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House of Assembly - Fifty-Fifth Parliament, First Session (55-1)
2022-11-01 Daily Xml
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Ministerial Statement

National Energy Crisis

The Hon. P.B. MALINAUSKAS (Croydon—Premier) (14:05): I seek leave to make a ministerial statement.

Leave granted.

The Hon. P.B. MALINAUSKAS: The commonwealth budget delivered on 25 October forecasts that electricity prices will increase in the National Electricity Market by 20 per cent by the end of this year and a further 30 per cent the next financial year—a potential cumulative increase of 56 per cent. In addition, federal Treasury expects retail prices of gas to increase by 20 per cent this year and a further 20 per cent in 2023-24.

Price increases of this scale are completely unacceptable to the community and will have significant adverse impacts on households and businesses, worsening pressure on the cost-of-living crisis, reducing real disposable income and impacting economic growth. As noted by the commonwealth, the Australian Energy Market Operator and the Australian Energy Regulator, the illegal invasion of Ukraine by Russia has caused a global gas supply crisis, which has increased prices to extraordinary levels. Australia, including South Australia, is not immune to these price rises.

Electricity price rises have been exacerbated by a related global increase in coal prices, and in Australia the increasingly unreliability of aging coal-fired power stations and problems with coal supply. South Australia has a higher level of renewable generation, and price rises here are expected to be lower than in the Eastern States, which rely on coal-fired powered fire stations. However, while lower, the predicted rises are severe.

Accordingly, the government has established a National Energy Crisis Committee of Cabinet, which will be chaired by me as Premier. The cabinet committee will be supported by a task force, which will help develop a response to the forecast electricity price increases with the aim of implementing measures that can reduce the scale of increase and mitigate the impact on the community.

The National Energy Crisis Taskforce will be co-chaired by the Minister for Energy and Mining, Minister Tom Koutsantonis, and the Chief Executive of the Department for Energy and Mining, with a membership including the Chief Executive of Hydrogen Power South Australia, Treasury and Finance, the Department of the Premier and Cabinet and other members as determined with support from the Department for Energy and Mining and expert energy market consultants.

In addition, South Australia is working collaboratively with the commonwealth, other states and territories and national market bodies the AER, the AMC and AEMO. The Malinauskas government is pleased that the commonwealth has reinvigorated the energy ministers process and welcomes the leadership of energy ministers by the commonwealth Minister for Climate Change and Energy, Chris Bowen.

This is a national energy crisis, and we welcome the statements from the commonwealth that Prime Minister, Anthony Albanese; Treasurer, Jim Chalmers; Minister for Resources, Madeleine King; Mr Bowen and colleagues; will consider all our options in addressing the challenge of this crisis. The commonwealth has considerable regulatory powers, and South Australia will welcome those powers being exercised in the pursuit of affordable, reliable and cleaner energy.

It is also important to dismiss the claims that renewable energy is the cause of the price increase. The cause is the increase in the prices of coal and gas and the internationalisation of prices domestically despite Australia's bountiful supplies.

In the Quarterly Energy Dynamics report, published last week by the Australian Energy Market Operator, this trend is quite clear. That report notes that in South Australia the average price of gas in the third quarter of 2021 was $11.51 per gigajoule. In the same quarter this year, it was $27.29; that is, there has been a 137 per cent increase. AEMO found that thermal coal export prices in July 2021 were below $A200 a tonne. In the third quarter this year, they averaged $612 a tonne.

These prices are then reflected in the wholesale price setting of the National Electricity Market. AEMO records the average marginal price set in the NEM according to the form of generation. For black coal, the average price in the third quarter of 2021 was $61 per megawatt hour. In the same quarter this year, that was $197 per megawatt hour, or more than three times higher. For gas, the average increased from $134 in quarter 3 of 2021 to $330 this year, an increase of nearly 150 per cent.

In contrast, there was a very different position in the NEM, where renewables set the price. For wind, the price changed from negative $41 in quarter 3 of 2021 to negative $1 this year, clearly reducing overall pricing rather than stoking increases. For solar, the price reduced from $33 in 2021 to $31 this year, again showing that renewables are driving prices down.

These figures show that the Malinauskas government's policy to build a hydrogen industry and encourage more renewable energy investment will both decarbonise our economy and drive down prices for consumers and businesses. My government is committed to assessing all possible options available at a state level to protect South Australia from the worst impacts of the national energy crisis.

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