Bills

National Electricity (South Australia) (Australian Energy Regulator - Wholesale Market Monitoring) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 28 September 2016.)

Mr VAN HOLST PELLEKAAN (Stuart) (11:02): I rise on behalf of the opposition to debate this bill, and I indicate that I am the opposition's lead speaker on this matter. I also make it clear for people who are listening or who follow this debate in Hansard that, while at the moment we are debating the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill, this bill is part of a broader body of work that the government is undertaking at the moment and is closely connected with the Statutes Amendment (National Electricity and Gas Laws—Information Collection and Publication) Bill, which I expect this house will debate next.

People who are interested in this topic, and who are following what is discussed and said in this place, may well want to look at the transcripts of both those to get the complete picture because, while they are two separate bills, there is a lot of interrelationship between the two of them. This bill, the one we are dealing with at the moment—the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill—is essentially about conferring on the Australian Energy Regulator a wholesale market monitoring and reporting function.

As members of this house would know, the AER has many functions and one of them is to ensure that laws and regulations are being followed appropriately by participants in the electricity and broader energy market. While the AER currently has the responsibility to provide oversight, what the government is proposing to do at the moment is to give it an obligation of market monitoring and, very importantly, reporting.

The opposition supports this bill. I note that the consultation that was undertaken by the COAG Energy Council received no negative feedback whatsoever. There were a few small queries and questions as to why it was necessary, whether it will work effectively, was it really going to achieve what the government said it wanted to achieve, but I am not aware of any energy market participant who raised any specific objection whatsoever to the government pursuing this path and trying to improve the completely unacceptable situation we have with regard to electricity in our state at the moment.

The government wants the AER to systematically monitor the performance of the wholesale electricity market in relation to effective competition and perform other monitoring functions that relate to offers and prices within the wholesale electricity market. That seems pretty straightforward and I have no concerns with that whatsoever, but it is probably worth going through how we got here. The minister has made it very clear that this bill has come before the house in an effort to improve the lot of South Australians, both household and commercial users, whether they be small or large, and that the government wants to try to make things better for South Australian electricity consumers.

Back in July, Mr Speaker, you will remember that we had a very significant price spike in the electricity market in South Australia. At that point in time, while there were quite a few factors that all came together, one of the key factors was that there was extremely high wind velocity and high electricity demand at the same time. That meant that some of the wind farms had to shut down and that meant demand far exceeded supply, prices shot through the roof and a group of some of our state's most important companies—not the only important ones but some of the most important ones, including Arrium, Nyrstar, BHP, Adelaide Brighton Cement and others—came to the government and said, 'This is completely unacceptable. The situation our state is facing has got to be addressed.'

It is worth making crystal clear for everybody that in South Australia our largest employers are typically also our largest electricity consumers, and so it is no surprise that we have the highest electricity prices in the nation and, simultaneously, the highest unemployment rate in mainland Australia at the moment and, in fact, quite often including Tasmania as well. When those companies came to see the government, they said, 'Look, you've got to do something. This is completely unacceptable and it cannot continue.'

It was also brought to light, through the media and via the opposition and many different commentators, that the government up until that point had ignored warnings of this type of price spike and this type of reduced reliability of electricity supply. These warnings had come quite publicly, quite freely and quite openly from Deloitte Access Economics, from AEMO itself, from Frontier Economics and from other organisations.

The opposition was aware of these warnings. I say quite openly that I do not think anybody in the opposition, myself included as the shadow minister, considers themselves to be an expert in electricity, far from it, but I certainly heeded these warnings, and the opposition and the Leader of the Opposition certainly heeded these warnings, and we tried very hard to bring them to the government's attention. The government ignored those warnings but, thankfully, when that group of large companies went to the government and said to them directly, 'Something has got to be done,' the government did listen then, and I am pleased that those companies did that.

Interestingly, Alinta also warned the government of the increases in prices that would come to our market during discussions between the government and Alinta about, at that point in time, the potential closure of the Port Augusta power station and the Leigh Creek coalmine. Alinta said to the government, I am led to believe, that if the Port Augusta power station closed prices across the state would increase very quickly and be very high and that there would also be a marked decrease in the reliability of supply of electricity.

I am advised that the government's response at the time was that they did not believe that was the case and that it believed that it was Alinta trying to negotiate, trying to improve their position with regard to negotiations seeking help, etc. The reality is that this is exactly what has happened. Since Alinta announced the closure of its Port Augusta power station, forward contract prices in South Australia, on average, have gone up 72 per cent. Since Alinta actually closed the power station in May this year, on average spot prices have gone up 105 per cent across the state.

Alinta's warnings, and the warnings of Frontier Economics, Deloitte Access Economics, AEMO, etc., have all proven to be true. We have had a more than doubling in the spot market prices, on average, from the period before the closure compared with the period after the closure in South Australia. That has hurt South Australian businesses and South Australian employers enormously.

There is still a huge impact of that which is yet to flow through to household electricity prices because until now most household consumers have been protected by the agreements they are on with their retailers and they have not been subject to these significantly high prices. The next time that the prices are reviewed, this more than doubling in the spot market will flow through to those households. So, it is a double-edged sword. I welcome the government doing what it can, but it has come way too late: it could easily have been addressed many months ago.

Alinta was in discussions with the state government about the potential closure of the Port Augusta power station in the first half of the 2015 calendar year, so the government has had a very long time to address these issues, yet today we are here dealing with the legislation the government has brought forward to try to deal with it.

When this group of companies came and spoke to the government, and when the government said, 'Okay, yes, now we're starting to understand. We ignored the warnings of these independent economic commentators, we ignored the warnings of the opposition, and we ignored the warnings of Alinta, but, yes, we now get it.' The first thing the government did was try to blame lots of other people, lots of other organisations. It blamed privatisation, Mr Speaker, and you would have heard that many times.

Let me say very clearly that South Australia and Victoria are both privatised electricity markets. They were both privatised at almost exactly the same time, yet South Australia has the highest electricity prices in the nation and Victoria has the lowest electricity prices in the nation—so it has nothing to do with privatisation.

The government tried to blame gas supplies. The government said very clearly that it thought the market was not fair and open and operating the way it should with regard to the supply of gas into electricity generation businesses. The government tried to blame the electricity market itself and talked about generators entering and leaving the market in a way that would be opportune for those generators so that the prices they would receive would be as high as possible.

So, the government basically tried to blame everybody else at the time, and then the government said—and what we are debating at the moment is part of this—it would do three key things. It would look at trying to improve market rules and regulations, trying to improve the electricity market essentially, and that is what this bill is seeking to do and that is what the next bill that we will debate shortly will also be part of. That comes with COAG agreement, and I respect that.

The second thing the government said it would do is provide $24 million to the gas industry to encourage the gas industry to produce extra gas, ideally to produce cheaper gas so that we can have cheaper gas going to electricity generation, and hopefully that would flow through to cheaper electricity prices. That sounds good, and not surprisingly the gas industry welcomed that with open arms. The gas industry thought $24 million completely unexpectedly into their industry—

The Hon. A. KOUTSANTONIS: Point of order, Mr Speaker: relevance. This is a COAG energy reform. The bill is about wholesale market monitoring. The shadow minister is talking about the gas market.

Mr VAN HOLST PELLEKAAN: This bill we are debating is one of three attempts the government is making, so I think it is important to talk about the other two.

The SPEAKER: Yes, the member for Stuart is always most helpful to me in shaping my rulings, and despite his submissions I am going to allow him to continue.

Mr VAN HOLST PELLEKAAN: Thank you, Mr Speaker. While the bill we are debating at the moment is part of the government's response in the first of the three efforts that it is making, as I was saying, the second is $24 million towards the gas industry. The government has not made public how it intends to spend that $24 million. People from the gas industry tell me that they still do not know. The government may have shared that with some participants in the gas industry but certainly there are plenty of them saying that they still do not know what that money is for, how it is going to produce cheaper gas or cheaper electricity, but let's hope it does.

The third response that the government had to its realisation that there was actually a very serious issue that needs to be dealt with in South Australia in regard to electricity prices and reliability is that it said it would offer 75 per cent of its own government consumption to a new generator supplier into the market, so 75 per cent of its own business would be offered over a 10-year contract. That seems like a pretty good thing to do on the face of it, but when you actually look at the numbers the government's electricity consumption is approximately 484 gigawatt hours per year; so 75 per cent of that is 363 gigawatt hours per year approximately. That is far too small an amount to attract a new generator to be built in South Australia, unfortunately, and the 10-year offer rather than the 20-year offer the industry would seek is also not nearly long enough.

I understand that the government today is briefing industry participants, people and companies who would tender for this business, and I look forward to learning more about what the government wants to do. Certainly generators have made it very clear to me in advance of the briefing—which I think might even be going on as we speak, as I believe it started at 10.30 this morning—that the government offering 75 per cent of its own use is not going to be nearly enough to attract a new generator into the market.

I am still extremely concerned that none of these three strategies that the government has offered will actually provide South Australian households and South Australian commercial consumers with much hope whatsoever. I would like to point out, though, that on that third offer, the size of what the government is offering would fit very neatly with the 110 megawatt capacity solar thermal power station development that has been proposed to the government. That would actually fit very neatly.

I also highlight that the Treasurer announced over the weekend that the government has received $42 million of surplus over and above the $258 million that was predicted under the last budget, so the government has $42 million available to it to use, which it did not expect to have at the time the budget was released. That money could be extremely well placed to contribute to solar thermal power generation in Port Augusta.

That then would make the third of those three planks that the government is offering potentially useful because that is the size, roughly, of a power plant. They would still need a 20-year contract instead of a 10-year contract, but that might actually work very well. It is for the Treasurer and the Premier to determine how best they are going to spend that money. I know that they would have many options, but that is certainly one of them. I encourage them to consider that option very seriously because that would be not only useful with regard to encouraging a new generator into the market, as the government wants to do, but also very positive with regard to supporting the transition from fossil fuels to renewable energy.

The key is that we need renewable energy with storage. Until we can store renewable energy at large scale, there is only so much of it that we can have in our energy mix without making the problems we have in South Australia even worse. That is something for the Treasurer to consider, and he may well have already. The Premier might well be thinking about that already. That is essentially what the government's plan is: to try to change the market, try to make the market more transparent, try to support the gas industry to provide cheaper gas—and ideally that will flow through to cheaper electricity—and to offer a share of its own use towards a new generator.

Coming back to this bill and the first of those three prongs of the government's strategy, unfortunately I am not convinced that this is going to work, but I am more than supportive of the government having a go at this. I think there is a good chance that it might add red tape. I think there is a good chance it might add extra cost to the AER, which, of course, must flow through to all consumers. Certainly, there is no harm in this bill that I am aware of, apart from that. I think it is important that the government is given every opportunity to get on and address the electricity crisis that we have in our state.

The opposition will not stand in its way with regard to this bill. Unfortunately, we have the highest electricity prices in the nation: something must be done. We also have the most unreliable electricity in the nation. I have a very strong view that that is because the government has the mix wrong in the generation. That generation mix is all coming forward from private industry. I respect the fact that the government is not the generator, but the government does have the opportunity to manage that mix as other states have done much, much better.

I say again that Victoria, a privatised state, has the mix much better and the cheapest electricity prices in the nation. We have the highest electricity prices in the nation. The opposition will support the government in every way possible to address this issue, and if the government believes that this bill will provide cheaper electricity to South Australia, then we will give it every bit of support that we possibly can to allow that to happen.

Mr PICTON (Kaurna) (11:24): I rise to support the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill, as introduced by the Minister for Energy. To begin with, I note that this bill has come about from a large amount of work across the states and territories. As members should know, we are the lead legislator across Australia in terms of energy policy for the National Electricity Market, and so our bringing a bill to amend the legislation in this regard will flow through to other states.

This is a proposal that has been supported not just by this state but also by states across the country and the commonwealth government. The Liberal commonwealth government has been very supportive of this move in terms of wholesale market monitoring, as have other states, such as the Baird government in New South Wales, as well as other Liberal governments, such as the Tasmanian Liberal government. I think that it is important that we give these extra additional powers to the Australian Energy Regulator to ensure that we have better confidence that the market is operating properly at the wholesale generation level.

That is not something that we necessarily have complete confidence in at the moment. I think this particularly affects states like South Australia where there is a small number of market players and they wield quite significant powers. That is why we often face the brunt of those market operators wielding those powers. The Australian Energy Regulator having more powers to investigate and to make recommendations about how we can have a better market, to protect both consumers in South Australia and also large industrial consumers of energy in South Australia, I think is going to be very important.

Why do we need this protection? This is not something that we necessarily needed 20 years ago, when we owned the generators and we owned the wholesalers and we owned all our network assets. I am often reminded by the member for Schubert that Sir Thomas Playford looks down upon us, sitting right above the member for Elder, who of course led the introduction of the Electricity Trust of South Australia as a government asset, as an asset for the people of South Australia. Sadly, that was privatised in the 1990s by the Olsen Liberal government.

That is something that has just been defended in the last 20 minutes by the member for Stuart in his conversation with this house. Because our electricity assets have been privatised in South Australia, we do not own the generators, we do not control the market and we do not have the ability to provide those protections without ensuring that there are protections within the market, and we need to take every step that we can to make that happen. This is one of those elements to doing that. This is combined with a number of other things that the government is doing to ensure better competition in the electricity market in South Australia.

First and foremost is that, as has already been mentioned, we are offering to the private sector 75 per cent of the government's electricity load to attract a new competitor into the wholesale generation market in South Australia. We think that that is particularly important to ensure that there is another player who can offer long-term or medium-term contracts for people to provide dispatchable power, particularly for a lot of our large industrial users in South Australia. At the moment there are two, if you are lucky, but quite often there might only be one person you can go to in South Australia to get those contracts.

That is where we see a lot of the games being played in the wholesale market, and that is why we are offering this 75 per cent, to ensure that a new competitor can come into the market and offer those contracts, not just to the South Australian government but also to industrial providers in South Australia as well as flowing through to the retail consumer market and small business market. Getting that competition right is very important here in South Australia. Comparison was made earlier to Victoria.

Victoria has a whole series of different players in the market; not only do they have significantly more competition in the market but they also have significantly more interconnection to other states. They have connections through to New South Wales, to South Australia and to Tasmania, whereas we have connection only into Victoria. The reason that we do that is that when ETSA was sold it was a clear principle of the then Liberal government to ensure that we did not build an interconnector through to New South Wales so that they could get the best price for selling off those assets here in South Australia.

We are paying the price for that now. You can easily go back and see the quotes, when the current shadow treasurer, the Hon. Rob Lucas, said that he saw that power prices would come down under privatisation. The truth of the matter is that that has not happened, in large part because of the lack of competition in South Australia. Adding this additional power for the Australian Energy Regulator and also the actions that the government is taking, in terms of offering up our load to attract a new competitor, is very important.

The other thing of note that has happened in the last couple of weeks is that we have seen the opposition say that we should turn the Port Augusta power station back on. I think this is quite surprising since we do not own the Port Augusta power station. That was sold by the previous Liberal government. We do not have the power to switch that on. We did not turn it off. It was turned off by the private sector owner of the power station.

If they want to do this—and this is part of their '2036' plan; I do not know if it will happen in 2036 or earlier—what is the cost of that? How much taxpayers' money would they be paying to a private sector company to get them to turn on that coal-fired power plant? They do not know. They have not produced any funding plan for this. They have not said where they would be getting the funding to do it. The idea that we have the power to get somebody to do that without handing over large sums of money is quite farcical.

What we are doing are the right steps in terms of reforming the National Electricity Market. The Minister for Energy has taken a number of reforms to the COAG energy ministers' meeting and has gone a long way in terms of getting other states to agree that we need to fix a number of things in the market that we think will improve the situation in South Australia. Also, what we are doing here, in terms of this bill and wholesale market monitoring by the Australian Energy Regulator, and in terms of trying to attract a new competitor, are all very important things to manage this. I completely support this bill and the efforts the minister is making. We are dealing with a situation that we have unfortunately inherited due to some poor planning in the 1990s.

Ms CHAPMAN (Bragg—Deputy Leader of the Opposition) (11:32): I rise to speak on the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill 2016. The lead for the opposition has indicated that we will be supporting this bill, together with one to follow. In supporting this bill, I do not accept for one moment that it is going to make a scrap of difference to the price vulnerability that South Australians experienced in a most serious way in July this year.

I am not surprised that the Treasurer, as Minister for Energy, attended a COAG meeting in July, riddled with embarrassment, red-faced, over the disgrace that occurred here in South Australia, where there had been a price spike that was unprecedented, and asked what we can do to ensure that we pacify our constituents about this embarrassing situation. He came up with the assertion, which he stated in September this year, that the energy ministers recognised that there was a lack of transparency in the way generators operate in the NEM and that we needed to be able to better monitor market behaviour in the interests of consumers. That was his quote. That was his way of saying to us that he had gone off to this meeting and agreed with the other ministers as to how they were going to placate the outrage of the public over the circumstances that had developed in their own mismanagement of energy wholesale production in the country.

As was published in the local media, he went on to point out the importance of doing this and of being transparent and giving 'the independent regulator the teeth they need to go in and investigate and more importantly make public the findings they have of excessive market power'. That is the position he presented to us, as though this was a reasoned and responsible reaction to what was a mess of his own making.

What was incredible about that was that at the same time, in the same months, the South Australian public had been demanding to see the Alinta documents in respect of the closure of the Port Augusta power station, which the Ombudsman of South Australia had directed the South Australian government to make available publicly so that they could see what was going on, so that they could have some documentary transparency as to what was going on.

What has happened? The government have consistently refused to produce that documentation and have been utterly untransparent and opaque in allowing the public, the consumers, to know what is going on. Why does he keep bleating to the minister about confidentiality, respecting the people with whom we have contracted, yet in the direct opposite, says, 'But the regulators must provide this information under a new regime which is to provide for a report every two years, covering a preceding five-year period, with certain information that is to be published.'

I will refer to the bill because it really, essentially, makes provision for a small amendment by an addition into the National Electricity Law, which is currently a schedule to our national electricity act. That talks about confidential supply information and defines who is to be affected by this. It is to do an analysis of whether there is effective competition in the market. Frankly, I would have seen that as already within the AER's charter. Secondly, it is to monitor and report on the features of the market that may be detrimental to effective competition and the features of the market that may be impacting detrimentally on the efficient functioning of the market. There are two-year and five-year obligations in respect of that.

Then there is provision for the use and disclosure of that information under the new proposed section 18D, which is then highly qualified by subsections (2), (3) and (4), which essentially then give a right to be able to protect the confidential information, so I do not see this as a major leap forward in transparency at all. It does indicate that there has to be a statutory obligation for time-specific reporting, but that is it. How is that going to help us deal with the fact that we have a wholesale market that applies for South Australia that is frankly woefully inadequate for the purposes of having any genuine competition?

The other aspect of this, which I draw the attention of the parliament to, is that the Australian Energy Regulator, which is the body in Australia that regulates the energy markets and networks, including the wholesale markets (which is the specific subject of its annual report), has now been operating for over 10 years. In its 2014-15 annual report, which is its last published report, the AER sets out a number of things it has achieved. It proffers a report from the current chair, Paula Conboy, who I think was appointed in 2014, and she talks about the importance of the work they do. Interestingly, board members Steve Edwell and Mr Andrew Reeves, together with Mr Ed Willett, provide some interesting observations. These are some longstanding members of that board. Mr Edwell tells us, in this annual report:

I see the AER at this time of its 10th birthday as a very credible and best practice regulatory agency. Well-functioning energy markets require vigorous competition; and where regulation applies, the regulatory agency must be independent, transparent and professionally competent. For mine, the AER delivers on these fronts as part of a broad institutional architecture that makes the National Electricity Market one of the world’s most efficient energy markets.

That is his assessment. He goes on to say:

Ten years on, we have completed at least two regulatory cycles, overhauled the regulatory rules and revamped the Tribunal remit. The AER has developed a comprehensive benchmarking framework and guidelines to strengthen efficiency and regulatory certainty. All for the better. The evidence, however, is that business submissions are increasingly voluminous, there has been no reduction in the reset timeline and consumers find it difficult to engage in a reset process that is ever more technically complex. Such is the world of best practice energy regulation.

The contribution from Mr Geoff Swier was:

The AER can be proud of many of its achievements over the past 10 years. It has learned much from its more challenging experiences. Further, Australia’s energy regulatory institutional arrangements are well regarded worldwide.

Mr Ed Willett's comments were:

I believe the National Electricity Market remains, by a clear margin, the best electricity market in the world. But there are clear vulnerabilities. Network prices remain too high, wholesale contract markets are too thin, the spot market’s continued viability as an effective market (rather than a mere dispatch engine) is at risk and demand side participation remains formative.

Mr Andrew Reeves, who is the former chair, makes similar comment, and even Ms Cristina Cifuentes said:

The AER’s independence, purpose and objectives are reflected in legislation. Our challenge has been to give effect to this in our everyday work. We have made it a priority to ensure our decisions are not only evidence based and supported by robust analysis, but are clearly reasoned and communicated.

The contributions in this report outline the legislative framework, governance and management under which they operate. It sets out a report on the performance and strategic priorities, and it identifies the performance of the work program. None of this report suggests, in any recommendation to this parliament, that there needs to be some increase in a reporting process to the parliament or to the minister.

The Hon. A. Koutsantonis interjecting:

Ms CHAPMAN: Sorry? None of this recommends that; in fact, they suggest that they have a website which already has, I think, 4,500 documents which they uploaded in that financial year. So I say to the parliament that I have no confidence that adding to this extra provision of information, which is so heavily cloaked with exemptions under the confidentiality rules, is going to make a scrap of difference to what is a real problem: that is, the competitive lack of contestability within the wholesale market.

The government may have some other programs in which they might invest in a policy or reform area which may or may not work. That is not the ambit of this bill. However, the minister should not come in here and make statements to the public pretending that his position, clothed with the embarrassment of what happened in July, of a general agreement at COAG, is some justification for advancing even a higher level. I would like to have some information from the minister regarding the extra costs that would be involved, whether there has been any consultation with the AER on what their obligations will be in providing this material, what extra costs will be involved in the legal assessment of what is confidential and what is not. There will be some other questions during the committee stage.

In this parliament we rely on organisations, in this case the Australian Energy Regulator. Remember (for most who perhaps were not here in the parliament) that this was established as an entity independent of the ACCC because of the very special nature of the significance of a secure and affordable energy supply being provided to the public, both domestically and for industry. I will be interested in the answers the minister will have in respect of this, but I rely on this.

If the regulator says, 'Look, we are hamstrung in providing certain information, we need some assistance in this regard,' then I would have thought we would have heard from them. They would have identified an area in the report which was inadequate for them to be able to do their duty to be open and transparent and assist the consumer to be informed, to enable them to make submissions to them. All of that is good, but it is unbelievable coming from the lips of the Treasurer, who will not even give us a document about Alinta in this state.

The Hon. P. CAICA (Colton) (11:44): I will not hold the house for very long. I obviously support this bill and, indeed, you cannot look at this bill without looking at the one that is going to follow this bill as well. I think the member for Kaurna made a very salient point, and that was that our state's position in the electricity market has been somewhat compromised as a result of the decision by those opposite to privatise ETSA.

The member for Kaurna also mentioned some of the shortcomings of that privatisation with respect to maximising the return that the opposition, when they were in government, would get as a government for the sale of that particular entity. Contrary to the views that were expressed at the time, the privatisation of ETSA has not resulted in power prices coming down. I do not think this state government or any state government is going to compulsorily acquire the means of production. Some people might like that to happen, and I am not suggesting that it would, but what I am saying is that the last time I had a look around I do not think we are going to do that, and I understand the reasons that we would not.

That said, how is it then that we as a government, working with people interstate and the commonwealth government, can have some say in the way in which the marketplace operates, and that is through a regulatory framework? This is another tool in the toolbox. I think it is very important that this bill does provide the AER with a wholesale market monitoring function and a wholesale market reporting function, and that is a good thing.

I find the electricity market very technical, and I have suggested that I am not technically minded to be able to understand every aspect of it, but I commend these two bills because I think, in the scheme of the technicality that is the Australian electricity marketplace, this is a simple and good move that is going to provide a level of transparency that I believe does not exist at the moment.

It pains me to say this, but the member for Bragg spoke on confidentiality and the restrictions that exist with respect to the promulgation of information. However, in my reading of the bill, that confidential information can be used. It needs to be combined and arranged with other information so that it does protect the interests of those people who are being inquired upon, but it can be used and I think that is a very good thing.

The member for Bragg also spoke about and quoted from the board papers or information that the board has promulgated. Let's face it, why would the members of that board not be promoting what a great job they are doing? That is just what they do. That is not to suggest that they are not doing some good things, but of course they are always going to say, 'What a great job we are doing. We are leaders in this particular area and, indeed, the way we do things is the standard by which the rest of the world should operate.' Why would they not say that?

It is a bit like those opposite saying, 'By geez, we're a good opposition.' I guess you have had a lot of time to be in opposition to get good at it, but I do not think you are a good opposition. My mum used to say that self-praise is no recommendation. Of course, what was quoted by the member for Bragg was nothing more than some self recommendation by those people who sit on the board. That is not to say, as I said earlier, that they are not doing a reasonable job, but this is another tool in the toolbox.

I think this is a tool in the toolbox that is going to be celebrated by our consumers because it will add a level of transparency, a proper analysis of how the marketplace is operating, an analysis of what restrictions are in place and identified in regard to uncompetitive practices or even untoward practices, and that can only be a good thing.

This bill defines what the AER must assess in determining whether there is effective competition. We live in a marketplace and the marketplace will only survive if there is effective competition. The marketplace will only thrive if there is effective competition. The consumers of electricity will only benefit if there is effective competition within that particular marketplace and this bill is about promoting that. How will it promote that? As I said, it will determine whether there is effective competition in the wholesale electricity market and that includes active competitors where the prices are determined over the long term by underlying costs of market power, barriers to entry and independent rivalry.

It allows a level of transparency that I do not believe exists at the moment, and I am very pleased that, as South Australia is the lead state with respect to matters of energy across Australia, this has been put in place and supported, as I understand it, by all states and, indeed, by the commonwealth minister; so, it could not be a bad thing. It is another example of those opposite being at odds with their parliamentary colleagues at the commonwealth level.

Mr Pengilly interjecting:

The Hon. P. CAICA: Well, it is not the first time. It is not like it is an aurora australis that you do not see very often. You see it very often when it comes to those opposite being at odds with their people at the commonwealth level. I can look at my friend the Minister for Energy here and say that we have not always agreed on things and that, from time to time, we have had a bit of a blue on issues, but on this—

Mr Knoll interjecting:

The Hon. P. CAICA: No, I'm not, on this particular issue I support him 100 per cent. What we will see, despite the fact that we have heard all that has been said on the other side about, 'This won't make an iota of difference,' is the simple fact is that they are going to support it, and why are they going to support it? Because it is the right thing to do—and, indeed, they believe that it will make a difference, and it will make a difference.

I am very pleased about the reporting periods and, in particular, that a report will be provided at least every two years and work over a four or five-year monitoring period and cover that period; so, that is also a very good thing. Of course, that report will need to be done in such a way, as I say, that the person who is catching a bus at bus stop 28 outside my office will be able to understand it, and if it is not written in that way then it is up to us to make sure that it is done in such a way that it adds transparency to the way in which it is communicated.

Mr Knoll interjecting:

The Hon. P. CAICA: I do not know whether that is right. What I am saying is that quite often when I was the science minister I used to look at a report and say, 'What the hell does that mean? Please take it away and write it so that (1) I understand it, but, more importantly, so that I can then approach the member for Schubert and be able to communicate it in such a way that he understands it as well, and in turn he would then be able to communicate it.'

It is about how you actually report in such way that it has some meaning and some understanding for those people who are going to read it. That is a challenge for some of these people of a technical nature, just as it was for the scientists who said, 'Oh, that will be difficult', but they went away and did it, and then it ensured that it was easily readable, understood and digested by those people to whom a report will be most meaningful.

I am not going to bang on about the liability or the confidentiality that the member for Bragg spoke about because I think that she is wrong in that particular area. As I said, that information can be combined and arranged with other information there. I think that this is a good thing. Again, I do not say that our constituents are not clever, because particularly in my electorate I have numbers and numbers, tens of thousands of the most intelligent people, but this is a technical area.

However, what they do not have available to them is a level of transparency about how the marketplace works; a level of transparency about why it is that certain things are impacting upon them in how they perceive and feel is an adverse way. This bill, in tandem with a bill that we are going to debate in, I hope, a not too long a period of time, are very important tools in the toolbox. A toolbox has to have a lot of tools in it to be an effective toolbox and this is one of those tools, and I—

The Hon. A. Koutsantonis interjecting:

The Hon. P. CAICA: Was that directed at me?

The Hon. A. Koutsantonis: No, sir.

The Hon. P. CAICA: Right.

The Hon. A. Koutsantonis interjecting:

The Hon. P. CAICA: No, that is it. So, in finishing off, I congratulate the minister on bringing this bill to the house. I congratulate his colleagues for embracing it in the way in which they have at the national level. I congratulate the federal government for embracing these measures as it has, and I commend the bill to the house.

Mr KNOLL (Schubert) (11:54): I rise to support this legislation but, in the true style I understand the debate was meant to be formed in this house, I would like to discuss a few things that have been said in the preceding couple of speeches. It seems quite interesting that the member for Colton made a contribution in which he called members of his own community scientifically illiterate, he called me scientifically illiterate, and then also went on to question the integrity of the AER board being truthful in their annual reports. He is welcome to his own contribution, and obviously everyone can interpret it as they wish, but I would have thought that the AER board had extreme integrity in their dealings, and they should be commended for the work that they have been doing.

The second point is that I think the government and government members, who have made contributions trying to pin this on privatisation, fail to understand one point; that is, if privatisation was going to drive up prices in the electricity market and ETSA was privatised (and I am going to say in 1997, 1999), why is it that it is only 17 years later that we have started to talk about issues in relation to price? Why is it only in the last couple of years that we have started to talk about these issues? Surely, if privatisation were going to be a problem, if a lack of interconnection were going be a problem, this would have been a problem soon after the privatisation of ETSA. Why is it that it is only now, 17 years later, that we are starting to deal with these issues? Could it be that there are other changes within the energy market that have led to these price spikes?

Interestingly, if the government is so against privatisation of the energy electricity market in South Australia, then nationalise. If you think that privatisation is the thing that is holding it back, then do it; and if you do not, then do not. The point is that you are trying to have your cake and eat it too by blaming something and then saying that you are not going to fix it.

Although, interestingly, it would go against statements that the Treasurer has made on a huge number of occasions when it comes to the sale of the forests, the Lotteries, HomeStart Finance, the Lands Titles Office, the Motor Accident Commission, any building that is not otherwise nailed down in South Australia that they own, TAFE campuses. This is a government that has flogged off everything that moves but somehow has some sort of moral tirade against the privatisation of ETSA.

Well, I tell you what has changed in recent years, what has changed the South Australian electricity market, what is likely to have led to increased prices (and I say this with a reasonable degree of evidence that I will go through in a minute)—it is the fact that we have seen a huge increase in the amount of intermittent energy generation in South Australia.

One of the points that the member for Kaurna made related to the level of competition in the market, the fact that there is not enough competition in the market. Well, I tell you what: when you have wind energy bidding into the market at prices that mean that other forms of energy generation cannot compete and drives that energy generation out of the market, is that not what causes reduced competition in the marketplace? The answer is yes, and it is a fact that those opposite do not want to talk about.

The truth is that when you force out operators from the market and you have a lower number of operators with an ability to compete, you then rely more on interconnection from interstate in order to get generation. Surely, that is what is creating a lack of competition within the market. It is interesting that those opposite have tried to frame this debate as coal versus renewables. There could not be anything further from the truth. When the Premier stood up hours after having received the AEMO interim report and said, 'You basically have to choose now whether you are on the side of renewables or whether you are on the side of coal,' the truth is that it is his government that has chosen coal-fired generation, but they did not choose South Australian coal-fired generation: they chose Victorian coal-fired generation.

When you have 26 per cent of capacity coming across the Heywood interconnector and 51 per cent of that generation is coal, you are backing coal. You are just not backing South Australian coal, you are backing Victorian coal. It is an absolute disgrace for them to frame this debate in that way because, even if you were to accept their premise, they fail by their own standard that they have set for themselves. Do not think that this government is anything other than a lover of coal. They just want it to be far enough away that they can look good in front of their trendy lefty mates while forgetting the fact that the Heywood interconnector pumps coal across the border every single day. In fact, without that Heywood interconnector coal generation we would not have been able to kickstart the South Australian electricity market after the blackout.

When it comes to this bill, I think there is an inherent understanding that these things are sensible. What effect they will have in the longer term is debatable, but it makes sense. Greater information and greater transparency within a marketplace help to improve the efficiency and operation of that market. That we can concede. Having said that, what it does not deal with is the fundamental energy mix and the fundamental transmission and competition capacity within our marketplace—that it does not do. It is all well and good to potentially have greater information about the fact that you have the highest power prices in the country, but you still have the highest power prices in the country.

Whilst we support this bill because, in principle, it seems like a reasonable idea and, as the member for Stuart has talked about, there has not been opposition to it, the idea that this is some sort of panacea is completely wrong. We move on to the fact that in recent years we have seen a huge increase in the price of electricity, especially the wholesale price of electricity, in our market. That is something that the member for Stuart talked about, and he referred to specific bits of evidence.

I would like to go back to 2003, when the member for West Torrens was a lowly backbencher in the early stage of his long time in the darkness and wilderness of the government backbench. He sat on the Environment, Resources and Development Committee when it heard from a man who at that stage was the head of ESCOSA. His name was Lew Owens. Interestingly, Lew Owens has gone on to have other roles with utility infrastructure in South Australia. Lew Owens makes the following point:

The other generators are then required to make up the difference. If all the wind farms are busily generating at their maximum amount, all the other generators will back off by that amount, and if the wind stops, then the other generators have to come back up. That causes severe operational problems for other generators. If you are a coal fire generator, you like to be running fairly constant demands, you cannot turn it up and down every few minutes, it causes major operational instability. When you have few megawatts of wind power and you have 1,500 megawatts of gas fired or coal fired generation, it does not matter, it can easily be absorbed and it is just a gentle flicker.

However, as you start to increase the quantity of wind power coming into that system up to 100 megawatts, 200 megawatts, or whatever, you start to cause this instability in the rest of the system where, for example, if we had 1,000 megawatts of wind energy coming in, most of the base load stations in South Australia would be required to shut down, and to then start them up again is a 10-hour operation. There becomes a physical limit to just how much of this wind energy, which can be full capacity one hour and down to zero the next hour, you can actually fit into the system.

That is from 2003, from a committee that the now Treasurer sat on. It is a warning from a man the government obviously respects because he is a long-term chairman of SA Water, and it is advice that they should have heeded at that point. We come now to the Deloitte Access Economics report, released in November last year, which states:

It is the intermittent nature of this renewable electricity that creates challenges for systems and markets that were designed around dispatchable plant such as hydro, fossil fuels and nuclear. These conventional plant types also have characteristics that allow them to contribute to the stability of the grid, including keeping frequency levels consistent and being able to restart the system after a major blackout. Solar is not designed to contribute in this way, and while wind can (in limited circumstances) assist, its intermittency constrains its use for grid stability.

This morning, on the front page of The Australian, in a submission to the review into electricity security, the Queensland government-owned Stanwell Corporation said:

…renewable energy policies had 'emphasised "energy", while neglecting to value other electricity market services which are required to maintain a secure and reliable electricity supply'.

'This has led to the weak system and instability problems in South Australia,' Stanwell said…

We then go on to the Frontier Economics report, which states:

South Australia has experienced a spate of high wholesale electricity price events in July 2015. As has been long predicted, increasing penetration of wind, and its inherent intermittency, appears to be primarily responsible for the events.

This briefing from Frontier Economics then goes on to examine these incidents and how policy changes might be required to ensure the South Australian market operates more efficiently. We then go on to the Deloitte Access Economics report which talks about the increased spot price movement volatility in the South Australian market:

This greater price volatility in the wholesale market relative to Victoria can be linked back to the increased penetration of renewables that results in squeezing out of base-load and mid-merit generation (in SA) and is leading to:

(a) an increased dependence on intermittent wind; and

(b) an increased reliance on electricity supply from Victoria.

It goes on to say many other things. I do not know how many bits of evidence the government needs to be able to say we have a problem with our electricity mix generation in South Australia.

I do not know how many bits of evidence this government needs before it takes its head out of the sand. What scares me more is that we have a government that in 2012 put through an interim DPA that basically made it impossible to stop wind farms in South Australia. I have had two of them approved in my electorate: the Keyneton wind farm was approved under the old scheme in about 2012-13 and the Palmer wind farm was approved earlier this year but is still going through an appeals process in court.

Interestingly, many people ask me about where the Keyneton wind farm proposal is at. It has been quite dormant for a while. The reason it has been dormant I think in part is due to the renewable energy target renegotiations that happened at a federal level. When Tony Abbott as the Prime Minister announced that review, he basically stopped investment in renewable generation across Australia whilst that target was being renegotiated. If that process had not occurred, I have no doubt that we would see even more wind generation further advanced in South Australia, leading to potentially a larger problem than even the one we have now.

The truth is that the Liberal Party is not against renewables. We are not against renewables, but we want a decent, nuanced, cautious discussion, which the government refuses to engage in because they know they have egg on their face. Here is the thing: if you wanted to see the success of renewable energy and to deal with the issues that come as a result of climate change, then the worst thing you could do is undermine public support for renewables in South Australia or across the country.

The way you ruin support for renewables is by stuffing it up, by not being able to manage to integrate renewable energy into the grid properly. What will happen is that now, as the member for Stuart said, when we start to see consumers having to have renegotiated high electricity prices come in, when potentially we see brownouts and blackouts over the summer because we do not have the Northern Power Station to fall back on for base load generation, we will start to see an undermining of the broad support that exists for renewables.

It will not be our fault because we want to have the nuanced conversation, albeit that the government has not been able to do this properly, has not been able to integrate the supply into the grid. Once South Australians realise that it is the government's fault for not being able to do that and that they are the ones paying from their hip pocket, that will then flow back to renewable energy generation. Then, everyone on the other side of the parliament who stands up and believes that they are some sort of champion will be the ones who caused this issue in the first place and should be the ones—and we will be here making sure that South Australians know it—who stand condemned for not being able to get the job done properly.

We should have done what the rest of the country has done—that is, taken a more cautious approach and incrementally increased wind so that we can start to test the limits of their intermittency and the lack of synchronous supply, in terms of dealing with low levels of frequency stabilisation that wind brings. We would be able to test the market and then start to deal with the issues that result.

But, because we have had a government that blindly went about this without looking at the consequences, even though so many of the experts were able to tell them that this was going to happen, we now have a situation where we have gone too far and where we are going to have to start to fix things after the fact, as opposed to being able to look forward and actually predict some of the things that were going to happen in the first place.

The problem is that anything to do with electricity supply is not a quick fix. We talk about interconnection, which could potentially take three to five years; we talk about improvements to battery storage, which could potentially solve some problems around the intermittency of wind generation but which is still years and years off, and who knows if and when that technology will come on board. Instead of waiting for those things to happen, the government is blindly, with its blinkers on, saying, 'We're just going to head down this path, regardless of any of the consequences, and we're just going to see what happens afterwards,' and it is South Australians who will have to pay.

We on this side of the house will continue to be a sound and reasonable voice, to actually talk about these things in a detailed, scientific and rational way. I commend the member for Stuart for the way he has gone about dealing with the issue to this point. The government needs to realise that we will not be silent on this issue, and over the next 18 months we will prosecute this issue with great fervour. The government also needs to realise that issues are coming up in our future—that is, the potential shutdown of the Hazelwood power plant next year that could cause us further issues into the 2018 summer—and we will be here, making sure that South Australia realises that the worst friend of renewable energy in South Australia is the Labor government of South Australia.

Mr PEDERICK (Hammond) (12:09): I rise to speak to the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill 2016. This comes in line with another bill that I believe will be debated later today. We are the lead jurisdiction for energy legislation, and these bills were developed by the COAG Energy Council's Energy Working Group in response to issues raised by the Australian Energy Market Commission, which is the national governing body for our energy markets. These two bills were developed together as part of a national electricity law and national gas law amendment package.

Certainly, back in 2013, the Australian Energy Market Commission identified vulnerabilities in the National Electricity Market, resulting in potential barriers to entry into the wholesale electricity market for generators and structural factors that may be limiting competition. As a result, the COAG Energy Council agreed to introduce an explicit wholesale market monitoring function for the Australian Energy Regulator to identify these issues and propose possible solutions.

Part of the solution is to enable the AER to regularly and systematically monitor the performance of the wholesale electricity market in relation to competition; to require the AER to publish on its website a whole market monitoring report at least every two years, including its opinion on whether there are features of the wholesale electricity market that may be detrimental to effective competition or effective functioning of the market, which may require a legislative response; and also to introduce explicit provisions around the process to seek additional information on the terms of confidentiality.

These measures are intended to ensure that there is effective competition in the National Electricity Market, protecting the long-term interests of consumers. The monitoring and reporting functions are designed to provide energy ministers with information and evidence to support legislative and regulatory responses that may be necessary. This talks about the security of the market, wholesale markets, and monitoring using confidential information, and about how we can manage these markets.

What we have witnessed, especially since Alinta has shut down at Leigh Creek, causing the subsequent closure of Port Augusta, is the collapse of power generation in South Australia and the collapse of the management of power generation in South Australia. Just short of three weeks ago, we had 'black Wednesday', 28 September—

Ms Redmond: At least this government got us back in the black.

Mr PEDERICK: Yes—when the whole state went black. I reckon that has probably never been competed with anywhere else in the world, but I would have to check that. To me, there is a host of failures there; one is the initial issue of at least 22 towers either coming out of the ground or bending over near their bases in winds that essentially were not that high, from what I understand. That happens, but then it trips out the entire state on a circuit-breaker, for want of a better word, to protect the rest of the national network through to Victoria.

We had this absurd situation where people in Nelson, in Victoria, had their lights on. They could cook dinner, they could do everything they needed to do at night after work—they could get home and travel with streetlights on and that sort of thing—yet a few kilometres away in Mount Gambier the lights were off. There is a significant flaw in the system, when these towers collapse 250 kilometres north of Adelaide and it throws the state out. There has to be a better way. Anyone in private industry who ran a situation like this would not be in business. It just would not happen. To think that protections could not be put in place just shows how headlong this government has run into the mantra of renewable energy.

What happened that day was that because the government was so reliant on the interconnector to Heywood, when all of a sudden it looked like there was going to be a problem on the line, that line tripped out and we lost the lot. Obviously, not much wind was operating and what was operating was not generating much. The issue we have with wind energy is that it is not synchronous, it does not run at 50 hertz to give a base load base that is needed, and that was certainly what was needed to bring us back from the black. From what I understand, the Heywood interconnector was needed to power up Pelican Point on the gas to get it going to help us light up the state again.

We saw progressively over that night that some of the outer areas got power before a lot of Adelaide. I know the inner city came back reasonably quickly. I know that around Murray Bridge in my electorate it came back at around 9 o'clock and outer areas in Adelaide did not come back until midnight or 1 o'clock in the morning. But then we look at what happened in farther flung areas, and essentially the state's West Coast or Eyre Peninsula was just abandoned.

Emergency generators did not fire or could not fire. We saw that happen over there. We saw people out for 60 to 70 hours. In fact, from what I am told, it is hard to buy a generator on Eyre Peninsula. I have heard that Paramount Browns' have had to put back orders in. People I have talked to who come from not only that part of the state but elsewhere are now buying diesel generators to connect to the house so that they can have the lights on and manage their households into the future. They have no faith in how things are managed in this state.

We have a state where the government talks about wind energy and is hell bent on it, yet we have a minister, who is a mining minister and very much a fan of mining, who has seen the closure of a perfectly good coalmine that would have had coal for another 15 years for this state. What the government wants to hide from the people, as the member for Schubert exemplified in his contribution, is the simple fact that without coal-powered generation from Victoria, without that base load, we would not function in this state.

Even Mike Rann, the champion of the miniature windmills on top of this place (that did not work either), acknowledged years ago that we needed more interconnection and we needed that interconnector to New South Wales because he understood that you had to be connected to base load to even out the reliance on wind energy. That is the issue: it is not, as has been said, that we are against wind energy, but you have to balance it out. I certainly believe that for every kilowatt of wind energy you have, you have to have a kilowatt of base load. That is part of the reason why we are the most expensive jurisdiction for electricity, not just in this country but in the world.

It is ridiculous. You would think that when you pay a higher price for electricity that you would have reliability of supply, but that is the last thing that happens in this state. I, along with many others, have put on solar panels mainly because I need to protect myself from what I know is going to happen in the next two years. It is going to get worse, it is going to get a lot worse as we head into the 2018 election and the different scheme changes for solar panels. They are getting quite cheap but obviously you do not get the payback.

In fact, I talked to my supplier when I put the last lot on. I think the person I was talking to on the phone was in Melbourne and she said, 'Adrian, you only need this much.' I said, 'I need more. I need to turn that meter backwards. I need to turn it backwards when I can because of the costs that are going to be imposed on top of what we are already paying now.' What we are already paying now is outrageous enough when we look at what happened on that Wednesday—'black Wednesday', 'blackout Wednesday'. The simple fact is that we do not have surety in this state. If people do not think it is going to happen again, just remember what happened back in July, when the minister had to beg Pelican Point to fire up. Industry was on his door saying, 'We need Pelican Point operating to make sure we have power supplies to keep industry going in this state.'

With 'black Wednesday', we had industries that were nearly caught with blast furnaces solidifying, and they barely managed to get through. We know there are enough issues at Whyalla without imposing that issue on them, and also Nyrstar. On 'black Wednesday' Pelican Point was not operating—even though the minister advised it was operating—and it had to be brought on later.

As I indicated, we are finding now that we essentially have no base load supply of basin gas here in South Australia. We have the Murraylink interconnector from Red Cliffs in Victoria through to Berri, which is a 220-megawatt line: there are a couple of cables buried underground, and that line won some awards when it went in. That is a 180-kilometre line. We have the Heywood interconnector which, with the upgrade, comes out at 650 megawatts, and that is certainly what we are reliant on to back up our gas.

As the federal minister, Josh Frydenberg, indicated in the media the other day, one day with the wind it was operating at 1 per cent of our power supply and the next day it was operating at 80 per cent, and that is the issue. The only way to balance that out is to have base load but, essentially, you end up running two different systems. I want to look at what is happening in Queensland, and I quote from an article in today's publication of The Australian:

Annastacia Palaszczuk's ambitious 50 per cent renewables energy target has been undercut by Queensland's largest government-owned power generator, which has warned Australia is moving from being one of the lowest-cost electricity nations to one of the highest.

In a submission to a landmark review into electricity security, the Queensland government-owned Stanwell Corporation said renewable energy policies had 'emphasised "energy", while neglecting to value other electricity market services which are required to maintain—

And this is the secret, and you do not have to be a brain surgeon—

a secure and reliable electricity supply'.

Stanwell also said:

'This has led to the weak system and instability problems in South Australia,'…while also ringing the alarm about energy affordability. 'It is disappointing that Australia has moved from one of the lowest-cost electricity nations to one of the highest cost, to the detriment of Australian industry and economic growth.'

The comments, which are focused on the national energy market and do not single out Queensland, have reignited debate over renewable targets and are significant as the Queensland Premier pursues a 50 per cent renewables target by 2030.

I just hope that Queensland is having a good look south at what is happening in this state. The article continues:

Former Queensland Labor treasurer Keith DeLacy warned last night that high renewable energy could send energy-intensive industries offshore, which would mostly have an impact on those on lower incomes. 'There is no place for hi-vis shirts in a high-renewable energy state,' he told The Australian. 'All manufacturing jobs will be gone, exported offshore to all those countries who are more interested in growing the economy and providing electricity than they are in saving the world.'

This is coming from a Labor man, so we really do need to have a good look at what is going on in this state. We cannot have a government that makes out that they are the champion of renewables, yet are as much reliant on coal as anyone else in this country. We are absolutely reliant on the Murraylink and the Heywood interconnector, as has already been said in this place.

If some of those coalmines in Victoria—I think it is the Hazelwood mine— shut down next year as rumoured, what do we do then? From some of the information I have been reading, coalmine power and their power stations are cleaning up their act. They are doing a great job in reducing their emissions from the emission totals that they were emitting in the past. The simple fact is they are an absolute part of our mix, because the issue with the renewable energy targets is that it is made so that the gas generators cannot compete, coal generators absolutely could not compete in South Australia, and that is why Alinta made the decision.

As the member for Bragg said, it would be interesting to see on the correspondence from Alinta to the government their warnings to the government about what would happen into the future with Leigh Creek closing down. We are in dire straits. I look at people making investment decisions in electorates along the border of South Australia, in the Riverland right down to the South-East, and certainly if I had almond properties—and they are the real go at the moment in Victoria and South Australia—and I had to build an operating shed or a packing shed, I reckon I know which state I would build it in, and sadly it would not be here—

The Hon. A. Koutsantonis: What a disgrace!

Mr PEDERICK: —because one of the costs—no.

The DEPUTY SPEAKER: Order!

Mr PEDERICK: This is a state where people are making those decisions because it costs so much to operate those businesses, especially with the high power costs. I have had businesses that have long been established in South Australia that are telling me—

An honourable member interjecting:

Mr PEDERICK: Yes. They are telling me that they are expanding their interstate operations because—

The Hon. A. Koutsantonis: No, you said you would.

The DEPUTY SPEAKER: Order!

Members interjecting:

The DEPUTY SPEAKER: Order! I am on my feet. Sit down. Members on both sides are asked not to interject. I remind them of the standing orders, on both my left and my right. The member is entitled to be heard in silence.

Mr PEDERICK: Thank you, Madam Deputy Speaker. I know companies that are investing and broadening their exposure interstate because one of the issues is the price of running their business. Certainly, as a South Australian, that angers me. Even when you look at it, you would have to look at the operating costs to see whether you would operate on this side of the border in this great state, which I truly cherish, but as a businessman you would have to make a sound decision, and that is the issue we have here. We have such vulnerability in our power supplies in this state. We do not have security of supply, yet we pay the most for electricity in this country.

People talk about the electricity market in this state not being government owned anymore, but neither is Victoria's. They have the cheapest power, the cheapest electricity costs, in this country and yet we have the most expensive. People are making investment decisions around that, and I hope we can attract more business into this state. We saw what Keith De Lacy, a Labor man from Queensland, has said. He said himself that the hi-vis shirts will go and there will not be any manufacturing if Queensland goes down the path of what is happening here in South Australia.

Mr WILLIAMS (MacKillop) (12:29): What an interesting debate! I think it is very timely; in fact, I think it is a bit too late. South Australia is on the precipice of economic ruin. A fair bit of it is caused by our government, and our government remains in denial. Ever since the government came to power in the early 2000s it has run this mantra that the selling of ETSA has caused increasing power prices, and it has caused a whole heap of other issues and ills for the state.

The reality is that nothing could be further from the truth. As the member for Hammond just pointed out, the Victorian government sold their power assets at about the same time and now enjoy the cheapest power in the nation. We, alternatively, enjoy the most expensive power in the nation. The government has no answers, other than to repeat the lies that the selling of ETSA has caused a problem. I will give a quick lesson in history, Madam Deputy Speaker, because you and I were both here at the time, and a few people were here, as was the minister.

At the time that we sold ETSA, the demand for electricity in South Australia was much greater than it is now; indeed, we were staring at the spectre of the lights going out and there was a debate about building an interconnector to New South Wales. When we were in government, we took an alternative decision. We took a decision that we would be better off building a new power station in South Australia—thus, Pelican Point Power Station. But, Madam Deputy Speaker, you and some of your colleagues will remember that the state did not have the capacity to borrow the money to build that power station. Why not? Because it was already almost broke because of the previous Labor administration, with debt to the point where we could barely borrow any money at all.

Indeed, the last borrowings made by the outgoing Labor administration in the very early 1990s (and we were still paying off this debt) was borrowed at an interest rate of 15 per cent from a group of Belgian dentists—15 per cent. We would have the member for Kaurna and the member for Colton suggest to us that we should have borrowed money at 15 per cent. Remember, this is because of the recession that we had to have—another Labor institution—but they would have South Australians believe that we should have borrowed money at 15 per cent or more to build power infrastructure and an interconnector to New South Wales.

If we had gone down that path, what would have been the energy source for that power? It would have been coal from old thermal power stations. I do not know what the efficiency ratio is, but I suspect that it is flat out to be 30 per cent. Instead, we built a combined cycle gas turbine generator at Pelican Point. When I say that we built it, we enabled the private sector to build it and built a modern combined cycle gas generator that has an efficiency of producing electricity from the thermal value of the gas fuel that it burns of probably in the high 60s—I think it is probably 67 or 68 per cent thermal efficiency.

That means that the carbon footprint from that power station is less than half the carbon footprint of supplying electricity into Australia from an interconnector into New South Wales. All these years later, our current Premier and Minister for Energy are turning back the clock and saying, 'Shouldn't we build another interconnector? That's our answer: we will build another interconnector into New South Wales.' The South Australian community has already bled to the tune of billions of dollars building wind farms and installing rooftop solar panels.

I would suggest that in excess of $3 billion has been spent in South Australia in the last 10 or so years, maybe a little bit longer, in building that infrastructure. What have we seen happen? As a number of my colleagues have pointed out, the fact that they are intermittent generators of electricity means that we have had to retain backup. Basically, we have invested in capital investment twice: we have already had the investment in the traditional generating capacity and then we built a new generating capacity which is unreliable, so we have to keep the old generating capacity and switch it on whenever it is necessary.

But it gets worse, because it is not a matter of switching it on and switching it off. This is the problem with the Northern Power Station, a coal-fired thermal power station: you cannot switch it on and switch it off at a whim. It takes hours and hours to heat up the boiler in a steam-fired facility. So what happened at Alinta's power station, the Northern Power Station? When the wind blew, they kept pouring coal into the boilers, kept the boilers ready for when they needed to be switched on and, virtually every day of the week, at some point in the day, they were called on to switch on and fill the gap that had been caused by the drop in wind or the sun going down.

The reality is that the same amount of coal was being burnt in that facility whether they were selling electricity or not. The reality is that for a fair bit of the day they were not selling electricity. That is why Alinta took the decision firstly to shut down the power station in the winter months when the demand was lower, and then finally the decision to mothball, or shut down, the whole station. It is not because it is not efficient, and it is not because it is not cost-effective if it was doing what it was designed to do, and that is keep churning out power 24/7. It is very efficient and very cost-effective.

The fact is that they cannot keep putting coal into the boilers to keep them hot for the few hours or sometimes longer each day when they are asked to supply to the network. The reality is that even when the Premier and the minister beat their chest about this and say, 'We are producing 40 per cent of our electricity needs from renewables,' we are still burning the same amount of coal. Today, since Alinta has shut down the Northern Power Station, that coal is being burnt in Victoria. It is not burnt at Port Augusta, but do not think that because it is not burnt at Port Augusta it is not being burnt.

If the generators in Victoria did not have the capacity to feed electricity across the interconnector whenever the wind stops blowing or the sun goes down, our lights would be going out far more regularly, I can assure you. The member for Colton said that he struggled with technical information and technical explanations. He is lucky, and I suspect a lot of his colleagues are the same. They are lucky because they do not have to worry about the rubbish that they have been told by their political masters down here in the front corner.

They can go away and think that the world is one that resembles fairyland because that is the world they are living in. If the member for Colton did have some technical ability, he would understand the reality of what I am saying. He would understand that it does not matter how much renewable energy is used in South Australia: whilst we rely on backup principally from thermal, coal-fired power stations in Victoria—and the Premier and the minister want us to get further backup out of New South Wales—the same amount of carbon is being pumped into the atmosphere.

It gets worse again because, to pump electricity from the other side of Melbourne to our major load centre here in Adelaide in South Australia, we lose about 15 per cent of the electricity that is produced on the other side of Melbourne in what we call transmission losses in pushing it through those wires to get it here to South Australia. It is about 15 per cent. Indeed, you have to burn even more coal to provide the transmission. If we build a power interconnector to New South Wales—I can tell you I know a little bit about geography too, and I do not know whether anybody over there understands geography—it is a lot farther to the major power generators in New South Wales than it is to the Latrobe Valley on the other side of Melbourne.

Those transmission losses will be even more. I would suggest they would be in excess of 20 per cent. I think when we looked at this issue all those years ago when we were last in government, and there was a debate in our party room about the various alternatives, from memory the figures that we were given were somewhere between 20 and 25 per cent of energy losses in transporting electricity from the coast of New South Wales to the major load centres here in South Australia.

This is the great lie that has been told to the people of South Australia. The great lie that has been told to the people of South Australia is that we are saving the planet by building wind farms. The reality is that we are costing ourselves a huge amount of money and we are making diddly squat difference to our carbon footprint. That is the reality. I fully appreciate that most of the people on the other side are like the member for Colton and struggle with technical information and struggle with understanding it. That could be the only explanation for the decisions that they have been making.

My friend and colleague the member for Hammond spoke of the spectre of people considering investment options and whether they build a facility over the border in Victoria or they build it in South Australia; whether they move a business opportunity to South Australia or to some other part of Australia. The member for Hammond said that he could understand, if he was faced with that, and electricity was a big part of the decision-making, he would be hard-pressed to make the decision to build it here in South Australia.

The minister was sitting in his place at the time and he said, 'What a disgrace!' I agree with the minister. What a disgrace that the government of this state has put us in a position where it is almost impossible for somebody to invest in South Australia because of the cost of electricity. I think that is a disgrace. The further disgrace is that from the Premier through to the minister, right down and throughout every member of this government, they all remain in denial as to what is happening here in South Australia.

I served as the shadow minister for energy for a significant number of years. I am very keen on the spectre of us being able to produce electricity without putting more carbon into the atmosphere. I look forward to the day when we can do that. The reality is that today it is just not technically possible. It may be at some time in the future. I would suggest that it is at least 20 years away. I might be proved wrong. It might be a bit sooner than that. I suspect that it will be more like 40 to 50 years away before we can reliably say that we now have a renewable energy source which can provide all of our electricity 24/7 and do it at a cost that will allow us to survive in the real world—not that fairyland world that most of the members of the government seem to live in.

Why can we not build motor cars here in South Australia anymore? I will guarantee that electricity costs are part of the equation. There are lots of parts to the equation. I am not saying it is the only issue, but I will guarantee that it is part of the equation. When Ford announced that they were closing down their Victorian car building facilities, I was not surprised when they said they could build cars more cheaply in Asia—in fact, they said they could build a car for about a quarter of the price in Asia—but I was astounded when they said that they could build a car for half the price in Europe.

We did not have the economies of scale in our car building industry, but one of the things we did have here in Australia was cheap energy. That was a distinct advantage and one of the reasons why the car industry was able to survive for so long. But now we do not have cheap energy. South Australia's electricity costs are up there with Germany and some of those northern European countries that have gone headlong into renewables—Belgium, Denmark, Germany—and turned their back on traditional electricity-generating systems, yet import bollocks of electricity from places like France, which embraced nuclear 30 or 40 years ago.

The electricity market and the electricity industry are very complex. I fully accept that probably nobody on the government side, including the minister, fully comprehends how it works. If the minister does comprehend how it works, that is even worse for this government—that, in spite of understanding the problems, he remains in denial. The reality is that we are driving up the price of electricity through policy and we are having diddly squat impact on our carbon footprint.

There are articles in the paper every day about battery storage, most of them driven by people who have a vested interest in selling batteries. It is good business for them to sell batteries. They are going to turn themselves into millionaires, as a number of people putting rooftop solar panels on our roofs have turned themselves into millionaires. It has not solved our fundamental problem. It has not reduced our footprint and it has not provided us with cheap electricity. It has provided a few people with cheap electricity at the expense of everybody else.

The solar rooftop industry in South Australia is the worst piece of public policy I have seen in the time I have been in this parliament. We have encouraged the wealthy people in this state to put solar panels on their roof and they are being subsidised by the poorest people in this state. It is a disgraceful piece of public policy run purely to point out a political argument about the sale of ETSA. That is what drove it, and it was a disgrace. The people who today cannot afford to put solar panels on their roof are subsidising all those who have been able to afford it. I can tell the house that I have not gone out and bought solar panels and put them on my roof because I have an ethical issue with that. That is my personal issue.

We have this nonsense where the minister has been saying for months that the solution to the problem is to shop around. Now we have the minister saying that we have this problem because we need more competition. Then the minister says that we have to build another interconnector to New South Wales, and then he says that we are going to sign contracts for electricity supply—big, long-term contracts to get a new player into the marketplace to drive that competition. The minister changes his line every couple of days, but the reality is that the competition we have had here in South Australia has been driven to the wall by policies of this government.

The Northern Power Station has been closed down and we are now relying on a coal-fired thermal power station in Victoria that is just as dirty. The minister wants to rely on another one in New South Wales that has the same footprint, plus the 15 or 20 per cent transmission losses. We have Pelican Point sitting out there, a very modern, efficient, combined cycle gas generator sitting idle for the exact same reason—that it cannot afford to keep its boilers running and that it cannot afford to keep hot water whilst it is not selling electricity.

The people of South Australia have been lied to for too long by this government. The people of South Australia will start to wake up. The government has been getting away with it to date, but one good thing that might come out of the blackout that befell us all recently is that the people of South Australia might get to understand the truth a little more quickly.

Mr BELL (Mount Gambier) (12:49): I rise to support the bill before the house, the National Electricity (South Australia) (Australian Energy Regulator—Wholesale Market Monitoring) Amendment Bill 2016. I note with interest that South Australia is the lead parliament for national energy legislation, and quite possibly the reason for that is that we are the most desperate.

We have been put in a perilous position, a vulnerable position and—there is no other way of putting it—we are at the mercy of Victoria. This state government has eroded our independence to the point where we are now at the mercy of Victoria. Of course they will sell us electricity, but they will dictate the price and they will look after their own state first. If we need to purchase electricity at peak times we will be paying an exorbitant price for it.

What most people do not understand is that the interconnector with Victoria currently has the ability to supply only around 23 per cent of our peak demand. So what we had the other day, when all the wind farms turned off in a very short period of time, was this massive draw on the interconnector at Heywood in Victoria. That is basically like putting your kettle, toaster, microwave, every light and every electrical appliance in your house on right at the same time. Of course, the safety switch flicks in the electricity box.

Unlike turning off the appliances, going outside and flicking the safety switch back on, and then turning appliances on slowly—which can be done in a matter of a few minutes—when it occurs from a state perspective it takes a hell of a long time to reset the system. That is one part that has not been spoken about too much over the last few weeks when we had, of course, the statewide blackout and were totally at the mercy of any other state because the safety switch had been flicked.

Renewables have a part to play in this, there is no doubt about that, but what intrigues me about the statewide blackout is that I have had a lot of engineers come to talk to me and I have seen photos of one of the electricity towers that had been blown completely over, not bent over but basically picked up and blown over. What astounded them was the lack of concrete on the footings; in fact, one engineer said that his pergola would have more concrete on it than that electricity tower.

They then went on to say that what has been reported in the media was perhaps half-truths—and shock, horror when I heard that. It is virtually impossible for one of those towers to crumple the way some of the photos have shown, the reason being that they are built with steel lattice; that is, the criss-cross connection provides the strength with the steel. There is very little resistance for wind in there because the wind has nothing to push up against; it passes through the electricity towers and continues on.

These towers survive cyclones, hurricanes and are stress tested to a very high degree. What those engineers proposed to me was that, in fact, the first tower went over due to poor footings or virtually no footings, and the weight of the wires attached to that first tower then pulled over the other towers into that crumpled-looking mess that the Premier gets out and says, 'Well, the reason this happened is because we had a big storm.' Well many parts of the world, and certainly many parts of Australia, have far bigger storms, far bigger wind events, and those towers stay perfectly upright.

Interestingly, if you look around the tower that was crumpled over, and used with the spin doctor's blessing, many of the trees in the background are perfectly upright and standing. You would have to wonder whether that construction was perhaps built out of Chinese steel, or whether it was what some engineers have come and told me: that the first tower being picked up, due to no or limited footings, and the weight of the wires were the actual causes of pulling that tower over.

What we have seen over the last 14 years is a failure to plan. There is an old saying that failing to plan is planning to fail, and over 14 years the chickens are now coming home to roost. This government has been on a wild binge of spending, but not in the right areas: not on energy security and not on reducing the price of energy, but on pet projects or, might I say, vanity projects. We have a $2 billion desalination plant which has barely even been switched on to its insurance operating level—$2 billion. We have a $2 billion new Royal Adelaide Hospital, but of course it is the $1.1 million per day every day for 36 years that is going to really cost us dearly.

There is $4 billion that could have been used to address power security and the price of power, but it gets a lot worse. Of course, we had the sale of the Lotteries Commission; we had the sale of the Motor Accident Commission, reported to be in the order of over $2 billion when all the payments come through; and we had the sale of the South-East forests. However, no attention has been given to energy security or price.

What does the government spend their money on? I went through a couple of things, including the desalination plant and the new Royal Adelaide Hospital, but there is also the O-Bahn. What a light-bulb moment that would have been for somebody. It is interesting that the O-Bahn runs through a couple of marginal seats; you might see the true intent of this current government. In fact, I am hoping the people of South Australia wake up and pull the plug on this Labor government because they have no plan on how to power this state.

I will go to the member for Hammond's point, who was rudely interrupted, which should never be tolerated in this place. He made the point that it is expensive to do business in South Australia, so I went and got a couple of quick stats. On Christmas Day, according to the average price tables published by the Australian Energy Market Operator, the regional reference price—that is, the average spot price—for a megawatt hour of electricity in South Australia was $91.67. At exactly the same time, the corresponding prices in New South Wales, Victoria and Queensland were: $37.33 in New South Wales; $20.38 in Victoria which, as has been pointed out time and time again, has a privatised system; and $36.20 in Queensland.

Ms Redmond interjecting:

Mr BELL: As the member for Heysen has pointed out—

The DEPUTY SPEAKER: You should not take any notice of that.

Mr BELL: —quite neatly, we could total the price of all three of those and it would still be around the South Australian average. However, of course the real pain comes when we have price volatility. On 17 December, the average spot price for a megawatt hour of electricity in South Australia was not $91.67: it was $259.59. No wonder major employers in South Australia say that this is a concern and that if this government does not take it seriously they will take their business elsewhere. Also, other businesses and employers wanting to set up in South Australia would look at these risk factors and say, 'Why would I bother?'

It is quite interesting that on 29 November a new climate change strategy for South Australia was released by the Premier and the Minister for Climate Change, Ian Hunter, and it was called an economic development initiative. I seek leave to continue my remarks.

Leave granted; debate adjourned.

Sitting suspended from 12:59 to 14:00.