Interview with Sarah Ferguson, 7:30
SARAH FERGUSON: On the last day of winter, the body responsible for managing Australia's energy market is warning a hot summer will trigger a higher risk of blackouts in South Australia and Victoria. AEMO's report is a call to arms for the next decade to sharpen efforts in the energy transition. At the same time, it was confirmed that the costs of Snowy 2.0, the large energy storage project, have blown out. Chris Bowen is the Federal Energy Minister. Chris Bowen, welcome to 7:30.
CHRIS BOWEN: Great to be back, Sarah.
SARAH FERGUSON: If Australia does experience the weather patterns we're expecting this summer, are we going to see energy blackouts?
CHRIS BOWEN: That is not my expectation, and we are working very hard to ensure our energy grid is as strong and secure as it should be.
SARAH FERGUSON: It's quite a big warning from AEMO, though, isn't it?
CHRIS BOWEN: Well, this Electricity Opportunity Statement, which is a standard piece of the electricity infrastructure, is a reminder to everyone about where gaps exist. As Daniel Westerman himself has said, if government programs and investment, federal and state, are implemented, and implemented on the timetable that we've outlined, it will deal with the vast majority of pressure in the system. But let me just talk about summer for a moment, you asked me, so let me deal with it. This summer will be very hot, no question about it. We know El Nino is coming. We have a range of measures in place, Commonwealth and State, to ensure we are as prepared as we can be, have been doing this not this week or last week, for months now. State Ministers and I agreed to give AEMO $3 million more to have faster connections. We have a process to streamline connections, and this summer there's 3.4 gigawatts more capacity in the system than there was last summer.
SARAH FERGUSON: But we know that that equation is out of whack, isn't it? There's more energy going out than there is coming in at the moment, but just to be clear –
CHRIS BOWEN: No, that's not right, Sarah. That traditionally is the case. There were four gigawatts of dispatchable power left the grid over the last decade and one came in. We're fixing that. We are seeing very substantial inputs, more 3.4 gigawatts more this summer than last summer. We're turning around that problem that has existed in a policy failure of ten years. We've been turning that around.
SARAH FERGUSON: Well, let's just talk about this summer, though, so people understand, because if we have this combination of very high temperatures, of lower wind and we've also got increasing problems with our unreliable generators, doesn't that perfect storm create a circumstance that does make it unpredictable, where we could see blackouts?
CHRIS BOWEN: Well, I don't think we should rush to the blackout language, because there's reliability figures which are very onerous. They should be. They're about 0.002% of the time, 5 hours over a ten-year period, except, for example, that there may be shortages. 5 hours over a ten-year period. So, let's just accurately reflect what the AEMO report says. It is not, as some people have said today, a stark warning that blackouts are inevitable. It's just not true. It's [indistinct] and irresponsible, not by you, but by other commentators.
SARAH FERGUSON: Let me ask this, is there a case where you could start asking people to ration their electricity?
CHRIS BOWEN: Well, we have existing schemes with very large industry users already where AEMO asks large industrial users to moderate the use at various times. That's always been the case. Was the case under the previous government. Is the case under us. And that will continue. But the key is to turn around the ten years of policy dysfunction where 4 gigawatts left and only 1 gigawatt came on. We're seeing that turned around. We've seen very big figures of renewable dispatchable approvals come through in the last quarter, particularly around storage.
SARAH FERGUSON: Aren't we in a position, though, where we are seeing too few projects get to final investment decision?
CHRIS BOWEN: I want to see more of the pipeline reach final investment decision. Absolutely. I'm not saying the job is done, far from it. We have a big task ahead of us to lift the renewables share of the grid from where it was when we came to office, around 33% up to 82%. Very big task.
SARAH FERGUSON: Let me just ask you a very simple question, because I understand that with such a massive task at hand, that optimism is an important part of it. You can't go around saying that we're not going to get there. Is there enough energy coming in to replace that which is leaving?
CHRIS BOWEN: We're doing well, but I want to do better. I want to see more of that very big pipeline, which everybody acknowledges exists, of investment that's coming down the road. I want to see more of it reach financial – final investment decisions sooner to get connection approval and, if appropriate, environmental approval. And we have various schemes in place to do so and we're doing more and will do more.
SARAH FERGUSON: One of the biggest uncertainties is around the transmission lines that need to be built to carry the energy. Now, you said earlier this year that a social licence is essential for this rollout. What exactly is a social licence in this case?
CHRIS BOWEN: A social licence is community support, is community permission, if you like, to have this infrastructure running through communities, particularly rural and regional communities, obviously, to move renewable energy around our very big grid.
SARAH FERGUSON: Does it also mean that the government has a social licence in the end, to deny an individual landowner for the greater good?
CHRIS BOWEN: Well, that's not what I was referring to, but of course, there are rules and regulations in place, but the key point is this –
SARAH FERGUSON: What do you mean by that; rules and regulations? In the end you can –
CHRIS BOWEN: Well, I mean there are processes in place, but my view is this is absolutely essential infrastructure. I want to see better community engagement. I want to see better community consultation. It hasn't been good enough. Communities know their communities better than you or I do. They have good ideas about where the transmission lines go. In my experience, talking to communities, as I do a lot, very rare has somebody said to me, look, we don't think these transmission lines are necessary. Very rare has somebody said to me, oh, we don't think climate change is real, or we don’t –
SARAH FERGUSON: No, but they are unquestionably oblite. So, I guess in the end, if there is significant resistance to them, will you consider putting them underground? Is that what should be happening?
CHRIS BOWEN: Well, they say we think there's a better way, better routes, better way of doing it. Undergrounding does come up and in some small instances it's appropriate for particular locations, but it is far from the answer. It is very, very, very expensive. That means an impact on energy bills in due course, or somebody's got to pay. And also, it's not an environmental no-brainer either. Digging big trenches and laying wires in sensitive areas is not necessarily a straightforward or simple or correct answer either.
SARAH FERGUSON: Let me come to Snowy. You've made it clear that Snowy 2.0, obviously, today we've been reading a lot about cost blowouts, but you've made it clear that it is a project that's going to stay as part of the energy mix, that we needed. Who's going to pick up the bill, though, for that cost blowout? If these are mistakes made by the contractors, is it going to be the taxpayer that pays for that or the contractor?
CHRIS BOWEN: We're changing the contract because the current contract is not fit for purpose. It has not rewarded good results.
SARAH FERGUSON: Whose fault is that?
CHRIS BOWEN: Well, previous Snowy management entered into that contract, and it is clearly not fit for purpose going forward. And I have accepted with my fellow shareholder, Minister Gallagher, the advice that we should change that contract going forward. Very strong advice that if we didn't change the contract, the project would take even longer and cost even more. Very strong advice to us. So, the new Snowy management has renegotiated those contracts.
SARAH FERGUSON: And in terms of picking up the costs, is that us or them?
CHRIS BOWEN: Well, we are ensuring going forward that poor performance, whether on budget or cost, is penalised.
SARAH FERGUSON: And those costs, now, where do those –
CHRIS BOWEN: Well, at the moment it's a contract where there's no incentive for the joint venture partners.
SARAH FERGUSON: So that means the taxpayer will be stepping in.
CHRIS BOWEN: Well, Snowy is of course a company in government ownership, but a company, and we have equity in that company, and we can consider putting more equity in. Snowy can absorb some of the costs themselves and we can also consider putting more equity in. But these are matters which, as we've said, we've very transparently acknowledged this. Minister Gallagher and I, the two shareholders received this report the day before yesterday out the door to go to the public as it should, the previous government knew there were long delays and hid it deliberately from the Australian people.
SARAH FERGUSON: Just one question on energy bills. Obviously, there were measures to help people with their energy bills. You did make a promise about $275 by 2025. Are you going to be able to keep that promise?
CHRIS BOWEN: We're not walking away from our intention to get as much renewables into the system, which reduces prices. Believe it or not, and the Liberal Party doesn't believe it –
SARAH FERGUSON: That was a straight question about a number though, not just lower, but $275.
CHRIS BOWEN: And we stand by our plans to get more renewables into the system, to reduce –
SARAH FERGUSON: I’m just going to hold you to that, not just to get more in, but the question is, are you going to stick to $275 by 2025?
CHRIS BOWEN: Well, that is what the modelling showed. And we still believe that renewable energy is the cheapest form of energy. People can judge us by 2025 as to how much renewable energy we've got into the system. The Liberal Party likes to say the promise was for last week. Of course, it was the result of modelling in 2021.
SARAH FERGUSON: It was still a very clear promise in your manifesto.
CHRIS BOWEN: In 2021, which we were very clear upfront about, and we remain clear and upfront about.
SARAH FERGUSON: So, that's a maybe, wait and see. So, far you're sticking to it.
CHRIS BOWEN: Well, you're asking me what energy prices will be in 2025. I'm telling you what our policy is which is to get as much –
SARAH FERGUSON: And I'm asking you if you're going to keep an election promise.
CHRIS BOWEN: Is to point out that renewable energy is the cheapest form of energy, and we stand by getting as much of that into the system, not only to reduce emissions, but also to reduce prices.
SARAH FERGUSON: Chris Bowen, thank you very much indeed for joining us.
CHRIS BOWEN: Always a pleasure, Sarah.