HANSARD
SITTING CALENDAR
SEARCH
LIVE BROADCAST
Hansard Dynamic Subject Index
House of Assembly - Fifty-Fifth Parliament, First Session (55-1)
2024-11-26 Daily Xml
Contents
Xml

Bills

National Electricity (South Australia) (Orderly Exit Management Framework) Amendment Bill

Committee Stage

In committee (resumed on motion).

Clause 4.

Mr ODENWALDER: Mr Chair, I wish to draw your attention to the state of the committee.

A quorum having been formed:

The CHAIR: Member for Morphett, you had the floor. You had two questions. You have another question on clause 4, if you wish, but we can actually just agree to the clause and move on, if you like.

Mr PATTERSON: Just in terms of the rules, one of the opportunities is that the minister asks for prescribed information. Maybe he could detail what that might entail. Also, there is the option for the minister to ask for additional prescribed information. Is that in response to the prescribed information that is received, or anticipatory so that the minister just asks for additional information over and above what is required? What would be the circumstances in which that additional information might be sought?

The Hon. A. KOUTSANTONIS: The prescribed rules that you are referring to have not been agreed to yet by the minister and council, which will be agreed hopefully in December of this year in Adelaide. Prescribed information means information I can receive prescribed by the rules. Of course, the Australian Energy Regulator can seek other information, either at the request of the minister or at their own volition to try to help inform them about whether or not there needs to be an intervention or otherwise. I think that answers your question.

Clause passed.

Clause 5.

Mr PATTERSON: We are going through the process in the rules, and I know that they have to be put up, but I am assuming they will form part of the rules that you look at in early December. Once a mandatory operation direction is in place, on completion I think it is the intention of the framework that the generator has to shut down; it cannot keep going. If there is still going to be a reliability or a public safety risk at the end of the MOD, are there mechanisms that would occur to keep the generators open after this date?

The Hon. A. KOUTSANTONIS: The idea of the framework is to give the system time to adapt to the loss of the generator. The framework will see the exit of the generator. You go through the mandatory process, you are in for a period of time. That is giving time for other processes to occur outside this framework to ensure system security.

So this is basically a measure or a framework designed to maintain a generator for a period time. At the end of that period of time, the generator will exit. Once it has exited, there are other frameworks and it gives us time, bides us time, to deal with the loss of the generation in the system through other measures not necessarily contemplated through this framework. This framework is simply about the orderly exit of generation.

Mr PATTERSON: In terms of this framework, are there any situations where it could cover a generator being mothballed rather than retiring early? For example, the generator says, 'We are going to mothball a generator. We are not retiring it, we are just mothballing it.' Are there situations where this framework could apply to that circumstance?

The Hon. A. KOUTSANTONIS: This framework does not deal with mothballing; this framework only deals with hard exits.

Mr PATTERSON: I think I know the answer to this but I may as well put it out there. We talked about at the end of the MOD that is it, you are out. It does not deal with mothballing. Could there be a scenario where it gets to the end and there is a shortfall still identified and, yes, it was going to exit at that date in the normal course of events if this generation was not brought forward? Could it be an option where there is a way to mothball the generator rather than shut it down?

The Hon. A. KOUTSANTONIS: No. If you announce the exit of your generation equipment and we enact this framework, at the end of this framework period that generator must shut.

Mr McBRIDE: In regard to the minister's first point, can I just come back and reiterate that when you replied, minister, you assumed that I questioned the calibre and the ability of the bosses of Energy Australia and AEMO as though they were not competent and did not have the right skill base to perhaps look out for the best interests of South Australians or Australians in the power network. That would be absolutely contrary to my questions to you and contrary to what my beliefs are.

That came up because I am concerned and I put both hands up to you and asked that question. On the one hand, you have the financial, private, stock exchange, massive big businesses trying to make as much money and record profits—and they love records and they like beating records—and on the other hand, we have the Public Service trying to hold them to account. I believe they have a really big job on their hands. That is my concern, not that they cannot do it.

In regard to clause 5, we talk about old infrastructure needing to roll on to provide security and energy for the network around Australia. For me, I think it is really typical at this stage because South Australia, in my part of the world, depends on Victorian generation sometimes. The question then is: if the investment in power generation is coming to the end of its cycle, at what levels do you think government will have to participate in keeping old infrastructure and old furnaces going?

If the private sector, business, says, 'This is too hard, too costly; it's about to deteriorate to an extent that makes it inoperable for us,' what sorts of measures or investment do you think governments—be it the Victorian government, or perhaps if you are at the table batting for some power generation in Victoria that South Australia deems is important—are going to have to play in this field if the term of the generation has another 10 years to roll but you want 15 years out of it, or you might want 20 years to roll because the security in the network is not quite up to speed when that comes up? What sort of investment do you think state governments are going to have to play in this field to maintain security in electricity that I know you and I want for consumers?

The Hon. A. KOUTSANTONIS: There is no such thing as a generator that cannot be saved. It is all a matter of cost. My biggest concern with the way the National Electricity Market operates is nameplate capacity. Australian conditions are very harsh. Maintenance is everything.

This is the problem with explaining this to the public: nameplate capacity is 250 megawatts. People do not understand why 250 megawatts is not available all the time. Heat has an impact. Weather conditions have an impact. Age has an impact. Maintenance has an impact. Generators go bang, things break, things rust, things get old. As things enter end of life they stop maintaining them. These are decisions that individual governments have to make about maintenance and bilateral arrangements.

What governments are doing, though, and the part of your question that you are ignoring is the transition—grid-scale batteries, renewable resources, brand-new fast start, and aeroderivative thermal generators that can provide quick, fast response to the grid. Base load is not going to be the way of the future. The way of the future is going to be large-scale renewable projects operating with gas firming them at times of either dunkelflaute or at times of high demand. That is fast response kit which would probably be new. As this transition happens, it makes no economic sense to keep old clunking coal-fired power stations operating, as nostalgic as some people are about them.

Mr McBRIDE: Thank you, minister, because that is a good answer and you have answered my query. Just taking it a little bit further then, on that same line, I hear you about your renewables, I hear that it is going to roll and I agree that it is going to roll out. Do you think that the AEMOs and the national energy regulator will have a really good feel about the longevity of the old power generation investments that are old fossil fuel, and we are talking mainly about coal, are all going to last long enough to actually cover the new rollout that you allude to by the renewable energy investments? That due date, that expiry date, just somehow aligns the same. The old furnaces and all that, they just collapse right here, but guess what? On the other side, our renewables are going to pick up the pieces and it is all going to mesh together well. Is that what you are suggesting, minister?

The Hon. A. KOUTSANTONIS: No, what I am suggesting is that the reason we are bringing in frameworks like this is because they are not meshing and they are not meeting timeframes. Look at Project EnergyConnect. That was meant to be operational in 2022, and it is not. So you have transmission networks not being built, distribution networks not being built, generators not being built. The only predictions that are coming out on time are closures. There are plenty of predictions and announcements in the market of new generation and new developments. They are usually always delayed and they are usually always postponed. However, the closures are remarkably accurate and on time, and that is what we are trying to deal with here.

Clause passed.

Clause 6.

Mr PATTERSON: We talked about circumstances where you could have generators where things go bang just out of the blue and significant breakdowns could result in large capital costs. The bill refers to the fact that ministers will need to consider managing risk even of a low probability event that could have a high impact on that. Once this MOD is entered into, who bears the risk for such an event happening? Is it the generator? Is it the customers? Is it both? Of course, we are talking about a plant that is old in some cases and prone to catastrophic failure.

The Hon. A. KOUTSANTONIS: That is good question. You would remember I spoke to you earlier about part of the assessment here is on what maintenance needs to be done. There is always a risk profile for every generator, no matter what it is. Pelican Point trips regularly. The old Northern Power Station used to trip as regularly as an old Collingwood player after retirement. These things go over, but within the framework it allows insurance costs to be recovered, allows for maintenance costs and upgrade work. We do our very best within a risk profile and within a reliability framework.

Anyone who says to you that they can guarantee the operation of a generator 24/7 365 days of the year is simply lying. It is not possible. All equipment has fatigue, all equipment has breakdowns, all equipment needs shutdown for maintenance, but we do everything we can to minimise that and guard against it, and this is no different.

Mr PATTERSON: During the consultation process, there was some issue around whether, once one of these MODs is entered into, the generator should be constrained to only operate in peak periods potentially rather than being able to use this as a mechanism to get some regulated income and just run the whole time and pad out the income for that particular generation asset. Is that feasible that you could have especially some old equipment not go for 12 months? What about the implications on staff? How do you retain staff if they are not potentially working? Is that feasible or something that should be considered?

The Hon. A. KOUTSANTONIS: The performance indicators will be a bilateral arrangement between the minister, the AER and the proponent, but I just point out there are peaking generators now that are operating as available in the system that do not turn on other than in summer, so they literally go 12 months without dispatching, or they are just sitting there opportunistically, or they are operating on the basis of an arbitrage through their book versus their gas contract versus price in the spot. This is not new for the NEM.

I suppose the best way I can explain this framework is imagine you have a retired old generator that you have made a merchant decision to shut, yet your board has told you, 'No, we are keeping that in. Tell us what you need to keep it open and operating for the next three years, and then you can close it.' What we are doing is compelling you to do that on the basis that you would do it on a merchant basis and that you will work out everything you need to do to keep it open.

There are frameworks that we will negotiate bilaterally, but what we are basically doing is asking someone to do what they would not normally do but, if they would do it, what would it cost, how would they go about it, and is it feasible, and then we would work out a plan to operate it. We are basically removing the merchant risk by enabling them to recover their costs and saying they will stay in. It is a relatively commonsense solution that should have been in place a long time ago.

Mr PATTERSON: Another aspect to that is they enter into an MOD, it might be meant to run for a certain period, and then there might be cause to terminate the agreement—I think the bill puts in the situations in terms of a termination. The question is, is there a formal process that has to be followed if the minister is thinking of terminating agreements? Also, specifically around notice to the market that an agreement is going to be terminated early, could you give some commentary around that, please?

The Hon. A. KOUTSANTONIS: Just for context, these are organisations that want to shut their generator; they have made a commercial decision to shut it. We can terminate by agreement—'I don't need them anymore, so they can shut'; or I am satisfied that in accordance with the rules there has been effective compliance and the direction is no longer possible or required; or the generation might have blown up or something happens; or I determine on reasonable grounds—and 'reasonable grounds' is a well-defined parliamentary definition—that the direction should be terminated; or in any circumstances prescribed by the rules. It is just a matter of us trying to come to a common agreement.

For example, generator X is to shut, generator X is shutting, the MoD is put into place, and the plan to remedy the situation is brought forward. Why expend unnecessary money on old generation through an MOD? You terminate early and allow the solution to commence. It makes sense.

Clause passed.

Long title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (17:03): I move:

That this bill be now read a third time.

Bill read a third time and passed.

PARLIAMENTARY BUSINESS
MEMBERS
GET INVOLVED
ABOUT PARLIAMENT
VISIT
LEGISLATIVE COUNCIL
HOUSE OF ASSEMBLY
CONTACT