Estimates Vote

Department for Energy and Mining, $47,775,000

Office of Hydrogen Power South Australia, $402,176,000

Minister:

Hon. A. Koutsantonis, Minister for Infrastructure and Transport, Minister for Energy and Mining.

Departmental Advisers:

Dr P. Heithersay, Chief Executive, Department for Energy and Mining.

Mr S. Crafter, Chief Executive Officer, Office of Hydrogen Power SA.

Mr V. Duffy, Deputy Chief Executive, Department for Energy and Mining.

Ms R. Knights, Executive Director, Strategic Policy and Delivery, Department for Energy and Mining.

Mr N. Panagopoulos, Acting Executive Director, Energy Resources Division, Department for Energy and Mining.

Mr B. Zammit, Acting Executive Director, Mineral Resources Division, Department for Energy and Mining.

Mr W. Pasten, Director, Commercial Corporate, Department for Energy and Mining.

Ms A. Butler, Director, Strategic Policy and Corporate Services, Office of Hydrogen Power SA.

The CHAIR: Welcome to today's hearing of Estimates Committee A. I respectfully acknowledge Aboriginal and Torres Strait Islander peoples as the traditional owners of this country throughout Australia and their connection to land and community. We pay our respects to them and their cultures and to elders both past and present.

The estimates committees are a relatively informal procedure and, as such, there is no need to stand to ask or answer questions. I understand that the minister and the lead speaker for the opposition have agreed on an approximate time for the consideration of proposed payments, which will facilitate a change of departmental advisers.

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: Yes.

The CHAIR: Changes to committee membership will be notified as they occur. Members should ensure the Chair is provided with a completed request to be discharged form. If the minister undertakes to supply information at a later date, it must be submitted to the Clerk Assistant via the Answers to Questions mailbox no later than Friday 6 September 2024.

I propose to allow both the minister and the lead speaker for the opposition to make opening statements of up to 10 minutes each, should they wish to do so. There will be a flexible approach to giving the call for asking questions. A member who is not on the committee may ask a question at the discretion of the Chair.

All questions are to be directed to the minister and not the minister's advisers. The minister may refer questions to advisers for a response. Questions must be based on lines of expenditure in the budget papers and must be identifiable or referenced. Members who are unable to complete their questions during the proceedings may submit them as questions on notice for inclusion in the assembly Notice Paper.

I remind members that the rules of debate in the house apply in committee. Consistent with the rules of the house, photography by members from the chamber floor is not permitted while the committee is sitting. Ministers and members may not table documents before the committee; however, documents can be supplied to the Chair for distribution.

The incorporation of material in Hansard is permitted on the same basis as applies in the house; that is, it is purely statistical and limited to one page in length. The committee's examinations will be broadcast in the same manner as sittings of the house, through the IPTV system within Parliament House and online via the parliament website. I understand that 69 people tuned in yesterday—69. It was a ratings bonanza yesterday.

The Hon. A. KOUTSANTONIS: We will beat that today.

The CHAIR: You are going to beat that today? As long as committee A beats committee B, we will be fine. I now proceed to open the following lines for examination: Department for Energy and Mining and the Office of Hydrogen Power South Australia. I declare the proposed payments open for examination. I now call on the minister to make a statement, if he wishes, and to introduce his advisers. I then call on the lead speaker to make a statement or go straight into questions. Minister, the floor is yours.

The Hon. A. KOUTSANTONIS: Thank you Chair. To my left is Paul Heithersay, the Chief Executive Officer of the Department for Energy and Mining. To my right is Mr Sam Crafter, the Chief Executive Officer of the Office of Hydrogen Power SA. To Paul Heithersay's left is Mr Will Pasten. Sitting behind me is Mr Vince Duffy, the Deputy Chief Executive of the department, alongside Amy Butler. Behind Mr Duffy is Ms Rebecca Knights, Executive Director, with Mr Nick Panagopoulos and Ben Zammit.

Rather than take up any more time of the committee, I defer to my friend, the shadow minister, to have as long as he likes to ask questions or make a statement.

Mr PATTERSON: No statement; we will just go straight into questions. I refer to Budget Paper 4, Volume 2, page 104, referring to the objectives about electricity prices. In July last year, South Australian households on the default market offer saw their power bills skyrocket up to 24 per cent. Now we have the next default market offer due to commence very shortly on 1 July, and thankfully it has prices moderating down to between $63 and $41 but still this means that households are paying between $500 to $670 more since the March 2022 state election. Those not on default market offers but still on contracts have experienced similar price rises. What is the government doing to help struggling South Australian working families reduce their power bills?

The Hon. A. KOUTSANTONIS: Again, I think whenever parliamentarians attempt to say they have complete control over a deregulated electricity market, it creates a level of anticipation that there is something that politicians can do to fundamentally alter the impacts of the market. What we are attempting to do is not make promises we cannot keep. A very famous case is the former Marshall government promising to reduce power prices by over $300 and failing to do it, failing to get anywhere near it. In fact, for the entire time they were in office, power prices were higher than they were under the previous Weatherill government.

So I think first things first: let's set expectations. A jurisdiction of our size has limited ability to impact what we can do in terms of setting retail pricing. It is set by the Australian Energy Regulator—they did a default market offer—and prices are heading in the right direction. There are decreases on the way for South Australians. Is it enough? No. I agree it should be more. But I could have sat where the shadow minister is sitting and asked exactly the same question of former energy minister Mr van Holst Pellekaan. In his last year as energy minister power prices were higher than they were under the last year of the previous Weatherill government.

Ultimately, it is important to know what we are attempting to do which is to try to facilitate as much renewable energy as we possibly can into the system, which drives wholesale power prices down, which in turn drives retail prices down. The more that we have renewable energy in the system and the less firming that is required by gas peakers, the cheaper power will be. Of course, there is a lot of unpredictability about weather patterns across Australia which has meant that it is very, very hard to price that risk. We are doing what we can with getting more renewables built. There has been a flourish, a run, of renewable energy being built since we have been in office. I do note the renewable drought that occurred between 2018 and 2022; that might not be the fault of the previous government but it seemed to me that the development of renewable energy seemed to go a lot slower.

A lot of these factors are about weather, about gas prices. The gas price is often set, the firming price is set to long-term variable costs of energy. We are a government that promotes the extraction of gas to be used as firming, because we believe it can decarbonise and firm renewable energy to get more renewable energy into the system. I note the previous government banned the extraction of gas in some parts of the state and I also note AEMO's report this morning and yesterday about gas shortages across south-eastern Australia, so I will leave that to the shadow minister to ponder his previous decisions and his votes to ban gas extraction in some parts of the state where we are gas-rich, which could potentially have a dramatic impact on price. I exclude the member for Hammond from that criticism who was a supporter of the gas industry and was prepared to cross the floor to vote with the opposition to stop that. He is a man of principle.

I think the important thing to note here with prices is that the DMO is heading in the right direction, but the uncertainty that we are having with the culture/climate wars that are occurring in Canberra will have an impact on investment. In the car this morning on the way in, I listened to the national ABC. There were a number of national experts talking about the potential for this to degenerate into an investment strike for new generation because what has happened is that a potential incoming commonwealth government led by Mr Dutton could have a dramatic impact on investment, which would have an impact on prices.

This is not a fault of the opposition, but they are supporting it. The idea that private investment now will be forced to compete with state-owned, state-subsidised nuclear reactors will in turn mean a renewables strike in investment and a strike in investment in gas peakers. I think this policy has not been thought through and could have a devastating impact on prices over the next two decades.

The government's strategy is obviously to make sure that there is a reliable supply. We are building a 200-megawatt generator. We want to incentivise as much as we possibly can, through the Hydrogen and Renewable Energy Act, the development of new renewable projects, especially on Crown land, and that will garner more renewable energy, which will require less thermal capacity. The less thermal capacity is used, the lower prices will be.

Mr PATTERSON: Further to that default market offer, it showed the prices in the different cities throughout the country—Melbourne, Sydney, Brisbane, Adelaide. It showed that South Australian households are going to be paying more for the average electricity bill than those in Melbourne, those in Sydney and those in Brisbane. Previously, you as the minister have claimed it is an east coast crisis. Why, then, if it is an east coast crisis, is South Australia having to pay the highest price for households on the default market offer?

The Hon. A. KOUTSANTONIS: The DMO decreases for South Australian residential customers were fairly consistent with the changes in New South Wales. There are three zones, varying between a 0.2 per cent to a 5.9 per cent reduction, while Queensland residential prices will increase by as much as 4.9 per cent. Victoria set their own default market offer, so they are not calculated by the Australian Energy Regulator, and they have an annual decrease.

I think what the shadow minister is doing is potentially inadvertently selectively quoting, selectively cherrypicking, prices. Prices are high across the entire country. They are unacceptably high across the entire country. I could extrapolate from that question, but I think it would be unfair on the shadow minister, that he thinks that the prices in New South Wales are acceptable. I do not think that they are; I think they are too high as well. But on average, South Australians have lower prices than those people in New South Wales. That is the advice I have. That is the advice the AER released, and I stand by that.

Like I said to the shadow minister, Australians have been seeing politicians, one after the other, promise price reductions in their power bills off benchmarks that are hard to measure, hard to understand, in a privatised market. Now, the shadow minister is supporting a policy that could create a massive investment risk, that could stop the private sector from investing in the electricity market ever again.

Mr PATTERSON: On the same budget line—

The Hon. A. KOUTSANTONIS: It is not a budget line: it is an overview.

Mr PATTERSON: Sure. It is a paragraph in the budget paper.

The CHAIR: Member for Morphett, for my benefit, which page are we looking at?

Mr PATTERSON: Page 104, on objectives.

The CHAIR: Which objective?

Mr PATTERSON: The first line of the first paragraph, talking about electricity prices. The most recent ESCOSA energy retail offer prices that come out every August showed that bills went up for the average South Australian household. That was up to June 2023. We will, of course, be waiting for that to come out again this August. What new plans does the minister and the department have in this budget to reduce the cost of power bills for South Australian families?

The Hon. A. KOUTSANTONIS: I think we are going around in circles. I have given the government's strategy. The government's strategy is to facilitate, as it is said in the objectives there, a $20 billion pipeline of renewable energy in South Australia. I will just explain to the shadow minister and the parliament one more time how I think this will help decrease power prices. What is setting power prices in this country higher is not renewables, it is thermal capacity. That is what is setting the price, as well as massive government subsidy schemes and programs that are in New South Wales and Victoria, and indeed some parts of Queensland.

The more renewable energy you have, the more you overbuild for your demand, the less you will be required to use thermal energy, which will push prices down. It is pretty self-explanatory in the opening statement in the objectives, which is that by unlocking a $20 billion pipeline of renewable energy grid, on grid or off grid, you are potentially able to offset your industrial use, or you can actually get more power into the system, because we have amazing coincident of sun and wind resources in this state which allow us to facilitate that renewable energy to be built.

I think the important thing here is to know that if you build more renewables and you are able to provide renewables more often to South Australians, as opposed to gas-fired power or coal-fired power from interstate, you will see prices drop dramatically. In autumn and spring in this state prices are very, very low during those periods and we have seen some of the largest reduction in wholesale power prices in the country in this state as a result of renewable energy. If that trend continues with more renewable energy being built, you will see power prices dropping.

What I think would cause an increase in power prices is creating some sort of investment strike by the private sector. The last time there was a merchant investment in thermal capacity in this state was by AGL for Barker Inlet in 2016. There was no investment in thermal capacity at all during the life of the Marshall government, and I will explain to the committee why. It was because they put all of their subsidies into the interconnection with New South Wales. That project has blown out by hundreds of millions of dollars, is delayed by years, and that created an investment strike in South Australia. So every time the government makes a decision to change the way market forces occur, there is an equal and opposite result. There was no new thermal capacity built in this state while my friend the shadow minister was in office and that was as a direct consequence of the government's policies.

My concern now is that the Dutton plan—because, let's face it, governments at a federal level change, governments always change in this country because we are a democracy. If there is a plan for a government capital subsidy to build nuclear power plants and then an operational subsidy to run them—because the costs of those prices will be prohibitively high they would need to be subsidised to make them even affordable for Australians to use—who is going to build any generation to compete with a commonwealth subsidy that they are not eligible for? The answer to that is no-one. There is a biblical phrase here I am thinking about: before you look at the speck in my eye, perhaps maybe the log in your own might be something to look at.

Mr PATTERSON: My eyes are quite clear, thank you, minister. If I could go to the same budget paper, page 107, the investing expenditure summary, we have the budget line there for the Hydrogen Jobs Plan.

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: The estimated result for 2023-24 is $126,232,000. Of that money, how much has been spent on the storage component?

The Hon. A. KOUTSANTONIS: We are still in the engineering and ECI phase of the procurement, so I cannot give you a breakdown on that, but I suspect I know where the shadow minister is going here, given the commentary on what he claims the cost of storage will be. We are getting accurate costs from the ECI process, from our consortium that has been awarded. There have been some early costs on, obviously, acquisition of land, prepayments for the turbines and, of course, a lot of that ECI work that we are doing to get to a position of design and construct. I cannot give you a breakdown on those numbers that you are asking for, so I apologise, but it is true that the government has plans to build storage, electrolysers and generation.

Mr PATTERSON: From that response you are saying, in terms of the storage component, there has been money spent on the design but no money spent even on a deposit or for any materials?

The Hon. A. KOUTSANTONIS: I cannot give you a breakdown. I will have to refer you to my previous answer.

Mr PATTERSON: Maybe if we go to the turbines, as you said, because you said you have spent some money on that. How much money has been spent on the turbines?

The Hon. A. KOUTSANTONIS: I think we have placed a preorder with General Electric to make sure that we are in the appropriate queue to be available by 2025. The government announced that they were the successful tenderer to provide the generator. I understand that the prepayment has been in the order of $25 million, but I will double-check that and get back to you.

Mr PATTERSON: In terms of the electrolysers as well, of that $126 million, has any money been spent on a preorder of electrolysers or a deposit?

The Hon. A. KOUTSANTONIS: Like I said, we are in an engineering stage now.

Mr PATTERSON: In the engineering stage for the electrolysers? So no preorder on the electrolysers?

The Hon. A. KOUTSANTONIS: Well, we have a consortium that are working with BOC Linde and ATCO going through the engineering phase and design phase with their supply partners. As I said to you earlier, it is too hard for me to give you a breakdown of exactly how much we spent on the electrolysers and the generation, and the breakdown of it, so I will try to go away and find out what that is.

Mr PATTERSON: So you will commit to coming back to the committee with that?

The Hon. A. KOUTSANTONIS: If I am able to, yes, but of course it might be difficult for me to do so. I am not trying to be difficult for the member—this is all going to be laid out anyway in future budgets—but I may not be able to do that in this number.

Mr PATTERSON: In terms of money spent on the connections to the transmission lines or any substations, how much money has been spent of that $126 million on that?

The Hon. A. KOUTSANTONIS: We have spent some money on connections with ElectraNet and SA Power Networks. I do not have that breakdown here, but I can get that for you.

Mr PATTERSON: So when you say money is being spent, we have not been able to spend money to build the generators or electrolysers, but you have spent money on the transmission. Is that to do with a substation? Or is it—because how can it connect? Where are transmission lines going into? Are they built and running into the site at the moment?

The Hon. A. KOUTSANTONIS: The site is next to the GFG site, I understand, and there is ample infrastructure nearby. But obviously, when we are building generators we are going to need to make sure that we have the appropriate connections in place. I will get you a breakdown of those.

Mr PATTERSON: Thank you. In terms of that $126 million, how much money has been spent on water infrastructure or pipeline connections?

The Hon. A. KOUTSANTONIS: Again, I will come back to you with that.

Mr PATTERSON: In terms of that breakdown, if you can also break it down in terms of the design work as well. Are you able to break down the components of the design in terms of the money?

The Hon. A. KOUTSANTONIS: I will do what I can, but we are still in the procurement phase. This is going to be a difficult task for the agency, so we will do what we can.

Mr PATTERSON: I appreciate that, and thank you in advance to those who have to do the work on that. From what I am seeing, there is a lot of money being spent on the design. If we then move forward to the estimated spend for 2024-25, we have the budgeted amount there of $388.8 million. You have an estimate there. How much of that is budgeted to be spent on the generators? You said you already have a deposit; how much would it then be for the final payment?

The Hon. A. KOUTSANTONIS: I am not going to announce the breakdown here in the parliament because we are in a procurement stage with the rest of the program. It would be inappropriate of me and could disadvantage the state. What we are saying is that we have $388 million to be spent in 2024-25 on this project.

Mr PATTERSON: It just seems extraordinary that there is that much money and yet so little information that you can provide this committee.

The Hon. A. KOUTSANTONIS: It would be no different to any other infrastructure program: when you are in a procurement stage, our job is to protect the state's interests.

Mr PATTERSON: I am mindful of that. One way of protecting the state's interests is transparency so we know things are being done transparently.

The Hon. A. KOUTSANTONIS: I am trying to be transparent with you. If you would like me to do the procurement in public, where everyone bidding for any state project can see what everyone else is bidding, I think that would do us a great disservice. I am sorry, but some things need to be done in an appropriate way with the appropriate probity around it. It would be inappropriate for me to give you that breakdown here. But ultimately, to the member's point about transparency, the final numbers will be published—of course they will be. What we have given you is the number we are spending this year.

Mr PATTERSON: Since the initial costings we have had massive inflations: construction inflation, especially, and supply chain disruption. Is it still the department's cost estimate that the overall cost will be $593 million?

The Hon. A. KOUTSANTONIS: That is the budgeted amount we have in the budget, $593 million. Obviously, we are still in procurement so I cannot give you the answer to that, but the advice I have is that is something we have budgeted and that is what we are sticking to.

Mr PATTERSON: Have you been advised that it might change?

The Hon. A. KOUTSANTONIS: That it might change?

Mr PATTERSON: Yes, that it might be more than—

The Hon. A. KOUTSANTONIS: Other than from you? You are regularly advising me it is going to change. I am not sure where you are getting your information from. We want it to come in on budget.

Mr PATTERSON: Is there any contingency being put on this project for cost escalations?

The Hon. A. KOUTSANTONIS: Every project has contingencies.

Mr PATTERSON: What is the contingency for this project?

The Hon. A. KOUTSANTONIS: We do not announce our contingencies. Again, my interests are in protecting the state, and I would assume so are the opposition's.

Mr PATTERSON: Are you able to say if the contingency has changed since the first budget that was handed down—

The Hon. A. KOUTSANTONIS: That would be inappropriate while we are in a procurement.

Mr PATTERSON: I refer to the same budget paper, page 118, Office of Hydrogen Power SA. I am looking at the program summary. We have here the actuals for 2022-23. I just preface that by saying in the original budget measure that was announced in the 2022-23 budget, it budgeted $2 million per annum for the Office of Hydrogen Power SA, and eight full-time staff. Last year's estimated result, the 2022-23 result, had expenditure blowing out above this to $7.8 million and 23 FTEs, and now we find that what was reported to us and this parliament in June, of $7.8 million—now the actual—has come out, and we have $13.6 million as the actual. Why is there such a difference between last year's estimated result and the actual? What happened in that short time between the budget and 30 June?

The Hon. A. KOUTSANTONIS: You are including supplies and services as part of the FTE increase?

Mr PATTERSON: I am talking about the budgeted amount here, the dollar amount.

The Hon. A. KOUTSANTONIS: Within a program, as work is undertaken you spend it. It is no different from the north-south corridor or any other procurement project. Money can be brought forward and spent or money that is work that you plan to do that is not done is deferred to a following year. This is no different.

Mr PATTERSON: I think I have made the point that it is a massive change from the $2 million that was budgeted for. If we look at last year's budget of 2023-24, it points out in these papers that expenditure will be $6.8 million and 23 FTEs. That is what was budgeted. In fact, what we find is that expenses are now $35 million and FTEs are 55. Why is there such a difference between last year's budget and the estimated result in terms of expenses?

The Hon. A. KOUTSANTONIS: If you look at the note beneath it, it states:

The increase in expenditure and revenue between the 2023-24 Estimated Results and the 2023-24 Budget is primarily due to—

wait for it—

the commencement of the Port Bonython Hydrogen Hub State-Commonwealth Agreement.

Commonwealth grants have come in, so we are spending more money.

Mr PATTERSON: So that is commonwealth. Where you see in the same budget government transfers of $35 million, that is money to do with Port Bonython. In terms of Port Bonython, the project was based around funding for common user infrastructure at the hub, so what common user infrastructure has been decided on for the hub?

The Hon. A. KOUTSANTONIS: The $28.5 million increase in operating expenditure from $6.9 million to $35.4 million is due to an increase of $24 million on the commencement of the Port Bonython Hydrogen Hub state-commonwealth project. It has an operating budget of $2.1 million—there was a MoG change transferring the Port Bonython Hydrogen Hub from DTF to the Office of Hydrogen Power SA—and $2.4 million for the reprofiling of OHPSA's total expense budget to align with an increase in activity in promoting hydrogen production in South Australia, and there was a once-off establishment cost. Of course, the increase in operating revenue is due to matching funding from the commonwealth government, which is explained in the dot point under the table. I am not quite sure what the member is looking for.

The advice I have is that there have been a number of works on some marine studies about berthing at Port Bonython. There has been, obviously, a lot of survey work done and studies in conjunction with Santos about the delivery of and export of facilities off the jetty. There will need to be augmentations to that. Obviously, there have been some civil works—I imagine—and other associated works that go with it. I am happy to get you a more detailed breakdown on those.

Mr PATTERSON: That would be appreciated. So that would break down physical works, as opposed to design works, but for the common user infrastructure it was unclear in your answer, minister: is it jetty augmentation?

The Hon. A. KOUTSANTONIS: That is the most important piece of common user infrastructure down there. That jetty is one of the most important assets in the state.

Mr PATTERSON: There was $37 million from DIT for that as well. So this is outside of what was provided from DIT?

The Hon. A. KOUTSANTONIS: You have to remember this: the DIT money was about restoring some of the dolphins on the jetty, a lot of repair work, replacement of steel, a lot of routine maintenance and infrastructure upgrades. That is separate. The work that we are doing here is about facilitating common user infrastructure to make sure that people who want to export off that jetty are able to do so without interrupting any petrochemical export. It is a complex piece of work.

Mr PATTERSON: Going forward, we have here that the budgeted amount for expenses is $23 million. How much confidence do you have that next year when we have the budget handed down, those expenses will be that figure and not a similar blowout?

The Hon. A. KOUTSANTONIS: You have to be careful with your terminology here. I understand you are in opposition, but it is not a blowout, it is only an increase because we are doing works and we have matching commonwealth government funding. In terms of the one-year budget, you are categorising it a certain way; when you look at the overall budget, it has not exceeded that. So I do not think you can categorise it the way you have.

What we are doing is: as we are getting works done, the commonwealth government is giving us money and we are funding things and we are doing the works, and if the commonwealth government gives us extra money, that is reflected in the budget. So getting extra revenue in cannot be categorised as a blowout. That is just not right.

Mr PATTERSON: Can the minister outline how many of the 55 FTEs are working on the Port Bonython project and how many are working on the hydrogen plan?

The Hon. A. KOUTSANTONIS: My advice is that work is one team across all the projects.

Mr PATTERSON: So what you are saying, minister, in terms of this money—the $140 million for the Port Bonython Hydrogen Hub for infrastructure—what we are seeing is a lot of it being used up in operational costs and design costs, so we are not actually getting the full $140 million going into infrastructure?

The Hon. A. KOUTSANTONIS: No. With any piece of infrastructure, when you allocate capital—and this is true of the last budget the former government delivered—the money that you had allocated towards Port Bonython included money for studies. Not all of that money was going to be delivered in terms of infrastructure; it was always planned to do the studies. You just do not go out and build multi-user common user infrastructure without doing the design work and without doing the studies.

With marine berthing, we are talking about exporting ammonia and we are talking about cryogenic frozen hydrogen down to minus 253°: two very different types of shipping. From what you are telling me, we should hypothecate that $140 million and do no studies on marine berthing—no studies.

Mr PATTERSON: No, I never said that so don't try and say that.

The Hon. A. KOUTSANTONIS: Okay, good. We are spending some money on studies, which is the appropriate thing you do in each and every infrastructure program—north-south corridor. There is money allocated towards the bidders who are doing the design work. We do not say the entire budget is just for construction. There has got to be an allocation within the entire budget for the appropriate design works. That happens in every infrastructure program, including the ones that the Marshall government delivered. I am not quite sure why there is that confusion.

Mr PATTERSON: The same program summary. In terms of the $30 million spent on supplies and services, can you provide a breakdown of how much of that was spent on contractors and how much was spent on consultants?

The Hon. A. KOUTSANTONIS: That is all published in the annual reports, and I refer the opposition to those.

Mr PATTERSON: A detailed breakdown of each contractor—

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: —and the services they provide?

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: Similarly, what value of tenders commissioned by the Office of Hydrogen Power can you provide out of that figure?

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

Mr PATTERSON: Of that figure, how much was related to paying for tenders, and what were the tenders?

The Hon. A. KOUTSANTONIS: What part was that?

Mr PATTERSON: Of the $30 million in supplies and services.

The Hon. A. KOUTSANTONIS: In terms of paying the tenders, what do you mean? Do you mean in terms of the final successful tenderer, or do you mean the tender cost? What do you want?

Mr PATTERSON: The final successful tenderer.

The Hon. A. KOUTSANTONIS: For each and every tender? If those tenders are completed, we can provide them.

Mr PATTERSON: Thank you. If we go to page 117 of the same budget paper, in the highlights and the first dot point talking about awarding contracts. These are for early works contract involvement for the electrolyser. That was for BOC.

The Hon. A. KOUTSANTONIS: What are you asking?

Mr PATTERSON: Yes, just to confirm. I will say that and then, if it is not, you can correct me. Can you also specify what the value of that contract was?

The Hon. A. KOUTSANTONIS: We will not disclose the contract cost just yet because it is still in procurement for early contractor involvement. The early contractor involvement contracts were for ATCO, BOC Linde and Epic Energy.

Mr PATTERSON: Just to confirm, this contract for BOC did not involve a deposit or payment at this stage for the electrolyser?

The Hon. A. KOUTSANTONIS: I am not going to divulge the government's procurement tactics and estimates with our contractors.

Mr PATTERSON: Surely your contractor would know if you have placed an order with them or not. Have you at least placed an order for the electrolyser?

The Hon. A. KOUTSANTONIS: We are in early contractor involvement now. I am confident that we can get through the final procurement relatively quickly. I will report back to the house more generally about it once we have completed it. While we are in the ECI phase of this procurement, I think it is appropriate and responsible for government to do everything we can to protect the taxpayer.

Mr PATTERSON: What electrolyser models have been put forward as part of the early works?

The Hon. A. KOUTSANTONIS: The two we could have chosen were PEM or alkaline. The government's preferred option is alkaline.

Mr PATTERSON: When will the design associated with the early works be completed?

The Hon. A. KOUTSANTONIS: It is going to happen this year.

Mr PATTERSON: Have you a narrower time frame than this year?

The Hon. A. KOUTSANTONIS: I am not going to put an expectation while we are in early contractor involvement that could impact price.

Mr PATTERSON: There is talk at the same page around the early contractor involvement with ATCO Australia. Can you disclose what the value of this contract was, seeing you have placed on order?

The Hon. A. KOUTSANTONIS: Again, it is ECI so I am not going to be talking about contract values.

Mr PATTERSON: Who are you competing against? You are not going to award another ECI. You have said you have put your stake in the ground and said, 'We are going with ATCO,' so I am not quite sure how that does not allow you to talk about the price of that.

The Hon. A. KOUTSANTONIS: We are down to the final group. I do not want to lock in costs in public statements that I make while we are in procurement. I do not want contractors banking prices when they can move on. As far as I am concerned, until the procurement is finished, there is a potential for savings. I am not locking in prices just to satisfy a political inquiry. I am interested in protecting the state taxpayer.

Mr PATTERSON: Just on that, you have said to the committee you have paid a $25 million deposit for the model. Which model of generator did you choose?

The Hon. A. KOUTSANTONIS: Aeroderivative. Like the ones you privatised that we owned, that you sold to two consortiums.

Mr PATTERSON: That now operate more than once every two years. You are not prepared to say what actual model it is?

The Hon. A. KOUTSANTONIS: I just told you: alkaline.

Mr PATTERSON: No, it is not. It is a generator.

The Hon. A. KOUTSANTONIS: The turbines?

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: I told you: Aeroderivative, General Electric.

Mr PATTERSON: No, the actual model number. You have put an order in for it. What is the model number?

The Hon. A. KOUTSANTONIS: You want the model number?

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: We can get you the model number. Do you want the colour?

Mr PATTERSON: If you have that available.

The Hon. A. KOUTSANTONIS: Okay. I will get you the colour. What colour would you prefer? Silver or red?

The CHAIR: Order! We are getting off the track a bit here.

Mr PATTERSON: We know what the deposit is. Can you tell us what the value of the contract is for electrolysers because presumably you have made an order for them so you know what the full price is going into that order.

The Hon. A. KOUTSANTONIS: I think I have given you my answer on this. We are just going around in circles.

Mr PATTERSON: Will the Auditor-General have access to this to go through it?

The Hon. A. KOUTSANTONIS: The Auditor-General has access to all government contracts on my understanding.

The Hon. D.G. PISONI: Not cabinet documents.

The Hon. A. KOUTSANTONIS: Of course he does not get cabinet documents. Why would he?

The CHAIR: Order! Questions!

The Hon. A. KOUTSANTONIS: Why would the Auditor-General have access to cabinet documents?

The Hon. D.G. PISONI: They had ours, they had access to ours if he wanted them.

Members interjecting:

The CHAIR: Order!

The Hon. A. KOUTSANTONIS: If the opposition is making a commitment to have their cabinet meetings held and open once they are elected, that's a courageous move.

The Hon. D.G. PISONI: We practised handing over cabinet documents to the Auditor-General—but you say no.

The CHAIR: Member for Unley!

Members interjecting:

The CHAIR: Members on my right, I don't need your assistance, thank you. Not at this point in time, anyway.

The Hon. A. KOUTSANTONIS: I will get you the model number and the colour.

Mr PATTERSON: I really care about the model number. In terms of the storage, that is with Epic Energy. I know you are reluctant to give the value of the contract, but have you made a decision on which option you are going to use at the site?

The Hon. A. KOUTSANTONIS: We are still in the competitive process for storage so I am not going to be adding any more details to that.

Mr PATTERSON: But at this stage you have not made any prepayment or deposit for the storage component of the plan?

The Hon. A. KOUTSANTONIS: Other than, I imagine, tender costs. We are involved in early engineering and contractor involvement. We are progressing with works to get up to a design standard where we can make then a choice between proponents and make an understanding at the best possible price, so I am not going to jeopardise that process.

Mr PATTERSON: In terms of the contracts, has the government signed any co-ownership agreements with BOC in relation to the electrolysers?

The Hon. A. KOUTSANTONIS: We will be ultimately the owners of the electrolysers once they are built. We are in—

Mr PATTERSON: I said 'co-ownership'.

The Hon. A. KOUTSANTONIS: Sorry?

Mr PATTERSON: Co-ownership.

The Hon. A. KOUTSANTONIS: Co-ownership?

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: What do you mean?

Mr PATTERSON: Have you signed co-ownership between the government and BOC Linde?

The Hon. A. KOUTSANTONIS: Co-ownership?

Mr PATTERSON: Yes, for the electrolysers.

The Hon. A. KOUTSANTONIS: Not to my knowledge, no.

Mr PATTERSON: Have you signed any co-ownership agreements with ATCO Australia in relation to the turbines?

The Hon. A. KOUTSANTONIS: The turbines?

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: Not that I am aware of, no. We will own the turbines.

Mr PATTERSON: Have you signed any co-ownership agreements with Epic Energy in relation to the storage?

The Hon. A. KOUTSANTONIS: We are in a procurement process for that, so I am not going to comment any further on the procurement process for the storage.

Mr PATTERSON: Has any money from the Port Bonython Hydrogen Hub been put towards the storage component?

The Hon. A. KOUTSANTONIS: No.

Mr PATTERSON: In terms of statements out, AEMO put out a statement of opportunities report that looked at reliability forecasts and stating they had not included the hydrogen power station being in operation until 2026-27. Will the plant be operational by December 2025, as promised before the election?

The Hon. A. KOUTSANTONIS: My advice is that what AEMO do is they are very conservative with their forecasts and they always allow time for slippage. It is my anticipated view that the generation will be available for the period of 2025-26.

Mr PATTERSON: When will construction of the plant start?

The Hon. A. KOUTSANTONIS: As soon as possible.

Mr PATTERSON: You said that you have not signed the contracts, they will be some stage this year, but will construction commence before any contracts are signed?

The Hon. A. KOUTSANTONIS: There will be early civil works, of course.

Mr PATTERSON: At that stage, to do early civil works, you would have made a decision around what the electrolyser will be, what the turbines will be, so why would you not have signed the contract before doing early civil works?

The Hon. A. KOUTSANTONIS: Because it is our site, we will own it and we are entitled to do civil works in preparation. For the same reason on any other procurement project, we can anticipate works in advance.

Mr PATTERSON: What circumstances would delay the plant starting?

The Hon. A. KOUTSANTONIS: The scenarios that might see a delay are any EPBC referrals that could delay the project, any shipping issues in terms of transport to get materials here, any engineering issues or design issues could cause delay, any international unforeseen occurrences could cause delay. I think there have been very good preparatory works done by the department to try to make sure we get a good line of sight with EPBC, and we are doing our work there to get our approvals. We have self-referred. That takes a process; that is completely out of our hands.

Ultimately, these projects, when they are built, if something occurs while the generator is being built in the United States in Ohio that could cause an issue. They could paint it a colour you do not like and we would have to get it resprayed; that could cost some time. But generally, they are the same sorts of issues that could occur at any type of project that is relying on imports. There are shipping delays, there are component delays that could occur. Whether these things pop up or not, you try to manage them, which is why you have a consortium.

Mr PATTERSON: Have there been any delays in the design and engineering to date?

The Hon. A. KOUTSANTONIS: I would not characterise them as delays rather than prudent questioning by government and contractors, the normal to-and-fro of what you would do. I am convinced that the generators will be here and we will have an operational plant in 2025-26 of a functional generation capacity. If there is a delay, I will have to come back to the house and tell you that, but we are still in procurement, so I cannot tell you there is going to be a delay.

Mr PATTERSON: Has the government started the process of getting the generators commissioned by AEMO?

The Hon. A. KOUTSANTONIS: I am confident we can meet all those expectations. It is a well-worn path. AEMO are very keen to see our generator operational in the appropriate time given the interconnector's massive blowout and delay and its cause of shutting Torrens Island earlier. The previous government has left us saddled with potential shortfalls of generation, so our 200-megawatt generator now is, I think, essential for system security.

Mr PATTERSON: What measures are you taking in relation to environmental considerations? You talked about going to the EPBC Act. Are there any state environmental considerations?

The Hon. A. KOUTSANTONIS: We have met all of the state environmental considerations. We have an obligation to, obviously. We will meet all the federal ones as well, but ultimately that is a regulatory process that is out of our hands.

Mr PATTERSON: In terms of offtake, what plans does the office have for hydrogen offtake from the power station?

The Hon. A. KOUTSANTONIS: Hydrogen offtake from the power station? Well, the state prosperity plan. I am glad the member has asked because, if he has seen the prosperity plan, what we are attempting to do is—stay with me here for a moment. We chose Whyalla for this facility because of the magnetite resources that are alongside it. The generator and the magnetite and Whyalla are key. For me, I think ultimately hydrogen's biggest benefit to the state will not just be about a form of storage of renewable energy but it will be the beneficiation of ore into green iron, which we can then export or use here.

They are the offtakes that we are seeking to advance, whether it is with GFG. Yesterday, the government launched its expression of interest for green steel and green iron in South Australia. We are going out globally and saying, 'If you want to build a direct iron reduction facility in South Australia, what are the gaps? What is it you need?' The government is putting in an electrolyser. The government is undertaking a feasibility study on Northern Water. The government has a permissive regime on mining for magnetite and other resources.

We have collapsed all of our approvals processes for the Hydrogen and Renewable Energy Act, six acts into one, to try to stimulate renewable energy generation being built. We are slowly and systematically and sequentially getting everything lined up for green iron. So the offtake opportunity for us is initially going to be the generator, but ultimately what we see as the big benefit for the state is the beneficiation of our own raw materials here, like magnetite, to green iron, because we want to go up the value chain.

I would encourage the opposition to consider this as a bipartisan policy because this will take generations, and decades. There was a very good decision made by the Tonkin government to insist that BHP smelt their copper here. That was an excellent decision taken by that government. It was also one that was essential given the uranium requirements that are in the ore there but, ultimately, BHP smelting copper is good for our state because it adds complexity to our state, and, of course, that is now why we want that second stage smelter built at Roxby Downs.

What we want to do now is lock in that value-add in Whyalla and Port Pirie, where we have another smelter, to make sure that we can decarbonise that value-add and use our own raw materials. So that is the offtake plan that we have in the Upper Spencer Gulf.

Mr PATTERSON: When does the minister envisage these offtake agreements being signed?

The Hon. A. KOUTSANTONIS: I cannot give you a time frame, but I am hoping relatively quickly once the electrolysers are operational, but of course the problem we have now—

Mr PATTERSON: So you are talking 2025, 2030, 2035?

The Hon. A. KOUTSANTONIS: I cannot give you a time frame, but one of the things that has concerned me, and you talked about delays earlier, is Mr Sanjeev Gupta's delay on his electric arc furnace to 2027, which has caused a lot of concern in Whyalla, and within the government and nationally as well. Obviously, an electric arc furnace and a DRI plant would be ideal for offtake arrangements, and the longer he takes the longer it will be for these offtake arrangements.

Mr PATTERSON: Have you modelled a percentage of hydrogen produced by the electrolyser anticipated for offtake?

The Hon. A. KOUTSANTONIS: We have done a lot of modelling, and I am not prepared to release that yet.

Mr PATTERSON: Is there at least a minimum hydrogen offtake volume that you would consider?

The Hon. A. KOUTSANTONIS: Well the minimum offtake is going to be from the generator.

Mr PATTERSON: Is there a minimum amount of hydrogen volume that is going to be set aside for the generator to use?

The Hon. A. KOUTSANTONIS: I will get back to you on that, but, yes, ultimately there will need to be, to operate the generator. If your point is: will there be sufficient capacity for other offtakes, we believe that there can be.

Mr PATTERSON: Talking to the plan, so at this stage will the plan have 250 megawatts of electrolyser? Is that still the intention of the design?

The Hon. A. KOUTSANTONIS: That is the intention of the government, yes.

Mr PATTERSON: Is it still the intention that the cost of that would be $220 million?

The Hon. A. KOUTSANTONIS: Yes, that is what we have budgeted.

Mr PATTERSON: What will be the capacity factor on a yearly basis for these electrolysers?

The Hon. A. KOUTSANTONIS: That will depend on the capacity factor of the generator and depend on conditions that we get in the market for purchasing electricity.

Mr PATTERSON: Okay. We will get to that generator. Will the hydrogen plan have 200 megawatts of generation capacity?

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: Will the turbines be combined cycle turbines?

The Hon. A. KOUTSANTONIS: No, they are aeroderivative, as I said earlier.

Mr PATTERSON: Why has the government walked away from its commitment to combined cycle turbines?

The Hon. A. KOUTSANTONIS: We did a tender process. We are getting our 200 megawatts, and the technology improvement that we got from General Electric made the case compelling.

Mr PATTERSON: Now, of course, combined cycle turbines are more efficient than open cycle turbines, so why would you have chosen open cycle?

The Hon. A. KOUTSANTONIS: We worked through a procurement process and found that it would be advantageous for us to have aeroderivative generators.

Mr PATTERSON: Will those turbines cost $342 million as budgeted?

The Hon. A. KOUTSANTONIS: That is my understanding, yes.

Mr PATTERSON: Is that the reason that you chose open cycle turbines over combined cycle, because the open cycles were cheaper—and so you couldn't meet your election commitment of combined cycle in the budget?

The Hon. A. KOUTSANTONIS: No, we want to have the ability to run these things on dual fuel. These things can run on gas and 100 per cent hydrogen. An aeroderivative would be the best way for us to respond as a peaking generator into the market quickly.

Mr PATTERSON: Talking of that, there is a provision for hydrocarbon supply into the plant, so are you looking at running them on gas as well?

The Hon. A. KOUTSANTONIS: No, we want to run them on hydrogen but they will be able to run on gas. It is the same way with the backup generators that we bought. They can run on natural gas or they can run on diesel. These things can run on natural gas or they can run on hydrogen.

Mr PATTERSON: Previously, you have said to the committee that you are only using the hydrocarbon to start the turbines. Now you are saying, 'Actually, we're looking at using them—

The Hon. A. KOUTSANTONIS: No, you are saying that.

Mr PATTERSON: That is what you said to this committee last time. You said the hydrocarbon will only be used just to start the turbine and then after that it is 100 per cent hydrogen.

The Hon. A. KOUTSANTONIS: You are misinterpreting what I said. I said to you that these generators will have the capacity to run on both fuels. It is our intent to run it on hydrogen.

Mr PATTERSON: Okay, so we will talk about that capacity factor. What will be the capacity factor of these generators?

The Hon. A. KOUTSANTONIS: That will depend on conditions.

Mr PATTERSON: Surely you have an envisaged range?

The Hon. A. KOUTSANTONIS: They can run at 100 per cent or they can run at 20 per cent or they can run at 2 per cent. It is an operational decision. It is not something you plug in at the beginning.

Mr PATTERSON: We were talking about running on natural gas or hydrogen. Are they going to be running on 100 per cent hydrogen? Are they going to be running on a blend of gas and hydrogen?

The Hon. A. KOUTSANTONIS: They can do either. This is the beauty of what General Electric have been able to do, and this is why we are so keen on what General Electric are doing. We are able to showcase that these things can be 100 per cent renewable, run on zero emissions, which is what we are attempting to do. The benefit of that means that other kit that is in the field now could be potentially augmented to run either on blends or on hydrogen, which will mean that rather than having to rebuild infrastructure and rebuild kit—rebuild transmission lines, rebuild pipelines—you could have gas-fired turbines around the country operating on blends of hydrogen from decarbonising or going to complete hydrogen. That is why we want to showcase that our generator can operate on 100 per cent hydrogen and make a virtue of it, despite you calling it experimental.

Mr PATTERSON: Is it your intention to run on 100 per cent hydrogen all the time, not just as a showcase?

The Hon. A. KOUTSANTONIS: That is our intention, yes.

Mr PATTERSON: In terms of storage, is it still your intention for 3,600 tonnes of hydrogen storage?

The Hon. A. KOUTSANTONIS: We will try to optimise as much storage as we possibly can.

Mr PATTERSON: The tender put out was for 100 tonnes. Is that—

The Hon. A. KOUTSANTONIS: We will optimise as much as we possibly can.

Mr PATTERSON: Will the solution have at least 100 tonnes of storage, as claimed?

The Hon. A. KOUTSANTONIS: We are still in early contractor involvement and we are still doing the engineering and we are still out to procurement, so it would be inappropriate for me to make these broad statements.

Mr PATTERSON: That was what you promised. The election commitment was to have that storage. You have changed it and now you are looking to change it again.

The Hon. A. KOUTSANTONIS: What we have said we are going to do is we are going to have a form of storage, we are going to have a generator, and we are going to have electrolysers. We aim for them to be certain sizes. We are doing all that, and we are trying to get it done. We are out to procurement now. We are doing it; we are out there. This is not something that is a concept.

Mr PATTERSON: Will the storage be liquefied, the hydrogen?

The Hon. A. KOUTSANTONIS: That will depend on the procurement process.

Mr PATTERSON: So you are still aiming to have liquefied hydrogen now? Previously you have said that it is not going to be, so that is back in the mix, is it?

The Hon. A. KOUTSANTONIS: We might get a better solution some other way. Why wouldn't we accept that?

Mr PATTERSON: Are the early contractor works working on that at the moment?

The Hon. A. KOUTSANTONIS: They are working on delivering their tender outcomes.

Mr PATTERSON: Are you able to at least advise how many hours of storage of hydrogen there will be at the site?

The Hon. A. KOUTSANTONIS: That will depend on the operation and the capacity factor you operate at.

Mr PATTERSON: So we have spent $126 million this year and we are still really none the wiser about what is going on?

The Hon. A. KOUTSANTONIS: No, you are getting a generator, electrolysers and storage, and you are getting a renewable plant built at Whyalla that will facilitate for us the ability to decarbonise steel and decarbonise power production and soak up renewable energy in the middle of the day—when your plan was simply just to turn it off.

Mr PATTERSON: You said before you were considering either pipes or storage. In regard to the option of pipes, where are those pipes modelled to go?

The Hon. A. KOUTSANTONIS: In and around the facility.

Mr PATTERSON: Are they going to be connected to any other third parties?

The Hon. A. KOUTSANTONIS: Well, we will wait to see how the procurement goes. There is the potential for uptakes, there is the potential for others who want to get access to this; it is a valuable commodity. We will optimise the ability of the government to maximise its operational revenue—of course we will.

Mr PATTERSON: I refer to page 117, dot point 6, talking about the State Prosperity Project, which you have alluded to in some way, so I do not want to go over that old ground, but what are the timelines involved around the expansion of Olympic Dam?

The Hon. A. KOUTSANTONIS: Olympic Dam—that is a matter for BHP. Ultimately, what we want them to do is we want them to start the decline at Oak Dam, we want them to ultimately purchase a second-stage smelter for Olympic Dam and we would like them to obviously increase their operations dramatically at Olympic Dam. That is why they spent $10 billion on purchasing Oz Minerals. That purchase gives them the ability to create a province. Oak Dam is going to be one of the great discoveries in South Australia, and so those timelines for BHP are their own but we are trying to work to make it as hard as possible for them not to press the button.

Mr PATTERSON: I was going to ask about Oak Dam separately, but you have brought that in together. So Oak Dam, at the moment, they are doing exploration on that. Can you give us some idea about timelines? I know it is for BHP, but the media commentary has been around 2030. Is that feasible?

The Hon. A. KOUTSANTONIS: Edgar Basto said at a Committee for Adelaide event that he would like to have Oak Dam potentially operational by 2030. That would be record-breaking. We are willing, ready and prepared to go through a very, very good regulatory process to make sure we can do what we can to improve that but, again, it depends on them. The encouraging thing for me is that they are very keen on starting the decline.

Along with the Premier, the Treasurer, the education minister and the Deputy Premier, I was able to visit the site at Oak Dam where their exploration was going, and actually drove past where the decline would begin for Oak Dam. So they are in that process now. It is hard for me to give you a time frame on what they are claiming they are going to do. 2030 seems really, really fast—that is six years away—but if there is a company that can do it, it is them; if there is a company that can let you down, it is them.

Mr PATTERSON: You talk about the opportunities of the expansion of Oak Dam. Would that be before 2030 or is that also after Oak Dam?

The Hon. A. KOUTSANTONIS: It would not be an expansion, it would be the beginning of mining.

Mr PATTERSON: Did I say Oak Dam? Sorry, I meant Olympic Dam when I said that. My apologies. So with Olympic Dam and the opportunities there, could that precede Oak Dam?

The Hon. A. KOUTSANTONIS: Yes, that is the advice I have. The advice I have is that we would like to see the expansion beginning now, as quickly as possible.

Mr PATTERSON: Is that expansion dependent on water? Can these projects go ahead without the Northern Water project?

The Hon. A. KOUTSANTONIS: They do have water coming out of the Great Artesian Basin and they have their own reverse osmosis facility in place there, but ultimately they are going to need more water, and they are going to need more water quickly. We recently had a MoG change, where Northern Water was brought into my office as an attached office to the Department for Infrastructure and Transport, and I am very keen to try to get that first stage done as quickly as possible.

But, ultimately, we are walking a tightrope here, because we have to build it and make sure that the capital costs are not so high that it requires an operational subsidy, and that the water is affordable for BHP to actually use and maintain, with some redundancy in place, depending on copper prices and how they move—that they can actually produce copper at a competitive rate out of Australia. So it is a very, very challenging task.

Mr PATTERSON: In terms of the goals of the state plan that you have put in place it says it can add a significant amount to the gross state product, upwards towards $5 billion and support about 4,000 full-time jobs. How much of that $5 billion is based upon these terrific opportunities at Olympic Dam and Oak Dam?

The Hon. A. KOUTSANTONIS: I think a large part of it is, but also the opportunity for green iron. There are two major streams here, there is copper and there is iron, and ultimately I would like to see our gross state product grow more than just the $5 billion from this State Prosperity Plan, because in my recent visit with Danieli their view was that the Middleback Ranges could host five 2½ million tonne per annum DRI plants. That is a lot of processing of ore into a beneficiated product, which is lots of jobs, which would add a lot to gross state product. There is plenty of capacity there for it. Like I said, we have done that sequentially: the Hydrogen and Renewable Energy Act, Northern Water, the electrolyser, getting hydrogen there; the Prosperity Plan and the EOI. This is all about a sequential approach to developing a beneficiation model for our ores.

Exporting ore gives you a good standard of living—I am not opposed to it, I think it is a good idea. If you can add value to it in your own state you can actually create a lot more jobs. So I actually think the Prosperity Plan is the type of plan that the state has been waiting for. It is a plan that a lot of people in Adelaide might not be able to ever see, but the truth is the wealth it could create for the state in the Upper Spencer Gulf could be dramatic and it could be a boom for regional South Australia, the Eyre Peninsula, the Upper Spencer Gulf and the Mid North.

Unlocking the Gawler Craton has always been an aspiration of mine and the former Rann government, the Weatherill government and now the Malinauskas government. We believe copper and our copper production is linked to our future prosperity and we have got to do everything we can to try to unlock it. That is why we started the plan to seal the Strzelecki Track, that is why we started the plan to put roads in the Upper Mid North, that is why we encouraged OZ Minerals to move their headquarters here to Adelaide, despite criticism by former Premier Marshall for doing so. Those plans were all about getting more copper investment, more exploration in South Australia. That is why in my last year as Treasurer I spent over $20 million in aeromagnetical surveys over the Gawler Craton, which found anomalies like Oak Dam. We want to open up South Australia for more mining. We think mining is a good part of good diversified industry for our state, and I know members, some members, support it.

Mr PATTERSON: Getting back to the crux of the question: how much of that $5 billion at the moment is based upon Olympic Dam and Oak Dam?

The Hon. A. KOUTSANTONIS: I think I have answered that, haven't I?.

Mr PATTERSON: You haven't. Is it 80 per cent, 90 per cent, 50 per cent?

The Hon. A. KOUTSANTONIS: I think I have answered your question.

Mr PATTERSON: If we go to Budget Measures Statement, Volume 5, page 28, it has got there 'Whyalla Steelworks transformation'.

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: We are in the process—obviously Whyalla has been through a lot of challenges the last few months with the steelworks there and it seems like they have overcome one of the hurdles in terms of that furnace. So this money that is allocated here, $800,000 in 2023-24, $800,000 in 2024-25, is that mostly to help out with getting the steelworks back online, or is this for a separate project?

The Hon. A. KOUTSANTONIS: It is the Steel Task Force. The Steel Task Force was established by me, I think in 2015. As you will see at the dot point below, we are putting more money into it. It is case management. It is understanding exactly what is occurring at the steelworks and trying to offer expertise. It will inform the government. A lot of it will be consultancies and advisory services; we are not experts in blast furnace technology.

We have a $50 million fund that we put into contingency when I was Treasurer. That money is sitting there. Obviously, if GFG want to expend that money, we are going to need to get some advice about its effect and its impact, so this is about making sure the Steel Task Force has the resources it needs to manage that transformation.

Mr PATTERSON: It would be fair to say that with the challenges that Whyalla is going through at the moment with the furnace, a lot of the focus is on that, so maybe if you can give an update on the proposed electric arc furnace that was meant to be there and also the direct reduction iron plant?

The Hon. A. KOUTSANTONIS: Sure. That is not mentioned in the budget papers but I think it is important that the committee be made aware of it. I think it is a good question by the shadow minister and I know he has a concern about this as well. The blast furnace will not go through a reline again, so this is the last blast furnace that will service Whyalla. It needs to get back up to temperature. We need to get it producing steel again. Families in Whyalla are hurting through the loss of work and shiftwork, and it is causing a lot of disruption in Whyalla.

The electric arc furnace, through the big reveal—one of the many big reveals that Mr Gupta has given South Australians and Australians—was meant to be in place by 2025. That electric arc furnace costs about $80 million, with an associated infrastructure taking the total to $250 million for an electric arc furnace, in today's money. That, obviously, will escalate as time goes on.

As time goes on, Mr Gupta has now said that he is planning 2027 for an electric arc furnace. I look forward to that investment by Mr Gupta. The state government stands ready to assist him, as does the commonwealth government. The commonwealth government has allocated over $62½ million, I think, or $63 million, around that. We have $50 million. That is $112 million of taxpayer money that we are prepared to put into the steelworks to get this thing producing steel long-term.

The problem with an electric arc furnace is that it requires to operate on scrap, and there is insufficient scrap steel in this state to operate at a million tonnes per annum or 2½ million tonnes per annum. You would need to have more scrap, so that would require some—

Mr PATTERSON: That is a big range—not to cut you off. So is it one million or 2½ million?

The Hon. A. KOUTSANTONIS: The electric arc furnace?

Mr PATTERSON: Yes.

The Hon. A. KOUTSANTONIS: That is a matter for Mr Gupta. I am hoping for a 2½ million tonne electric arc furnace; he might build a million tonne electric arc furnace. I would have thought it would be cost-effective to do a 2½ million tonne electric arc furnace, for which Danieli are renowned for their technology. The state government's policy has always been—from the very beginning, from the receivership of Arrium—that the virgin ore must be linked at all stages to the steelworks. We can never allow that separation. That is critical for us, to make sure that the magnetite mines and the hematite mines that are in the Middleback Ranges are linked always to the steelworks. We do not want them separated at any time.

For an electric arc furnace, we want to see a DRI plant built as well. A DRI plant is a much bigger expense: it is close to over a billion dollars, I understand, a DRI plant. There would need to be works done at the mines as well, for brand-new pellet plants. They are a considerable investment. My understanding is that the GFG operations in Australia are the most profitable and the jewel in the crown of his operations globally. From what I can tell, from reading their annual reports and what we see, there are sufficient funds within that operation to begin this transformation.

I think we are all sick of the big reveals and I think it is time now we started seeing some action. I think that is what this government and the Prime Minister are very keen to see. We are keen to see some action and we are keen to see some investment. The DRI plant is about, obviously, direct reduction iron, which I think is the holy grail. That is exactly what we want. We want direct reduction iron occurring in South Australia, using either hydrogen or natural gas. Obviously, there are shortages of gas at Whyalla. The lateral is at capacity, so that, potentially, could need upgrade. There are lots of moving parts here to sustain the long-term operation. I can see the member for Unley eager to read out the questions on notice.

Mr PATTERSON: The omnibus questions? You are okay; you are off the hook.

The Hon. A. KOUTSANTONIS: We are okay?

Mr PATTERSON: We will do it another time, because this is very important for the state. I think we need to spend the last minutes on this. You said that the government has put up $50 million. Is that the extent of it, or is there a possibility that you will have to provide more? That seems like a lot of money to get the whole electric arc furnace DRI in place.

The Hon. A. KOUTSANTONIS: The electric arc furnace is $80 million, the associated crane works and infrastructure around it take it to a total cost of $250 million. These are public figures. I have not seen any actual tender figures that GFG have conducted on this, so they could potentially get a better price; I do not know. If you think about it, the state government has put up $50 million and the commonwealth government have put up $63 million. That is nearly half the total cost for an upgrade of an electric arc furnace.

Mr PATTERSON: Are you putting that up on completion or before?

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

Mr PATTERSON: So, it has to be completed?

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: Will the governments provide the guarantee to allow GFG to raise capital or loan funds to purchase the electric arc furnace or the direct reduction iron?

The Hon. A. KOUTSANTONIS: He has made no such request.

Mr PATTERSON: Good to see. In terms of the electric arc furnace, you have been over to Italy. The promise now is for it to be operational by 2027. What evidence do you have that that is going to be the case and that we are not going to be faced with further delays in the future?

The Hon. A. KOUTSANTONIS: I have a press release from Mr Gupta.

Mr PATTERSON: We know in that press release he advised one of the reasons was because hydrogen will not be available before 2027. I am just trying to work it through. You have the electric arc furnace that relies on scrap steel. Can that operate in the absence of a DRI plant?

The Hon. A. KOUTSANTONIS: Yes.

Mr PATTERSON: Without using scrap steel only, or can it only operate if there is scrap steel?

The Hon. A. KOUTSANTONIS: If you read Mr Gupta's press release, they claim the cause for the delay is that they have changed their model to a hybrid model of DRI, virgin ore and scrap. Their conclusion is that the delays have been caused by a lack of availability of scrap so, therefore, they need a hybrid option, and the hybrid option is virgin ore, DRI and an electric arc furnace.

Mr PATTERSON: In terms of the cost you outlined to the committee, would that potentially cost more? It sounds like it is more advanced.

The Hon. A. KOUTSANTONIS: That would cost a lot more, yes.

Mr PATTERSON: But that would then allow the opportunity to use the ore that is currently used in the process without DRI.

The Hon. A. KOUTSANTONIS: That is right.

Mr PATTERSON: Have you been provided with an update or has the department been advised when an expected DRI plant would come online at Whyalla?

The Hon. A. KOUTSANTONIS: That was 2027 in the press release that Mr Gupta released.

Mr PATTERSON: Is there any indication around this DRI plant that the process will run on natural gas or hydrogen? Were there any indications around that as well?

The Hon. A. KOUTSANTONIS: The beauty of the Danieli facilities is that they can operate on both. Using traditional coking coal to beneficiate iron, you will get, with every tonne of steel, two tonnes of carbon. If you use natural gas, you can drop that to about 400 kilograms of carbon, so a dramatic reduction, down to 0.4. If you use hydrogen, you get that right down to zero. So, two tonnes, 2,000 kilograms, down to 400 kilograms of carbon for every 1,000 kilograms of steel is still a dramatic reduction in carbon. Then, you can either blend hydrogen, or use hydrogen, which can get your numbers right down as well.

The CHAIR: Have you finished your answer, minister?

The Hon. A. KOUTSANTONIS: Yes.

The CHAIR: The allotted time having expired, I declare the examination of the Department for Energy and Mining and the Office of Hydrogen Power SA complete. The examination of the proposed payments for the Office of Hydrogen Power are now complete. The examination of the proposed payments for the Department for Energy and Mining are adjourned until Monday 24 June. I thank the minister and his advisers for their contribution, and I also thank the member for Morphett for his questions.

Sitting suspended from 10:31 to 10:45.