Launch of Energy Green Paper in speech to International Mining and Resources Conference
23 September 2014
[Check against delivery]
Thank you for the welcome and for the opportunity to speak with you today.
Hosting the International Mining and Resources Conference here in Melbourne is a clear reminder that the Australian energy and resources sector drives our national economy.
While so much of the activity in the sector takes place in regional and sometimes remote areas, the impact and benefits of this sector are essential to all parts of the Australian economy, right down to the people who turn on their light switches here in Melbourne this evening.
Given your focus and your clear understanding of the significance of the energy and resources sector to our national economy, I can think of no better occasion in which to outline further details about the Government’s plan for the energy sector.
Today I am launching the Government’s Energy Green Paper, which will set the course for a comprehensive blueprint for Australia’s energy future.
The Energy Green Paper has been the Government’s focus in energy policy over the last twelve months, and it considers the topics and themes that affect the sector today, but just as importantly it considers themes that extend well beyond today, this month or this year.
One of our key objectives in compiling the Energy Green Paper has been to be forward looking.
The energy sector is a fundamental pillar of the Australian economy, so our focus should also be on putting in place the broad structure that will allow Australia to predict, as far as possible, the issues that will arise in the future.
Yes, most of us here in this room are very well acquainted with the energy sector, and we give deep consideration to the full range of issues in energy and resources.
But we want to take that one step further and put in place a blueprint that can equip Australian policy-makers, industry and consumers - ranging from businesses to households - with the facts, figures and trends that can pre-empt likely opportunities and challenges.
The Green Paper is broad by design. We want to encourage a robust and diverse debate about an issue that is central to the Australian economy, and we want that discussion to be industry-relevant and industry specific.
The importance of energy to Australia’s economy
In recent weeks I have been speaking about the new approach for Australian industry policy, which is built around our areas of natural and competitive strength.
There is little doubt that the energy sector constitutes one of those strengths, and the Energy Green Paper is a tool for building on that strength, with a focus on competition, innovation and productivity.
Australia is consolidating its position as an energy superpower,
We are well regarded internationally for our access to a diverse range of energy sources and we are supplying increasing volumes of energy commodities to energy-hungry nations in the Asian region.
Yes, Australia has great energy resources, but we’re not making the most of them.
Therefore the Government’s chief objective, to be delivered by the Energy Green Paper and then subsequently the White Paper, is to identify the ways in which we can improve the framework surrounding our energy assets.
This ranges from addressing questions about how to ensure Australia’s vast gas reserves are accessed to the benefit of local industry, consumers and export markets.
It also means ensuring Australia has access to the sophisticated and technologically skilled workforce in order to maximise our opportunities.
And it means having the good information available so that consumers can drive innovation through competition and choice.
It’s not enough that Australia has the best energy resources in the world, we must be the world’s best in how we access and utilise these resources as well.
Whether it’s through world firsts in floating LNG technology, ensuring flexible, transparent domestic energy markets, or connecting the Australian energy market in the most sophisticated way that adds value to our economy, we want Australia’s energy policy framework to empower consumers with competition and choice to minimise their electricity costs. And we want to do this by, getting the settings right to maximise our competitive edge and natural strengths.
Coal exports continue to account for the majority of Australia’s energy exports.
In 2013-2014 exports of thermal and metallurgical coal accounted for $40 billion in Australian exports.
LNG was 16.4 billion and uranium around half a billion dollars.
As Australia’s LNG export facilities in Queensland come on line, and following the formalisation of an agreement to supply uranium to India, substantial growth is anticipated in both sectors.
Our most significant energy export markets are in Asia.
Japan is the largest single market with a 41 per cent share of Australian energy exports, valued at just over $29 billion.
Our second largest market is China, which accounts for 14 per cent of our energy exports, or just over $10 billion worth.
India currently accounts for 7 per cent of energy exports from Australia, but as already mentioned, now that the Prime Minister has formalised an agreement to supply uranium to the subcontinent for power generation purposes, the value of that market will grow.
The figures provide compelling evidence of Australia’s status as an energy superpower, most notably to the energy hungry markets in our immediate region.
Domestically, the energy industries account for nearly 7 per cent of Australia’s economy, let by oil and gas extraction, which makes up $32.7 billion of the gross value added measure in our economy, then coal mining which makes up $30.9 billion.
Australian homes and businesses are also increasingly energy savvy and the context in which the Energy Green Paper is being prepared is an environment in which consumers and customers are better informed and more engaged than ever before.
When it comes to larger businesses, over the past five years for every one dollar that has been invested in energy efficiency upgrades and practices, almost four dollars in savings have been delivered.
Australian industry has not only listened to the need to become more energy efficient and put in place measures to deliver efficiency gains, businesses have taken the opportunity and run with it.
Finding new efficiencies has been good for the bottom line, whether it’s through lower maintenance and training costs or improved quality control.
At the household level there have also been significant efficiency gains and related benefits.
Improvements in home design and size mean modern homes can use 29 per cent less electricity than homes built just ten years ago.
Perhaps the clearest example is the fridge.
Refrigerators today use less than two thirds of the energy of those made 20 years ago.
What these examples illustrate is that both Australian businesses and households are well primed to move into the next phase of energy development, in which we actively pursue policies that build on our advantages and take a more proactive approach to capitalising on our energy resources and assets.
We cannot afford to coast along just because we are blessed with such diverse energy resources.
Based on the significant consultation that has already been undertaken on the Energy Green Paper four key themes have emerged.
In the first twelve months of the Abbott Government, we have delivered on significant promises to the electorate, which have a direct role in setting the context in which the Green Paper has been prepared.
The Government has delivered on our firm commitment to abolish the carbon tax and the mining tax and we continue to put in place policies to cut the excessive red tape that has been a billion dollar drag on the business community.
Australia is open for business – in word and in deed.
The Government is determined to restore the policy settings that make Australia an attractive investment destination.
This is particularly important for the energy sector, where we cannot afford to be complacent in the face of significant competition from other energy exporting nations.
Therefore, the central theme underpinning the Energy Green Paper is a focus on ensuring Australia’s competitiveness as an investment destination.
The Government has made significant reforms to streamline regulation and approvals.
The Government will create the right business conditions to attract investment. This means deregulating and streamlining, improving skills and workforce productivity, and promoting exports.
The Government proposes to attract energy resources sector through several measures.
We intend to continue our work in streamlining environmental and other approvals to create more certain, timely and accessible approvals.
We are also focussed on improving skills and workforce productivity including access to skilled migration to ensure industry has access to the skills it needs.
Other measures will include enhancing pre-competitive geoscience and improving access to environmental data to lower costs.
The Government has a substantial infrastructure agenda, which includes identifying and addressing infrastructure bottlenecks so industry has certainty relating to access and reduced infrastructure cost.
Downward pressure on electricity prices
The Government is progressing the ongoing process of energy market reform.
The bottom line in this process is to put downward pressure on electricity prices and implement reforms that empower consumers to use various sources of knowledge to take control of their bills.
The imperative is to make the customers ‘the boss’ – that is we want to give consumers the power to decide how they use electricity to suit their needs and pay a fair cost for that use.
This can be done by deregulating retail markets, allowing flexible electricity tariffs, and giving consumers the information they need to manage their energy usage.
Overall, this will create more competition, choice, and innovative products and services to consumers.
This process is long-term and forward looking and will require the co-operation of the States and Territories.
The COAG Energy Council will be the main forum through which this progress is made, and I can assure you from my previous experiences with this council, while the debate is often robust, it has traditionally been a place where relevant Ministers have approached the issues with an open mind and a clear understanding of the issues.
While I expect each state or territory Minister to be a forthright advocate for their region’s interests, I have confidence that this forum can also be used to address issues in the national interest – all of which ultimately benefit the consumer.
Gas supply and market development
I referred earlier to the Government’s goal of preparing an Energy White Paper that can better predict looming issues in the energy sector, as well as provide the framework for addressing those issues.
I can think of no clearer example than the supply crunch facing New South Wales, which has resulted from the stalling of the CSG industry.
The combination of rising gas prices and uncertainty in gas supply is creating market challenges for large gas users around information on pricing and supply availability.
To address these issues, the Government will continue to fulfil a leadership role to bring on new gas supply as quickly as possible to avoid potential supply shortages.
The Government is also determined to improve availability and quality of market information to improve market transparency and competition.
And the Green Paper also flags our intention to develop strategies for the unconventional gas industry and for more flexible and transparent market arrangements.
Future energy supply
The Government will make sure there is ongoing access to reliable and competitively priced energy.
We will ensure our science is relevant, our regulatory system allows for innovation in future energy technology to be adopted and encourage energy to be used more productively.
Having diverse energy options, and making the best use of our energy, will strengthen our energy security.
The Green Paper is deliberately agnostic when it comes to the issue of technology.
Given the document sets a broad framework for the long-term, it is not an exercise in prescribing the types of energy sources that will be used and when.
Of course this gives rise to questions about the role of nuclear energy.
The Government does not want to be in the business of ruling out any energy source, equally it must be acknowledged that there is no intention for this Government to lead a new debate on nuclear energy.
It has always been the case that in order for nuclear power to be considered a viable domestic energy source, it will require bipartisan political support and widespread community acceptance.
While the framework in which this Green Paper is being developed is very clearly about maximising our natural resources – and uranium is one of the those resources that we have in abundance – the fact remains that community acceptance for nuclear power has been undermined by the Fukushima incident.
Prior to this incident support for nuclear energy in Australia was running at around 50 per cent, and while I haven’t seen any comprehensive polling since, I suspect that sentiment has been eroded.
However, the Energy Green Paper and White Paper process would not be thorough if it wasn’t open to a conversation on all energy options.
It will also include a thorough consideration of traditional energy sources such as coal and gas, as well as the role of renewables and unconventional energy sources.
In each case, there will be a clear role for industry to articulate its case and participate in the communication process with the community.
More broadly, the Government is implementing a new approach to industry policy, which has a clear focus on playing to our strengths, as well as encouraging greater collaboration between industry and research.
The energy sector is well primed to capitalise on these stronger links, especially as we move our focus to our technological advantages, for example in LNG.
Already, the Government has been engaged in extensive consultations with the sector.
The Green Paper has been informed by the response to the Issues Paper as well as the Eastern Australian Domestic Gas Market Study.
Submissions will be open until November 4.
The Government will then prepare an Energy White Paper which evaluate the submissions to the Green Paper and the broad feedback that is provided.
This Energy White Paper will map out a policy framework that will put the energy industry on a firm footing to make full use of our resources and build on our existing strengths.
A diverse and robust energy and resources sector has been the mainstay of our economic strength in recent decades and it will continue to be one of our most important sectors as Australia moves forward to capitalise on its areas of competitive strength.
While the energy sector is diverse and strong, it is essential that Australia has a coherent and clear blueprint as we move forward.
The Energy White Paper process is at the heart of this, and with the release today of the Green Paper, we are well on track to ensuring Australia moves to the next step, in not only recognising our strengths, but building on them, and making full use of our standing as an energy super power.
Media contact: Mr Macfarlane's office 02 6277 7070