Press conference at Sydney CPO
CHRIS BOWEN: I've got two things to talk about today. Firstly, obviously, the release of the statement of electricity opportunities. This statement highlights the importance of the transition underway and highlights the importance of government investment and government frameworks to encourage renewable energy investment. That is very clear. It's very clear from the report itself. It's very clear from Mr Westerman's comments today. For example, the statement says, "federal and state initiatives, including transmission projects identified in the Integrated System Plan and mechanisms delivering firming capacity, such as the Commonwealth's Capacity Investment Scheme, can address many of the identified risks over most of the ten year horizon if delivered on schedule." And that's the point. It underlines the importance of getting on with the job, getting on with the Rewiring The Nation job, getting on with the capacity investment mechanism, getting on with the framework of investment which this government has put in place, working closely with all our state and territory colleagues.
A capacity investment mechanism, for example, which will unleash and underpin investment of many billions of dollars. Six gigawatts of investment across the country. The NSW auction is well underway. And yesterday, with Ministers D'Ambrosio and Koutsantonis, I announced the timeline to begin the South Australian and Victorian auctions. That is work that's well underway. And as the ESOO makes clear, the central case doesn't take into account, quite rightly, those investments which are not yet finalised. But when you look through the issue and see the impact of government investments, including the Capacity Investment Scheme, it deals with the vast majority of the shortfalls. Now, of course, we are dealing with a challenging environment. Over the last decade, four gigawatts of dispatchable energy left the national energy market and only one gigawatt came on. That means the system's very tight. It means we have a lot of catching up to do, but that catching up has begun and will continue. There are some in politics who call for a pause in renewable energy investment who say, we've got time. They're wrong. They've always been wrong. They've caused ten years of denial and delay already and they're still trying to get in the way and we won't be distracted, we'll continue to get on with the job.
Secondly, of course, Snowy 2.0. When we came to office, we were advised very early on coming to office, that Snowy 2.0 was a deeply troubled project. It was running late and none of this had been made public. AEMO hadn't been told, the states and territories hadn't been told, and most importantly, the Australian people hadn't been told just how troubled the project was. We made it public and we made it transparent. And when the government was advised earlier this year that the project was further delayed and wouldn't be delivering power until 2028 or 2029 we made it public immediately. And we also announced that we had asked the new Chief Executive, Dennis Barnes, to conduct a project reset and review. The day before yesterday, Minister Gallagher and I, as the two shareholding ministers, received that reset and review and the Snowy Hydro corporate plan and that's being released today publicly, in the normal, transparent way in which this government deals with challenges unlike the previous government.
In short, this finds that the cost is now $12 billion, that full power can now be expected in December 2028, which is earlier than previously indicated, and we certainly hope that's the case and that an extra 200 megawatts can be expected over and above the two gigawatts that had previously been indicated. Now, the $12 billion cost is obviously very, very substantial. And there are a couple of things at play here. Firstly, this is one of the most complex engineering projects underway anywhere in the world and it is subject to the same constraints and blowouts that all major infrastructure projects around the world are experiencing. That's just a fact, and we recognise that. Whether it be COVID-19 or the supply chain constraints which are following COVID-19, these are impacts on every project around the world. And we acknowledge that and we accept that. The clear advice to government, though, is also that things could have and should have been done better much earlier in the project's development. For example, design immaturity at financial investment decision stage. I.e. not enough proper work and due diligence was done early to identify the risks and costs. That is the very clear advice to government from Snowy. For example, it's well known that the tunnel-boring machine Florence has been stuck because the soil is very soft. That should have and could have been known at the time. There should have been more work done, more testing, more due diligence at the time. That needs to be acknowledged and is acknowledged by this government.
The reset has also identified improvements in the contract arrangements which should have been in place earlier and now will be put in place. The contractual challenges include capping prices in an environment with escalating costs, operational problems including financial viability of some of the contractors, safety issues, and environmental breaches which should have been avoided. Under the Snowy 2 reset, there will be a new model of working with the venture partners under the leadership of Dennis Barnes, the new Chief Executive, it will reward performing on budget and on time amongst the joint venture partners and will punish or penalise a poor performance over budget and over time. That's as it should be. That's a contract reset. That contract negotiation is well underway. I welcome the leadership brought by the new Chief Executive to this task. He is certainly making good progress. If the contract is not reset, the very clear advice to me and to Minister Gallagher is that the project would take longer, even longer, and will cost even more than the $12 billion. That is not acceptable to the government so we support the new steps being put in place by the new management of Snowy 2.0 to put this important project back on track. It is an important project. It still has a net present value of $3 billion. Mr Westerman himself said this morning that was the important project for the grid going forward.
So, we stand by the project. We said from opposition, even though it was a liberal government initiative, that it was an important project. It remains an important project. It has not been well delivered up until now. I want to make clear that is not the fault of the thousands of workers on site whom I've met when I've visited. They're doing a good job in difficult circumstances. It is not the fault of current management. They are cleaning up a very difficult situation and they have our full support. As they do so, we'll continue to focus on delivery and, unlike the previous government, will be open and upfront and transparent, as we are today. Received this report the day before yesterday, opened it out now to the public for all to see, unlike the previous government, which knew it was running late and deliberately hid it from the Australian people.
Happy to take questions.
JOURNALIST: Minister, with the ESOO forecast, is it true that it doesn't take into account certain projects which are in the works, including capacity investment and the like. However, by this summer there are liability risks for the system. What can the Federal Government do to minimise these risks? Whether it's speed up projects, give more support to the states to ensure that lights don't go out during the summer?
CHRIS BOWEN: So, it's important first I'll answer your question, but just by way of context as Mr Westerman said, this is not a prediction, it is a guide to where investment should go. So, I've seen others today out saying the lights are going out. Well, they can be irresponsible if they wish to. That's not how a Minister or Shadow Minister should behave. But if a certain Shadow Minister wants to behave like that's a matter of him, that's not what this report says. So, for example, just to be clear, the reliability standard at 0.02 per cent of unserved energy is a very complicated formula, but I can understand why people wouldn't be clear about what that means. It means that in a jurisdiction, 12 per cent of regional demand might not be met for eight hours once every five years, for example. I mean, it's a very high standard, which we rightly set a very high standard. In terms of next summer, it's no secret that next summer is going to be very hot. El Niño is coming and we've been aware of that for some time. So, a couple of things. Firstly, state and territory ministers, to their credit, agreed with me some months ago to provide AEMO with more money to get faster connections, a $3 million boost to AEMO to get faster connections approved in readiness for summer.
Also, we have established a Capacity and Connections Committee which meets very regularly to ensure that new capacity is coming online in time for next summer. So, that's very important and that is working well. You'll remember, Peter, that when I became Minister, soon after the government was elected, I was advised very early about the huge pressures on winter and that there was potential blackouts then. Clearly nothing had been done to prepare for winter by the previous government. We, on the other hand, knowing that a hot summer is coming, working with the Bureau, working with AEMO, working with state and territory colleagues, have put in place very comprehensive summer readiness plans to give us the best opportunity. I do note that there is 3.4 gigawatts of generation online this summer that was not online last summer.
JOURNALIST: So, could you guarantee then that there won't be blackouts on the east coast this summer?
CHRIS BOWEN: What I guarantee is that all the governments are working together with AEMO to make sure that our grid is as stable as it possibly can be going into what will be a very hot summer.
JOURNALIST: You said you've made investments, though, compared to what the previous government is. So, can you stand here today then, and give a guarantee that there won't be blackouts, that people in Victoria and South Australia won't get blackouts?
CHRIS BOWEN: The last time that we had an LOR3, which was a complicated way of saying pressure in the system leading to effectively potential blackouts, was 2019. So, people wander around saying there's going to be blackouts and the lights are going out and making up all sorts of funny one liners. It was 2019 was the last time the country faced that, very close in last winter. Yes. What I'm saying is that in an environment where we have a very hot summer, where we have coal-fired power stations, which, as this report highlights, are becoming increasingly unreliable, to be very frank and clear with you, they're getting older and what we call unexpected outages, expected outages, we can deal with that's scheduled maintenance. We know that's coming unexpected outages is when a coal-fired power station just closes unexpectedly, that puts real pressure on the system. What we need to do is what we are doing, getting more capacity in the system to deal with those sorts of challenges. I give due credit to every single state and territory minister for what they're doing with me. And, of course, with AEMO to ensure the system is stabilised and strengthened in the lead up to summer, which didn't occur under Angus Taylor's watch last winter.
JOURNALIST: Minister, do you support, considering that, keeping the Eraring Power Station open beyond its 2025 [indistinct]?
CHRIS BOWEN: Well, on Eraring, as I said, Mr Westerman said himself this morning, part of the issue is coal-fired power stations becoming increasingly unreliable and of course, Eraring is a coal-fired power station. It's no different to the others. It's no secret that the NSW Government's received a checkup, I think they call it a mini review. They'll work that through. I think Minister Sharpe and I would say the same thing either of us want to see a coal-fired power station stay open a day longer than it should or close a day earlier than it needs to, I'm sure the NSW Government will continue along that vein.
JOURNALIST: Two questions, one, on the issue of the ESOO, firstly. There was bad news in that for people in Victoria, is there any comfort that you can give them? Is there any further support that you can use the state of Victoria to try and buffer its supply through the summer?
CHRIS BOWEN: Well, firstly, just yesterday I was in Victoria, as you know, announcing the Capacity Investment Mechanism with Minister D'Ambrosio, a Commonwealth scheme, but one that we work with the states on. And that will support 600 megawatts of new generation - dispatchable, renewable generation across Victoria and South Australia, which, as you know, Nick, are very closely integrated grids. So, we're already doing all that. Victoria is a participant in our Capacity and Connections Committee. Minister D'Ambrosio and I have spoken several times over the last few days, including yesterday and today. And of course, we continue to provide whatever support we can. But the sorts of commentary we see in this ESOO aren't entirely new. You've seen similar commentary in ESOOs going back to 2017. Difference is, this government listens and is investing and he's working with governments like Victoria. The previous government, the Abbott, Turnbull, Morrison, Truss, Joyce, McCormack, Joyce government had 22 energy policies, I mean, almost as many Prime Ministers as energy policies couldn't land one and ignored these reports. We have a much more stable approach on all fronts.
JOURNALIST: Just to go to Snowy, obviously you saw this coming, but it's still an $8 billion price tag that now has to be accounted for. What does that knock out of your energy budget? There's a heap you have to do in energy and now you've got to come up with a lot more money.
CHRIS BOWEN: Well, with respect, Nick, there's different budgetary processes and treatment. I mean, some, without going into too much detail, some will be absorbed by Snowy Hydro itself. There are a range of options available to government which we will work through with Snowy to ensure their capitalisation and their continued appropriate credit rating, which is important. Governments in the past have done things like equity injections and there's matters of dividends, et cetera. All of that will be worked through. But it's not like, for example, you have a $20 billion Rewiring fund and then you transfer that to Snowy. None of that's on the cards. We continue with our energy agenda. Hugh.
JOURNALIST: If there are blackouts over the coming summer, who are the people sitting at home over their candles entitled to blame here?
CHRIS BOWEN: Well, I think, Hugh, with respect, let's not be too melodramatic about a report which highlights an investment need, but as Mr Westerman has made clear, is not a prediction or a forecast of blackouts, it is an indication of what needs to happen and an indication of reliability. So, in terms of --
JOURNALIST: But isn't the report, with all respect, isn't the report saying that there is a heightened risk of blackouts occurring in the system? So, if it happens, who can [indistinct] blame?
CHRIS BOWEN: Well, I think the Australian people would look at it and say four gigawatts of dispatchable, renewable - dispatchable energy came off the grid in the last decade and 1 gigawatt went on. So, that's a very poor outcome over the last decade. And they know that, given there's 3.4 gigawatts of new generation available this summer that wasn't available last summer, that governments are working together to ensure that the grid is as stable as is possible. But the Liberal Party has been predicting blackouts for 18 months now, just like they predicted that there'd be a foot and mouth outbreak and just like they predicted there'd be a deluge of boats. I mean, they want the country to fail. They are desperate for Australia to fail. We are a government which is ensuring that Australia succeeds. Every dire prediction that Peter Dutton has made over the last 18 months hasn't come true. So, that's the matter for them. They're out with their normal sort of rabble-rousing. Today, we're focused on the job. We've been doing the job for the better part of 18 months. And you can see there, with the 3.4 gigawatts of new generations come on, some of the dividend of that work.
JOURNALIST: On solar power, rooftop solar power. The report says that it has great benefits, potentially, but there's a problem with coordinating it and that that hasn't yet been achieved at scale. So, what is the message, what's the cutthrough message here to people if they're contemplating you get rooftop solar? Is it worth doing? Does it make any difference? Are you urging people to do it? Or in fact, are we still a long way short of the coordinating systems needed to make rooftop solar really work for [indistinct]?
CHRIS BOWEN: I think what the report is getting out of rooftop solar is not saying that it's not working. What it's saying is that it provides a new management challenge for the grid operator. And a lot of it happens, obviously, by definition, behind the metre, so they don't always have full visibility of everything that's happening. But solar is a very important part of our energy mix now. It's very, very useful. Increasingly, we need to see more storage of it to help balance the grid. And we're seeing that, the last Clean Energy Council figures, for example, showed six big batteries getting approval in the last quarter. That's a big step forward, more and more households. It's a very big step to get a battery, it's not cheap. And we've got our rollout of community batteries as well, 400 community batteries across the country, plus all the state's community batteries. So, storage is the key going forward of renewable energy. The deniers and delays in the LNP say the sun doesn't always shine and the wind doesn't always blow. Well, the rain doesn't always fall either, but we store water and we drink water every day. We can store renewable energy and we can use it every day.
JOURNALIST: AEMO spoke this morning about the challenges in transmission and securing a social licence to build within communities. How much of that is a concern for you? Does that risk slowing down further the renewable energy transition?
CHRIS BOWEN: So, you're right. AEMO has called for more and faster action on generation, on storage and transmission. 100 per cent. That's exactly what we're doing. We've got our $20 billion Rewiring The Nation fund, which is the sort of entry into the door to get the projects built, the missing link of finance. But then, yes, there are issues to be worked through with communities. Community engagement desperately needed to be improved on transmission. These are big pieces of infrastructure going through communities. And communities did not have enough visibility, enough real consultation and enough say.
We are changing that, working with the states and territories working with the Energy Infrastructure Commissioner Andrew Dyer. We've changed the rules, the energy market rules, to encourage more local dividends and consultation. Mr Dyer is leading for me a review of social licence and community supported transmission to see what more we can do better. The states are doing that too. The NSW, Queensland and Victorian governments have all done a good job in improving the compensation for landowners who host transmission lines. That's important, but not the be all - end all. Compensation for landowners doesn't do it all. We need to ensure real community benefit and real community consultation. That works well underway.
JOURNALIST: Just wondering if you could give us an update on the discussions over the Marinus Link, because the Tasmanian Government obviously looks like they might struggle to come with their [indistinct].
CHRIS BOWEN: It's no secret that just like Snowy and every other infrastructure project around the world, Marinus Link has had increased costing forecast. That's no secret. The Tasmanian and Federal governments have been working very closely together on a plan - with the Victorian government too, I should say, on a plan to deal with that. Those discussions have been productive and are very well advanced. I'll have more to say as soon as we're ready. Thanks, guys.