This is a (very lightly) edited transcript of our interview with Josh Frydenberg, the new minister for environment and energy. Our news story from the interview can be found here.
Giles Parkinson: Congratulations on your new combined portfolio, let’s get straight into it. The first thing that is on your agenda seems to be the COAG meeting next week. What are your top priorities going into that meeting?
Josh Frydenberg: As you know we have had significant reports into the gas market, from the AEMC and the ACCC, and they talk about getting more liquidity into the market, and transparency around pricing structures, as well as the need for more gas supplies and gas suppliers. So gas does play an important part in setting the price for electricity, particularly as we’re transitioning to renewables, more renewables. One of the reasons behind the dramatic price spikes, like in South Australia, is because of the higher than the long run average of price of gas. Ive got a – to of reforms that we’re focusing in around gas, the other area is around trying to get greater connectivity between state territories and federal government on energy policy. And coordination with climate policy. Also in terms of South Australia, for example, is the push for a new interconnecter.
GP: Do you support that?
Frydenberg: I’ve said this: anyone can build an interconnecter tomorrow. You just have to pay for it. If you want it be a regulated asset, which they do, then it has to go through a detailed process. That involves the AER. So that is in the hands of the expert regulators who look at the cost benefit analysis. The concept of greater connectivity between states in the NEM is what I support. And then the reforms that are underway from the Vertigan report around the improving the coherence in policy at the COAG level which is a critical opportunity to bring all the states and territories in the one room under the Commonwealth to drive change.
GP: Will you be pushing for the states to modify or moderate their own individual target that has been called for by some of the industry? Particularly the renewable energy targets
Frydenberg: I’ll phrase it like this, we just need better coordination .
GP: What does that mean though? Because some states want to go further and longer term with their renwables policy. Is there an argument that maybe the federal government should look beyond 2020 in its own renewable energy target.
Frydenberg: As you know we’ve got our 2020 target for our emission reduction, we’re on track to beat that, we’ve got our 2030 target which I think is a strong target on a per capita basis, about 50% reduction, and we’ve got a bipartisan legislated 2020 target for the RET. So I’m just focused on that.
GP: So when you talk about having better coordination on those policis, what does that mean in practice?
Frydenberg: Well, we have to work out what the impacts are on the market and the NEM. That work is underway on the impact of federal government policies. The whole energy market is very much in transition. Coal is around 60% of the electricity generation today. That has come down substantially since 2004 when it was above 75%, and it will continue to go down and that’s not a bad thing. But the transition has to be done in a way that focuses on what our objections are, which is the reliability and affordability of energy supply. But at the same time accepting that we have international targets and we’re transitioning to a lower emission future. You can’t transition to a lower emissions future without understanding the impact it has on reliability and affordability, and you can’t insure them without understanding the policies you have there on a lower emissions future. I think climate policies and energy policy are affectively two sides of the one coin.
GP; I think most people would agree with you, I think most people would argue that there’s probably been a 10 year hiatus in policy, when I guess those 2 sides have been working on opposite ends. That brings us to the climate review for next year, you talk about the need for transition, making sure there is affordable energy and also clear signals. Will that review look to longer term targets, and I’m thinking that the Paris climate deal basically signs all ountries on to become zero net emissions. Is that now official Australian government policy. Will that review look to longer term targets beyond 2030 for instance?
Frydenberg: I am saying that the review is a sit-rep (situation report). It’s simply looking at the effectiveness of our mechanisms today to meet our targets. It’s not about resetting our targets. What it’s doing is to look at the effectiveness of out policy to meet our target.
GP: So it wont be reviewing in any way about whether you need to lift the targets at this stage?
Frydenberg: I don’t want to pre-empt the review, because that is not until 2017. But if you want a quote from me, it’s “this review is a (sit rep?) to look at the effectiveness of the mechanisms we have in place today” that’s what the review is about. As for 2020 and 2030, I’ve already answered that. We’ve got our 2020 review, our 2030 energy efficiency target and our 2030 emission reduction target, we’re on track to meet our 2020 target, and some of the polices are working pretty effectively.
GP: I guess some people would argue that because of the climate deal that Australia has signed up to, you would need to have a longer term target, that we actually had until recently, there was a 2050 target for 80% reductions I think it was. When and will the government look to resume that longer term target, because wouldn’t that be the best way to set policy for the short, medium and long term?
Frydenberg: What I’ve said is that were focusing on implementing our policies on existing targets.
GP: Can I just turn to ARENA then. It was announced by the previous minister that ARENA would be defunded, I mean this has effectively been Coalition policy since 2014 in the budget. It does need legislation to go through parliament. Are you still intending to go through with that, and when are you thinking of doing that?
Frydenberg: Obviously we are moving ahead with our legislative agenda as soon as the parliament comes back, broadly, and the changes we announced in the ARENA funding areas important part of that. As you know ARENA works around R&D and renewable and clean energy technology. In the grand scheme we are not abolishing ARENA, that is not our policy. It was about creating a joint funds between CEFC and ARENA, and that’s not longer a grant program but a loan program, support the clean energy innovation and the movement to development and commercialisation. But at the same time those existing projects that are funded under ARENA continue to be funded and that’s more than 200 individual projects, including the large scale solar one in Broken Hill. So Labor did announce during the campaign that they would be supporting the savings around ARENA, so we’re proceeding with those savings into parliament.
GP: ARENA announced last week it was supporting AGL with their world leading virtual power plant in Adelaide. Are you confident that these projects are going to be able to be supported if the grant funding mechanism is removed?
Frydenberg: I’m confident that ARENA has the funding to support the important projects that it needs to fund, I welcomed the support for this virtual power plant project in SA , which was going to be the largest in the world.
GP: These are the sort of things we need to have as we transition the energy system. I’m just wondering that by getting rid of the grant mechanisms, are we going to be hindering our plans?
Frydenberg: I think we’ve put in place a billion dollar program through the CEFC, which will be supporting clean energy innovation, there is significant amount of government money that is going towards these exciting projects. One of the really exciting aspects of this portfolio is the importance of technology in driving better outcomes, their environmental outcomes. For example in the last 7 years the cost of wind has come down 50%, the cost of batteries by 80% , the changes around the NEM , the nation’s productivity plan has been a significant improvement. In 2007 we used 30% more energy than buildings made after 2010. An air conditioner sold in 2003, which was state of the art , in efficiency would not meet the minimum standards of ones sold today. It’s those developments in technology and efficiency, and in particularly battery storage which CSIRO told me will come down in cost by around 60%. It’s extremely exciting as you can get grid-scale battery storage , you’re going to really open up an even greater use of renewables.
GP: There was talk also before the election about support for large scale solar thermal projects, solar towers with molten salt? Different sorts of storage. Do you have any plans there?
Frydenberg: I’m watching closely the development in solar thermal, as you know there was a big project in (Nevada) a billion dollar plant there. I’m looking at all these technologies very closely, the other exciting things about the updating of new technologies is that Australian households have shown with solar PV on their roofs a great willingness to adapt to clean energy technologies, with 15% of Australian households with solar power on their roofs, which is the greatest number per capita in the world.
GP: Maybe we should be encouraging more of that.
Frydenberg: Well, yes we do, as you know, through the RET.
GP: You said before that a lot of people want to meet you now that you are in the new role, are you under a lot of pressure from the incumbent industries to change the RET, and will there be any changes?
Frydenberg: I’ve said publicly that the RET is set in stone, it’s legislated, it’s bipartisan, it’s a 23.5% target. There is someway to go, currently renewables are 15% of the Australian energy mix. Of course ,there are lots of stakeholders with lots of different positions, and one of the challenges that I have with this portfolio is I can’t please everyone. Bob Brown will never be happy, nor will Alan Jones. I just have to find the best outcomes which are consistent with my goals of affordable and reliable energy supply, as we transition to a lower emissions future. And the market is working, I mean 8 out of the 12 most emissions intensive power stations in Australia, all produced from coal, have closed in the last 5 years.
GP: Do you support a market mechanism in the future, because there is a push?
Frydenberg: I support the program that we’ve got …
GP: There is a push for assisted exit for coal.
Frydenberg: ….. $12.10 in the last auction is a very efficient cost of abatement. I support the renewable energy target and support clean energy finance corporation and ARENA and funding projects that we have with ARENA and CEFC together. I’m comfortable where our suite of policies. One of the challenges I have is following on the developments in South Australia and Tasmania , how do I ensure that we get the best possible outcomes.
GP: Are you confident that youre going to be able to find the right suite of measure for the gas industry? Will they be able keep a lid on gas prices?
Frydenberg: I think we have got the suite of policy reforms to keep prices (limited).
GP: So what are they, are they new pipelines coming from NT or WA, is a reservation policy being contemplated?
Frydenberg: We’re looking at implementing recommendations from the AEMC and the ACCC.
GP: With the change that’s happening so quickly in the energy markets, is it worth have the COAG meeting with the energy ministers more than every 6 months? There seems to be a lot to talk about.
Frydenberg: I think the agendas are pretty full. Six monthly basis works. For example after the ACCC report earlier this year to gas, we had a video hook up with state minister so we’ll call ministers together as need be, but the 2 meetings per year are appropriate at this stage.
GP: Can I leave with one final question, you’re talking about not being able to please everyone, from Bob Brown to Alan Jones, and I guess there are a lot of different views in the energy market as well with different agendas. What about within your own party, your own government, because there is a mix between progressive moderates that accept the need to meet those Paris climate goals and the other ones who are less enthusiastic about that. I saw the push backs against your comments on the South Australia, for instance, is that an issue?
Frydenberg: What I pointed out was that what happened in South Australia was a result of a complex range of factors, obviously the upgrade to the interconnecter, the spike in gas prices , the cold snap as well, it was too simplistic to say it was a result of renewables. And I see my job to put on the table the facts amongst some of the policies to enable a smooth transition. I work closely with colleagues and I accept the science around climate change and the need for action. I’m comfortable with our targets and policies and now I’m trying to get better coordination on a federal and state level.