Integration of Carbon and Energy Policy

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (14:07): I seek leave to make a ministerial statement.

Leave granted.

The Hon. A. KOUTSANTONIS: The key to a coordinated approach to the transition of our electricity supply is the integration of carbon and energy policy. At the COAG energy ministers' meeting in December 2015, the council recommended unanimously that officials be tasked with developing a nationally cooperative effort to integrate energy and carbon policy within the National Electricity Market. I congratulate Prime Minister Turnbull on the appointment of the Hon. Josh Frydenberg as the new Minister for the Environment and Energy. I wish Mr Frydenberg well and offer our cooperation in his new role.

The appointment of a single federal minister to oversee energy and environmental issues will help ensure a coordinated approach during the energy market transition and continues the important work begun at the last Council of Australian Governments meeting. A properly functioning national market for electricity will be essential for the success of this policy integration and implementation.

We saw the impacts of an outdated national electricity market on South Australia over the last few weeks, when the scarcity of uncontracted gas, extreme cold and infrastructure upgrades to the interconnector left some South Australian businesses with unacceptable energy prices. Some in the media and other commentators used this perfect storm to direct the blame directly at alternative energies like wind and solar. This could not be further from the truth.

Members interjecting:

The Hon. A. KOUTSANTONIS: I note the laughter of members opposite. A confluence of events conspired to leave South Australia vulnerable while work on the interconnector continued. High gas spot prices, availability of tradable gas, gas storage issues in Victoria, unusually high winter demand for gas and energy on the east coast and weather conditions not conducive to wind generation or solar energy all meant we were highly reliant on expensive peaking generation.

The government acted immediately and encouraged dormant gas-fired generation to come online into a market that offered limited incentive for them to do so. In short, the National Electricity Market failed when faced with conditions it was unable to react to or send market signals into to drive a satisfactory outcome for consumers. The electricity market needs to ensure low carbon generation capacity can be developed in the optimum location for the fuel source and reach demand centres to increase competition in wholesale electricity markets, breaking up the privatised monopolies, and provide pricing outcomes in the long-term interests of consumers.

South Australia is uniquely placed to assist in fulfilling the nation's bipartisan policy aspirations of meeting the renewable energy target of 33,000 gigawatts per annum by 2020 and the Paris carbon abatement agreements committed to by the Turnbull government. We can maximise our economic advantage and benefit our economy by unleashing the power and potential of our renewable energy resources across the National Electricity Market.

This is why the government recently announced a contribution of half a million dollars towards a feasibility study to explore greater energy interconnection with the Eastern States. Stronger energy interconnection to the Eastern States, to either New South Wales or Victoria, will improve wholesale market competition and power system security for South Australia by reducing our reliance on the Heywood interconnector.

I advise the house that the South Australian government is also pursuing a number of other activities to address the challenges associated with our transitioning electricity supply and to ensure we have a properly functioning national market into the future. To ensure the Australian Energy Market Operator has the appropriate mechanisms to manage supply and demand for electricity, I proposed a rule change request which has recently resulted in amendments to the National Electricity Rules to ensure that the market operator can continue to contract for reserves if there is forecast to be inadequate generation capacity to meet periods of high demand. Silence. I also submitted a new rule change request which seeks to ensure—

The SPEAKER: As there should be during a ministerial statement for which leave is given. I call the Treasurer to order.

The Hon. A. KOUTSANTONIS: Yes, sir. I also submitted a new rule change request which seeks to ensure that electricity frameworks provide the South Australian Energy Market Operator with the necessary flexibility to manage security challenges that may emerge during the electricity supply transition. The request responds to calls for a mechanism in the rules to deal with the declining inertia in the South Australian electricity system.

I have also called on the Essential Services Commission of South Australia (ESCOSA) to conduct a series of inquiries to address challenges associated with our electricity supply transition. ESCOSA is also reviewing the regulatory and price regulation agreements for small-scale operations in markets, including the sale or supply of electricity outside the national electricity market, and this will ensure that consumers are protected as new locally distributed electricity markets emerge.

More recently, I have tasked ESCOSA with providing advice on whether the electricity price increases by major retailers in South Australia are justifiable. I will also be seeking to change the national electricity law to enable the Australian Energy Regulator to periodically and systematically monitor the performance of the electricity wholesale market. The regulator will be able to analyse whether market features are observed which could be detrimental to an effectively competitive market environment.

The SPEAKER: For interruptions during that ministerial statement, I call to order the leader, the deputy leader, the members for Morialta, Schubert, Hammond, Chaffey and Unley. I warn for the first time the deputy leader and the members for Chaffey, Unley and Hammond. I warn for the second and the final time the deputy leader and the member for Hammond. Minister for Agriculture, Food and Fisheries.