ROSS GREENWOOD:  I think it's fair to say that the Federal Government is less than impressed by the timing of that announcement.  Energy Minister Angus Taylor joins me now. Angus, were you shocked and surprised by the timing and the announcement by Origin Energy this week? 

ANGUS TAYLOR:  Yeah, we were disappointed, Ross.  I mean there is a notice period required before closure happens and they've gone right to the line on that. 

ROSS GREENWOOD:  But they're actually within their limits of course? 

ANGUS TAYLOR:  Well, except that, you know, corporate and social responsibility matters here.  This is a market that matters to every Australian, to Australian industry, to small businesses and we expect companies to do the right thing by their customers.  It's incredibly important that alongside ESG there's another letter which is C, and that's the customer and they really count.  So it was disappointing the time frame here because we've got three and a half years to replace 2,800 megawatts.  Now that's an enormous ask.  The good news is we've been on adding capacity to the market, dispatchable capacity to the market for a long time now.  Lots of criticism about it.  You mow, sometimes from investors who want more profits from energy companies and would like to see less supply frankly. But the truth is we have been very focused on this for a long time, so we have a lot of projects coming through the pipeline, both private sector and public sector.          

ROSS GREENWOOD:  But in other words this though was a shock, this was not what you expected? 

ANGUS TAYLOR:  This is not what we expected, no.

ROSS GREENWOOD:  Okay, so that being the case there's a second part about this, because it is the propensity of roof top solar going into the system that is making power stations like Eraring unprofitable, which means that of the private sector that owns those power stations, AGL did it earlier in the week, are bringing forward their closures.  That's a reality.  They're not expected to lose money just simply to keep electricity prices cheap for the public, or indeed, you know, sort the Government, as it were. 

ANGUS TAYLOR:  So, Ross, we never, claimed that the private sector should keep running something that's unprofitable.  What we do say though is when a major piece of capacity, dispatchable capacity, which is what this is and that's the scarce resource in the energy market now, when that piece of capacity leaves it must be replaced so that we don't see upward pressure on prices.  We've learnt our lessons from Hazelwood in Victoria, in northern and South Australia where there wasn't replacement and there were very sharp increases in prices, and we expect those companies to play a role in making sure there is a replacement. Now what's disappointing about this is not just the short time period but the lack of replacement. And so we do expect companies to play a role, and this is why we've been driving through a capacity mechanism in the marketplace, despite again opposition from some.  We don't want to see more capacity coming into the market, but these are incredibly important reforms for customers, and this highlights why the approach we've been taking is the right one.  We need industry to get on board and support it because it is the right way to ensure we get affordable, reliable energy in this country on a sustainable basis.           

ROSS GREENWOOD:  Okay, so let's now go to the Australian energy market operator.  It runs the grid, it's the one that you as the Government look to, to make certain there is enough electricity there.  So this is Daniel wester man this week as that decision was made by Origin Energy. 

DANIEL WESTERMAN:  We're seeing a shift in the generation mix in New South Wales and if we continue to invest in transmission and generation, I'm confident that we can keep the grid stable when Eraring closes in 2025.  With planned investment, including projects announced today, there will be a sufficient electricity supply to meet demand in New South Wales when Eraring closes in 2025.    

ROSS GREENWOOD:  So he says there's plenty of electricity, there's sufficient electricity.  You're not saying that. 

ANGUS TAYLOR:  Well that's not what he's saying.  

ROSS GREENWOOD:  He’s saying he's confident that there is sufficient electricity. 

ANGUS TAYLOR:  No, well let me be clear.  Let me be clear.  I've spoken to Daniel directly on this.  They do not model price; they do not model affordability for customers.  Now that's very important.  AEMO's brief is such that if the price tripled there would still be enough.  They could still have within their modelling a conclusion that there's enough.  Now that's not good enough for consumers.  A tripling of price or a doubling of price, in fact that's what we saw with Hazelwood closure, is not good enough.

ROSS GREENWOOD:  Is that what you're suggesting will happen as a result of the closure of Eraring? 

ANGUS TAYLOR:  What I'm saying is we've seen very sharp price increases, more than double when we've seen actually less capacity withdrawn from the market than this.    

ROSS GREENWOOD:  So are you saying there could be a doubling of electricity prices when Eraring comes out? 

ANGUS TAYLOR:  What I'm saying, you know, you don't have to be a particularly proficient economist to know that when you take 15 or 20 per cent of the capacity out of the market prices are going to go up and they're going to go up sharply.  Now AEMO don't have that brief and they're very clear about that.  Daniel was very clear to me about that.  We do.  Affordable reliable energy is critical, and not just for households and small businesses but for industry.  I mean if you look at the Tomago smelter in the Hunter Valley, it is completely reliant on affordable reliable energy.  We've seen downward, strong downward shifts in those prices in recent years.  We want to maintain that otherwise we will lose manufacturing in this country.  There's no doubt about that. When prices doubled under Labor when they were last in government, we saw a swathe of manufacturing leave this country.  We don't want to see that happen again.         

ROSS GREENWOOD:  So, Angus, I'll get to industry in a moment because I do want to talk about that but in the meantime, I just want to go to price, because you've raised price here. If prices were higher there is no doubt that the Eraring power station would not be closing seven years earlier, there would be an economic case to keep it open.  The problem is with the preponderance of roof top solar and wind and other projects that are coming in, plus Snowy Hydro 2.0 which is your government in a previous incarnation's project coming into it, there is so much electricity that the prices, the wholesale prices are so low that these power stations can't make money.  That's why it's closing. 

ANGUS TAYLOR:  Take a step back.  I don't agree with that.  And here's the important point.  What we've got in the national electricity market that is increasingly unique around the world is what's known as an energy only market.  It's a market where you are paid for providing energy.  What we need more of is capacity.  So we need a price shift where, yep, low wholesale prices for electricity, you would expect that when the cost of solar is coming down so fast, four per cent a year for 50 years.  But at the same time we need to make sure capacity has the appropriate reward, which is why we've been driving reforms to have a capacity mechanism in the marketplace that rewards capacity and recognises that it is now the scarce resource in the marketplace. Now the truth is that has already been starting to happen in the market already.  The price, the caps as they're known, which is a reward for capacity, have been strengthening, particularly long‑term over‑the‑counter prices and we'll continue to see that as the price of wholesale energy comes down. So the market's changing.  It needs to continue to change.  We're driving those reforms.  They're reforms that will reward capacity being in the marketplace.  There have been opponents who now should take a very good look at their arguments because they're wrong.  This is incredibly important reform that everyone needs to get behind and those naysayers who say we don't need more capacity in the market have been proven wrong time and time and time again.

ROSS GREENWOOD:  Just one thing, with this argument, is there a danger that you are on the wrong side of the political argument right now, in other words trying to argue that a coal-fired power station should remain open for longer, given the fact that there is a broad sense in the community that long‑term we're going to renewables come what may? 

ANGUS TAYLOR:  So policy shouldn't be about broad senses.  Policy should be about what's right for Australia.  I tell you what's right for Australia, Ross, is emissions coming down over five per cent a year in our electricity grid because that's what's been happening.  Prices coming down ten per cent for small business, eight per cent for households, and four per cent for industry ‑‑

ROSS GREENWOOD:  Okay, because all the renewables are going into the system.  That's what's done it.

ANGUS TAYLOR:  But hang on, be careful, because you've also got to make sure that you've got a balance in your grid between those variable renewables that aren't there at night, which aren't there when the wind doesn't blow.   

ROSS GREENWOOD:  And the battery doesn't do it. 

ANGUS TAYLOR:  Well batteries are storage.           

ROSS GREENWOOD:  They're part of it but they're not all of it. 

ANGUS TAYLOR:  And they can be part of the mix, but the point here is balance.  You know, systems need balance.  Energy systems particularly need balance.  We are losing balance by losing capacity.  We are driving a series of reforms, both short‑term and longer-term, to make sure we've got that balance.  It's time to get in behind those reforms, support them.  Because I tell you this is vindicating exactly the approach we've been taking despite those opponents.  And you know what, it's all been completely consistent with a very rapid reduction in emissions.  That's not been our issue.  Our issue is to make sure we've got the balance for affordable reliable energy.       

ROSS GREENWOOD:  Angus Taylor, great to have you on the program today. 

ANGUS TAYLOR:  Good on you, thanks Ross.           

ROSS GREENWOOD:  Angus Taylor there.

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