Greens are saying is, open slather, open up more gas and export it, when we have a looming gas shortage in 26/27 which the Greens just pretend doesn't exist, and now they are proposing to rip up the one policy which is dealing with it, which is the Gas Code.

DAVID SPEERS: I want to ask you about transmission lines, one of the big concerns when it comes to rolling out all these renewables is how to plug them in, and we know there's about 10,000 kilometres of transmission lines required for all of these big projects that are going ahead. A lot of community resistance to some of these projects, I think nearly all of them are facing some sort of pause or delay because of the community backlash.

You want better consultation with communities, which sounds great, but at the end of the day, if they're not on board, will you still have to press on regardless with these transmission lines?

CHRIS BOWEN: Well, I mean these transmission lines are vital, they're in the integrated system plan as being integral to reliability again going forward. But of course it's been a long time since Australia built a major transmission line and the regulatory regime, the consultation rules weren't fit for purpose when we came to office, and we have moved and are continuing to move to improve them, because I want to bring communities with us. I'm not pretending it's always going to be an easy conversation, but we are making progress on all those lines. I mean the Hume Link, for example, is absolutely vital to plug in Snowy 2.0. I mean --

DAVID SPEERS: So you've still got to do it.

CHRIS BOWEN: -- there's no point --

DAVID SPEERS: Even if the community's not on board?

CHRIS BOWEN: Well, there's no point building Snowy 2.0 as the previous government started, with no plan to plug it in. We're coming along and plugging it in to the grid.  Now, yes, that involves conversations with communities. State governments are doing a good job, all three eastern coast governments, Victoria, New South Wales and Queensland have very good landholder compensation packages which ensures the landholder receive good payments for having transmission lines, but it's not just about landholders it's also about communities. I want to see real community benefit. 

Now we've changed some of the regulatory rules, including just in recent weeks those changes have taken effect. We've also asked Andrew Dyer, the Energy Infrastructure Commissioner, to advise us of other improvements we can make. He's done a very substantial number of round tables and community meetings getting feedback, and we'll continue to progress that work.

DAVID SPEERS: All right. Minister, a big question many households are asking: when will electricity prices start to come down?

CHRIS BOWEN: Well, David, I'm encouraged by the wholesale price movements in recent weeks and months, you know, at points the wholesale price has been 71 per cent lower than it was 12 months ago.

Now I know people don't pay wholesale prices, but they do flow through to retail prices in some form down the track. So we'll, of course, see the Default Market Offer release, the draft release in February, but I do expect some of those much reduced wholesale prices, which are as a result of two things; the coal and gas caps the Albanese Government put in place against the Opposition of Peter Dutton, and the increase in renewables, particularly solar, playing a bigger role in setting the prices, we'll see that that Default Market Offer be substantially less than we were dealing with last year in terms of the increase.

DAVID SPEERS: We know Labor promised lower prices. Will we get lower prices this term?

CHRIS BOWEN: Well, of course we indicated the impact of policies by 2025, something the Opposition often forgets to weave into their convenient little narrative. We're dealing with, you know, very challenging international circumstances in the energy market, just as every country, every government in the world is doing, but I am encouraged by some of the wholesale price movements, very substantial reductions, which will ultimately flow through to retail bills in due course, of course with the other factors that also flow into retail bills.

DAVID SPEERS: Look, just a couple of other things, the COP28 Climate Summit begins this week in Dubai. You're going to be there a little later in the summit. One of the big areas of focus is the multi trillion dollar Loss and Damage Fund this year. This is to compensate vulnerable nations. What will Australia be contributing? 

CHRIS BOWEN: It's not so much - just to pick up on one thing - it's not about compensation, David, it's about supporting developing countries in dealing with the impacts of climate change, and they are the most vulnerable. And particularly, our focus has been to support the Loss and Damage Fund, but to insist that it flows to small island developing states, i.e., the Pacific. 

There are plenty of funds in the world which don't flow to the countries like the Pacific. We have been insistent, and we've been very involved in the committee setting up the loss and damage scheme to say we want it to deal with the Pacific and countries, you know, similar in the Caribbean and elsewhere, but our focus is on the Pacific.

Also, I've said, for example, that the contributing countries, which were set in 1992 in terms of the countries that contribute to these funds, it's time to have another look at that, 'cause there are countries that weren't rich in 1992 that are rich now. Those conversations are ongoing   

DAVID SPEERS: Like China.

CHRIS BOWEN: Well, and others. Those conversations are ongoing. There's further work to do on the Loss and Damage Fund, but we have been very active and constructive internationally in those conversations.

DAVID SPEERS: A bunch of countries at the COP Conference will be seeking to expand the use of nuclear power; the US, the UK, Sweden, France and so on. Does Australia have any objection to that?

CHRIS BOWEN: Well, we respect other countries' plans, but David, in Australia's context, nuclear for Australia is a fantasy wrapped in a delusion accompanied by a pipe dream. I mean it is not the right solution for Australia. And I've seen some reports about the role of nuclear in the COP discussions. Those reporters might be in different conversations to the one I'm in.

The signature call of the COP presidency is a tripling of renewables and a doubling of energy efficiency, a call we support. It is not part of the COP negotiations in the way that it has been characterised, and you've just got to look at the International Energy Agency's recent World Energy Outlook Report. They show that renewables are reshaping the energy system around the world. 500 gigawatts of new renewables in 2023, a billion dollars being added to solar, you know, and nuclear really not moving the dial at all.

It is an attempt at distraction by Australia's chief climate inactivist, Peter Dutton, and we are not going to be distracted.

DAVID SPEERS: Just finally, Minister, before I let you go, more Israeli hostages have been released this morning our time, as part of the temporary ceasefire arrangement there. We know this has been a big concern, this conflict, for many in your electorate in Western Sydney. What should happen when this ceasefire comes to an end?

CHRIS BOWEN: Well, a very encouraging and welcome development we're seeing, David. And really, this is what Penny Wong called for in this interview two weeks ago, steps towards a ceasefire recognising that both sides have obligations, recognising that every innocent life is equally valuable and sacred, whether it be Palestinian or Israeli.

It's very good to see those Israeli hostages released, it's very good to see the ceasefire, and of course everyone wants to see peace and moves to a two state solution. I mean of course we want to see that.

Penny Wong has been very active in calling for what we've seen overnight, and I think that is a very encouraging development, and of course we all want to see these arrangements become more permanent, because that is the pathway to peace for the Middle East and a two state solution.

DAVID SPEERS: But Benjamin Netanyahu is clear, once Hamas stops releasing hostages, he wants the conflict to resume, to continue pursuing Hamas. Will Israel be justified in doing that?

CHRIS BOWEN: Well, we continue to call for steps towards a ceasefire, and the more enduring that ceasefire is, of course the better the world is, the better the region is, the better the people of Palestine are. Ultimately, David, I believe that Israel can only really be secure and free when Palestine is secure and free, and ultimately, that is our long term objective.

DAVID SPEERS: Does Israel have any right to continue this conflict?

CHRIS BOWEN: Well, Israel has always had rights, but also they have obligations under the, you know, the Rules of War, and we continue to call for those obligations to be observed, and as I said, Penny Wong, I thought, very articulately in this interview two weeks ago outlined what she would like to see happen.

I think what is happening is pretty close to what Penny Wong outlined, and of course we'll continue   you and I don't know what's about to happen in the Middle East, David, nobody really does, all we can do is express our principles and our principles are very clear, and a ceasefire and the steps towards it have been a very encouraging development.

DAVID SPEERS: Chris Bowen, thanks for joining us this morning.

CHRIS BOWEN: Thanks, David.