Topics: Proposed energy fund, National Energy Guarantee, government investment in power, NAIF funding

SPEERS:                Minister thanks very much for your time today. Where do you stand on this $5 billion fund that’s being talked about within the National Party. Would you like to see a special fund like this set up to help pay for baseload energy?

CANAVAN:         What I want to see, David, is an energy policy which can guarantee the affordability and reliability, and lower emissions from our energy sector over time. I'm not going to discuss the details of what may or may not have been discussed in the Nationals Party Room, but I understand many of my colleagues are concerned about the level of baseload dispatchable power in the system.

Those concerns are shared by the Australian Energy Market Operator, the regulator here. They produced a report to the government last year saying that there has not been enough investment in dispatchable power, and there are risks in the system right now and emerging even in a greater degree in the next five years. So I can understand those concerns. How we deal with those, well, that's obviously a matter that we'll discuss as a party but we do need to get on with the job with establishing a stable energy policy for Australia, that includes a National Energy Guarantee, that includes a pathway to meet our Paris commitments in a way that's affordable and maintains reliable power supplies.

SPEERS:                Yes, I guess the key here is, will the National Energy Guarantee address that problem of a lack of baseload supply? The regulators are the ones who have come up with this mechanism, the National Energy Guarantee. Are you confident it will address that baseload shortfall or is there a need for something else?

CANAVAN:         Well as I've said previously, David, the National Energy Guarantee will for the first time put in place a reliability standard for the system so that will help deliver reliable power sources. But, of course, the details of the National Energy Guarantee are rightfully the subject of debate from my colleagues. I know Josh Frydenberg is working very closely with them, but can I say there is absolutely full support for the National Energy Guarantee as a way forward, but of course there are a lot of details to work out with that policy as well.

SPEERS:                                This is a key one, whether there needs to be billions more spent on baseload power. If the Federal Government does that, some of the states might not support the whole thing.

CANAVAN:         I'm not going to go into details of what National Party speaks about in its party room, or that my leader may or may not raise with the Prime Minister. Just on that, my position is we've got to get on the job of with establishing a National Energy Guarantee, David, that's what we've got to do.

Now the states themselves, as you have raised, have raised particular details with the National Energy Guarantee that Josh is working with. It's absolutely appropriate for my colleagues, my Coalition colleagues, to also raise details, keeping in mind the context here of full support for the Guarantee itself.

But I don't quite understand this point from some State Governments, which seem to be saying that if the Federal Government were to insure or invest in, or try to guarantee, our reliable baseload dispatchable power sources, that somehow they'd pull out or not come on board. This is just a completely unreasonable position. It's also the position of the Australian Labor Party. They're saying that if those who want to see reliable sources of power delivered in this country get their way, they'll pull out of any support for the arrangement. How destructive can you be to energy policy in this country to take such an ideological and strict approach, given the position we are in?

SPEERS:                I guess the argument from Labor and some of the states is that if the Government starts investing in coal it’s going to crowd out other investment. But then, you’re doing that with Snowy Hydro 2.0 right? That’s a government decision to build hydro power.

CANAVAN:         Well absolutely it is. And that's in response to the situation we do find ourselves in, David. In that case there's a lot of stress on the system at peak times of power supplies and Snowy's business model is to respond to those peaks by supplying more power from its substantial hydro resources. The investment in Snowy Hydro 2.0 will allow it to respond even more fulsomely to those peaks and help bring those peaks down to a more average level.

That's a clear need we've identified. Now, in the case of Snowy Hydro 2.0 of course, the Federal Government and previously the states were the shareholders in Snowy Hydro 2. There's no suggestion it will be privatised, so the only ability for it to invest in such a large expansion programme would be for the government to provide further equity investment. That's why we've decided to do that at the Federal Government level as a shareholder.

SPEERS:                If it’s good enough for the Federal Government to do that, then in your view it should be good enough to invest in coal as well.

CANAVAN:         No, that's not quite right. They're quite separate because in the case of Snowy Hydro the Federal Government now will be the 100 per cent shareholder. We've obviously got to take a proper corporate commercial perspective to investment in Snowy Hydro's assets. The only people who can do that would be the government, short of privatisation which we're not going to do.

Obviously the situation for other baseload types of power supply, be it coal or gas, is that they're owned and operated by largely private interests in this country. Any support from the government would be quite additional and different from the Snowy side of things. As I say, I think the National Energy Guarantee is the way forward here. That's what we've got to get on with finalising and supporting.

SPEERS:                How could it possibly be done, if they’re privately owned companies as you say?

CANAVAN:         Yeah, that's obviously something that would have to be worked out. As I say, I'm not here to discuss those elements of the party room. But obviously the Federal Government, along with many states, has underwritten support of large-scale investments in intermittent power supplies or renewable power supplies for the last 10 years in a serious way. We could even go back to 2001 when the mandatory renewable energy target was first put in place in a much smaller fashion.

So that government involvement has helped attract that private sector investment. Obviously there's a challenge for us now to attract investment in that full-time, 24/7 power. That's something that the regulators have identified, and that's why the National Energy Guarantee has this reliability standard at its core. And it's of course why my colleagues are also raising issues and concerns about that particular challenge.

SPEERS:                So there could be government underwriting investments in the private sector?

CANAVAN:         Well, as I say, I'm not the one putting forward the policy, David, but it's such a crisis that we are in that we should be engaging in a serious and open-minded discussion on this challenge, not closing off responses unnecessarily and reflexively like the Labor Party are doing, like some of the state and territory governments seem to be doing.

SPEERS: Including around these ideas of investing in or underwriting coal-fired power …

CANAVAN:         I think it's also important to make the point, while there is a lot of attention on coal-fired power, and understandably, from the media, what is driving the concerns of my colleagues I know from discussions with them is baseload power, dispatchable power. It's not whether it's a black rock or it's hydrocarbons or whether it's the sun. It's about providing the consistent supply of power to Australians at an affordable price. That's what our objective is, that's what I think all of our shared objectives should be. I do think what we need to do now as a country, as a Parliament, as a federation, is work together in open-minded fashion on responses, not retreat to ideological corners and take sides here on particular sources of power. It's just kind of ridiculous that you'd be so passionate about a black rock or a solar panel. None of these things have romance in them. What is important is what they supply and generate to the Australian people. Our minds should be focused on the bills that appear in peoples' letterboxes every quarter and getting those down, and making sure we keep the lights on, not on just the producers or the technology of the power itself.

SPEERS:                Getting the bills down, keeping the lights on – absolutely. What about reducing emissions? Tony Abbott has this week suggested Australia should withdraw from the Paris Agreement on emissions reduction. What do you think?

CANAVAN:         Oh I don't think we should do that as a country. I don't think we as a nation sign agreements and then walk away from them. Other countries obviously are free to do what they choose, but that's not been our practice, and I don't think it's something we should start doing. We've got a well-earned reputation for doing what we say in international circles. I think that's a proud reputation we have and should keep.

I also think, while I understand the perspective Tony Abbott is coming from in terms of the challenge we've got in lowering emissions, I do think the target that we have set in terms of 26 to 28 per cent reduction by 2030 on 2005 levels, is achievable. And achievable in a way that will not damage our economy, providing we approach it in a flexible way, approach it in a way that allows all options to be on the table.

So, for example, we should allow all technologies that can lower emissions to be up for grabs, so to speak, to meet that target, because if we say certain types of fossil fuel technologies can't apply, well potentially we will have to meet that target at a higher cost. And then Mr. Abbott would be absolutely right in those concerns. But if we can keep all options on the table, and have an ‘all of the above’ approach to power generation, we can meet this target in a sensible way, which guarantees the jobs and energy security of all Australians.

SPEERS:                Now you mentioned all options should be on the table, what about nuclear power? This weekend the LNP State Convention will have a motion before it suggesting we should move to nuclear energy in Australia. Where do you stand on nuclear power?

CANAVAN:         Look, I don't think nuclear power's the solution for us right now in Australia, but I do welcome the policy suggestions that are put forward by LNP members. I love the debate in political parties. That's why I'm involved in politics, because I love the battle of ideas. Ideas come from within your party, from outside your party, and everybody should be free to bring them.

The reason I don't think nuclear power is the solution for Australia right now is primarily around its affordability. The United Kingdom is building a nuclear power plant at the moment at Hinkley Point. To get that built they have had to guarantee a price of 92 pounds a megawatt hour. That's approximately $160 Australian a megawatt hour. That's about double what the price is now in Australia, and we all recognise that price is too high. So it would not solve the immediate problem we've got in Australia, which is bringing a more affordable situation to Australian households and businesses. Our economy has been built on access to cheap and affordable power. We can't just jump from that to a more expensive form of power without paying a high price. I think that's primarily the issue with nuclear power right now.

SPEERS:                Let me turn to the Northern Australia Infrastructure Facility. You announced the first Queensland project under the fund this week with $96 million for a new technology innovation complex at James Cook University in Townsville. Is this what the Fund was designed for, to fund university projects?

CANAVAN:         It was a fund designed to deliver infrastructure, David, absolutely. In the legislation for the Northern Australia Infrastructure Facility, infrastructure was defined broadly, including, explicitly, to potentially fund social infrastructure such as education, health or other facilities, so it was designed for these types of projects. I can understand why some people, when you colloquially think of infrastructure, you can think of the more “hard”, for want of a better word, infrastructure like ports and rail lines etcetera, but it was also absolutely to potentially build the capacity of social infrastructure in Northern Australia.

SPEERS:                So it could be used for a school or a hospital project as well in northern Australia?

CANAVAN:         They've got to meet some other aspects of the mandatory criteria that we've established for the Northern Australia Infrastructure Facility. I don't believe there are any school projects at the moment. One of our criteria is that there aren't other sources of government funding or other abilities to finance those projects. Obviously, schools would typically be financed through other means. Another is that you've got to be able to pay back the loan as well, or have the ability to pay back what is a concessional loan. Universities obviously have that through the fees they charge students. I'd typically say roads aren't things that will come under the NAIF's jurisdiction because there's not typically a cash flow associated with road investments, certainly not in northern Australia. That's why we have other programmes to fund roads in northern Australia outside the NAIF.

SPEERS:                Matt Canavan, good to talk to you, thank for your time.

CANAVAN:         Thanks Speersy.

ENDS