ELECTRICITY INDUSTRY AMENDMENT (DISTRIBUTED ENERGY RESOURCES) BILL 2023
Second Reading
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[COUNCIL — Tuesday, 27 February 2024]
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Hon Dr Steve Thomas; Hon Neil Thomson; Hon Dr Brad Pettitt; Hon Darren West
Resumed from 11 October 2023
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HON DR STEVE THOMAS (South West) [1.36 pm]: Kia Orana, Madam President. I probably did not expect to be standing up and addressing a bill this quickly. At the outset, I thank members on both sides of the house for their well wishes and kind words. Thank you for your consideration, but it stops now, because I am not going away. I expect members to interject and give me a hard time in the same robust manner that they have done over the past three years. Please do not be gentle with me just because of a few tribulations. It is not the first tribulation I have been through and I suspect that it will not be the last.
Having said that, we are here to discuss the Electricity Industry Amendment (Distributed Energy Resources) Bill 2023. I am quite looking forward to making a contribution on the government’s performance on the provision of energy and its cost and reliability. I think this is a very good opportunity to do that, and it is quite timely. This is a reasonably long bill. I say at the outset that the bill does not deliver a specific set of outcomes. It is more of a bill that will simply put in place legislation that that will ultimately allow other regulations to try to fix the issues of electricity supply that the government faces. The bill is not a fix in and of itself. The opposition, unless it has changed its position in the last 24 hours, supports the bill because it will open up the capacity for the government to deliver better outcomes. Better outcomes need to be delivered because our energy supply, reliability and cost is one of the worst-performing sectors of this government. I have a few examples of that to go through.
Interestingly, one of the pertinent proposed sections of the bill is found at clause 5, which opens up a great opportunity for debate. I am sure members are looking forward to that. Clause 5 will insert proposed section 3A, which is the development of the state electricity objective. That is one of the key components of the bill. The new state electricity objective deserves to be read in full. It states —
(1) The State electricity objective is to promote efficient investment in, and efficient operation and use of, electricity services for the long-term interests of consumers of electricity in relation to —
(a) the quality, safety, security and reliability of supply of electricity; and
(b) the price of electricity; and
(c) the environment, including reducing greenhouse gas emissions.
Proposed paragraph (c) is the bit that is effectively being added by the bill before the house. We know that the new Minister for Energy has a very strong bent towards greenhouse gas emissions.
I think we need to have a bit of a discussion about how the state is performing, particular on the quality, safety, security and reliability of electricity supply. It would be interesting if we could bring forth the population of Kalgoorlie and ask them how they thought the government performed recently in terms of energy supply. I am not going to stand here and blame the government for a significant storm that did significant damage. As much as the former Premier liked to think that he managed everything in the state, perhaps including the weather, that was not the case. As much as it would be good to blame Hon Mark McGowan for that, or in this case the new Premier, Hon Roger Cook, I accept that these things will occur from time to time. In fact, interestingly, the new Minister for Environment, who is also the Minister for Energy, went on the radio and said that these things will happen more often because climate change is having a significant impact. I thought that was a very pertinent comment. The only problem was that a couple of years earlier, under the same government, a storm went through and there was a major power outage in Kalgoorlie. Kalgoorlie had a major power outage recently and also a major power outage two years earlier. Do members know what happened two years earlier? The backup generators did not kick in; they were not adequate for the job. Interestingly, two years after that—bear in mind that the government had a budget surplus of $6 billion in each of those years—another storm ran through the supply lines that run out to Kalgoorlie, and guess what happened? The backup generators did not work! Two years later, with the government having received $12 billion of free money—not because of the financial management of the government but because iron ore had propped it up—the generators still did not work. When we talk about the security and reliability of the electricity supply, that event indicates that maybe this legislation needed to come in a bit earlier.
I remind the government that part of its job is to provide a reliable supply of electricity. Kalgoorlie is not the only example of where the power has gone out; it has gone out in a lot of places. The power went out through the Perth hills and the western wheatbelt. The government could not do much about some of those things, because a lot of powerlines run through state forest, where trees blow down. That was not necessarily the government’s fault either, but there is work to be done to make the system more secure. That is not a significant criticism; I am sure the parliamentary secretary representing the minister has had similar things occur in his home patch. However, when there was a major outage and the backup system that was designed to keep the lights on failed because it was inadequate—keeping the lights on is important; I will come back to that in some detail—and then, two years later,
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Hon Dr Steve Thomas; Hon Neil Thomson; Hon Dr Brad Pettitt; Hon Darren West
the same problem occurred and the backup generator failed again, that is a failure of government. That is a failure of supply. That is a representation of the government.
Interestingly, I noticed that Western Power put out a press release towards the end of last year, telling us how much good work it was doing with the backup generators. It had put some money into maintenance and said that that was good. We will probably get some questions about this in the fullness of time, but I suspect the parliamentary secretary might be able to tell us either now or during question time at some point that the backup generator was not big enough. When the demand hit, Kalgoorlie could not get a reliable supply because the backup generator was underpowered. Okay, sure. I could accept that, except that it was underpowered two years ago. The Minister for Environment said that these storms will become more frequent because of climate change. We are going to get more storms and they are going to get worse. Two years ago, we discovered that the backup system in Kalgoorlie was underpowered. Two years later, after a bit of maintenance, it was still underpowered. I understand there were private providers that could have been used more rapidly. People in Kalgoorlie had their power off for days and days. Their fridges basically went into meltdown, their freezers defrosted and their food was thrown out. Businesses lost tens of thousands, if not hundreds of thousands of dollars. Originally, they were able to claim $120 in compensation, but ultimately that was doubled to $240. If someone has lost $200 000, $240 is not a big percentage, but I suppose it is a token effort. If there had not been a precedent under this government, I would say, “Okay, maybe that is a fair cop.” In some places, particularly in the Perth hills, where there is an issue with trees, powerlines and storms, maybe that is a fair cop. But there had been a problem with supply and the generators had proven to be insufficient. After two years of the greatest surpluses that have ever occurred in this state—the biggest combined surpluses of any state in the nation’s history—the government could not put generators in place that were able to do the job. Maybe we needed this a little bit earlier. This might have been a reminder to the Cook Labor government that, in effect, it should have invested in equipment and facilities that could actually do the job. I suspect that if the power went out for five days in central Perth, we would have mayhem on our hands. People would be rising up in the streets. Poor old Kalgoorlie had to suffer again.
Which issues of security and reliability of supply does the government need to look at? As demonstrated in Kalgoorlie, the first issue is generation. The transmission lines were down, but the power generation from the backup generators was inadequate. This will occur in the coming years under the government’s transition plan. The government’s target is to reduce greenhouse gas emissions and become net carbon neutral by 2050, which
I agree with. That will probably get me into trouble. I am in trouble not infrequently, which might surprise some members. The 2050 carbon neutral target is not a bad idea, but the reality is that the government is stuck with a 2030 close-down target that it cannot meet. The government does not have enough generation capacity to maintain reliable supply even up to 2030. It might have had that capacity if it extended the life span of the Collie coal generators. The government might leap up and say, “No way would we ever do that. Our carbon credentials are too powerful for that.” As members would understand, a few months after the government put all this in place, one of the first things it did was extend the life span of one of the coal units in Collie. When did it extend it to? Funnily enough, it was to a month after the next state election. Wow! It will not run all the time. It is there basically to get this government through next summer, because it is worried that the lights will go off. How worried was this government that the lights would go off this summer? It was not worried much. When was it really worried? It was last summer. Do members know what this government did? It brought 100 000 tonnes of coal from Newcastle to Collie. We imported coal to Collie! Why did we import coal to Collie? I think it was because the former Premier said to the former Minister for Energy, “Actually, our energy system is in a bit of strife. I’ve been running around the country saying that our energy system is better than everybody else’s energy system and that we have the perfect energy system and the domgas policy.”
That is not in this bill, but I am sure we will come to that debate in the fullness of time. The former Premier said, “We have the domgas policy, which is perfect. Our energy system is perfect, and we have plenty of electricity and gas. We do not need to worry about any of these things.” What happened? It started to get a few reports that said it might be in trouble and that it was not managing its energy system particularly well. There were two major reports from the Australian Energy Market Operator from the end of 2022 to the end of 2023. The reports said, “Guess what, Western Australia? First off, you’re likely to run out of gas.” I think the government must have panicked a bit at some point and appointed a committee to look at the domestic gas policy. I think it is interesting that the committee looking into the domestic gas policy, the Economics and Industry Standing Committee of the house that shall not be named, was going to release an interim report in November or December but had to push it back until a week or two ago. Basically, it said in its report that this policy is not fit for purpose. This was the policy that the former Premier—state daddy—was trumpeting around the country as perfection. He had to realise that “perfection” was not necessarily the right description; “panic” might have been a better description, but certainly not perfection.
That was not the only one. In its next report the Australian Energy Market Operator said, “We think the state government’s going to run out of electricity as well. It is not just gas, some of which provides electricity; we are going to run out of electricity.” Members have seen that report, but it is not just the AEMO’s reports; there are also reports
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from Synergy and Western Power. The government’s own reports told it exactly the same thing. The government report came in and said, “We are potentially going to run out of electricity.” The government, which thought it was perfect, truly believed that in its magnanimous perfection—that is hard to say!—the policy was absolutely perfect, and it had to realise that maybe it was not: “Maybe there’s more that we need to do.”
I know I have repeated myself many times in the house, much to the enjoyment of those on the other side, who I know like to hear me wax lyrical!
Hon Dan Caddy: It makes it easy!
Hon Dr STEVE THOMAS: You do not have to learn too much of anything new! We do not want to load you up too much with new material!
We had these reports coming in and the whole system plan was effectively out of date a few months after it dropped, because the government changed its agenda, particularly around removing coal. But to keep the lights on, we imported 100 000 tonnes of coal from Newcastle. Members have heard the expression “taking coals to Newcastle”; we took coal from Newcastle and elsewhere in New South Wales to Collie—the town in Western Australia where we mine coal. Why did we do that? I think it was because the previous Premier said to the Minister for Energy, “We’re in a bit of strife. Our energy system’s not performing like I said it was performing. You must keep the lights on over summer.” As it happened, the south west did not experience any temperatures over 40 degrees that summer, but the government was desperate to keep the lights on, but at what cost? I have heard a range of figures on this and they all start at around $900 a tonne. The price received by the producers of Collie coal—who, by the way, are effectively break-even or going bankrupt, depending on which one we look at—is in the order of $55 a tonne. The price to bring it in was something like $900 a tonne. That means that 100 000 tonnes would be $90 million. This government spent $90 million to $100 million to bring coal to Collie. How do members think the people of Collie felt about that particular exercise? Just imagine if that money had gone through the coal companies that are struggling to pay their bills or to keep their workers on. I can tell members, that did not go down all that well in Collie.
The government had started to panic. It had already closed operations at Muja 5; Muja 6 was theoretically the next one to go, but it has now been extended to beyond the next state election. The government will apparently attempt to close down the Collie A power station first, and then it will close down Muja 7 and Muja 8. In theory, the government will be out of the coal industry by the end of 2029, but I do not think it has a snowflake’s chance.
I probably have to be careful with that word; it means other things, apparently, in the modern dictionary. The government has no chance of getting out of coal in that time frame. Why does it have no chance of getting out of coal in that time frame? It is because its transition plan around generation is not adequately funded and timed.
I do not want to single out the generation component of the transition plan because none of the components of the transition plan are appropriately time framed or adequately funded. The generation, the transition and the storage are inadequate. None of the three sections of the energy system is adequately planned or funded. I have said in this chamber before that my view is that the minimum price to do what the government is proposing to do, if it can get there by the end of 2029, is probably $15 billion. Bear in mind it is now 2024, so the government has six years; that is $2.5 billion a year that it has to pump out. Unless iron ore goes back up to $US200 a tonne, I do not think it has any chance of delivering on that.
What will the government’s transition plan deliver in increased generation? It will deliver 810 megawatts of wind generation. Split in half, 400 megawatts are effectively going to the new desalination plan. That is set aside for the Water Corp. The government has $400 million to $410 million set aside for wind-farm generation, so it will not get close.
I remember in budget estimates hearings last year Hon Dr Brad Pettitt commenting that for the government to deliver on the transition plan it is proposing, it will probably need about 10 times that amount of wind. Put this one down for the books, Acting President: I am going to agree with Hon Dr Brad Pettitt. I think if the current plan is anything like accurate and the government is saying that it will deliver enough generation to replace, effectively, 300 megawatts at Collie and 200 megawatts each at units 6, 7 and 8 at Muja—it will send out 1 000 megawatts of coal—it will need far more wind generation than 410 megawatts going into the system. Why is it 10 times? I think Hon Dr Brad Pettitt is possibly pretty accurate. Other energy aficionados have said similar numbers to me—around 400 megawatts. It is because, obviously, wind is not a stable generation tool. A particularly good area will get 50 per cent on average nameplate generation out of wind. Unless we have the capacity to generate significantly more and store it—two things: generation plus storage—it will not work.
We will need significant wind. That 800 megawatts of wind generation in the budget was, I think, about $1.5 billion. Does Hon Dr Brad Pettitt remember the number?
Hon Dr Brad Pettitt: No, sorry.
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Hon Dr STEVE THOMAS: It was a significant amount. The parliamentary secretary probably has it at his fingertips so he can tell us later, but it is about two to one. It is about $2 million a megawatt. If that is the case, the 4 000 megawatts that we need if we go down the wind farm path means that it is an $8 billion exercise. I think we can get increased generation, which will ultimately have to be gas and renewables, and probably a $500 million budget will do. An amount that is bigger than the entire budget that the government has put aside for this transition will be needed just for generation. The government will probably say that the feds will come in and save the day; they owe $1 trillion anyway so they should make it $1.5 trillion and fund the extension of the energy system in this state. It might be right. I do not know. It depends how desperate “Albo” is to win the next election perhaps. Let us see. If we are relying on the state government, it is not funded. It has not been properly funded and it probably cannot be properly funded.
I have to say that probably the most controversial wind farms in Western Australia are the ones planned offshore. I know some people hate wind farms universally. I am not one of those. However, I think offshore wind farms are going to be problematic. Bear in mind that there is one off the coast between Mandurah and Cape Leeuwin. It sits between five miles and 100 kilometres offshore in international waters. Potentially hundreds of wind farms will be constructed out there, and I am pretty certain that people will go absolutely spare, particularly recreational fishers, who may well be banned from fishing in a fair bit of Geographe Bay. Good luck to “Albo” with that one. That is not the fault of the state government—as much as I would like to blame it for everything that is going on, and occasionally do—that is a federal government issue. There is not enough generation in the system. Clause 5 of the Electricity Industry Amendment (Distributed Energy Resources) Bill 2023 refers to the safety, security and reliability of supply of electricity. The reality is that with insufficient generation, that is not being achieved now. A major generation injection will be needed to achieve that objective.
I have only limited time, and I am sure we could talk about this for a long time, but generation will be critical. As I have said before, I believe that this government will be forced to build between 200 and 300 megawatts of gas generation capacity to keep the lights on, even with the best intent. This government has traditionally said, “No more fossil fuels. There are too many greenhouse gases.” The reality is that its numbers do not add up. It was interesting during the estimates in that other place that shall not be named when the then Minister for Energy said, “We think we probably have to build some gas to add to the dispatchable demand.” He did not say it would be needed 24 hours a day, seven days a week, but we dragged out of this government, kicking and screaming that it is likely to need additional gas capacity just to keep the lights on. I think that is true. Welcome on board, parliamentary secretary Hon Darren West; you have joined the Thomas train! We are all now talking about more gas capacity to keep the lights on. I do not know what the current Minister for Energy’s position is; he might be a bit more tie-dyed and hemp and hessian. No insult to hemp, Acting President (Hon Dr Brian Walker)! The new minister might be a bit less gung-ho on meeting that extra dispatchable demand. We used to call it base load and it is now dispatchable demand. I think it is a bit intermittent, but we do not need to get into the technical arguments, otherwise we would be here all day and we do not necessarily want to do that.
The former minister said, “We think we’re going to need some additional gas”, which is exactly what I have been saying for nearly two years. Perhaps at that point the former Minister for Energy—I do not want to do him justice— had decided that he was going to retire and was waiting for the right time to make the announcement and therefore felt freer to tell the truth than he might have otherwise been as a minister who was continuing on. At that point he might have been more frank and fearless in saying that we will need more gas because we do not have enough. He is absolutely right. Today—write this one down, Hansard—I have agreed with both Hon Dr Brad Pettitt and the former Minister for Energy, Hon Bill Johnston, and on the same day! I will be drummed out soon. This is the case. Hon Bill Johnston said that we will need additional gas capacity to keep the lights on, and he is right.
If I were to put in 300 megawatts of gas, where would I build it? I would build it in the northern suburbs or just north of the suburbs on the Bunbury to Dampier gas pipeline. Would I need to expand the capacity of the pipeline with a few more looping sections? I may well need to do that. Would it roughly fit under the current gas contracts? That would depend on how much gas is used. If I decided to run that gas pipeline like a base load—24/7, 365 days
a year, 300 megawatts of gas demand—what would I end up with? I would end up with 60 terajoules of consumption a day, which would take me out to 20 petajoules a year. That would not be a huge increase in what we currently use, but it would not run very often. It would run when the demand was not being met. When it is a hot, still night, renewables will not generate much, and because the government has not built adequate storage—we will come to storage in a minute because that is also part of the equation—to keep air conditioners on, not necessarily the lights, it will need more dispatchable energy. See—I can jump to the modern terminology. We will need that extra 300 megawatts.
Guess what? Hon Bill Johnston and I agree. We will need extra dispatchable energy, because the current system will not meet demand. We do not need a heck of a lot more. We have significant gas generation capacity now, but with only a limited amount of interruption—a couple of units under repair or in the event of a breakdown or, heaven forbid, a breakdown in the energy system—suddenly even the government’s extra 300 megawatts would struggle. That will need to be built.
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It will be interesting to see whether the new minister has the mathematical skills of the previous minister, because at least the previous Minister for Energy could add up. I will be interested to see whether the new minister can do the same thing or maybe departmental people will add up for him. We will need additional generation capacity on top of the continuing increase in rooftop solar. Rooftop solar is a critical part of the energy solution; I understand that. The issue again is that it is not a 24-hour reliable supply. Not much rooftop solar energy will be generated before 10.00 am, even in summer, or after four in the afternoon. There is a limited supply time. In the middle of the
day, more rooftop solar energy can be generated than could probably be used. The parliamentary secretary could answer that point, too, but I think more than half of rooftops in Western Australia have rooftop solar heading to 60 per cent. I forget the exact figure. It will get to 80 per cent, which is probably the maximum infusion, but it must be managed. There are some wind farms on top of that with an extra 400 megawatts going into the system. That is not nearly enough, but every bit helps.
The government is now on the Thomas train, so it will build an extra 300 megawatts of gas. If it adequately invests in transmission and storage at the same time, it might just keep the lights on and the air conditioners running. What has happened? This massive underinvestment in generation has been matched. This government is consistent. It is matched by its massive underinvestment in distribution, and its massive underinvestment in storage. At least the government has a consistent message here. When the power goes out, we can probably blame all parts of the power system equally—generation, distribution and storage.
A report released about 18 months ago said that Western Australia will need 4 000 kilometres of additional significant transmission lines. I am not convinced that that 4 000-kilometre figure is necessarily accurate, but it came from the state government. Maybe we can discount it a fair bit; state governments tend to overestimate or underestimate. In this case, I do not necessarily know whether it guessed it accurately, but if it has, and if we take this government at its word in terms of how much additional transmission line will be required to keep the lights on, it will be 4 000 kilometres of a 330–kilovolt ampere line, not the big 500–kilovolt ampere line. It is not the very expensive one, but it is bigger than standard. The old power poles people put on their property and ran to their house now cost well over $1 million a kilometre. The government wants to put the big 330 lines on metal—the ones that buckle on the way to Kalgoorlie. That size is needed for the Three Springs to Geraldton line extension. I expect to see that funded in the budget. If it is not funded in the budget, we will go to war on that one.
Hon Darren West interjected.
Hon Dr STEVE THOMAS: You reckon? Come on!
Hon Darren West: Do you know why it’s not there?
Hon Dr STEVE THOMAS: It is coming in the next budget?
Hon Darren West: It’s been in the budget.
Hon Dr STEVE THOMAS: The next budget will be interesting. This is Hon Darren West’s patch. Now that he is a parliamentary secretary with all the power—no pun intended—I expect to see him flex his parliamentary secretary muscles to see that project delivered within a time frame that is not five to 10 years down the track. I do not want to see it like the Geraldton Health Campus, whereby the start of construction has been delayed for five years to date. That is another project up in Hon Darren West’s patch. I want to see a deliverable time line, and for it to be properly funded.
I will talk about the government’s position on the 4 000 kilometres of additional transmission line because it is also important. If the line is 330 kilovolt amps, it would cost, say, $2 million to $4 million a kilometre. If it is $2 million a kilometre, 4 000 kilometres would cost $8 billion. If it is up to $4 million a kilometre, it would be $16 billion. I have seen projections that it will cost the government $40 billion or $50 billion to deliver this transition. I think
those numbers are probably questionable. I am working from my $15 billion back-of-the-envelope figure.
A report that came out recently—I will find it in a second. For the sake of the clerks, I am still unable to connect to any printer in the Parliament at the moment. Maybe I am blacklisted from the printers as well as everything else! I struggle to get any sort of coverage. I was going to print this off for the parliamentary secretary, but I have been unable to. I am happy to send the document to Hon Darren West. It is research from the Institute of Public Affairs on the delivery of the proposed transition. I will give the parliamentary secretary the name of the research paper because I think he will find it very interesting. It was published on 24 February and is entitled Unachievable at any cost: Analysis of Western Australia’s energy plan. I highly recommend that document to the parliamentary secretary; it is an interesting read. I am not sure that “unachievable at any cost” is necessarily an accurate reflection. Obviously, a government as rich as this one is off iron ore royalties can afford a fair bit; it is just about how many years it puts into it. It can be built up. It is like Metronet. It was to be $3 billion and now it is $12 billion, and it is still growing— we are not sure! When the government’s embarrassment of riches increases, it can do a fair bit.
This is an interesting document. It probably piggybacks off the work of some former employees of the power system in Western Australia. If the printer ever works, I will send a copy to the honourable member so that he can
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have a look at it. It basically says that the government’s entire project is completely undeliverable. It looks at different things. From my memory, the IPA’s costing was $50 billion, which I thought was perhaps gilding the lily a little bit, but the member is more than welcome to have a crack at that. It is not just the IPA; there are plenty of groups saying that this government is incapable of delivering.
We were talking previously about transmission. If the government is going to add 4 000 kilometres of transmission line upgrades for anywhere from $8 billion to $16 billion, it will be far more than the transition cost. What was the former Minister for Energy’s position on this? Again, I will give some credit to the former energy minister. I think he could at least add up—to 20 at least if he took his shoes and socks off! He understood how many billions of dollars
would probably be required for this. He said, “Well, most of this is going to be edge-of-grid new transmission line that will run to resources projects.” First off, I do not think that is true. Secondly, if the government expects the private sector to build 4 000 kilometres of additional distribution network, I think the private sector will want to build, own and operate it. I think the communists opposite are looking at a build, own and nationalise proposal, expecting to take over the poles and wires once industry has built them. There might be a very good mine in Hon Darren West’s electorate; he has a few good mines there. There will be a new mine and the private sector will have to build it, as it does now. It does not matter where someone buys a block of land, Western Power will not run power there free of charge. Those of us who are getting a bit long in the tooth can remember the contributory days when costs would be shared with others who might eventually be on the line. I wonder whether the government’s plan might be to reinstitute a contributory charge on those 4 000 kilometres of new transmission line. I suspect not;
I think the government will just take it over and nationalise it. I do not have a problem with the build, own and operate model in the private sector, but there would need to be third-party access, much in the way that there is third-party access to railway lines.
Sometimes how good that is depends on the legislation and who has the best lawyers. The government needs to make sure that it has the best lawyers in the room when it drafts a state agreement act. My good friend Hon Robin Chapple used to have a particular opinion on state agreement acts, and I presume Hon Dr Brad Pettitt probably has a similar one. The lawyers are generally better in the private sector than in government—it just happens to be. If these 4 000 kilometres of transmission lines are built, and let us be generous and say at a cost of $8 billion—maybe the private sector will build a bit of that, but I suspect that the reality is it will not—the best the government can hope for for an adequate distribution network is that it has its numbers wrong and demand will not nearly be as high as we said a few years ago. It will be, “Well done”, but the hope of the government will be that it got it wrong. Luckily, as we proved in Kalgoorlie not that long ago, this government gets it wrong not infrequently, so there is a reasonable chance that that will be the outcome. That covers transmission. There is an issue with transmission that the government has not fixed.
That brings me to storage. Bear in mind, I am still on clause 5 of the bill. We have not even got to the Committee of the Whole House stage yet and I am still on the one clause that needs to be addressed in significance. For the safety, security and reliability of electricity supply, we have to deal with storage. The Standing Committee on Estimates and Financial Operations over the last year managed to get some genuine answers. Hon Peter Collier and his committee members did some very good work. Hon Dr Brad Pettitt is on that committee as well. There was some excellent work done. What is the government’s plan for storage? The government’s plan is 4 400 megawatt hours of storage. It gets a little bit complicated because some people use megawatts and some use megawatt hours. I like to use megawatt hours because it is a discharge for a certain period of time at a certain volume. For 4 400 megawatt hours, if all that power is discharged in one hour, there will basically be 4 400 megawatts going out; it is a simple maths calculation. I find that better than just saying “megawatts” because in that case there is no time frame to deal with the battery. Let us say that the government is somehow magically successful in its transition plan; it casts a Harry Potter Accio spell over its transmission plan and suddenly these things are in place—it has magicked up the transmission plan, it has magicked up the $15 billion required, probably through a high iron ore royalty and the GST underpinning it, and it has this in place. It is a hot, still night, the air conditioners are going flat chat and suddenly there is a disruption in the Dampier to Bunbury natural gas pipeline. What are we relying on at that point? There is obviously no solar power coming in and very limited wind—there might be a little bit coming in. Plenty of the wind farms out there at the moment produce nothing at certain times, but sometimes they go flat tack. I have this running joke. I know a few people who hate wind farms and I just think that if we put one wind farm outside their front door, every morning when they had their cup of tea and shouted about the wind farm it would probably generate enough energy to fix the system! That might be the government’s new plan! I will not name any names, but I have used that on a few people.
I refer to storage. In that circumstance, we look at the storage and ask: will we have enough? If the gas supply was interrupted and the capacity of the generators that currently deliver a couple of thousand megawatts of gas was suddenly significantly reduced, what would 4 400 megawatt hours of storage do? If we turned off as much industry as we could, 4 400 megawatt hours would probably keep the south west interconnected system going for a couple
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of hours at best. There will be a couple of hours of storage if we have a significant disruption to gas. What is our backup mechanism for that? There is simply not enough storage in the system.
Battery storage is currently very expensive, but it is about the only option we have. Again, I find myself agreeing with the former Minister for Energy, Hon Bill Johnston. We can look at pumped hydrogen, for example, which a lot of countries are using for energy storage. I am quoting the former minister; I do that quite frequently. He said that Western Australia has everything it requires to pump hydro except an excess of water and hills. We have flat, dry country. The proposals around Collie, which have kind of got me into trouble recently, were always a nonsense. In my view, these were nonsense proposals that were never deliverable, and I think that Hon Bill Johnston understood that they were never deliverable. Therefore, we are effectively dealing with batteries, and they are expensive. I think that in stationary energy, in many cases, lithium batteries will be supplanted by vanadium flow batteries. We had a very interesting debate on vanadium batteries at the end of last year; I thought that was very good. I think there will be a significant shift. But with the best will in the world, those batteries are not being built, constructed and delivered in time to meet any of the world’s transition plan time frames. There is probably not enough lithium, and, if the price stays low, there will not be enough lithium, nickel or anything else. The price of all those critical minerals has always flexed up and down significantly; that is not new. I must admit, I had a look at some of the commentary on how we have to save the nickel industry. Some companies that make very big profits on iron ore said, “We can’t keep the nickel industry going.” I thought that was interesting. Companies expect taxpayers to prop up part of their business whilst the other part of their business is making a $10 billion profit. I would be interested to see where the government lands on that; I think that will be a very interesting component. I have digressed again.
There is inadequate storage in the system. With inadequate generation, distribution and storage, this transition plan is in trouble. Clause 5 of the bill provides an upgrade to section 3 of the Electricity Industry Act with proposed section 3A, “State electricity objective”, which is —
… to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity in relation to —
(a) the quality, safety, security and reliability of supply of electricity …
It is looking like a massive fail in advance, because we have not even passed the bill yet. Maybe we need to desperately get this out there so that the government starts to take this particular issue seriously. But it is a fail across the board.
It is probably pertinent to make a few comments on nuclear energy, which I have commented on numerous times, but not specifically recently. In my view, there may come a time when nuclear energy is economically viable, but it is not yet. I am not frightened of the technology. I am not frightened of it being put into energy systems; it is in energy systems around the world. A number of new nuclear power stations are being built around the world. The issue for Western Australia is that with a peak demand of 4 000 to 4 500 megawatts, we do not want more than about 10 per cent of our generation in any one particular unit, because if that unit went down, we would have a problem. Right now, if we are trying to get our cost of energy production below $US100 a megawatt hour, we have to use the big units, and the big 1 000 to 2 000–megawatt uranium units are far too big. We need many more units to be able to deliver any kind of accurate and reliable service.
There are many proposals around what they call small modular reactors. Again, I do not think we need to be frightened of those reactors, but they are not yet economically viable. The first truly commercial version is being built in Canada as we speak. I am watching that fairly carefully. It was a $1 billion build at the start. Bear in mind that I can build my 300 megawatts of additional gas generation for probably $300 million or less. Admittedly, I would have to pay for gas going forward. In a nuclear plant, obviously they stay there but there are costs and longer term issues involved in storage. At this point, it is $1 billion but it is blowing out to probably $2 billion-plus. For the state of Western Australia, it is not an economic proposition, but I do not think we should be ideologically opposed to nuclear
technology. I think we need to understand it; and, if it becomes a viable option for Western Australia, we need to look at it with an open mind. I have said that repeatedly and I have said it in the house before. We will need to have a look at it if it becomes an economically viable option for this state because it will provide a reliable, low-carbon option. It is not quite zero carbon. When it is operating it is zero carbon, but it has carbon in its construction.
I understand that nuclear energy is the biggest export from France today; it is not champagne. Nuclear energy is used around the world. It is not currently economically viable in Western Australia, but it might be in the eastern states if they were to shut down some of those brown coal stations in Victoria, for example. That network is 10 times the size of ours, because it is an integrated system through Queensland, New South Wales, Victoria and South Australia, with a pipeline down to Tasmania. It was interesting when the wind knocked over the powerlines to South Australia. That was a problem. South Australia probably has more renewable generation than any other state. It also has horrendous power prices. If I have time, I will get to power pricing in a minute. This government’s transition plan is going to oversee a massive blowout in power prices. The poor old consumer—the poor old purchaser of power—is going to end up footing that bill.
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That is nuclear generation in a nutshell. We need to look at it when it is viable. It is not viable in Western Australia at the moment. Members do not necessarily need to listen to me say that here; they can read my comments in various bits in the media. That is exactly what I have said. I am not frightened of it. If it were to come into Western Australia, interestingly, the state legislation does not prohibit it. The state legislation prohibits only the storage of nuclear waste. Two federal acts prohibit nuclear energy. There is the Environment Protection and Biodiversity Conservation Act and a nuclear-something-or-other act, which I probably should remember off the top of my head, but I have not had a lot of sleep. Federal legislation would have to be changed for that to happen.
Bill Gates and I do not agree on a lot of things. I find most of his computer stuff problematic. However, we both agree it will be at least 10 years before small modular reactors are likely to be commercially viable, if they are at that point. I think that is something Hon Bill Johnston, the former Minister for Energy, and I probably agree on. Obviously, he has to take the Labor Party’s ideological bent when it comes to these things, but that is precisely where it is.
I have still not got beyond this one particular clause, and I may well not. Unfortunately, we will have to look at reducing greenhouse gas emissions at clause 1. I do not intend to spend an inordinate amount of time on clause 1. Depending on what others want to do, we should get through this bill tonight, with a bit of luck by the dinner break. However, the cost of electricity is another thing. This new legislation will allow the government to “promote efficient investment in, and efficient operation and use of” electricity. The bill says —
The State electricity objective is to promote efficient investment in, and efficient operation and use of, electricity services …
I hope that is not restricted to government generation because it is absolutely the case that the private sector has a role to play in this. The government is prepared to have the private sector invest in its distribution network; it is just going to take it over by stealth. This government has had a privatisation agenda, which is great to see, particularly in the electricity industry, because it has privatised wind generators. It is great to see a bit of right-wing policy creeping into the Labor Party.
Hon Stephen Pratt interjected.
Hon Dr STEVE THOMAS: Left—sorry, right; this is the right wing over here. I used to be in the right wing, but it looks like I am more central now!
I love that there is a bit of right-wing policy creeping in; it might be privatisation by stealth. When the government came in in 2017, the first thing it did was to privatise a couple of windfarms that had been nationalised. That was good! Well done! It joined the economic conservatives. It should push that along a bit; I think that is a great thing. The government will have to do a lot more of it, I suspect.
Interestingly, at the same time, this government looks as though it is deliberately trying to shut down the Bluewaters power station and put it out of business. That power station has contracts with Synergy and the Water Corporation. Both the former Minister for Energy and the new one have said that they do not like coal and will not renew any of those contracts. That puts enormous pressure on the private sector and coal-fired generation and impacts the viability of that industry.
Again, I have said publicly that because the government knows it will have to extend the life span of coal—it might not want to admit it, and might want to keep it secret, but it has already done it once with its own power stations— it will need to put those contracts out for a general public tender. May the best provider win. It can then be properly assessed. If a wind or solar provider is a better provider and can do it reliably and more cost-effectively than Bluewaters power station, then that would be great! Stick it up there and tell us. Show us how it is done. Again, we are back to the private sector getting shafted by not just the McGowan Labor government, but also the Cook Labor government. If the government is going to go that way, it is going to go that way, but I think the current plan will contribute to the certainty that, under this government, the lights will go out and the air conditioners will stop running. What does the government need to produce in this legislation? The result of this legislation should, in theory, be a plan that will deliver reliable energy no matter the circumstances. It needs to deliver reliable energy that keeps the lights on and the air conditioners running at a cost consumers can afford. That brings me back to the issue of cost, for the last couple of minutes.
Synergy is currently whacking up prices in Western Power, and it is clever. It does not do it by changing the general charge significantly; it does it by starting to shift around the categories in which it puts people. Right now, I have an issue down in the south west, where all these businesses’ energy contracts with Synergy have gone up between 25 and 40 per cent a year. We have looked into this issue and have gone through the energy minister’s office and tried to do it the right way. When the answer came back, it said that costs are higher, so everybody just has to suck it up. Costs have gone up between 25 and 40 per cent! I can tell members that the government is not paying a lot more for coal energy, and the government has long-term gas contracts, so it is not paying significantly more for gas. It is probably paying a bit more for distribution. Why is the government paying a bit more for distribution? It
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is because the Economic Regulation Authority sets the price that Western Power can charge Synergy. Bear in mind that Synergy generates the power and then sells it at the other end. The government wants to make more money out of the energy system because it is not making any; it is a loss-maker. Ultimately, the way the government is shutting down power generation it might as well write down the complete value of Synergy to zero; it will basically be a retail arm. There will be a little bit of gas capital left, but it will basically destroy that system.
There has been a 25 to 40 per cent increase in Synergy prices for businesses that are trying to compete. It is not as though the vineyards and small business owners in the south west are rolling in money at the moment. Guess what? The cost of living is up. If they are constructing, costs are higher. Interest rates are up. Everything is up. The cost of labour is through the roof. Wages are starting to significantly lift. It is a problem that the state government is going to have fairly soon. It will have to somehow match its fat-cat pay rises for everybody else. Let us see how that goes for you guys. Prices are up. The government is already gilding the lily. It is not internationally competitive. When these people
complain, parliamentary secretary, the answer they get from Synergy is that the international market price for energy is a lot higher and it has to compete with that and therefore it is going up. The government has set coal and gas contracts and it is not building significant new infrastructure; in fact, it is mostly letting the infrastructure die slowly on the vine.
Why is there an additional cost? It is because the finances of the energy system in this state are an absolute mess. I started a long time ago, Hon Darren West. I remember when Synergy and Western Power used to make a motza— hundreds of millions of dollars. I remember Eric Ripper putting in a capital fund many years ago to hide a couple of billion dollars for future use. That is how much money was floating around in the energy system. They are all broke now, and they are shifting the price of that management on to consumers. It is not good enough. It is an absolute disgrace to see even 25 per cent increases in energy contracts on a fixed system with fixed costs. The south west integrated system is not in an internationally competitive market place. Yes, the government has to buy some gas. It has contracts for most of that. It does not change the price for coal unless it cannot get it out and it has to pay a premium to somebody. Griffin Coal supplies the Bluewaters power station, not the government. It is an absolute disgrace to pass on those massive costs, and the government needs to take a very long, hard look at its performance in energy.
HON NEIL THOMSON (Mining and Pastoral) [2.36 pm]: I also rise to speak on the Electricity Industry Amendment (Distributed Energy Resources) Bill 2023. This is obviously a fairly complex piece of legislation. I certainly do not claim to be an expert, but I want to make a few observations because of the feedback I get from my constituents about energy. Obviously, my colleague Hon Dr Steve Thomas raised the matter of the power blackout in Kalgoorlie on 17 January, but before I talk about that, I want to reflect a little on the regulation of the electricity industry in Western Australia. It has had a long and chequered history. We saw changes to the competition policy arrangements under Ripper’s management of the Treasury and energy portfolios. Then we saw changes under the Barnett government, but we have also seen changes under the current government. It does not fill me with a lot of confidence for the future, particularly with the rapid change in nature of the electricity generation systems in Western Australia and across the world.
The issue for me is the complexity of our arrangements. It is time for a top-down, holistic view of where we are going strategically. Certainly, this is not a reflection on anyone who has been involved in drafting these legislative changes. Proper scrutiny of the effectiveness of this needs to occur from a strategic point of view. Where are we going with energy generation? That is something that I would like more reassurance from the government on. There will be a change to the definition of “wholesale electricity market” and a new definition of “electricity system and market rules” in section 123 of the existing act. They will bring different elements into the wholesale electricity market. We know that is important because of the matters raised by my colleague Hon Dr Steve Thomas about the proliferation of other forms of energy generation across Western Australia—windfarms, solar farms and so forth. We are seeing changes to the definition of those distributed systems, which I think have a number of potential risks
and opportunities. In the Committee of the Whole House, I would like to hear the extent to which the government has consulted with private providers of energy systems, like those within shopping centres in my hometown of Broome. For example, there is an off-grid energy startup company doing a fantastic job in delivering standalone systems and providing distributed energy systems into shopping centres and major retail outlets. That startup and other companies have the potential to deliver into much bigger settings. Generally, we do not trust the private sector enough to get involved because we are going to see a much greater diversity in the types of energy networks and distributed systems in Western Australia. We will see a trend because of the decentralisation of our energy systems. WA has a decentralised system of energy distribution. We have the south west interconnected system and we have the Pilbara interconnected system. A lot of the energy distribution in my region is through island systems, which operate within a town. There may be a gas-fired power station there with solar backup, increasingly moving to solar and other forms of battery systems.
There is a huge opportunity to see a more dynamic delivery of new technologies if we get the regulatory arrangements right. I think that is very important. Whilst I am not passing judgement on these legislative changes, I would like to think that a lot of thought has gone into it in terms of the promotion of the diversity of potential arrangements. I refer to the Kalgoorlie situation when I say how important that is. Kalgoorlie is part of the south west interconnected