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CEDA Speech 7th June

Minister for Energy and Environment Matt Kean MP

I want to thank CEDA for hosting today’s event. CEDA does fantastic work and it is an absolute  pleasure to be here today.

I also want to congratulate the Morrison Government on its re-election. A returned Coalition Government is good news for the Australian people and the Australian economy. I intend to take a constructive, pragmatic approach in working with the Commonwealth Government. I have already met with Minister Taylor and I am looking forward to working constructively with him to address the challenges in the energy sector.


I have always had a connection to energy through my dad. You see in 1968, my dad, a young man just out of high school, started work as a clerk at the Electricity Commission. This was the start of a 38 year career in electricity, most of it spent as an accountant at the Sydney County Council and its successor organisations. At that time, the council ran the distribution network for metropolitan Sydney.

A lot has changed since my dad was a fresh-faced clerk on $24 a week. Back then, the Electricity Commission owned and operated the State’s generation fleet and it sold electricity to Councils who were responsible for supplying it to consumers. It is fair to say that today’s event would have been more of a departmental staff meeting in the 1960s than the gathering CEDA has put on for us today.

But however much has changed in the last fifty years, it is nothing compared to the change that is currently underway.  This is a change that is being driven by today’s economics and would not be happening without our past efforts at home and abroad to address climate change.

It’s more than 12 years since John Howard announced an inquiry into a national emissions trading scheme. A lot has happened since then. More than two million Australian households now have solar panels. The cost of wind and solar has fallen dramatically. More than 100 wind and solar farms have been built and ten coal-fired power stations have closed. Electricity prices have increased by around  60 per cent due in large part to the spike in wholesale prices from disorderly generation closures.

Since the Howard Government, successive state and federal governments have been acting and reacting on climate and energy. This political instability has increased uncertainty, exacerbated risk, stalled investment and contributed to the problem, rather than helped to solve it. The climate wars have not delivered for the people of NSW.

I know there are some on both the left and the right who want to continue this fight. But it is time for a new approach to climate and energy policy. The world has changed and climate and energy politics need to change with it.

Today, I want to set out the principles of a new pragmatic approach to climate and energy. An approach that addresses the practical constraints that face our electricity system today, harnesses the benefits of competitive markets and acknowledges that the state is the ultimate guarantor of electricity supply.

The objectives

It is useful to begin with the objectives of our approach. The people of NSW have three expectations from their Governments and the entities who participate in the electricity system:

First, they expect the lights to stay on. Our lives and businesses are built around electricity. Put simply, we cannot live without it. When blackouts occur, it is not just the TV or the dishwasher that are affected. Traffic lights, lifts, hospitals, pubs and restaurants all depend on reliable electricity and people expect these services to be available.

Second, the people of NSW want power costs to stop increasing and to start falling – high power prices hurt business, threaten jobs and eat into households budgets.

Increases in electricity bills are regressive; they affect the most vulnerable people in our community the most. As a modern liberal I do not want to see the hopes and aspirations of these people undermined.

Third,  the people of NSW  expect decisive and responsible  action on climate change.

Since the scientific revolution, we have evolved a greater understanding of the physical world and how things work. Modern life is built upon complex systems that incorporate advanced science and engineering in their seamless delivery.  Much of the progress that has been made has been due to our ability to draw
logical conclusions based on evidence.

Scientists have been applying these same principles to get a better understanding of the Earth’s climate for more than a century. Since the 1980s, their increasingly confident conclusion was that changes to the earth’s climate are being rapidly accelerated by human activity, and that this change poses a material risk to our prosperity and way of life.

No responsible leader can accept the contribution made by science but then ignore the risk posed by climate change.

This is why the New South Wales Government supports the Paris target of limiting global warming to well below two degrees Celsius. It is also why we set the State a target of net zero emissions by 2050. The more immediate question is what we do now.

The challenge

Over the next twenty years, most remaining coal fired power stations will close. That’s 60 per cent of Australia’s electricity generation. Right now the market is telling me that these power stations will be replaced with renewable energy firmed by a combination  of gas and emerging  storage technologies  because of the economics. We are already  seeing the consequences of  these economics.

Two weeks ago, one of our leading Australian energy companies, Infigen, announced it was buying a gas peaking power station in western Sydney to firm its growing portfolio of renewable generators. Their  share price increased by 12 per cent following  this announcement.

Today, the most economic form of reliable generation  is firmed renewables  and that is driving  the biggest  change in our electricity system’s history.  It will change the location,  availability  and  emissions of our power supply.

A decade ago, the challenge was to decarbonise a reliable grid, despite the economics. Today, the economics are decarbonising the grid. The challenge is to ensure the grid stays affordable  and reliable while it does.

And  we need  a new politics  to take on this challenge.
The climate wars saw ideology and populism pitted against our scientific traditions. Those traditions have lifted our prosperity and improved every aspect of our way of life.  We cannot afford  to let these ideological  indulgences continue.

During this  transition,  private  operators  may need  to upgrade  coal-fired  power plants to ensure they can supply their customers and provide more time for firmed renewable  generation  to be built.  Coal mines in NSW will continue  to supply power stations at home and overseas. This does not mean that we have given up on taking action on climate change. Rather, it reflects that our economy and economies overseas  need  to smooth the transition to low emissions electricity generation.

Likewise, investments in new coal generation need to be based on sound economics, not nostalgia.

The transition that is underway will impact all NSW households and businesses. The stakes are too high  to jettison the tools  that have  delivered  our society its prosperity. We need a new politics defined by pragmatism, evidence and which draws on our best traditions  of innovation  and science.

The principles

In taking  this new approach we will give  effect to four principles.

First, we will use markets to discover efficient solutions to new problems. The biggest  engine  in the world is capitalism and  competition. We will back the creativity of our entrepreneurs, engineers, and scientists. We will embrace competition to keep costs down and to reward innovation. And we will enable private capital to build  the 21st   century grid.

Government should not pick winners. We may be surprised by the combination of technologies  that  are developed  to deliver  this transformation.  That’s  ok.  We can’t always  predict the future.  We can only discover it. A clear framework will enable energy companies to compete, innovate and solve. The brightest minds and the best ideas  should win.

In this respect, we support market mechanisms such as the Retailer Reliability Obligation (RRO). But we have to ensure that they are sufficiently robust to achieve their purpose. The RRO has to be more than an intellectual exercise or just another trading scheme. It has to be real. It must provide us with the levels of reliability  the public  expects; it must drive new investment  in firm generation.

In  this respect, I have  already  asked for advice on how  we can ensure that retailers  have sufficient  capacity to deal with a one in ten-year  event.

Second, we want NSW  to be the easiest jurisdiction  to develop new electricity infrastructure in the OECD. This means making our planning and other approvals processes as streamlined as possible. This does not mean compromising the integrity  of the planning  and approvals  process. It does mean doing  them better.

Easy to do business also means ensuring  that there  is a pipeline  of new projects. The NSW Government has already supported our generation pipeline through the work of NSW Water on pumped hydro opportunities and through the Emerging Energy  Program which provides  grants for feasibility  studies.

While approval processes need to take their course, we also support more gas being made available  to the State. This may be through  import terminals, pipelines  or local sources of supply, but whatever the case we need to ensure that the state has a secure supply of gas.

Being  an easy place to do business also means reducing  investment risk to industry. In electricity, a key component of any new generation investment is being able to connect to the grid. A changing generation mix will require an enhanced transmission network, both within the state and to our neighbours. The NSW Government  has already  set out our transmission strategy,  including  renewable energy zones.

The Integrated System Plan produced by the AEMO is also an important guide to optimise transmission investment. Transmission will play an important role over the next decade to help manage reliability and to enable renewable generation to deploy where it can deliver the greatest value. We need to ensure that new transmission investment  complements investment  in new generation,  not impedes it.

Reducing risk also means that we need a national framework that properly integrates climate and energy  policy.  That’s  why the NSW  Government  still supports  the National Energy Guarantee and will continue to support a national mechanism that integrates climate and energy policy, which provides business with the freedom to innovate.

Third, the electricity system is too big to fail. Put simply, it is unacceptable for the State to be left with insufficient capacity to address peak demand. We need to transition  our generation;  not our expectations.

Accordingly, if the need arises, the NSW  Government  will act. Our strong preference is that we never have to. We strongly prefer to create sufficient certainty so that Governments  don’t have to step in as the provider  of last resort.

It should also be the preference of every industry participant that Government does not have to intervene.  If  the NSW Government  has to intervene  when a power station closes, it will be in a manner which ensures that market participants are not incentivised  to see Government  intervene again.

I want to see people get ahead because of the value they add, not because of the value  government  transferred to them.

Fourth, we will ensure that the people of NSW get long-term benefits from the advances in technology and the new products and services emerging from this transition.  The NSW Government  will explore  ways  to accelerate innovation and the development  of the new  technologies  needed  to support this transformation.

The nature  of this  innovation  is not just  limited to electricity.  I believe  that NSW can and should be a pioneer in industries that adapt to and capitalise on emerging energy technologies.

The term ahead

The first test of these principles will be the closure of the Liddell coal fired power station in 2022. We need to manage this better than the way we managed the recent closures of other major coal fired power stations. It  is my number  one priority  to ensure there is sufficient  capacity in New  South Wales after Liddell  has closed.

The NSW Government  will take a pragmatic  approach  to reliability.  Even if it were economic, a new coal power station would take at least seven years to plan, approve  and  build and  wouldn’t  be ready in time to address Liddell’s closure.

Instead, Liddell’s capacity will be replaced by a combination of increased interconnection to other States, and increased generation in New South Wales. We are working closely with industry and will expedite these investments to ensure they are delivered  on time.

But Liddell’s closure is just the next chapter in this transition. I want to ensure that in this term we have the framework in place to successfully manage  the closures of other  generators  that will inevitably follow.


My dad’s generation provided the people of this state with reliable and affordable electricity. Our generation is the first to have the opportunity of doing  the same while also taking  decisive  action on climate change.
To take this opportunity, we need a new politics that draws on our best scientific traditions. Traditions which have successfully eradicated diseases, taken us to the moon and given us the ability to instantaneously communicate with friends  and family on the other  side of the world.

In my time in Office, I intend to draw on these traditions to set the framework to manage this  transition  and to practically  deal with the challenges  it will pose.

The challenge for every energy person in this room is to take make the most of our opportunity. What we do over  the next  decade will pioneer  global  understanding of how large, isolated, high renewable electricity grids can operate. We have a responsibility to get this transition right, not only for our constituents who will suffer if we don’t,  but because the rest of the world is watching and  hoping  we can show them the way. This revolution done well will not only underpin the next generation of Australian prosperity but will see us export  our technologies  and  services to the rest of the world.

Done well, this revolution will see us get electricity back to being an unremarkable and science led industry that successfully powers this wonderful sunburnt country.