Energy Users Association of Australia Annual Conference address
17 October 2013
[Check against delivery]
Thank you for the opportunity to speak here today at your conference, one of my first speeches since returning to the industry portfolio, in the Abbott Government.
It's a great privilege to be entrusted with the crucial resources and energy responsibility as part of this portfolio.
Australia’s energy sector is critical to a productive and competitive Australian economy.
The sector is vital to protecting and creating jobs, as well as encouraging ongoing investment in our industries.
That is particularly evident here in Queensland, where the energy sector is driving local economies in rural areas, through the coal seam gas industry.
However, along with the opportunities in the energy sector, there are also challenges.
Electricity and gas prices have risen significantly over the past five years.
While the reasons are well documented, there is no denying that high energy costs have a significant impact on cost of living, including the cost of doing business in Australia.
In addition, we are facing changes in the way electricity is being produced and consumed, including significant changes in overall demand.
Only a few years ago, strong growth in peak demand drove a major increase in the use of gas in the power sector, as well as the need for a massive reinvestment in networks.
This is now changing, with overall demand for grid-based electricity falling over the last two years.
Falling demand can represent a range of complicated factors, including macroeconomic pressures, energy efficiency measures and consumer response to high prices.
But the Australian Energy Market Commission’s latest report on possible future trends in household electricity prices provides cause for optimism.
The report indicates a moderation in price rises over the next few years.
I note that these prices will moderate further after the repeal of the carbon tax—and I will return to this subject shortly.
Let's look at the key challenges facing the energy sector.
First, to gas.
There is enough gas in the ground to supply both the domestic and export markets.
What we need is timely investment to get this gas to market, and confidence that the regulatory environment supports rather than hinders its development.
Australia is well positioned to become one of the largest exporters of liquefied natural gas in the world.
However, this transition has given rise to a number of challenges around domestic prices and supply, especially in eastern Australia.
Slow approval processes and excessive green tape regarding our east coast gas supply are compromising the energy security of the region and beyond.
It's important we address these challenges now.
Taking decisive action now is a vital part of delivering improved productivity for the Australian economy.
It will also help protect and maintain our economic competitiveness.
After more than 30 years of mostly steady growth, gas supply will now be tripling in size in the next three years in response to new LNG export opportunities.
New gas resources are only becoming available through private sector investment by way of significant amounts of capital, time and effort.
Investment to undertake the necessary exploration and development and build the massive infrastructure required to bring these resources into production.
There are windows of opportunity that drive these developments and there is fierce international rivalry in the race to secure important markets.
I am acutely aware that given the scale and rate of change to secure these new opportunities, there are also tensions.
However these tensions are not a reason to delay; they should simply help inform our best approach.
To work through these issues the Government will develop a gas supply strategy for the east coast to 2020.
When it comes to coal seam gas, what is being done in Queensland works.
Farmers and gas companies are working together, within the framework set out by the Queensland Government, to sign access agreements that are allowing the CSG industry to develop, while delivering a return to farmers.
Just as importantly, this progress has meant there are new job opportunities in regional towns and, for the first time in my lifetime, we are seeing younger generations come back to their home districts to live – reversing the exodus of skilled people to the bigger cities.
I am also working closely with the NSW Government to find a real solution to that state’s gas challenge.
That includes convening a group of stakeholders including gas companies, farmers, other landholders and gas consumers to work on this challenge.
As I have made clear repeatedly in the past, the Coalition will not consider any retrospective or blanket domestic gas reservation policy.
I welcome the actions of the Business Council of Australia to bring together gas users and suppliers to work together to consider gas supply issues.
I have long advocated the need for industry groups to consider this issue. It is not the domain of Government to solve the problem alone.
As the Minister in a Government that understands the importance of the energy and resources sector and is keen to see the resources sector and the industry sector work together – which is why they’ve been brought together under one portfolio – I will work with industry to address gas supply issues in NSW and broader energy security matters.
Carbon tax repeal
A key focus of the Australian Government is to improve the productivity and competitiveness of our industries.
We have a clear set of pre-election commitments to achieve these goals.
First we have already commenced work on repealing the carbon tax.
This will reduce cost pressures for businesses and households.
The repeal of the carbon tax will assist with cost of living pressures through reducing electricity and gas bills prices.
As the Prime Minister made crystal clear earlier this week, the Government will follow through on this promise, and it will be the first priority when the new Parliament sits in a matter of weeks.
In its place, the Coalition’s Direct Action policies will address carbon emissions reductions, without driving up energy costs.
The Australian Government will also review the Renewable Energy Target in 2014.
I will be working closely with the Minister for Environment on this.
The review will be undertaken in an open and transparent process.
It will also be a broad review that properly considers the needs of energy users and the manufacturing sector.
COAG reform agenda
On improving cost of living pressures, I note the comprehensive energy market reform package agreed to by COAG—the Council of Australian Governments—in December 2012.
It is aimed at ensuring Australians enjoy a reliable supply of electricity at a minimal sustainable cost.
This will help ensure network expenditure is efficient, avoiding undue price pressure on electricity consumers.
It will also promote greater demand side participation to minimise peak demand and associated infrastructure investments.
There is also the National Energy Consumer Advocacy Body, which the Standing Council on Energy and Resources has agreed to launch on 1 July.
It will build further engagement on consumer issues with the broader community, as well as supporting research into key consumer issues.
Complementing these reforms are changes to the way the national regulator’s decisions are appealed under national energy laws, identified as a driver of rising prices.
On this, I encourage the South Australian Parliament, as lead legislator for the National Electricity Market, to pass this legislation as soon as possible.
It will ensure the new framework applies to future regulatory determinations.
I will work with my state and territory counterparts to finalise the key reforms through the COAG process.
Cutting red and green tape—one stop shop
We are also committed to ensuring environmental and social sustainability across our communities.
There is no argument that projects should comply with best practice environmental standards.
However, the current approval processes need to be simplified.
There are numerous examples of business facing excessive costs in obtaining environmental approvals in particular.
Some degree of regulation is, of course, a necessary and desirable component of establishing efficient markets.
But excessive red and green tape can have significant impact on productivity, efficiency and ultimately lower standard of living for all Australians.
This is why the Government has committed to cutting red and green tape.
We will work closely with the states and territories to create a one-stop shop to encourage the fast approval and commencement of new projects.
I note that there has already been progress in this area with an accreditation agreement signed between the Queensland and Australian Governments.
Now, to the issue of improving productivity.
The Government’s policies in this area aim to boost productivity and reduce the burden of regulation for the sector.
This is critical to making Australian businesses and workers better off.
There is a real need to address pressures in our electricity and gas markets to ensure they operate as efficiently as possible to promote competition and better outcomes for consumers.
Regarding the electricity sector, the Government understands that a secure and resilient domestic energy system is vital to investor confidence across our economy.
That is why we will look at real solutions to improve production efficiency, and the transportation and use of electricity, that benefit both business and consumers over the longer term.
Energy efficiency measures, in particular, can contribute to our priorities in achieving productivity improvements.
Extracting better value out of the energy we produce and use can play a key part in driving the future growth of the economy, as well contribute significantly to abatement.
AEMC—NSW review of retail competition
One practical way to improve the productivity of the market now is to deregulate electricity prices where competition is found to be effective.
I note that the Australian Energy Market Commission—the AEMC—in its recent assessment of the effectiveness of competition for small electricity and gas consumers in New South Wales, has recommended that retail price regulation be removed.
As seen in Victoria and South Australia, effective competition followed by price deregulation provides benefits for consumers through increased competitive pressures.
It creates opportunities for new and existing retailers to offer consumers not only competitive prices, but also innovative energy supply arrangements so they can better understand and manage their energy use and costs.
Any decision on price deregulation in NSW resides with the New South Wales Government.
Here in Queensland, the State Government has made clear that while it is not considering privatisation of distribution and transmission, any consideration to privatise electricity generation assets will be taken to the people in an election before a decision is made.
I encourage the Queensland Government to follow through with that process.
Improving competitiveness through technology and innovation
It is no secret that the application of new ideas and technology can contribute to economic growth through improvements to productivity, as well as the range of services that can be offered to consumers.
The ability to innovate by finding new ways to do business, developing new business models and tailoring products to a changing market, is vital to the success of Australian businesses.
This will help deliver a strong and prosperous economy that is productive and globally competitive.
Energy White Paper
The strength of our economy depends on the secure, reliable, efficient and competitively priced supply of energy.
Of course, the same can be said about the strength of the businesses you represent, and that's why these issues are at the core of your advocacy work.
The Australian Government has committed to a set of signature economy-wide reforms aimed at reducing key drivers of rising business costs.
While it is still very early days, I do have firm views on what the Energy White Paper should cover.
I believe the focus should be on those economy-wide reforms relevant to the energy sector, including streamlining regulation, improving workforce development, and stimulating research and development.
Our energy policy needs to balance our long-term domestic energy needs and growing our exports of energy products—both unrefined and value added—with putting in place the environmental safeguards the community expects.
We can reform regulation to set clear policy that reduces business uncertainty and supports markets.
The White Paper will strike the best possible balance between these goals to meet the long-term interests of consumers and the nation.
Australia is once again open for business with a new energy agenda to meet the needs of energy users across the nation.
While not a magic bullet, I am confident the agenda will strengthen and build a more vibrant and sustainable future for our industry and our regions.
The Australian Government is absolutely committed to delivering on our election commitments in this area.
We are working to cut red and green tape in energy supply approvals, repeal the carbon tax, take forward the COAG energy reforms and improve competition, productivity and efficiency in the energy sector.
And we welcome—and would encourage—the participation of stakeholders like the EUAA in implementing the government's energy agenda.
I note that the theme of today’s conference is ‘empowerment through participation’.
Similarly this Government is committed to engaging in genuine consultation with business, the not-for-profit sector and the community, before introducing any new legislation and regulation.
I encourage you all to engage in these processes as they arise.
I am sure there's no shortage of ideas here at this conference about the best way forward in our efforts to tackle Australia's energy challenges.
Media contact: Minister Macfarlane’s office 02 6277 7070