Jennifer Westacott interview with Kieran Gilbert, Sky's Speers on Sunday
5 August 2018
Event: Interview with Kieran Gilbert, Sky's Speers on Sunday
Speaker: Jennifer Westacott
Date: 5 August 2018
Topics: National Energy Guarantee and Company Tax
Kieran Gilbert, Host: Jennifer Westcott, thanks so much for your time.
Jennifer Westacott, Business Council of Australia, Chief Executive: You're welcome.
Kieran: You have written in the last week that the NEG, the National Energy Guarantee, is a game-changer. As I say, the business community is united in its voice on this. Why?
Jennifer: Because it does two things. It solves this problem of reliability and it tells us how are we’re going to treat emissions. So, let's go back, what's caused all of the problems? We've put a lot of renewable energy into the system, obviously that's intermittent energy and that created a reliability concern. Secondly, we have not known to, your point a decade of dysfunction, how emissions are going to be treated in the economy and that has had an effect on investment, particularly investment in baseload. So, we need companies to be investing in existing coal, in gas, in hydro, in that baseload capability and what the NEG does is says to a retailer, you have to satisfy two things, reliability standards, and you have to meet our emissions requirement, but it's up to you to find the right energy source, the dispatchable power. So, it's technology neutral. So, it solves all of those sorts of problems. It's not the only thing we need to do Kieran, but it's a huge platform that we can build on. And I've been around this issue for a long time and this is the one issue where businesses, whether they're retailers, generators, big users, all say this is the thing that we think can work and that has not been the case with the CPRS, with the ETS, with all of these other schemes where we've had a decade of doing pretty much nothing on. We've made so many false starts. This is the one where businesses say to me, actually, you know, we can make this one work. We need to end this decade of dysfunction and get on and do something because frankly, you know, the people who we've got to remember are the people who are going to get a power bill in the next month or so, that they can't pay. And they're going to say what are governments doing about this? What are we doing about shoring up our baseload? What are we doing about sending the investment to keep that going? What are we doing about gradually getting that affordability problem under control? Oh, we're doing nothing. We're dithering and we're going to have more political fights. Go and tell one of those families, go and sit at their table, when they're looking at that bill and working out what they're not going to spend their money on, that you can't solve it for political reasons.
Kieran: Yeah, well that's been the case as you wrote this week and as you articulate this morning and we've seen that investment strike basically, in that space in years gone by, now the Energy Security Board just in the last couple of days wrote explicitly urging parliamentarians, state and federal to get it done because it's not just the investment of years gone by, that's gone by the wayside, but the ESB says there's a significant pipeline of investment dependent on this getting through.
Jennifer: Absolutely. I think people, that's absolutely spot on, people forget a couple of things. We need to keep the baseload in the system, we need of course to unleash new baseload, like gas, and of course it would be good if the states lifted their moratoriums on that. We need to bring in the new technologies, not just the renewables, but the new technologies around aluminium smelting. I was in Canada a few weeks ago, Rio Tinto have invented a carbon neutral aluminium smelting procedure. Now you know how they going to invest in this country if they do not understand how emissions are going to be treated in the economy. We've got this chilling effect on investment and we have to end it. So when I hear people saying, let's delay it, well what? How, for what purpose? Why are we going to delay it? "Oh, well, we wanted to have more political fights. We want to score political points." Well tell that to a family who can't pay their electricity bill.
Kieran: And one of the risks here as we look at this debate, Jennifer Westacott, now the extremes at either end, so GetUp! and the Conservation Foundation, a group of others are going to campaign against the National Energy Guarantee on that side of the debate and in Victoria putting pressure on the Andrews Government. You've got others, the usual critics and the Coalition party room, the coal lobby and so on at the other end. But the problem for both those extremes of the debate, is it not that bipartisanship in a space like this is crucial or at least some level of it.
Kieran: Because you're talking about assets with life cycles of 10, 20, 30 years or more.
Jennifer: You're spot on. Look, you can't satisfy the extremes of this debate. If you took the extreme green movement, you do nothing because the community would not tolerate the deindustrialisation of the economy that basically they're arguing for. And of course when there's been opportunities for them to get behind things that get us at least on a path, because it's not perfect in their minds, their answer to that is to do nothing. You can't satisfy the extreme right of this debate because again, you do nothing, so you end up doing nothing because you can't please all of those extremes of the debate. So we keep dithering as a country and as we dither, you know, prices continue to go up. Investment uncertainty continues to rise. People keep forgetting that you know, about 70 per cent, 60 to 70 per cent of our power is still coal fire generated. We need to keep those plants going. We do not need people to kind of stop investing in those and we need to send the signal about reliability, about how emissions will be treated. We need to bring on new baseload, we need to of course continue the expansion of renewables and get the prices down. Those things can't happen unless the policy framework is there to tell people how things will be treated. This is the scheme that puts the retailer in charge. That doesn't create, as I said in my article the other day, doesn't create new classes of permits, new classes of certificates. We can do it within the existing arrangements. We'll just have to get on with this and get some progress. If you're trying to satisfy both ends of this debate, you know, you will do nothing for another 20 years.
Kieran: The point on the price component, obviously it's a sensitive one. You've touched on it, it's going to be something which is going to loom large in the coalition party room, but Frydenberg has got at least some progress on that front. You look at the spot price, the wholesale price and the national energy market, that was down to $62 last week compared to on average $104 per megawatt hour the year before.
So, there's been some improvement on that front. He's got some runs on the board. I guess he can take to the party room to say look, there is, there is some improvement there. It is, it is happening.
Jennifer: Absolutely. And now we've got to get momentum. And we've got to solve some other things. And you know, obviously the government's keen on solving the storage issue as well, with hydro, Snowy 2.0. You know, we've got to do all these things, we've got to lift these gas moratoriums, but this scheme is the scheme that business has been crying out for. How do we deal with reliability? How do we treat emissions? And it's this scheme that I think, you know, business can work with. So, to your point, you know, let's actually start to build momentum, let's start to get stuff done and we've got some movement on prices, but gosh, we need to keep going. If we stall now, you know, we sort of potentially run the risk of going backwards on prices.
Kieran: And one of the arguments that's made about, you know, the broader discussion on this is the United States and Donald Trump's position. But if you look at that country you've been, you said in North America recently, you’re well aware of the different views the state level in California, for example, one of the biggest economies in the world has already met it's 2030 emissions targets. So, it's not, I guess, it's difficult to just look at that country and say that, okay, that's the one view. There are various views and progress that's been made in the United States as we speak.
Jennifer: Absolutely. And of course the Americans made tremendous amount of progress because they've unleashed their shale gas reserves and they've actually become sort of back in the energy super power space. And of course that's had a flow on effect to their manufacturing sector, as they've been able to lower prices. So, you know, this requires a kind of total effort. And I think, you know, just using the kind of Donald Trump, Paris thing as an excuse for doing nothing, it just becomes another excuse to do nothing. I mean, you know, we've had a decade of every week someone finding another excuse to do nothing. Let's do something, let's get this done. Let's get the Commonwealth and the states, the Commonwealth has got a plan. It's a plan that business, for the first time I can remember, where all of the kind of sides of business say, "yep, we can make this work". Well, let's get on and do this important thing. So we have to stop dithering on this important issue. We get something done. We make some progress. And, and you know, people always want to find an excuse in this country to do nothing. I've just been traveling for a little while to places like Canada. People just truly, they shake their heads about Australia. They go, well, "you should be an energy super power, you know, Why aren't you? Why aren't you a more competitive economy? Why is it so hard to get stuff done"? And it's just, you know, you look back on it and you say, this is just pure politics. Well, sorry, it's not going to wash with people who want their power bills to go down.
Kieran: I want to ask you about the company tax debate before I let you go. In terms of where this is at, it looks like the government won't get the whole thing through. Would an incremental step say, to companies with turnovers up to $500 million a year, is that a step in the right direction or are you worried that such a move would entrench a two-tiered system and basically encourage companies to be smaller than they otherwise would be?
Jennifer: Absolutely. I mean, a couple of points, Kieran. First of all, it already is an incremental system and this is the thing, people keep forgetting, that large companies don't get the first cut until 2023 and then they don't get the full cut until 2026. So, it already is incremental. I mean they don't get the benefits of this, but they'd get the signal and the mining companies particularly need that signal because they've got choices about where else they could go. Second to your point, we end up with a two-tiered tax system. Let me give you an example of how serious this is. If I'm a company with a turnover of $50 million and assuming I make a five per cent profit, I am going to pay for that $1, for that $1, $125,000 in extra tax. You don't think that a disincentive to grow your business? And the final point is, you know, we just keep forgetting that there are mid-size companies, mid-sized companies that now won't get this. Thomas Foods, Coopers Brewery in South Australia, Bega Cheese. And our big mining companies, you know, these are still driving the economy in terms of terms of trade. So, what are we left with if we walk away from this? Well, we're left with a two-tiered tax system, we're left with an absolute saddle on the investment capability of Australian companies, that reduces their competition, that reduces their ability to invest, to invest in new technology, to expand their operations. What does that all come down to? It comes down to our capacity to create jobs and pay people more. That's what this is fundamentally about. If people walk away from this or they want to carve it up even further, they're sending a signal that we can't get something done again. That we're going to have a two-tiered tax system. We're going to put our economy at the mercy of the rest of the world and we are going to suffocate the capacity of business which employs 86 per cent of Australians and generates 80 per cent of economic output. We are going to suffocate their capacity to invest, to grow, to compete internationally. Seriously? You know, really people, I don't know why people are in public life. Are they in public life to achieve something for the country or they are they in public life to score political points? I hope, that they're in public life to make our country better, to make sure people have got a job, they've got higher wages and that we've got the revenues so that government can give people the services they need. If not, you know, frankly, people have to stand back and say, if we walk away from this, where are we going to be as a country? If we walk away from the NEG, how are we going to actually ever get on the path to fixing your energy problems? That's the challenge for the parliament, when they reconvene in the next couple of weeks, do you want to act in the national interest or are we going to continue to be a country of ditherers?
Kieran: Yep, it's going to be a big few weeks ahead. I appreciate your time this Sunday morning.
Jennifer: You’re very welcome.