I did have another little dig around and found these senate hearings. The first is from early this year, Feb 2017. It’s between the Clean Energy Finance Corporation’s former boss Dr de Brouwer and ALP senator Urquhart. It seems pretty clear that there is still no certainty about emissions targets and that consequently investment in coal is considered high risk.
The second discussion is between Treasury rep Meghan Quinn, who is involved in formulating energy policy, and ALP senator McAllister. These are senate estimates committee hearings so it’s an opportunity for the opposition to grill bureaucrats. Still a lot of uncertainty.
CHAIR: I now call officers from the department in relation to program 5.1, energy. As I indicated, we have a lot of questions in 5.1, so we will break at 3.50 as scheduled, but we are very likely to come back to 5.1 for further questions. Senator Urquhart, would you like to kick off?
CEFC FEBRUARY 25 2017
Senator URQUHART: We heard today from CEFC that they would not view an investment into a new coal plant as viable unless the project would be provided with an indemnity for future carbon costs. Have you performed any analysis of what the cost of such an indemnity would be to taxpayers based on achieving the government's 2030 emissions targets?
Dr de Brouwer : The government has not made any decisions around this. What has been very clear is that it is looking to cover all the range of technology as it addresses the security and affordability of the electricity system as well as reduce emissions in the sector and across the economy. As you know, the government has also set up an energy committee to look at these matters. It has said that there is a public debate around this. It has encouraged that public debate, but no decisions have been made at this stage. To your question around the advice, we cannot say where that has landed. Senator URQUHART: Okay. But you have not performed any analysis at this stage?
Dr de Brouwer : As I said, there is a committee of cabinet. The way we would normally work, as you know, is that we would advise the minister and cabinet, and that is a deliberative process that we do not normally talk about. Senator URQUHART: We try to get you to, but you will not. What would providing such an indemnity mean for the meeting of future carbon reduction targets and the broader shift to a low-emissions electricity sector?
Dr de Brouwer : I really cannot answer that question, because we really have not got into that analysis, except to be clear that the government is committed— Senator URQUHART: But if there was to be an analysis on it and an indemnity?
Dr de Brouwer : I cannot go to the indemnity issue; that is a very specific form of intervention. Government has been clear about its 26 to 28 per cent commitment to reduce emissions by 2030 on 2005 levels. It will use whatever technology or be engaged in whatever technology achieves that target and puts us on a path to a longer term emissions target profile. Senator URQUHART: I know you indicated earlier that it was cabinet information, but have you as a department done any analysis to inform government at all?
Dr de Brouwer : That would be for the purposes of cabinet, and we do not talk about the deliberative processes of our advice to government. Senator URQUHART: So you cannot tell us whether you have actually done an analysis or not?
Dr de Brouwer : No. Senator URQUHART: No, you have not, or no, you cannot tell us? Sorry, I am just trying to—
Dr de Brouwer : I am not confirming the content of advice that we give to provide— Senator URQUHART: No, I am not asking about the content. I am just asking whether or not you have actually done any analysis.
Dr de Brouwer : Specifically on the nature of guarantees or the interventions? Senator URQUHART: Yes.
Dr de Brouwer : I would have to take that on notice. That is a very specific element. Senator URQUHART: Are you able to get back to us today?
Dr de Brouwer : I am not sure. I am not going to commit to that, because I really want to make sure that I am accurate in the answer. It is going to take a little bit of a look around. Senator URQUHART: I am on the indemnity thread, so I will keep going. What implications would such an indemnity have on the functioning of electricity markets?
Dr de Brouwer : Again—unless my colleagues want to come in—I think we are getting into speculation when we do not have an indemnity talked about or any proposition for an indemnity for us to look at what the impact would be on markets. Senator URQUHART: Have you performed any analysis on the costs of new coal power stations—ultra, supercritical or plants with carbon capture—compared to alternatives like gas and renewables?
Dr de Brouwer : In general, again, we provide advice to government in its own deliberative processes. There is a wide range of public material that we would draw on as well that would look at either what is called the 'levelised cost of electricity' or the capital costs required for different kinds of generation. There is a large amount literature on that from the CO2CRC and a range of other bodies. We are happy to talk about what those numbers are, but that is just, in a sense, public. It is all in the public domain. Senator URQUHART: It is all public anyway, so I am sure we have that information. How has the energy industry reacted to the idea of building new coal power plants in Australia?
Dr de Brouwer : We would all read the press and hear what people say. I do not think I have anything in addition to what you read in the press, Senator. I do not want to provide a commentary around what I think the nature is of the strength or weakness of public debate on that. Senator Birmingham: The energy industry is, like many other statements one can make, a fairly broad collection of companies stakeholders and others as well. Senator URQUHART: It is indeed, Minister. Senator Birmingham: I am not sure there is one single voice in relation to such matters. Senator URQUHART: Based on the reaction that I have read about, is there much appetite from private industry to invest in new coal power plants?
Dr de Brouwer : The government said its first proposition is to talk about technology neutrality, or that there are many paths to emissions reduction and all those paths should be available. Specific proposals are what come next, and as you heard this morning, there is a proposal with the CEFC. What the government has been saying is, 'Get the overall global approach right, be technology neutral or technology agnostic and use whatever means you can to maintain security and affordability while achieving the emissions reduction.' Senator URQUHART: If there were to be new coal powered plants, would they require public subsidies to be viable?
Dr de Brouwer : That is a matter for what the specific proposal is by a proponent. Senator URQUHART: Given that public statements from the energy industry have been dismissive of new coal plants, do you think that private investment would be forthcoming?
Dr de Brouwer : I think you are asking for my personal opinion there.
CHAIR: You have to rephrase the question slightly. Senator URQUHART: That is alright. It was worth a try. Senator Birmingham: As you heard before, the CEFC has received a proposal quite recently on such matters. Who knows whether it is viable or not? That is one for markets and others to determine.
TREASURY OCTOBER 25 2017
Senator McALLISTER: Ms Quinn, I think you said that the relative advantage that you say derives from the National Energy Guarantee, compared to a CET, comes from its ability to obtain emissions reductions from a broader range of sources—that's correct? Given that the National Energy Guarantee only applies to the electricity sector, are you referring there to the proposal to incorporate international credits as a means of compliance in the system?
Ms Quinn : No, I'm referring to the possibility of getting emissions out of elements of generation that might not have been able to benefit from a clean energy target, depending on where a threshold might have been placed in that policy. Senator McALLISTER: So it's simply that all sources of generation could be incorporated into the system because there is no hard threshold?
Ms Quinn : Because there's no tilting of the playing field between relative emission intensive sources of energy, that's right. Senator McALLISTER: Is it the case that this is effectively an emissions intensity scheme with a sort of contractual—that imagines these processes being managed through a contract?
Ms Quinn : In the characterisation of different policies it's always difficult to compare apples and apples. I think it's more clear to say what it is proposed from the Energy Security Board, which is that the government would set the target. There will be a mechanism through the delivery of contracts at the retail level to match both reliability obligations and emissions reduction obligations. Senator McALLISTER: So it's a baseline and contracting scheme?
Ms Quinn : No, there's no baseline set in this process. There is an emissions target— Senator McALLISTER: Surely the emissions target is a baseline?
Ms Quinn : Not in the sense that you are referring to alternative policy designs and electricity emission reduction programs. This is a target that the government would set. Senator McALLISTER: Which you can go above or below and you can compensate for that through your contracting arrangements?
Ms Quinn : The target would be for the energy sector—for the electricity sector in this case, potentially the NEM or broader—and retailers would have to meet that target so they couldn't go over. They would have to meet that target. Senator McALLISTER: Will some of them meet it, do you think, or is it possible through the variety of sources that they meet it through upgrading coal fired power stations?
Ms Quinn : The design of the policy is technology neutral. Senator McALLISTER: They could do it through upgrading coal fired power stations—
Ms Quinn : Emission reductions from wherever sources they come from. That would be the retailers' obligation to meet their emission reduction targets for the whole electricity sector, and if they got it from different sources of generation, it is agnostic as to what generation sources. Senator McALLISTER: So an upgraded coal fired power station would be included?
Ms Quinn : They would be required to meet a target, irrespective of where they got the electricity from. It's not saying it has to come from one source or another. Senator McALLISTER: So potentially it conceivably could include an upgraded coal fired power station?
Ms Quinn : It can come from any source of generation. Senator McALLISTER: I don't understand why you won't answer that question.
CHAIR: I don't understand why you keep asking it. Senator McALLISTER: Because Ms Quinn won't answer it directly. She is avoiding answering this question. Senator Cormann: You're reflecting on the witness. The official is giving you the best answer she can give. I would ask you not to reflect on the witness. Senator McALLISTER: I'm not satisfied with the answer, which is why I have asked the question multiple times. The chair asked me to explain myself and so I did.
(20min delay)