Department of the Premier and Cabinet, $260,146,000

Administered Items for the Department of the Premier and Cabinet, $1,976,000

Membership:

Mr van Holst Pellekaan substituted for Mr Duluk.

Mr Wingard substituted for Mr Knoll.

Minister:

Hon. A. Koutsantonis, Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy.

Departmental Advisers:

Dr D. Russell, Chief Executive, Department of the Premier and Cabinet.

Mr S. Woolhouse, Chief Finance Officer, Department of the Premier and Cabinet.

Dr P. Heithersay, Deputy Chief Executive, Department of the Premier and Cabinet.

Ms P. Chau, Director, Performance and Governance, Department of the Premier and Cabinet.

Ms R. Knights, Director, Energy Markets, Department of the Premier and Cabinet.

Mr B. Goldstein, Executive Director, Energy Resources, Department of the Premier and Cabinet.

Ms P. Freeman, Acting Executive Director, Mineral Resources and Energy, Department of the Premier and Cabinet.

The CHAIR: I thank members for returning. Before we broke, I neglected to advise that the time had expired for the examination of the Department of Treasury and Finance and the administered items of the Department of Treasury and Finance and therefore the proposed payments are adjourned and referred to committee B.

We are now moving to the Department of the Premier and Cabinet. The minister appearing is the Minister for State Development and the Minister for Mineral Resources and Energy. I declare the proposed payments open for examination and refer members to the portfolio statements in Volume 4. I call on the minister to make an opening statement if he wishes and to introduce his advisers.

The Hon. A. KOUTSANTONIS: Thank you very much, ma'am. I will be making no opening statement. To my left is Mr Steve Woolhouse, Chief Financial Officer, DPC, and Dr Don Russell, Chief Executive. Dr Paul Heithersay is the Deputy Chief Executive. Phuong Chau is the Director, Performance and Governance, and Rebecca Knights is the Director, Energy Markets. Mr Barry Goldstein is the Executive Director, Energy Resources. Pru Freeman is back there as well, and she is the Acting Executive Director of Mineral Resources and Energy. I will take your questions.

Mr VAN HOLST PELLEKAAN: I will make a brief opening statement. By any measure, the results of the state government's energy policy over the last several years have been a complete failure. We have the highest electricity prices in the nation and some say in the world. We have regular blackouts. We have had job losses, and we now know from this budget that, in fact, the share of electricity generation in this state that creates emissions is going to increase.

The Treasurer has said on several occasions that the very best measure of future electricity prices is the ASX published forward contract prices. Interestingly, immediately after the government put out its energy plan on 15 March this year, those prices actually rose in response to the government's plan. Again, that is not helpful for anybody. Since then, both the minister and the Premier have walked away from some of their initial commitments they made, particularly including the fact that they both are on the record as saying that their plan would reduce electricity prices, but it is hard to get them to say that these days.

The government wants to spend $550 million of taxpayers' money to fix the problem that the government actually created. There is a much better way, and the Liberal Party will announce its energy policy well in advance of the next election. Minister, my first question relates to Budget Paper 5, page 12. The whole series of questions for the next while relates to the table at the top of the page.

The Hon. A. KOUTSANTONIS: Why did you demote him?

Mr VAN HOLST PELLEKAAN: Minister, as part of the state government energy plan what measure will directly reduce electricity prices, by how much and when?

The Hon. A. KOUTSANTONIS: Sorry, which budget line?

Mr VAN HOLST PELLEKAAN: Page 12, Budget Paper 5.

The Hon. A. KOUTSANTONIS: Budget Paper 5 and the energy plan. There are a number of causes of the dramatic spikes in power prices across the country. What you have seen in New South Wales and Victoria are prices close to above $100 a megawatt-hour consistently now. You have seen the interconnector reverse its flow. Rather than flowing from Victoria into South Australia, it is basically flowing directly into Victoria consistently. What is occurring is a policy paralysis in the National Electricity Market.

What we are in attempting to do with Our Energy Plan is to give some level of confidence for investment in the National Electricity Market here in South Australia. Unfortunately for South Australians, since the privatisation of ETSA there has been very little new investment in unregulated power plants in South Australia. There have been dramatic investments in regulated assets, given the sweetheart deal signed by the former government and current shadow treasurer with the foreign purchasers of our assets, but there has been very little investment in new generation in South Australia. The energy plan is attempting to get more investment into more generation into South Australia. The first example of that, of course, is the battery.

The 100-megawatt battery will be probably the first in the world to firm wind. That firming process is very exciting. It basically means that a battery working in conjunction with a wind farm will be able, for the first time, to offer dispatchable renewable energy; that is, AEMO will be able to schedule it to come on and off based on prevalent wind patterns and, of course, the charge of the battery. This is a very exciting outcome of our procurement and partnership with Neoen and Tesla, which is the first part of the battery. If this is proven and if it is able to operate and dispatch regularly, you will see prices much lower than the national average currently.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: Well, from my understanding, dramatically lower. Those prices that are dramatically lower could be offered in the market for high-intensity users, like glass manufacturing, or any form of high-intensity electrical use. The good thing about it is that it is a lot cheaper to operate than a gas-fired generator or transmission lines through interconnection. That is the first stage that I think will do a great deal to help lower prices.

The other thing we are doing is relieving a lot of the risk margin being priced into South Australians' prices by energy retailers. AGL or Origin are pricing risk into their prices by deciding that, given the age of their plant and equipment and the demand in South Australia, often that supply cannot be met, so they set a higher price for their electricity and sign fewer contracts in the market. What we need in the South Australian market is a lot more contracts. To have more contracts, you need more competition.

The plan is twofold; first, we have the energy security target, which is an incentive for all synchronous power generation to come onto the market through an initiative, which is a lot like an energy intensity scheme but without the intensity aspect, which would incentivise more synchronous power to operate more often, which will create more electrons into the system, which will mean that retailers will have to write more contracts.

Another aspect of the risk margin that we want to lower is building our own generation to be offered in lieu of load shedding. We will be making an announcement very, very soon about the outcome of our procurement. That procurement, I believe, will give us the ability to offer generation into the market in a non-competitive way. We are not competing against AGL, Origin or any of the retailers. We will be saying to the National Electricity Market that in lieu of load shedding we will offer our generation to make sure that South Australians are not necessarily removed from the grid, and we are doing that in conjunction with the battery.

The other aspect is the ancillary markets that will be using our plan. The ancillary markets can raise anywhere between $50 million and $100 million a year from South Australian consumers. This is where Origin and AGL use their market power to bid in one or two megawatts to offer these ancillary services at exorbitant prices. The battery will play in that market, lowering that market dramatically, saving millions of dollars for South Australian consumers.

Of course, the other aspect is our own procurement to bring a new competitor into this state. Since the privatisation of ETSA, there have been very few new entrants who have their own generation. There are a lot of small market participants offering very competitive prices in the lower smaller market, but the big C&I customers—the big industrial customers—need more competitive tension. What we will be doing is using our procurement to go out to the market for a 10-year period to try to get a new competitor to build new generation. As the Premier announced when we announced Our Energy Plan, we short-listed three candidates all who were offering to build new generation in the South Australian market.

The other aspects of the plan that we think will lower prices, of course, is our PACE Gas program. PACE Gas is a very important part of the program, and one of the major determinants for electricity pricing in the country is the cost of the fuel that is being used—whether it is coal, gas, bunker fuel or other very expensive—

Mr VAN HOLST PELLEKAAN: Diesel.

The Hon. A. KOUTSANTONIS: Yes, diesel.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: Yes, there is a lot of diesel. Yes, there is, especially in Victoria and New South Wales.

Members interjecting:

The CHAIR: I do not think he needs help; not the sort of help you might give him, anyway. Minister.

The Hon. A. KOUTSANTONIS: Thank you, ma'am. The other part of our program, of course, is to try to incentivise as much exploration of gas through other unconventional or conventional means. We have put up now nearly $48 million in grants to try to stimulate as much of that gas as we can out of the ground from really great targets in the South-East. I want to thank the opposition for their support for exploration of gas in the South-East, especially conventional wells, which do have some fracture stimulation involved.

It is good to see that the Leader of the Opposition has come around and is supporting fracture stimulation in conventional wells in the South-East. That is great news—a big step forward by the Leader of the Opposition—and I am putting out a statement tomorrow congratulating him on his support for that process in the South-East. I am sure that it will be welcomed by local residents down there. Unfortunately, Senator Xenophon and his group still do not support unconventional gas or conventional gas of any means in the South-East, so it is just you and me out there on our own supporting that conventional gas. I am sure Senator Xenophon will not find the support necessary to win those open seats down there.

Anyway, back to the topic. We want our unconventional players to try to stimulate as much gas out of the ground, and we will be hypothecating that gas in a number of ways. The first way will be to go to our generators and the second way will be to go to our industrial and business users for commercial purposes. After they are all satisfied, and through the surplus gas, after that it will go to domestic use. Only after that can it be exported. That is a brief explanation about ways in which we think we can lower prices and put downward pressure on electricity prices in the nation.

We went to a recent COAG where minister Frydenberg endorsed 49 of the 50 recommendations of Finkel. We would have liked all 50 to be adopted, and we will be tasking the Australian Energy Market Commission on behalf of South Australia, Queensland, Victoria and the ACT to begin their preparatory work on the clean energy target—which is a mechanism much like the RET, which is again much like the energy intensity scheme—to try to stimulate as much generation and investment in the industry as possible.

The Finkel inquiry's other recommendations were broad-ranging, from having an oversight board over the three market operators through the AER, the AEMC and AEMO, but currently the COAG is considering who will sit on that energy security board. There are other recommendations as well on calling on state governments to lift bans on gas exploration for unconventional gas to try to free up gas. The Prime Minister is very big on this. He wants to link GST payments targeted at governments that incentivise and assist in the exploration of gas and fuels. There are threats now to New South Wales and Victoria that they could lose GST payments if they persist with their gas bans, which is an unfortunate aspect for South Australians.

In the unfortunate circumstance that the opposition are ever elected, that could mean a loss in GST revenue because of their ban on unconventional gas in South Australia—a very dangerous and reckless move by the opposition—which Dr Finkel rejected completely in his recommendations.

We will be adopting all the Finkel requirements and start working on the 50^th, which is the clean energy target. We think we agree with minister Frydenberg and the Prime Minister that, in the absence of a national mechanism, you will not get price reductions: you will get the increased prices that you are seeing in New South Wales and Victoria and, of course, the behaviour that is going on in Queensland. By and large, I think there are many measures we can put in place to try to lower prices, and the energy plan is one key aspect of it.

Mr VAN HOLST PELLEKAAN: Thanks for that fulsome answer, minister. Given all that information and given that the market has had all that information for several months now, why is it that the ASX figures published yesterday still show that over the next four years South Australia, on average, will have forward electricity contract prices 21 per cent higher than the national average?

The Hon. A. KOUTSANTONIS: But they are coming down from where they are now. What the shadow minister does not mention in his remarks is that they actually show a decrease. The important thing is that this is a National Electricity Market. I agree with Dr Finkel and I agree with the Business Council of Australia and I agree with the Australian Industry Group and the Minerals Council. Without a coherent national policy, you are going to see prices continue to be unacceptably high.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: The Leader of the Opposition just interjected with 'going it alone'. The most recent COAG commissioned by Josh Frydenberg did an investigation into our energy plan and especially our powers of intervention. The most recent COAG gave South Australia a tick and said that our intervention was in the best interests of South Australians and was consistent with the national energy market framework. But why would you pay attention to what the COAG is saying? I think we are on the right track. We can do more, but we need national leadership. I think Josh Frydenberg is attempting to show that national leadership, but unfortunately we are seeing that played out in the commonwealth parliament.

There are some members of the commonwealth parliament who do not support any form of target or any form of emissions reduction, but the Business Council of Australia put it quite succinctly at the most recent COAG: if you abolish the RET, prices go up. If you do nothing, prices go up. If you bring in a clean energy target, prices will drop. In fact, Dr Finkel's own modelling shows that a national policy framework could reduce prices dramatically.

Mr VAN HOLST PELLEKAAN: In addition to the market showing that South Australia will stay approximately 20 per cent above the rest of the national average for electricity over the next several years, why is it that figures released yesterday by AEMO also show that we will have a reserve shortfall one out of every nine days on average over the next two years?

The Hon. A. KOUTSANTONIS: What report are you referring to?

Mr VAN HOLST PELLEKAAN: 'Reserve shortfall amounts (Generation and DSP and Net Import) available to the selected region', etc., and it goes on. It is an AEMO report.

The Hon. A. KOUTSANTONIS: That is why we are building our temporary generators. Our temporary generators are there to meet any shortfalls.

Mr VAN HOLST PELLEKAAN: But the market knows about the generators. AEMO knows about the generators—

The Hon. A. KOUTSANTONIS: Summer is just around the corner. We will see how they go.

Mr VAN HOLST PELLEKAAN: —but they are still forecasting on average that, on one in nine days, we will have a shortfall.

The Hon. A. KOUTSANTONIS: I am not sure that the forecasts do actually factor in our generation. If that is what you are telling the committee—

Mr VAN HOLST PELLEKAAN: Don't they think you are going to do it?

The Hon. A. KOUTSANTONIS: You are the one reading out a report that I have not seen.

Mr VAN HOLST PELLEKAAN: It is published all the time, I am sure. One of the 20 people sitting behind you would—

The Hon. A. KOUTSANTONIS: I am not sure that the forecasts do take into account our generation.

Mr VAN HOLST PELLEKAAN: How many external independent consultants were used to develop the government's Our Energy Plan?

The Hon. A. KOUTSANTONIS: AEMO put out a report recently saying that we are going to meet our reliability standards because of our temporary generation and battery, so I am not quite sure where you are getting your information from.

Mr VAN HOLST PELLEKAAN: Could you table that report, minister?

The Hon. A. KOUTSANTONIS: I do not have the ability to table it, but I can make it publicly available to you. I think AEMO have it on their website.

Mr VAN HOLST PELLEKAAN: How many external independent consultants were engaged by the government to develop the government's energy plan and what did that cost?

The Hon. A. KOUTSANTONIS: I understand the Premier has taken that question on notice. I understand it is Frontier Economics, but I am not sure of the cost. Either the Premier or I will get that for you.

Mr VAN HOLST PELLEKAAN: Was it only Frontier Economics?

The Hon. A. KOUTSANTONIS: The Premier has taken that on notice and he will get that back to you later today.

Mr VAN HOLST PELLEKAAN: You are the energy minister. You would know how many different people you went to to help you develop your plan.

The Hon. A. KOUTSANTONIS: Yes, and you are such a high performing opposition that you got demoted.

An honourable member interjecting:

The Hon. A. KOUTSANTONIS: And fake laughs do not work either.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: What would you know about the electricity market?

The CHAIR: Order!

Mr VAN HOLST PELLEKAAN: Let's focus on the—

The CHAIR: No, when I say order, you are actually supposed to all stop. Continue.

Mr VAN HOLST PELLEKAAN: Minister, let's focus on the one independent person who you have mentioned so far: Frontier Economics and Danny Price. Why is it that Danny Price said, 'The South Australian government is to blame for electricity prices, not things that are outside of their control,' on 25 January?

The Hon. A. KOUTSANTONIS: You have used this comment before in question time and you have taken comments from it. I can extrapolate from that a number of things. I can extrapolate from that the South Australian government's privatisation of our electricity networks is to blame for the power prices that we are having right now because you sold to monopolies and did everything you could to dramatically get a big return for the regulated assets that you privatised. You could say that because any comment can be taken out of context.

What we have done with Danny Price is work with him to try to bring about a very clever and well thought-out plan to try to do everything we can to increase the reliability and security of our electricity assets and improve the competitive market that should have been set up when the assets were privatised but were not. We are doing everything we can.

For example, the opposition are very often quoting the Victorian example of privatisation and how there was no dramatic increase in prices there. Treasurer Stockdale did something very different from what treasurer Lucas did when he privatised his assets. He brought in something called contestability. When Rob Lucas sold the regulated assets to transmission lines and the distribution lines, he sold them as a monopoly and allowed no-one else to compete to build any new infrastructure.

What treasurer Stockdale did when he privatised those assets was say to those monopoly purchasers, 'You can have these items as a monopoly, but if you ever want to extend the networks or build new infrastructure or upgrade the infrastructure, it must be contestable to a third party.' That has meant dramatic differences in the rollout of their transmission lines and to the costs put by consumers, whereas the opposite occurred here. You gave unfettered monopoly power to massive interests to be able to charge dramatic amounts to gold plate our networks. That is part of the difference.

Mr VAN HOLST PELLEKAAN: With regard to the proposed state-owned gas-fired power station, when do you expect the request for proposals process to be completed?

The Hon. A. KOUTSANTONIS: Soon.

Mr VAN HOLST PELLEKAAN: How many proposals have been shortlisted?

The Hon. A. KOUTSANTONIS: I am not going to go into that while the process is still underway.

Mr MARSHALL: You just did with the other commentary, just five seconds ago. You said there were three that were short-listed.

The CHAIR: Is that a question, leader?

Mr MARSHALL: A comment.

The CHAIR: You are not allowed to comment.

Mr VAN HOLST PELLEKAAN: What locations for the site are being considered for the power station?

The Hon. A. KOUTSANTONIS: I do not have that with me, but obviously the site would need to be fit for purpose for the type of equipment we are purchasing. Once the process is finalised, we will be able to choose a site.

Mr VAN HOLST PELLEKAAN: Will the power station have to go through the same assessments and regulatory approval process as if a private company were building it?

The Hon. A. KOUTSANTONIS: That depends on the urgency at hand. If it is urgent that we get our generators up and running quickly, we could come to the parliament and seek advice; we could try to use our regulatory powers to get this done faster. This is not about enabling a private competitor to come into the market, this is about energy security for the state. It is much more important. Obviously, we would want to be good corporate citizens and obey our own practices and rules and make sure no-one is disadvantaged. But if we have to move quickly, we will.

Mr VAN HOLST PELLEKAAN: So it is possible that the government might ease the burden of regulation on itself which it applies to—

The Hon. A. KOUTSANTONIS: If it is an emergency, absolutely. Of course, we should. It would be ridiculous to say that we would be short for summer simply because of red tape.

Mr VAN HOLST PELLEKAAN: Which summer?

The Hon. A. KOUTSANTONIS: Any summer. You are surely not proposing that the government tie itself in knots on a regulation to get this temporary generator. It is our regulation.

Mr VAN HOLST PELLEKAAN: I am just asking whether the government—

The Hon. A. KOUTSANTONIS: Well, I just gave you my answer.

Mr VAN HOLST PELLEKAAN: —applies the same standards to itself that it applies to others. Could a private company make a case to say that its power plant could avoid some of that regulatory burden so that it could be ready faster?

The Hon. A. KOUTSANTONIS: There are many processes within the regulatory process that will allow things to be fast-tracked: there is major development status; there are all sorts of processes that we have in place.

Mr VAN HOLST PELLEKAAN: Do you have the same view that was provided to the Budget and Finance Committee the other day, that the power station will be 18 months away or thereabouts?

The Hon. A. KOUTSANTONIS: We will have to wait until the process is completed.

Mr VAN HOLST PELLEKAAN: Is it possible that it could be longer?

The Hon. A. KOUTSANTONIS: You will have to wait and see.

Mr VAN HOLST PELLEKAAN: On 15 March 2017, the Premier said that a gas-fired power station would be operational by next summer; now we are being told that it will be 18 months away. What advice did the government receive and rely upon initially to say that it would be ready in time for this coming summer?

The Hon. A. KOUTSANTONIS: Our advice is that our temporary generation will be in place by 1 December.

Mr VAN HOLST PELLEKAAN: My question, though, was: what advice did the government receive initially that led the Premier to commit that it would be ready in time for this summer?

The Hon. A. KOUTSANTONIS: I thought he was talking about the temporary generation.

Mr VAN HOLST PELLEKAAN: No, he was talking about gas generated.

The Hon. A. KOUTSANTONIS: It is technically possible to be in place by summer, but there is no reason to think that the temporary generation might not be gas.

Mr VAN HOLST PELLEKAAN: You could build a gas-fired power station by this summer?

The Hon. A. KOUTSANTONIS: I have said all along that our temporary generators could be hybrid generators.

Mr VAN HOLST PELLEKAAN: But we are talking about the gas generator particularly.

The Hon. A. KOUTSANTONIS: I think the opposition's knowledge on the generation industry is coming to the fore. There are a number of types of generators you can buy: you can buy generators that are hybrid, you can buy diesel generators, you can buy gas plant that is mobile, you can buy gas plant that runs on diesel and gas, you can buy gas plant that runs on bunker fuel.

Mr VAN HOLST PELLEKAAN: Chair, just to help the minister, I am talking about the one that is in the plan.

The Hon. A. KOUTSANTONIS: There are all sorts of different types of fuels.

The CHAIR: We have a really strange thing happening here today where we ask a question and then we wait for the answer before we do the next thing. Can we hear him first and then you can tell me your next question.

Mr VAN HOLST PELLEKAAN: I am helping the minister.

The CHAIR: He does not need your help. We are doing really well. It is 5 o'clock. You have been excellent.

The Hon. A. KOUTSANTONIS: Thank you, ma'am.

The CHAIR: Have you finished your answer?

The Hon. A. KOUTSANTONIS: Yes, ma'am.

The CHAIR: Member for Stuart, you have another question?

Mr VAN HOLST PELLEKAAN: Minister, the question was specifically about the 250-megawatt gas-fired generator that is in your plan, not any other generator. The question was about the fact that the Premier initially said it would be ready in time for this summer. On what advice did he base that comment and what has changed?

The Hon. A. KOUTSANTONIS: It is possible to have it in place by summer, but more importantly we will have our temporary generation in place by summer.

Mr VAN HOLST PELLEKAAN: If it were possible to have it ready by this summer, why would you not do that instead of the temporary—

The Hon. A. KOUTSANTONIS: It depends on procurement processes, making sure we get the best value for money for the taxpayer, making sure of availability, where they are on the assembly lines in construction. All sorts of things would have been in play.

Mr VAN HOLST PELLEKAAN: What is the operational budget for this particular power station?

The Hon. A. KOUTSANTONIS: Once the procurement is completed, we will reveal that.

Mr VAN HOLST PELLEKAAN: Why did senior government officials provide specific figures to the Budget and Finance Committee just last week?

The Hon. A. KOUTSANTONIS: I do not have them here, but I imagine that there would be some estimates for operational costs, but we have not finished the procurement yet.

Mr VAN HOLST PELLEKAAN: Does the government's $360 million price tag include the price of gas, ongoing maintenance and operational costs, or is that just the capital cost?

The Hon. A. KOUTSANTONIS: I do not have that with me because we are still in the procurement process, but we will make all this available once the process is finalised.

Mr MARSHALL: How did you come up with a budget?

Mr VAN HOLST PELLEKAAN: Exactly. How did you determine the $360 million figure, minister?

The Hon. A. KOUTSANTONIS: We took advice from our consultants.

Mr VAN HOLST PELLEKAAN: Which consultants?

The Hon. A. KOUTSANTONIS: I understand that we were engaged with Frontier Economics. I am not sure if there was any other, and we took advice—

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: While the Leader of the Opposition scoffs, Frontier Economics was a personal adviser to the Prime Minister. If Malcolm Turnbull thought it was good enough to help him formulate an energy policy, why is it not good enough for South Australia? That is just another example of not thinking ahead. If you criticise Danny Price, you are criticising Malcolm Turnbull's judgement because he hired him. It is a pretty obvious connection, isn't it?

Mr MARSHALL: But you cannot tell us the depreciation costs, what the operating losses are going to be, the interest rate costs on it. We have just one number—$360 million. How did you come up with it?

The Hon. A. KOUTSANTONIS: As we said earlier, we had consultants in place to work out what it would cost to meet the shortfalls that the market could not meet for us this summer and we have allocated the money to do it.

Mr VAN HOLST PELLEKAAN: Has the government received any modelling on the number of times the power station is expected to be used each year?

The Hon. A. KOUTSANTONIS: The way the operation of the—

Members interjecting:

The CHAIR: Order!

The Hon. A. KOUTSANTONIS: The way the generation—

Members interjecting:

The CHAIR: Order!

The Hon. A. KOUTSANTONIS: —will work is that they will work in lieu of load shedding. They will come on last, after everything else is on. Hopefully, it will not be needed at all. We will have to wait and see how many times it is called upon, but there could be a number of reasons why it is called upon. It could be a bushfire taking out transmission lines between the generator and the grid. It could be a fault at a generator. There are a whole number of reasons why it may or may not come on, so it is very difficult to forecast.

Mr VAN HOLST PELLEKAAN: Minister, do you rule out using this generator to take peaks off prices?

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: It is purely for shortfalls?

The Hon. A. KOUTSANTONIS: It is not a competitor in the market. It is there in lieu of load shedding. We are not competing with AGL or Origin. That decision was taken from us when assets were privatised.

Mr VAN HOLST PELLEKAAN: Has the government any plans to establish a fund for the decommissioning and rehabilitation of the site down the track?

The Hon. A. KOUTSANTONIS: Which site?

Mr VAN HOLST PELLEKAAN: This site—

The Hon. A. KOUTSANTONIS: Of the temporary generators?

Mr VAN HOLST PELLEKAAN: —where the gas-fired generator goes. The gas-fired generator—

The Hon. A. KOUTSANTONIS: Obviously, the government will hold all liabilities because it is a government-owned asset.

Mr VAN HOLST PELLEKAAN: Are there any arrangements—

The Hon. A. KOUTSANTONIS: I would not put money in contingency for it, no, because the government will be able to look after itself.

Mr VAN HOLST PELLEKAAN: Have you estimated the cost?

The Hon. A. KOUTSANTONIS: No. We have not finished the procurement yet, so we do not know what type of kit we are getting.

The Hon. A. KOUTSANTONIS: Are you going to ask a question or are you just sitting there?

Mr VAN HOLST PELLEKAAN: What advice or feedback has the government received—

Mr Wingard interjecting:

The Hon. A. KOUTSANTONIS: You do not have a question? Ask a question.

Mr VAN HOLST PELLEKAAN: —regarding the impact of a state-owned power generator on future generation investments—

The CHAIR: Order! I do not know how you can hear the question if you are engaging with the member for Mitchell, who is clearly out of order.

The Hon. A. KOUTSANTONIS: Out of his depth, ma'am.

The CHAIR: I am listening to you, member for Stuart.

Mr VAN HOLST PELLEKAAN: Thank you, ma'am. Minister, what advice or feedback has the government received regarding the impact of a state-owned power generator on future or other generation investments from the private sector?

The Hon. A. KOUTSANTONIS: What impact it will have on other—

Mr VAN HOLST PELLEKAAN: Yes, what advice have you had?

The Hon. A. KOUTSANTONIS: Given when we announced the purchase of a new generator subsequently AGL announced a massive investment in Torrens Island, obviously none.

Mr VAN HOLST PELLEKAAN: No, the question was: did you get any advice? I remember hearing you very well saying that you intend to do this because the private sector will not.

The Hon. A. KOUTSANTONIS: Yes, because if we are short this summer—

Mr VAN HOLST PELLEKAAN: But now the private sector has invested.

The Hon. A. KOUTSANTONIS: If we are short this summer, it is because the market, in a privatised market, cannot meet our demands, so the government is making an investment to make sure that we have energy security. What I have said is that, to ensure that we do not impact any commercial decisions by any generator, we will not be offering our generation in any competitive way. It will not be bidding into the market to offer competitive rates. It will not be there to try to compete with anyone. It is there to be offered in lieu of load shedding on the advice from AEMO.

Mr VAN HOLST PELLEKAAN: Minster, will the gas-fired generator be required to obtain a certificate of compliance from the Office of the Technical Regulator?

The Hon. A. KOUTSANTONIS: Of course, yes.

Mr VAN HOLST PELLEKAAN: That will not be one of the short cuts that is taken if you deem it an emergency?

The Hon. A. KOUTSANTONIS: The Office of the Technical Regulator should absolutely make sure that we are not doing anything to hurt energy security. That is what their licensing is for.

Mr VAN HOLST PELLEKAAN: Given that there are numerous proposals being considered for additional gas generation in South Australia, is there a point at which you might decide not to build the one that you have proposed?

The Hon. A. KOUTSANTONIS: No.

Mr MARSHALL: Definitely going ahead?

The Hon. A. KOUTSANTONIS: Definitely going ahead.

Mr VAN HOLST PELLEKAAN: Regardless? Even if three or four others are all built?

The Hon. A. KOUTSANTONIS: We have had a privatised market now since the 1990s, and the only new generation built was Pelican Point; that was then mothballed. We have seen a publicly owned generator that was privatised closed. We have seen very little new investment. We are seeing a deliberate policy of scarcity in the market by the private owners across the NEM. Whether they are government owned or privately owned, they are deliberately taking generation out of the market to increase price, so I think oversupply is a good thing.

Mr VAN HOLST PELLEKAAN: There is no level of new capacity installed in the market at which you would not go ahead and build this?

The Hon. A. KOUTSANTONIS: Given what occurred during the 8 February incident when the load shedding occurred, when we had a privately owned generator not dispatched and not ordered to dispatch by AEMO, and the market thought load shedding 90,000 South Australians was just fabulous and everything was working perfectly, that is massive market failure. Excuse me if the state government believes that South Australians should have their own capacity to make sure that we have energy security in place. I think it is an important reserve for us to have. It is very important.

Business SA put out a number on the cost of the statewide blackout and subsequent blackouts to the state's economy. They estimated the cost to be over $400 million. If we are able to stop one statewide blackout or stop one major load shedding event, these generators pay for themselves, on the advice of Business SA itself. Why anyone would be calling on me to stop purchasing temporary generation—

Mr VAN HOLST PELLEKAAN: No-one is.

The Hon. A. KOUTSANTONIS: I notice you are shaking your head, saying, no, you agree.

Mr VAN HOLST PELLEKAAN: No-one is. I am just asking the questions.

The Hon. A. KOUTSANTONIS: Good. That implies that you agree with our policy of—

Mr VAN HOLST PELLEKAAN: No, it does not. That is incorrect.

The Hon. A. KOUTSANTONIS: You have no policy on it?

Mr VAN HOLST PELLEKAAN: No.

The Hon. A. KOUTSANTONIS: You have no view on it?

Mr VAN HOLST PELLEKAAN: No.

The Hon. A. KOUTSANTONIS: You are not for or against it. You just work here.

Mr VAN HOLST PELLEKAAN: Minister, settle down and answer the questions.

The Hon. A. KOUTSANTONIS: Great, okay; fair enough.

Mr VAN HOLST PELLEKAAN: Settle down and answer the questions.

The Hon. A. KOUTSANTONIS: 'I just work here'—unbelievable.

Mr VAN HOLST PELLEKAAN: No, that is complete nonsense and you know it. Is there a minimum requirement for local content in the build of this generator?

The Hon. A. KOUTSANTONIS: Given we do not manufacture generators, it would be very difficult. We would like to use South Australian gas. I know you have an aversion to South Australian gas, but we want to use—

Mr VAN HOLST PELLEKAAN: Minister, we do not manufacture submarines either, and there is a—

The Hon. A. KOUTSANTONIS: We do now.

Mr VAN HOLST PELLEKAAN: We are about to start—

The Hon. A. KOUTSANTONIS: We absolutely do now; that is right.

Mr VAN HOLST PELLEKAAN: We are about to start—

The Hon. A. KOUTSANTONIS: But we do not manufacture generators.

Mr VAN HOLST PELLEKAAN: That is exactly right.

The Hon. A. KOUTSANTONIS: You really just walked into that, didn't you?

Mr VAN HOLST PELLEKAAN: No.

The CHAIR: I just remind members—

Members interjecting:

The CHAIR: Order! I just remind members that we have to finish the question in silence, and then you get to answer in silence—

The Hon. A. KOUTSANTONIS: Yes, ma'am.

The CHAIR: —because Hansard cannot hear over the top of you both screaming.

The Hon. A. KOUTSANTONIS: Thanks, Chair. We do not manufacture submarines!

Mr VAN HOLST PELLEKAAN: Moving on to the diesel generators, when will the government make its first payment on the diesel generators? These are the temporary diesel generators for the next two years.

The Hon. A. KOUTSANTONIS: Again, the procurement process has not been completed. Once that is completed, we will make that publicly available.

Mr VAN HOLST PELLEKAAN: Will those diesel generators be required to follow the same licensing and regulatory requirements—

The Hon. A. KOUTSANTONIS: Again, you are making assumptions about the form of generation but, once the process is completed, we will make all this publicly available.

Mr VAN HOLST PELLEKAAN: Is it correct that approximately four to five sites are being considered in the metropolitan area for the location of those generators?

The Hon. A. KOUTSANTONIS: I have left that to the independent experts. I will check with them and get back to you.

Mr VAN HOLST PELLEKAAN: If the gas-fired power generator is not operational by the summer of 2021, is there any scope for the government to extend the two-year contract for the diesel generation to cover that extra time?

The Hon. A. KOUTSANTONIS: I am not going to answer hypothetical questions in estimates.

Mr VAN HOLST PELLEKAAN: Is the government considering including that in the terms of the contract?

The Hon. A. KOUTSANTONIS: I am not going to publicly canvass the contract terms in the estimates hearing.

Mr VAN HOLST PELLEKAAN: Will the government agree to consult with the surrounding local community prior to agreeing to the locations of the generators?

The Hon. A. KOUTSANTONIS: Yes, of course.

Mr VAN HOLST PELLEKAAN: What if the local communities object?

The Hon. A. KOUTSANTONIS: We will go through the normal consultation process.

Mr VAN HOLST PELLEKAAN: But the question was: what if they object? You are saying you are just going to consult with—

The Hon. A. KOUTSANTONIS: It depends on whether there will be an impact. I am not sure what the impact is. I am not sure we have settled on a site yet. When we do, we will make it public and we will start a consultation process.

Mr VAN HOLST PELLEKAAN: What emissions forecasts has the government got for the diesel generators?

The Hon. A. KOUTSANTONIS: Again, we have not finished the procurement, so it is premature to be talking about emissions.

Mr VAN HOLST PELLEKAAN: Is there a maximum allowable emissions level—

The Hon. A. KOUTSANTONIS: Obviously, we have to operate within Australian standards, yes, of course.

Mr VAN HOLST PELLEKAAN: No, is there a maximum allowable limit that the government has put into the contract, or into the tender, essentially?

The Hon. A. KOUTSANTONIS: I am not going to talk about the contract details, but we will follow all Australian standards.

Mr VAN HOLST PELLEKAAN: Has the government budgeted $19 million each year over the forward estimates for the renewable technology fund, as per the evidence of the Budget and Finance Committee?

The Hon. A. KOUTSANTONIS: I will have to check.

Mr VAN HOLST PELLEKAAN: I will frame it another way, minister, so it has nothing to do with the Budget and Finance Committee. How much is the government budgeting for the operation of the Renewable Technology Fund each year over the forward estimates?

The Hon. A. KOUTSANTONIS: It depends on how the fund is expended. We know that the cost of the Tesla-Neoen battery is about $50 million over the next 10 years. Depending on what other subscriptions we have to the fund through grants or loans, we will be able to know more detail, but I will get you a more detailed answer on notice.

Mr VAN HOLST PELLEKAAN: Minister, what does the $50 million over 10 years that you mentioned actually cover? Is that just the purchase of the batteries or is that the operation of the batteries?

The Hon. A. KOUTSANTONIS: We will not own the battery. The battery will be owned by Tesla and Neoen, it is a joint venture. We will be paying for a service.

Mr VAN HOLST PELLEKAAN: Is there any operational cost in that at all?

The Hon. A. KOUTSANTONIS: I do not have the contract details here.

Mr VAN HOLST PELLEKAAN: What service are you paying for?

The Hon. A. KOUTSANTONIS: I understand the figure of up to $50 million covers the payments for up to 10 years. Obviously, the cost of the battery far exceeds the $50 million; that is a risk borne by the operators, Neoen and Tesla. They will be purchasing the kit, plant and equipment, the operating and management system, installing it, importing it, operating it and distributing it into the NEM. Our fee is for service.

Mr VAN HOLST PELLEKAAN: Can you repeat all those things that are part of the $50 million?

The Hon. A. KOUTSANTONIS: Our $50 million is separate from the purchase of the battery; that is something that Neoen and Tesla will be doing. Ours is a fee. We are commissioning this battery to offer us services into the National Electricity Market.

Mr VAN HOLST PELLEKAAN: Are Neoen purchasing the battery, or are they leasing the battery?

The Hon. A. KOUTSANTONIS: I understand that they are working in a joint venture with Tesla. Tesla own the battery, I think it is their technology, and Neoen operate the operating system and also operate the substation and the wind farm alongside the battery.

Mr VAN HOLST PELLEKAAN: Can you be clear, please: $50 million over 10 years is the price for the service. What is the service that the government and the taxpayer will receive?

The Hon. A. KOUTSANTONIS: It will be dispatching to the ancillary market to try to lower the cost of that ancillary market for frequency control. It will also be used in reserve to try to avoid load shedding, in conjunction with our generators.

Mr VAN HOLST PELLEKAAN: They are the things that the whole project will do.

The Hon. A. KOUTSANTONIS: No, the whole project will do a lot of other things as well.

Mr VAN HOLST PELLEKAAN: But the government will not be doing those things, so is it a subsidy, essentially? Is it a financial contribution to make it happen?

The Hon. A. KOUTSANTONIS: No, we went out to the market and said that we want someone to build us a battery to offer us services. They came back and said, 'We will build this battery and operate these services. This is what we can provide the South Australian government and this is the cost,' and they came in with the best offer. The cost for us is $50 million over 10 years, roughly $5 million a year, and that gives us services in the ancillary market.

I said to you earlier that the frequency control and ancillary services market is about $50 million to $100 million per year. If this battery does its job in that market, we could see that market plummet to next to nothing, which would save South Australians dramatic amounts of money on their bills. It could also offer services for us in lieu of load shedding, in conjunction with our generator. It also has the ability to offer other services for the benefit of Tesla and Neoen; that is, as I said to you earlier, affirming contracts for the wind farm to offer scheduled dispatchable power on demand.

Mr VAN HOLST PELLEKAAN: Who will actually operate the battery?

The Hon. A. KOUTSANTONIS: Neoen.

Mr VAN HOLST PELLEKAAN: So Neoen will actually operate it?

The Hon. A. KOUTSANTONIS: I understand that they will be the operator, yes.

Mr VAN HOLST PELLEKAAN: Who will be responsible for the replacement of the battery when that is required?

The Hon. A. KOUTSANTONIS: The owners.

Mr VAN HOLST PELLEKAAN: Tesla?

The Hon. A. KOUTSANTONIS: It is the joint venture; it is their responsibility. If there is any update to that, I will get back to you and give you an update, but my understanding is that we are paying money for a service, not ownership of the battery.

Mr VAN HOLST PELLEKAAN: Is that in the contract: if the government is going to spend $50 million over 10 years, is there a guarantee that comes with that deal that the battery will provide the service for—

The Hon. A. KOUTSANTONIS: You heard it said very publicly: if it is not done in time, it is free.

Mr VAN HOLST PELLEKAAN: No.

The Hon. A. KOUTSANTONIS: You do not like that guarantee?

Mr VAN HOLST PELLEKAAN: No, that is not what I am asking about.

The Hon. A. KOUTSANTONIS: You want a different guarantee?

Mr VAN HOLST PELLEKAAN: You interrupted, so you do not know what the question is. The question is: is there a guarantee that comes with that $50 million over 10 years that the full battery service will be provided over 10 years?

The Hon. A. KOUTSANTONIS: We have a contractual obligation for 10 years.

Mr VAN HOLST PELLEKAAN: If the battery needs replacing or some part of it needs replacing—

The Hon. A. KOUTSANTONIS: They have services that they need to provide to us over that 10-year period, and they need to provide them.

Mr VAN HOLST PELLEKAAN: Who is responsible for disposal of the battery and any components of it?

The Hon. A. KOUTSANTONIS: I will get you a detailed answer, but I am pretty sure it is the owners of the battery.

Mr VAN HOLST PELLEKAAN: Is that all wrapped up in the same price?

The Hon. A. KOUTSANTONIS: I would have to check and get back to you, but we are not paying any extra.

Mr VAN HOLST PELLEKAAN: Do you believe it will last for 10 years?

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: Minister, will the battery and the wind farm be able to dispatch into the grid at the same time, or does the wind farm—

The Hon. A. KOUTSANTONIS: I do not know. I would have to speak to Neoen and AEMO about the dispatch protocol. I do not know what their bid structure is going to be. I do not know how they are going to bid into the market or how often they are going to bid. I do not know if they are going to have power purchase agreements done on the side. We have basically entered into a power purchase agreement with this organisation, so they will be offering us ancillary services in the FCAS market. They will be offering us load shedding services in lieu of load shedding in conjunction with our generator. Obviously, that will leave capacity for them to operate in the market. The way that they operate is a matter for them as long as our contractual obligations are met.

Mr VAN HOLST PELLEKAAN: Minister, when developing this plan did you not ask whether it would be possible for the wind farm and the battery to discharge into the market or whether, if you took the electricity from the battery, the wind farm may not be able to dispatch into the market, so you would be taking that electricity away?

The Hon. A. KOUTSANTONIS: No, I think you misunderstand the nature of the investment. The battery will sit alongside the wind farm. Dispatch protocols will be done on a market basis that is outside our contractual obligations.

Mr VAN HOLST PELLEKAAN: I understand.

The Hon. A. KOUTSANTONIS: Good. If you understand, then we are done.

Mr VAN HOLST PELLEKAAN: No, minister, the question was—

Mr Wingard interjecting:

The Hon. A. KOUTSANTONIS: Hang on, the member for Mitchell has a question. What is it? What do you want to know?

Mr WINGARD: Answer his question.

The Hon. A. KOUTSANTONIS: What is it?

Mr WINGARD: He is saying: can the battery and the wind farm actually put into the market at the same time? That is the question.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: They do not understand it.

Mr VAN HOLST PELLEKAAN: It is a yes or a no.

The Hon. A. KOUTSANTONIS: The operation of the battery outside the contractual obligations of the government is a matter for the operator. If they want to dispatch at the same time, it is behind the meter, as it were. It is entirely up to them how they dispatch it. For example, if there is no load shedding, there is a high price event in the market and there are no contractual obligations that they have to meet on our behalf, then how they use their battery and wind farm is a matter for them, not us, but what we want is our contractual obligations met. If they want to dispatch at the same time, it is a matter for them, but what we want is our contractual obligations met, which is in lieu of load shedding and in the FCAS market.

Mr VAN HOLST PELLEKAAN: I understand that those choices are up to them.

The Hon. A. KOUTSANTONIS: Good. Then why are you asking me more and more questions about the same thing?

Mr VAN HOLST PELLEKAAN: The question is: will it be physically possible for the wind farm and the battery to dispatch into the market simultaneously—

The Hon. A. KOUTSANTONIS: This is bizarre.

Mr VAN HOLST PELLEKAAN: —whether or not it was your choice or their choice?

The Hon. A. KOUTSANTONIS: I see no reason why it could not if, again, it is a matter for the operation of the battery. For example, there are a number of electricity assets that are connected to the grid and the NEM that offer dispatch that bid and are not dispatched. The way these things are dispatched is not necessarily up to the operators. It is up to the market operator to dispatch market participants. The market participants put in bids, and then it is up to the market operator to say who gets dispatched and who does not.

Mr VAN HOLST PELLEKAAN: I am just asking about the physical capacity, or does—

The Hon. A. KOUTSANTONIS: If the battery can offer us generation in lieu of load shedding, it means it can dispatch into the grid.

Mr VAN HOLST PELLEKAAN: At the same time?

The Hon. A. KOUTSANTONIS: The wind farm is already connected to the grid. How they dispatch it is a matter for them. What is so hard to understand? I get it from the member for Mitchell, but you should know better.

Mr VAN HOLST PELLEKAAN: Minister, I am just asking whether it is physically possible.

The Hon. A. KOUTSANTONIS: No, I understand why he does not get it; it is you I do not understand.

Mr VAN HOLST PELLEKAAN: You have finally answered the question and said that you do not see any reason why it would not be possible. Is an upgrade to the local substation required?

Mr Wingard interjecting:

The Hon. A. KOUTSANTONIS: Even you got it? Even the member for Mitchell got it. Hallelujah! It is a red letter day.

Mr WINGARD: You are laughable.

The Hon. A. KOUTSANTONIS: Ask me a question.

Mr WINGARD: I just asked you one. You took 20 minutes and you could not answer it.

The Hon. A. KOUTSANTONIS: Ask me another one.

Mr WINGARD: It took 20 minutes to answer the simplest of questions and you struggled.

The CHAIR: The Chair has been really lenient today.

The Hon. A. KOUTSANTONIS: And wise.

The CHAIR: I agree. I take that criticism on board. It may be that the last hour of today is going to be the worst, and I would hate to see your questions—

The Hon. A. KOUTSANTONIS: We will go out with a bang, ma'am. We will go out in a blaze of glory.

Members interjecting:

The CHAIR: Order! Audible laughter, Speaker Bishop has given a ruling on that—out. The member for Stuart.

Mr VAN HOLST PELLEKAAN: Minister, given that you said in the very last part of your answer that you did not see any reason why they cannot dispatch into the market at the same time, if that is what the operators want can the local substation currently support both the wind farm and the battery, or is an upgrade required?

The Hon. A. KOUTSANTONIS: I do not know; I will have to check.

Mr VAN HOLST PELLEKAAN: You have not checked? Okay. How much did it cost the government to hold the battery announcement event at Adelaide Oval?

The Hon. A. KOUTSANTONIS: I do not know, but whatever it was it was worth every cent. It got the front page of numerous papers around the world. It was breaking news I think on CNN, breaking news on Fox News and it was breaking news on international cable TV. It was reported widely. Whatever we spent, it was probably the best cost-benefit analysis the government has ever spent any money on. To have one of the most high profile disruptive technology leaders in the world here in Adelaide committing to come back to Adelaide was a great event and put Adelaide on the map.

Mr VAN HOLST PELLEKAAN: Was that part of the $2.6 million advertising budget, or is that additional money?

The Hon. A. KOUTSANTONIS: I do not know; I will check.

Mr VAN HOLST PELLEKAAN: And come back with an answer?

The Hon. A. KOUTSANTONIS: Sure.

Mr VAN HOLST PELLEKAAN: What other technology is eligible for the renewable technology fund?

The Hon. A. KOUTSANTONIS: Lots if they are renewable. Hydrogen fuel cell technology is eligible and more batteries are eligible. As things that would assist in demand management and help intermittent energy to become dispatchable, forms of storage and hydro would be absolutely eligible because these are forms of renewable technologies that could store energy, so more battery technology, hydrogen fuel cells and demand management mechanisms for large users.

The Hon. J.M. RANKINE: Minister, can you tell the committee what feedback you have received in relation to South Australia's energy plan and then also, more recently, the announcement of the batteries?

The Hon. A. KOUTSANTONIS: It has been overwhelming. The level of excitement generated by the investment of Tesla and Neoen were a bit overshadowed on the day by the star power of Elon Musk, but the truth is that Neoen are leaders in the delivery of not only hydrogen technology but of course wind technology. To have two of the world leaders in Adelaide talking about—

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: No, premiers only.

Mr Marshall interjecting:

The Hon. A. KOUTSANTONIS: That is what happens with these great announcements: you work for your Premier. It is called loyalty and discipline—things members opposite do not really understand. I think it has been exceptional. I think the proudest moment for me during the entire energy plan was at the last COAG, when Rob Heffernan was commissioned by the previous COAG to investigate what we had done through Our Energy Plan. There was a lot of criticism by other governments about South Australia apparently going it alone.

To hear Rob Heffernan read out his remarks at COAG and give South Australia a big tick for what it had done and to hear the endorsement by AEMO, the Australian Energy Market Commission and the AER I think humiliated those who mocked the plan. It made them look small, childish and foolish, and of course it endorsed what the government had been working on. It was a great tick also for the public servants who had developed this plan, who had worked tirelessly to make sure that South Australia was able to get through what we had been suffering last summer. I was very pleased with the outcome.

The international media attention generated by the world's largest battery has been very good for South Australia. The front line of those disruptive technologies is here in South Australia now. It is not Denmark, it is not Europe, it is not the United States: it is South Australia, and Australia holds the title for two very distinct hallmarks of energy generation. We have two jurisdictions: one has the highest penetration of coal in the world and one has the highest penetration of wind—New South Wales and South Australia. We are in a battle of ideas, and that battle of ideas is being fought out in Australia.

We do not contribute to the majority of global emissions, but we are leading the way to learn how to deal with capping those emissions and to offer South Australians and Australians affordable, cheap reliable power through this disruptive technology. I think we are leading the charge and I think it is very exciting.

Mr VAN HOLST PELLEKAAN: When do you expect the Renewable Technology Fund to be open for proposals?

The Hon. A. KOUTSANTONIS: Very soon.

Mr VAN HOLST PELLEKAAN: Is the funding for the Renewable Technology Fund all included in that table on this page that we are looking at?

The Hon. A. KOUTSANTONIS: Which page is that?

Mr VAN HOLST PELLEKAAN: Page 12.

The Hon. A. KOUTSANTONIS: The advice I have is that the table on page 12 is just the grants aspect of the technology fund, not the loans part of the technology fund.

Mr VAN HOLST PELLEKAAN: How much are the grants and how much are the loans?

The Hon. A. KOUTSANTONIS: My understanding is 75 and 75.

Mr VAN HOLST PELLEKAAN: I refer now to Budget Paper 4, Volume 3, page 178. Why is electricity generated from renewable sources expected to be reduced in 2017-18 compared with the financial year just finished?

The Hon. A. KOUTSANTONIS: The advice I have is that, with the exit of Hazelwood coal-fired generation, we expect to see a lot more operation of our gas-fired generators producing more electricity here in South Australia.

Mr VAN HOLST PELLEKAAN: Is the soon to be implemented 100 megawatts of diesel generation included in—

The Hon. A. KOUTSANTONIS: Which 100 megawatts of diesel generation?

Mr VAN HOLST PELLEKAAN: The temporary diesel generation.

The Hon. A. KOUTSANTONIS: Again, I said to you that we have not concluded that—and it is 200 megawatts, not 100.

Mr VAN HOLST PELLEKAAN: In relation to the 200 megawatts of temporary generation that will be in four or five places around the state, are the emissions from those generators included in these figures, or will they be additional emissions?

The Hon. A. KOUTSANTONIS: There are a couple of things. These forecasts are designed around how much gas-fired generation we think will displace renewable energy in the absence of Hazelwood, because a lot more synchronous generation will come on with the exit of Hazelwood. We do not expect our temporary generation to come on very often. Load shedding is not a regular occurrence. It is not something that happens every summer. It is not something that happens every hot day. It would be very rare, so their emissions impact would be negligible, and it is not forecast in these numbers.

Mr VAN HOLST PELLEKAAN: How many days per year do you expect to use this temporary generation?

The Hon. A. KOUTSANTONIS: Hopefully, none.

Mr VAN HOLST PELLEKAAN: So $110 million—

The Hon. A. KOUTSANTONIS: As I said to you earlier, Business SA did a piece of modelling where they claimed, and the Leader of the Opposition has repeated, that the blackouts have cost South Australia over $400 million. If our generation stops and saves one blackout, it has paid for itself.

Mr MARSHALL: If only we had that Alinta plant still there.

The Hon. A. KOUTSANTONIS: If we had Alinta operating, we would not have Pelican Point on and we would not have parts of Torrens Island—

Mr MARSHALL: We would not have had blackouts either.

The Hon. A. KOUTSANTONIS: That is not true. The real cause of the blackout was the way the interconnector was managed during the storm.

Mr MARSHALL: We did not have diesel generators when Alinta was operating.

The Hon. A. KOUTSANTONIS: We did not have Pelican Point operating either. The most efficient gas-fired generator in the country was mothballed, and we had a coal-fired plant with a capacity of 750 megawatts operating at 250 megawatts—appalling.

Mr VAN HOLST PELLEKAAN: Minister, with regard to emissions and the government's current own-use electricity supply, what share of that is coming from renewable energy?

The Hon. A. KOUTSANTONIS: Our current contract was with Alinta. We had contracted with them that the government purchase electricity to try to—

Mr VAN HOLST PELLEKAAN: Was that 100 per cent of the government's use?

The Hon. A. KOUTSANTONIS: I am not quite sure of the details. I do not have the details here, but I think it was a large portion of our money. They would offset that purchase with the closure of Northern, so I am not sure what the portion of our purchase is. What we have done subsequently is we have gone out to the market for a 10-year contract to try to incentivise new generation to be offered in a competitive way in the South Australian market. We use our purchase to underwrite the purchase and building of a new generator, which will have surplus capacity to be able to generate and offer more contracts into the South Australian market.

Mr VAN HOLST PELLEKAAN: When will that contract be announced?

The Hon. A. KOUTSANTONIS: Soon.

Mr VAN HOLST PELLEKAAN: Have you completed all the internal work to assess it that was meant to be done by February?

The Hon. A. KOUTSANTONIS: No.

Mr VAN HOLST PELLEKAAN: What has caused the delay?

The Hon. A. KOUTSANTONIS: I would not call it a delay. I would call it due diligence. Obviously market conditions are changing dramatically across the NEM, but we will have an answer very, very soon.

Mr VAN HOLST PELLEKAAN: Is solar thermal at Port Augusta being considered?

The Hon. A. KOUTSANTONIS: I am not going to talk about any of the participants, other than to say that solar thermal is an excellent suggestion. Questions about whether or not they are competitive in a bid would be inappropriate for me to mention here. I like the technology. I have been out to Arizona—Nevada, sorry, or was it California? Anyway—

Mr MARSHALL: You have been to America; let's just leave it at that.

The Hon. A. KOUTSANTONIS: I have been to the operational—

Mr MARSHALL: You have been on a plane, great. We have narrowed it down.

The Hon. A. KOUTSANTONIS: I have been to the operational—

Members interjecting:

The Hon. A. KOUTSANTONIS: Is he having nanna naps? He is having nanna naps.

Members interjecting:

The CHAIR: Order!

The Hon. A. KOUTSANTONIS: I have been to see the solar thermal plant, and they have gas backup at that solar thermal plant in the United States. It is an impressive array.

Mr MARSHALL: Is that a pun? Array? Solar array? He does not get it because he did not read that briefing note.

The Hon. A. KOUTSANTONIS: Honestly, if you did not have him, you would have to invent him. It was a very impressive operation. I think heat storage through solar thermal is something that will eventually break through, whether it is in Port Augusta or Upper Spencer Gulf or somewhere else, I do not know, but I think its time is coming very soon.

Mr VAN HOLST PELLEKAAN: Given that 75 per cent of this supply is meant to come from a new generator and 25 per cent is meant to come from a renewable generator, would any of the currently proposed or considered new generators be eligible; for example, the expansion at Torrens Island by AGL?

The Hon. A. KOUTSANTONIS: No.

Mr VAN HOLST PELLEKAAN: That would not be eligible to bid?

The Hon. A. KOUTSANTONIS: That is right.

Mr VAN HOLST PELLEKAAN: How about the others that have not been confirmed, but are being considered?

The Hon. A. KOUTSANTONIS: I am not going to talk about proponents who are currently in the process.

Mr VAN HOLST PELLEKAAN: Given that this contract is meant to take effect on 1 January 2018 and it takes a significant amount of time to build a new generator (18 months in the case of your gas-fired power station), how is it that that contract could be fulfilled with 75 per cent delivery from a new generator when the decision has not been announced yet, but the contract is meant to start on 1 January?

The Hon. A. KOUTSANTONIS: Any new operator could have a retail arm where they can offset. They can toll through other generators.

Mr VAN HOLST PELLEKAAN: Sorry, but you said initially—

The Hon. A. KOUTSANTONIS: You asked me a question. I am trying to answer it for you.

Mr VAN HOLST PELLEKAAN: Fair enough.

The Hon. A. KOUTSANTONIS: You are now seeing operations where Origin and ENGIE have entered a tolling arrangement at Pelican Point where Origin provide gas and are using a portion of its generation capacity to distribute to Origin customers and ENGIE are using the remainder for themselves. There is plenty of capacity throughout South Australia, as I have said many times. There are over 2,900 megawatts of gas-fired generation available in South Australia that is not always on at any one time. Any successful bidder, while they are constructing any new plant, can have the opportunity to buy power through an offset tolling arrangement. That is a matter for them.

Mr VAN HOLST PELLEKAAN: Minister, are you saying that, with the 10 years of the contract period that starts on 1 January coming up, if it took two years to build a power station, they could actually deliver 75 per cent from a new power station just for the last eight years of that 10 years? Is that what you are saying?

The Hon. A. KOUTSANTONIS: Yes, but we get a new competitor in the market, which is the whole idea. The whole idea is not so much about us getting our power. We can go out to the market tomorrow to procure our power; that is not the issue. We can get it just like everyone else. The availability of power is not the issue. It is the cost.

What we are attempting to do is to use our procurement to say that existing operators in the market need not apply. We want new operators to come into the market with new competitive market offers and offer us new generation. It is not about us getting our power: we can get that any way we want. What we are attempting to do here is to get a new competitor to offer new contracts because the problem we have in South Australia is that there is scarcity in the market and they are deliberately pricing scarcity in their contracts. We need more market contract offers in there.

Mr VAN HOLST PELLEKAAN: So it is possible that someone could win this contract for 75 per cent new generation and 25 per cent renewable generation, but not actually fulfil that component of the contract for a few years.

The Hon. A. KOUTSANTONIS: No, because I will have a retailer offering competitive prices immediately.

Mr VAN HOLST PELLEKAAN: They could deliver the electricity, but it would—

The Hon. A. KOUTSANTONIS: The AEMC released a report the day before. The AEMC released a report about how the market operates at the lower end of the market amongst competitive offers and they are showing that market competition amongst small retailers is very, very healthy. You are seeing a lot of competitive tension from those small market operators, but the problem we have is large industrial customers not being able to get long-term contracts. That is why you are seeing people like the South Australian Chamber of Mines and Energy and now Business SA catching up to go out and try to aggregate businesses together to try to get one large contract. You are seeing big customers like BHP and OZ Minerals try to use these large procurement contracts to try to get cheaper power.

What we are attempting to do with our procurement is to try to get more of that capacity in, so we have people out there offering long-term market offers, not 12 or 18 months but five-year contracts, at much lower prices. If we can use our procurement to underwrite a new competitor into the market during construction that can offer long-term contracts to market players, you will see the forward curve go down, spot prices drop and contract offers drop as well. That is what we are attempting to do. Of course, the market will not factor that into the forward price because it has no visibility as to what the procurement is going to be yet and so you will have to wait and see.

Mr VAN HOLST PELLEKAAN: Minister, for how long would you be prepared to stretch that time frame? If somebody starts delivering electricity from another source on 1 January, but they say that they will have a new power station up in one year, two years, five years or six years—

The Hon. A. KOUTSANTONIS: We will wait and see what the competitive offers have to say, and I will leave that to the negotiators to make sure that they get the best value for price.

Mr VAN HOLST PELLEKAAN: So in your own mind you do not have a time when that new generator must—

The Hon. A. KOUTSANTONIS: The most important thing for us, whatever the outcome, is to have new competitive offers made to the market.

Mr VAN HOLST PELLEKAAN: But not necessarily from a new generator or a renewable generator?

The Hon. A. KOUTSANTONIS: No, we want new generation, absolutely.

Mr VAN HOLST PELLEKAAN: But it is not actually a requirement?

The Hon. A. KOUTSANTONIS: It is a requirement, and obviously there will be a lag time for construction. That makes sense.

Mr VAN HOLST PELLEKAAN: When is it required?

The Hon. A. KOUTSANTONIS: As quickly as possible. It depends on who wins: if it is solar thermal, if they are in the process, there is construction time there; if it is a gas-fired generator, there is construction time there; if it is another form of generation, there is another time there. It depends on what it is and it depends on what the successful procurement is.

Mr VAN HOLST PELLEKAAN: And you are very flexible with how long that would actually take?

The Hon. A. KOUTSANTONIS: I want to see the best outcome.

Mr MARSHALL: It is going well so far.

The Hon. A. KOUTSANTONIS: It is.

Mr VAN HOLST PELLEKAAN: On a different book, minister, Budget Paper 3, page 143, towards the bottom of that page of table, where it says 'Fuel and energy', what does the $38 million budget in 2016-17 refer to?

The Hon. A. KOUTSANTONIS: I understand that it is the general government's electricity and other energy costs, but I will confirm that and get back to you.

Mr VAN HOLST PELLEKAAN: That is essentially the same energy, the same electricity that is out for tender at the moment?

The Hon. A. KOUTSANTONIS: I do not know. I will have to check.

Mr VAN HOLST PELLEKAAN: Minister, why did the estimated result come in $17 million over budget this year?

The Hon. A. KOUTSANTONIS: I do not know. I have to check exactly what that line is for, as I said in my earlier answer.

Mr VAN HOLST PELLEKAAN: Somebody behind you must know.

The Hon. A. KOUTSANTONIS: This is a general government table, not a department for energy table, so I will get an answer for you.

Mr VAN HOLST PELLEKAAN: What is the estimated difference in the annual cost to supply electricity to the government sites in 2018 compared with the existing contract? Have you budgeted in an amount that you are willing to pay for this new contract?

The Hon. A. KOUTSANTONIS: I am not going to reveal this while we are in the middle of a competitive process.

Mr VAN HOLST PELLEKAAN: It presumably exists, but it is not in the budget?

The Hon. A. KOUTSANTONIS: It is probably in a contingency, but I will check and get back to you, but I will not be revealing the number while we are in a competitive process.

Mr VAN HOLST PELLEKAAN: Why was SA Water not part of the SA government's procurement process for the supply of electricity?

The Hon. A. KOUTSANTONIS: SA Water also have their own energy solutions. They have their own ability to generate electricity—I think up to five megawatts. They can generate through movement through their pipes, and they have demand management policies in place. They have their own innovative solutions, and obviously you would recall that they were corporatised by the previous Liberal government, so they have an independent board making their decisions.

Mr VAN HOLST PELLEKAAN: Would it be possible to add them in?

The Hon. A. KOUTSANTONIS: It is a very different load profile from what we are asking. Our load profile is very steady: it is hospitals, schools, police stations—very steady, a very different form from pumping.

Mr VAN HOLST PELLEKAAN: Pumping of water is quite steady too, often.

The Hon. A. KOUTSANTONIS: Different loads, different peaks, but they manage themselves.

Mr VAN HOLST PELLEKAAN: Minister, back to the first table in the first book.

The Hon. A. KOUTSANTONIS: Which one? Which book?

Mr VAN HOLST PELLEKAAN: Budget Paper 5, page 12, the main table that shows all your energy expenditure. Did any of the feedback received by external stakeholders to the energy security target support the government's claim that it will lower electricity prices to consumers?

The Hon. A. KOUTSANTONIS: I am not sure what you mean.

Mr VAN HOLST PELLEKAAN: Did any of the feedback received by the government from external stakeholders, with reference to the energy security target, support the government's claim that an energy security target will reduce prices?

The Hon. A. KOUTSANTONIS: Feedback from the stakeholders we went out to consult with was diverse. Some stakeholders had a concern that it might have an increase on their business, and this is obviously from energy generators who have to purchase credits, from retailers who have to purchase credits. But the advice from Frontier Economics was that the cost to the scheme would be offset by decreases in the wholesale market due to the larger generation and the production of more electrons into the system which would mean more contracting behaviour.

Mr VAN HOLST PELLEKAAN: When does the government intend to commence the energy security target?

The Hon. A. KOUTSANTONIS: On 1 January.

Mr VAN HOLST PELLEKAAN: How does that fit with the possibility of South Australia, Victoria and Queensland going it alone on a clean energy target which has been discussed?

The Hon. A. KOUTSANTONIS: Let's be very clear about this. I do not want to go it alone on the clean energy target. I want there to be a national approach. What minister Frydenberg is struggling with are recalcitrants within the commonwealth parliament who believe that a clean energy target will drive prices up despite the evidence. What we agreed at COAG, what most states agreed at COAG, is that we would ask John Pierce at the Australian Energy Market Commission to do the preparatory work about how this would look.

When we designed the energy security target, we designed it to fit in with any national model. If there was a national EIS, or a national CET or LET, or whatever they wanted to call it, we could just slide ours in. I am hopeful that we can get some sort of settlement. If we get a settlement that there is going to be a clean energy target in place, obviously that will feed into our process because we want to have a national approach.

I hope it does not get to the point where states have to go it alone, but let's be frank about this: the National Electricity Market (NEM) is largely governed by states. The commonwealth has almost no responsibility in this area. All the bodies that run it, except the AER, are creatures of the states. Technically, if all the NEM states agreed, we could bring in our own NEM. I would prefer that we had national agreement so that there could not be any overriding commonwealth legislation to mute it or change it later. But ultimately the best outcome is for the commonwealth government to sort out its internal processes and either say yea or nay for a CET. That is when we know what the outcome is.

If it is a no, we are not doing a CET, we will do the other 49 recommendations of Finkel, then the states could have a discussion about what we do. If it is a yes, we do want a CET, the commonwealth government says by 2020 we will have it in place and there is bipartisan support, that changes our thinking.

My very strong view is that we should not go it alone, as is the Premier's, but in the absence of national leadership you have the Business Council of Australia, the Australian Industry Group, the CSIRO, the Chief Scientist, and the AEMC, the market operator, all saying, 'Maybe the states should consider this market mechanism, but the best option is a national approach.' I do not know how you would convince some members. I do not want to be political here. I am not sure how you would convince Tony Abbott that a clean energy target or an energy intensity scheme is the right thing to do. While we have a parliament with a one-seat majority, I am not sure that we can ever have national agreement.

Mr VAN HOLST PELLEKAAN: If there is national agreement on a clean energy target, will you persist with the energy security target or will you let that go?

The Hon. A. KOUTSANTONIS: I suspect that we will persist with it, because it will be a price signal into the South Australian market to invest, and it will aid in security outcomes as well.

Mr VAN HOLST PELLEKAAN: With regard to the operating expenses, DPC has created an energy plan unit, which I understand is under the leadership of Mr Sam Crafter, with four FTEs and 16 contractors. Is that the case?

The Hon. A. KOUTSANTONIS: Sorry, can you repeat the question?

Mr VAN HOLST PELLEKAAN: Within DPC and within this budget line that we are looking at at the moment—

The Hon. A. KOUTSANTONIS: If it is DPC operations, I refer you to the Premier and his estimates.

Mr VAN HOLST PELLEKAAN: Within this budget line here, there has been created an energy plan unit under the leadership of Mr Sam Crafter, I think, with four FTEs and 16 contractors. Is that the case?

The Hon. A. KOUTSANTONIS: I refer you to the Department of the Premier and Cabinet.

Mr VAN HOLST PELLEKAAN: Does that mean that the expenditure for that energy plan unit is not included in this budget line here?

The Hon. A. KOUTSANTONIS: The questions you are asking about the FTEs and the group assisting, they are based in DPC and report to the Premier's Program 1, so those questions should have been directed to the Premier this morning.

Mr VAN HOLST PELLEKAAN: Is the $5 million for the 2016-17 year, 2017-18 year and $2 million for the—

The Hon. A. KOUTSANTONIS: I have just been advised that these questions were asked this morning, so they are on notice anyway.

Mr VAN HOLST PELLEKAAN: So you do not have any answers to those?

The Hon. A. KOUTSANTONIS: No, they are the Premier's questions, and I understand that the Leader of the Opposition asked these questions this morning.

Mr VAN HOLST PELLEKAAN: I was not aware of that. What I am asking is whether that expenditure is in your budget line here?

The Hon. A. KOUTSANTONIS: No, I am advised that it is not.

Mr VAN HOLST PELLEKAAN: It is not. Okay, so it is outside.

The Hon. A. KOUTSANTONIS: I think we are talking about the same thing. You are talking about these FTEs?

Mr VAN HOLST PELLEKAAN: I left the FTEs out of the question because you did not want to answer that, so I am asking you about the dollars. Let me pare it down a bit further.

The Hon. A. KOUTSANTONIS: The program, the money and the implementation team all sit in the Premier's program.

Mr VAN HOLST PELLEKAAN: Nothing to do with this table at all? None of it is in this table on page 12?

The Hon. A. KOUTSANTONIS: The operating money out of this table has gone into the Premier's program to run it.

Mr VAN HOLST PELLEKAAN: I refer to Budget Paper 4, Volume 3, page 177, Sub-program 8.4: Energy Policy and Programs. Given that there is a reduction of 16 FTEs in the 2016-17 year compared with the budget allocation, what positions were removed from this division and where did they go? On that page, looking at the FTEs, the budget for 2016-17 was 54.8 and the estimated result was 38.8, so 16 people have gone somewhere.

The Hon. A. KOUTSANTONIS: I think you are talking about accommodation costs and corporate overheads and corporate allocations, so I will get you a detailed answer on that on notice.

Mr VAN HOLST PELLEKAAN: With reference to interconnection and dot point 3, why has the regulatory investment test into additional interconnection with other states been delayed?

The Hon. A. KOUTSANTONIS: I am not sure that it has been delayed.

Mr VAN HOLST PELLEKAAN: There was $500,000 in the budget for that, but only $300,000 has been expended, so presumably the project has been delayed.

The Hon. A. KOUTSANTONIS: No, the project is run by ElectraNet. They do the regulatory test, I understand. We have helped fund them; they have put in their own half a million. The actual cost of the RIT-T is $1 million. We have just put in half the money. If $300,000 has been expended, I am assuming, and I will have to check, that actually $600,000 has been spent because ElectraNet would have put in the other half. It is a dollar-for-dollar operation.

Mr VAN HOLST PELLEKAAN: Why was $200,000 not spent as expected?

The Hon. A. KOUTSANTONIS: I understand they commissioned extra modelling, which has just pushed out some of the time lines, but there has been no deliberate stalling or delay. It is just part of the process.

Mr VAN HOLST PELLEKAAN: I did not say it was deliberate. I asked what the delay was, and if they have commissioned extra modelling it has pushed out the time line. That is a pretty straightforward answer, so thank you for that. When is the project expected to be finished now?

The Hon. A. KOUTSANTONIS: I am advised that it will not be completed until early next year.

Mr VAN HOLST PELLEKAAN: Over on the next page, the fourth dot point from the bottom, with regard to new generation at Maree, when will the government award this contract?

The Hon. A. KOUTSANTONIS: The South Australian government has responsibility for electricity supply to 25 remote off-grid communities, including 15 Aboriginal communities, in South Australia. The DPC operates the Remote Areas Energy Supplies scheme, providing operational management and electricity infrastructure in these communities. An open tender procurement process for the provision of a high-penetration solar-diesel hybrid power station at Marree, one of the towns under the Remote Areas Energy Supplies scheme, closed in June of this year and evaluations are currently underway. We expect procurement to be completed by October 2017 and to commence the contract in November of this year.

Mr VAN HOLST PELLEKAAN: What has caused the delay?

The Hon. A. KOUTSANTONIS: I am not sure that there is a delay.

Mr VAN HOLST PELLEKAAN: In June last year, you said that it would be 12 months.

The Hon. A. KOUTSANTONIS: The information I have is that the open tender for the project closed in June of this year (last month) and will be operational by late 2017. It will take 12 months of contracting issuing, with the system taking over the supply of the Marree township by December 2018. I am not sure that there has been a delay, but if there has I will get to the bottom of it and get back to you.

The CHAIR: Make this the last question, member for Stuart.

Mr VAN HOLST PELLEKAAN: With regard to the RAES scheme, will there be more of these hybrid generation plants rolled out through the other dozen or so RAES locations?

The Hon. A. KOUTSANTONIS: I hope so.

Mr VAN HOLST PELLEKAAN: Over what period of time? Do you have a plan for that?

The Hon. A. KOUTSANTONIS: I will seek advice from the agency and get back to you, but I think they are a good way of lowering power prices.

Mr VAN HOLST PELLEKAAN: So this is the only one on the books at the moment?

The Hon. A. KOUTSANTONIS: There is also Coober Pedy, I think, which is operational now.

The CHAIR: Time having expired for examination of this area, I declare the examination of the proposed payments closed. I thank the minister, his advisers and members of the committee for their help and cooperation today.

At 17:59 the committee adjourned to Thursday 27 July 2017 at 09:00.