Bills

Statutes Amendment (National Energy Laws) (Rules) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 7 June 2018.)

Mr PATTERSON (Morphett) (11:02): I rise to speak on this bill, noting that our electricity grid was originally designed at a time when generation was centralised in a few large power stations with consumers spread out across distribution networks spanning thousands of kilometres.

The National Electricity Market (NEM) was established in 1998, when the economy was different from that of today. Electricity was unidirectional, flowing from the generators towards the consumers, and the electrical usage over the period of any 24-hour day was mostly predictable, rising and falling smoothly each day while, on an annual cycle, the consumer demand grew year on year.

Until about a decade ago, electricity generation was fundamentally consistent over the period of 100 years, with the primary energy sources being coal, gas, diesel and hydro. The electricity generation techniques and technologies improved, but principally they were the same, and each of these types operated as synchronous generators. Today's electricity market is quite different.

The COAG Energy Council was established on 8 June 2001, and it is the council of ministers with the primary carriage of energy matters at a national level. It comprises ministers representing the commonwealth, the states, the Australian Capital Territory and the Northern Territory. The COAG Energy Council's responsibilities include policy oversight and strategic direction, but do not extend to the day-to-day operations of the National Electricity Market. These responsibilities lie with the Australian Energy Market Commission (AEMC) as the rule maker, the Australian Energy Regulator (AER) as the market regulator and the Australian Energy Market Operator (AEMO) as the market operator and national transmission planner.

In September 2016, the electricity supply in South Australia blacked out, which was the first time an entire state had experienced a blackout since the NEM was established in 1998. In response, on 7 October 2016 the COAG energy ministers agreed to an independent review of the National Electricity Market. Dr Alan Finkel AO, the Australian government Chief Scientist, was appointed to lead the review, with the primary purpose of the review being to develop a national reform blueprint to maintain security and reliability in the National Electricity Market.

On 9 June 2017, Dr Finkel released the final report, which was entitled 'Independent review into the future security of the National Electricity Market', known as the Finkel review. This report focused on key outcomes for the National Electricity Market: increased security, future reliability and rewarding consumers for reductions in their demand. These outcomes are to be underpinned by the three pillars of an orderly transition, better system and network planning to support this transition, and stronger governance to achieve a more adaptable system that can better integrate emerging technology.

To achieve stronger governance, the Finkel review recommendations included that the COAG Energy Council should develop and maintain a strategic energy plan informed by the panel's blueprint to guide the operation and evolution of the National Electricity Market and that the COAG Energy Council should immediately agree to establish an energy security board to have responsibility for the implementation of the blueprint and for providing whole-of-system oversight for energy security and reliability. The Energy Security Board should be comprised of an independent chair supported by an independent deputy chair, with the chief executive of the Australian Energy Market Operator and the chairs of the Australian Energy Regulator and the Australian Energy Market Commission as members.

In line with this recommendation, at the COAG Energy Council meeting of 14 July 2017 ministers agreed to establish the Energy Security Board as a non-statutory body to monitor and implement the Finkel review recommendations. The Energy Security Board operates by the delegated authority of the COAG Energy Council. The Energy Security Board's role will be reviewed in three years.

The Energy Security Board's terms of reference state that the board will support the transition of Australian energy markets and advance the long-term interests of consumers in the process. It will have responsibility for the implementation of recommendations from the 'Independent review into the future security of the National Electricity Market' and provide whole-of-system oversight to the COAG Energy Council on energy security, reliability and affordability in the National Electricity Market.

The board will facilitate better planning coordination and action between governments, the COAG Energy Council and market bodies. The board's work will support the National Electricity Objective and the National Gas Objective. The board will provide the COAG Energy Council with assessments of the performance of the National Electricity Market, any significant opportunities and risks in its operation and how they should be dealt with.

Dr Finkel also noted that the design and governance of our electricity market will need to be resilient to match the constantly evolving market and that this resilience is to be achieved by actively integrating new technologies to ensure that needs are met. The Marshall Liberal government took to the election an energy solution that is consistent with this national approach emphasised in the Finkel review and that will provide householders and businesses with electricity that is more affordable, reliable and secure.

It is a plan to get electricity prices down and, importantly, deliver an orderly transition to clean energy at the same time as making that transition in a way that will not punish South Australians with high prices and blackouts and that particularly does not punish the most vulnerable South Australians with these high prices and blackouts.

Around the world, jurisdictions that are successfully managing this transition to a low-carbon future have two features in common: they have sufficient base load generation providing system security and lowering costs and they have strong reliable interconnection between regions and different types of generation.

The Marshall Liberal government will implement a series of specific realistic actions not only to stop the continuing escalation in these electricity prices but also to improve the reliability of the supply for the long term. Instead of abandoning the National Electricity Market and adopting Labor's go it alone approach, this Liberal government will retake South Australia's former role as a leader within the National Electricity Market for the benefit of South Australian families and businesses.

In line with the Finkel review's recommendations to provide improved system planning, we will establish a renewable energy zone between South Australia and New South Wales, which will unlock the vast potential of the renewable resources that exist across the borders of these two states, providing the next wave of generation that will gradually replace the older electricity plants. This will allow us to take advantage of the geography of Australia as renewable zones work best between states with different weather patterns.

Victoria and South Australia have similar weather patterns, and so when South Australia has periods of high usage, usually so does Victoria. However, New South Wales and South Australia have quite different weather patterns. This increases the likelihood that demand and supply are decoupled between the two regions.

At present, South Australia has an interconnector with Victoria and we are at the end of the line. We need to better become part of the loop and so establish an interconnection fund with the delivery of an interconnector between South Australia and New South Wales as the first priority to give us more access to cheaper base load power. More options mean there will be more flexibility, but also allow South Australia to export their renewables.

Currently, South Australia has approximately 770 megawatts of installed rooftop solar capacity and these solar systems generate their peak electricity during the middle of the afternoon; however, most household peak usage occurs in the late afternoon and early evening when people are getting home from work while, at the same time, businesses are still running. By installing battery systems, households can align their generated electricity to their usage.

The Marshall Liberal government has plans to invest $100 million to support the take-up of storage for home-based solar systems, and this scheme will provide a means-tested grant, averaging $2,500, to facilitate the installation of batteries in 40,000 homes. This household scheme does not only benefit those with rooftop solar systems. It will also help reduce the pressure on supply in peak periods and so lower generation costs overall and therefore all consumers will benefit.

We will also establish a $50 million grid-scale storage fund to facilitate the development of new storage technologies capable of addressing the intermittency of South Australia's electricity system. This might be battery, pumped hydro, hydrogen or solar thermal. These reforms target the needs of people and are focused on practical outcomes, not politics, glitz or glamour. Dr Finkel himself stated that one of the common consultation points was that the National Electricity Market needs to evolve much more quickly than it has to date. This requires a mechanism to allow for the timely implementation of the Energy Security Board's recommendations.

At the same meeting on 14 July 2017 that the Energy Security Board was established, the COAG Energy Council ministers also agreed to further strengthen the role of the Energy Security Board so that, where council is unanimous in its support for Energy Security Board recommendations, they are implemented. As the lead legislator, South Australia is tasked by the COAG Energy Council with implementing the ministerial power to make rules where the rules are recommended by the Energy Security Board and approved by the COAG Energy Council, the latter requiring the unanimous support of ministers in accordance with the COAG Energy Council's meeting protocols.

The Statues Amendment (National Energy Laws) (Rules) Amendment Bill 2018 establishes this rule-making mechanism by which a proposed rule recommended by the Energy Security Board, once it has unanimous support of the COAG Energy Council, can be made by the South Australian minister for minerals resources and energy under the National Electricity Law, the National Energy Retail Law or the National Gas Law, as appropriate.

Whilst the process contained in the bill is designed to be an efficient one and ensure timely implementation of recommendations made by the Energy Security Board, to the extent they are within the scope of the board's roles and responsibilities, the bill contains several statutory requirements that must be met before a rule can be made by the minister. This ensures that there are sufficient checks and balances in place to provide for a rule that has been sufficiently considered and scrutinised, both by the Energy Security Board through its respective members and the COAG Energy Council's approved consultation procedures.

I remind the house that the members of the Energy Security Board consist of an independent chair, supported by an independent deputy chair, with the heads of the Australian Energy Market Operator, the Australian Energy Regulator and the Australian Energy Market Commission as members. This board can draw on expertise and understanding of each of the market bodies when recommending a rule.

The development of the National Energy Guarantee by the Energy Security Board is an example of where a recommendation of the Energy Security Board is being developed and refined through an extensive public consultation process. This process is continuing. Even after a rule has met the various tests contained in the bill with respect to its scope and consultation, it must still receive the unanimous support of the COAG energy ministers through the COAG Energy Council.

Importantly, the same rule that is recommended by the Energy Security Board to the COAG Energy Council must then be submitted to the minister. Any variations require the process to be reinitiated. In addition, any rule created under this process once made becomes indistinguishable from all other rules made by the Australian Energy Market Commission. This includes the ability for a party to submit a rule change request through the usual process, should it feel this is warranted.

This rule-making power can be used by the minister only while the Energy Security Board exists. At present, this will be reviewed after three years, and if there is a decision to abolish the Energy Security Board the minister's power to make rules as part of this bill will also stop. The Finkel review also recommended implementing recommendations of the Review of Governance Arrangements for Australian Energy Markets, referred to as the Vertigan review, to expedite the current rule-making process.

This bill makes the necessary change, specifically allowing in the Australian Energy Market Commission's publication time line for a rule change that is considered non-controversial to be increased from six to eight weeks. It is anticipated this will result in these provisions being used more often by the Australian Energy Market Commission.

The government is confident the ministerial rule-making power, the change to the expedited rule change provisions, as well as the establishment of the Energy Security Board by the COAG Energy Council last year, will allow for a more responsive governance structure that better adapts to an ever-changing energy market, as identified by the Finkel review. Dr Finkel pointed out a statement of principle from Jack Welch, the former CEO of GE, which is the only company to have survived in the Dow Jones index since the index was formed 110 years ago, as follows:

If the rate of change on the outside exceeds the rate of change on the inside, the end is near.

To allow the NEM to provide a stable and affordable electricity system, we have to proactively respond to the inevitable change and change on the inside in order to remain effective.

This Statutes Amendment (National Energy Laws) (Rules) Amendment Bill 2018 assists in this regard by establishing a mechanism to allow for the timely implementation of the Energy Security Board's recommendations should they be unanimously agreed to by the COAG energy ministers. I commend the Minister for Energy and Mining for his commitment to restoring South Australia's leadership role at the COAG Energy Council in fixing the National Electricity Market, and this bill is one such example. I commend this bill to members.

Ms HILDYARD (Reynell) (11:19): I rise today to also speak on the Statutes Amendment (National Energy Laws) (Rules) Amendment Bill. Labor supports this bill and is very proud of what we achieved in the energy space when in government.

The electricity market has changed so very much over the years, a change that brings with it both enormous opportunities and challenges. We as legislators need to be able to change our focus with it so that we can ensure that South Australian businesses and individuals, and indeed Australian businesses and individuals, have access to reliable and affordable power that is sustainable for future generations.

As has been outlined, in June last year Dr Alan Finkel—who chaired an expert panel with members Karen Moses, Chloe Munro, Terry Effeney and Mary O'Kane AC—handed down a final report of an independent review of the National Electricity Market. The final report, the blueprint for the future security of the National Electricity Market, is an important plan designed to maintain security and reliability in the National Electricity Market during the significant transition that is underway. It is a transition that is driven by a number of factors, including technological changes as well as the problems associated with ageing coal-fired power stations.

This review took place after an agreement by COAG energy ministers in October 2016 that the security and reliability of the nation's electricity market needed to be thoroughly and rightly investigated. A key recommendation of this review was the establishment of the Energy Security Board. The board comprises the Australian Energy Market Commission, the Australian Energy Market Operator, and the Australian Energy Regulator, with an independent chair and deputy chair. The implementation of the blueprint produced by Dr Finkel is the responsibility of the board, as is the provision, rightly, of whole-of-system oversight of the security and reliability of the National Electricity Market.

On 14 July last year, the COAG Energy Council agreed that such a mechanism was needed to allow for the Energy Security Board's recommendations to be efficiently implemented in a reasonable time frame. The bill established a mechanism by which recommendations of the Energy Security Board to make a rule can be made by the South Australian energy minister under the National Electricity Law, the National Gas Law or the National Energy Retail Law. A proposed rule must rightly be in connection with energy security and reliability or long-term planning on the National Electricity Market for this legislation to apply and for the minister to make the rule.

In closing, I want to use this opportunity to again mention Labor's commitment to reliable, affordable, clean, and secure energy. I was so privileged to be a part of the Labor government that made South Australia a leader in renewable energy, not just in Australia but across the world. I hope our state is able to continue to be a leader in this space under this government and is not pulled backwards. This is an important bill for the people of South Australia and for the energy future of our state. The bill enables us to adapt to the rapidly changing electricity market, and it also rightly brings necessary scrutiny. I commend the bill to the house.

Debate adjourned on motion of Mr Pederick.