Energystrategy@stategrowth.tas.gov.au
Energy Strategy Submissions
Department of State Growth
GPO Box 536
Hobart Tas 7001.
Submission to the Tasmanian Government’s Energy Strategy
Introduction
Tasmanian Labor is pleased to provide a submission to the Government’s Energy
Strategy process.
We believe a strong and efficient energy sector is the key building block of an
expanding Tasmanian economy and Labor has a proud history of construction,
investment and reform in our most fundamental commercial strength.
Over the past 20 years, Tasmania’s electricity industry has been subject to ongoing
reform from successive Governments. Labor’s disaggregation of Hydro Tasmania in
1998, the subsequent construction of Basslink and Tasmania’s participation in the
National Electricity Market are amongst the most significant.
To be effective, energy reform in Tasmania must reflect our unique and highly
complex relationship with the National Electricity Market (NEM) and maximise
our strategic advantage as a significant producer of carbon free energy.
Broadly, Labor supports the principles of the Energy Strategy proposed by Minister
Groom but the lack of detail provided is concerning. Perhaps even more concerning
is the prospect of expensive duplication and political point scoring by undermining
the major achievements of the Tasmanian Electricity Reform program implemented
over the past four years.
In 2010 Labor commissioned the Electricity Supply Industry Expert Panel under the
provisions of the Electricity Supply Industry Expert Panel Act 2010 - an exhaustive
reform process, that utilised the expertise and hard work of a large number of
dedicated people across the State-owned electricity businesses and the State
Service.
The Panel’s recommendations – delivered in March 2012 – addressed fundamental
structural issues within the Tasmanian Electricity Supply Industry (TESI).
The Panel concluded that one of the specific aims of Tasmania’s entry into the NEM
was to deliver choice to electricity customers – both large and small. However at the
time of the Panel’s delivery of recommendations in 2012, the majority of consumers
were still unable to choose their supplier.
Based on its own analysis, experience and the submissions made to its review –
the panel concluded competitive prices and services should not be made available
to small businesses and households without structural reforms in markets and that
regulatory changes to facilitate competition to so called “mass market” customers
would – by themselves – be ultimately ineffectual.
The subsequent ‘Electricity Reform’ program, based on the Panel’s
recomendations involved major change to the three State-owned electricity
companies and the market in which they operate.
The reforms, like all major reforms programs, involved significant one-off costs that
are now delivering substantial ongoing benefits to Tasmania and Tasmanian
electricity users.
The reforms have lowered operating costs in the three State-owned electricity
businesses by tens of millions of dollars each year. Most of these savings were
achieved through the integration of State’s two network businesses and
rationalising Aurora’s other activites.
Additional to these savings, Tasmania is saving approximately $100 milllion each
year in gas and operating costs by integrating Tamar Valley Power Station (TVPS)
into the management of all Hydro Tasmania’s generating assets. TVPS can now
be strategically used to support Hydro Tasmania during times of need.
Since the implemetaion of the reforms – following a period of prices increases - retail
electicity prices have fallen considerably. The changes announced in the 2012-13
Budget further reformed the way in which wholesale energy prices were set and
effectively negated the price impact of the carbon tax.
The two key objectives of the Electricty Reform package - to minimise future
electricity price increases and to improve the efficiency of the three State-owned
electricity businesses – have been very successfully achieved.
A third objective of the reform was to place downward pressure on electricity prices
through the introduction of competition by breaking Aurora’s retail energy business
into customer bundles and selling them to entrant retailers. The difficult sale process
failed but the benefits of the business transformation will deliver ongoing operational
savings and benefits for Tasmania including a more customer focused business
ready to compete with entrant retailers.
It is now incumbent on this Government not to squander the very real achievements of
the past four years and to build on the success. Achieving the type of outcomes
needed to realise the Government’s ‘vision’ will require the same thouroughness of
understanding and willingness to engage in truly meaningful reform.
As the Government consider’s its path forward, Labor encourages future
energy reforms to encompass the following priorities.
Tasmania: one of the world's most dynamic low carbon economies.
Tasmania’s high rainfall, mountainous terrain and location in the path of prevailing
westerly winds means we enjoy some of the best renewable energy resources in the
world
Since 1998, Labor has overseen significant investment in wind energy, at
Woolnorth and Musselroe Bay. Underpinning all of this investment has been the
Basslink interconnector, which was delivered under a Labor Government.
Tasmania’s high rainfall, mountainous terrain and location in the path of
prevailing westerly winds means we enjoy some of the best renewable
energy resources in the world.
Jim Bacon claimed the 1998 election with a commitment that Labor would never sell
the Hydro, and that commitment still stands in the face of a Liberal push to privatise
infrastructure assets around the country.
Continued investment in renewable energy
The Labor Party has a proud history of supporting renewable energy investment in
Tasmania. Labor Governments throughout the 20th century built Tasmania’s
hydroelectric schemes that laid the foundation for the State’s industrial development
Labor is committed to Tasmania becoming home to new companies seeking the
benefits of our renewable energy base and the advantages that operating in a low
carbon economy can bring.
That is why future energy reforms must continue to reflect Tasmania’s major
competitive advantage - the generation, distribution and sale of clean renewable
energy.
It is inevitable that climate change will have an increasing influence on the
development of global energy policy and a greater proportion of Australia’s
energy will need to be extracted from renewable sources.
Supporting legislative reform
Tasmania is strategically positioned to capitalise on this immense commercial
opportunity but without progressive legislative reform from State and Federal
Governments, Tasmania’s unique energy capacities will continue to be undervalued.
Tony Abbott’s decision to remove carbon pricing has had a profoundly negative impact
on Tasmania’s budgetary position and future profitability of Hydro Tasmania.
During the 2007-08 Global Financial Crisis, the positive effects of pricing carbon
became increasingly apparent for Tasmania. As other revenues sources contracted
sharply, carbon pricing bolstered Hydro Tasmania’s profits - enabling it to invest in
critical infrastructure - and provided a much-needed source of revenue for the state.
Prior to abandoning his pre-election position on climate change and renewable
energy production, Mr Groom (apparently) shared this same important
understanding.
In his inaugural speech to Parliament, less than five years ago, he described climate
change as a “very significant issue and one which all of us, no matter our
background or political creed, should do more to address.” Mr Groom further stated:
“Future prices will be further impacted by the introduction of a carbon price, which in
my view is both inevitable and necessary”.
By abandoning his own personal convictions in government to support the populist
and regressive politics of Tony Abbott and his federal colleagues, Mr. Groom has
sold out the Tasmanian Economy.
Both Tasmanian and Federal Labor have consistently supported pricing carbon to
deliver environmental and economic benefits to Tasmania.
But Tasmanian Labor's support has always been contingent on an appropriately
designed emission trading scheme embracing three key principles:




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It must provide
 appropriate assistance to our emissions intensive, trade exposed
industries
It must compensate
low and middle income Tasmanians for any higher living costs it

brings and
It must recognise the State's early move into and substantial use of renewable energy.

Federally, Labor is the only party willing to price carbon while ensuring these
principles are reflected in legislation. If this outcome can be achieved, Tasmania will
benefit both environmentally and economically.
By continuing to exclude the cost of carbon pollution from legislative decisionmaking, the Liberal Government is effectively distorting markets and discouraging
investment in renewables. For Australia to contribute meaningfully to the globally
agreed goal of avoiding global warming of 2°C or more, it must encourage
investment in - and the expansion of - low emission energy companies such
as Hydro Tasmania.
The voters of Denison elected Mr Groom on a platform of pricing carbon,
lowering emissions and expanding renewable energy production and the Minister
needs to start delivering on that commitment for the betterment of Tasmania.
Supporting a National Gas Reservation Policy
Australia is a major gas-producing nation. Since its beginnings in the late 1970s, the
Australian gas industry has grown to become a major global producer of natural
gas.
This level of production should mean all Australians enjoy access to the benefits of
natural gas at an affordable price. But rising natural gas prices - driven by increasing
international demand - are negatively impacting Tasmania's manufacturing sector as
well as those Tasmanian households using gas for heating and other essential
services.
Increasing gas prices have already slowed the rollout of gas infrastructure across the
state because fewer consumers than anticipated have connected to the pipeline
network. Further expected price hikes could have serious implications for
Tasmania's economy. Major customers like Nyrstar, Simplot and Grange Resources
use significant quantities of gas to drive efficiencies within their operations.
The nation can retain a major competitive energy advantage and offer Australians
choice and competition by establishing a national gas reservation policy. By
reserving a small portion of Australia's gas production for sale within our domestic
market, consumers - both large and small - will benefit from affordable gas prices.
An appropriately structured policy, where a percentage of the gas extracted from
Australian reserves must be sold domestically still enables gas companies to export
the majority of Australian gas into international markets at a higher global price.
Gas reservation policies are already used effectively by other gas producing
countries around the world. Gas companies operating in these jurisdictions are able
to generate major profits through gas exports but the local economy retains a
competitive energy advantage.
Because Australia has such abundant gas reserves, only a relatively small
percentage of gas would have to be reserved to keep our gas prices affordable.
Australia is the only major gas-producing nation that allows gas companies
completely unrestricted access to natural gas reserves for foreign export.
Israel, Indonesia and Egypt have laws mandating a percentage of gas extracted
must stay within their domestic markets. In the US, the export of gas is regulated by
legislation requiring exports to be in the ‘public interest' and Canada also implements
a similar ‘public interest’ test.
Norway, Qatar, Russia, Algeria and Malaysia ensure domestic advantage from
their gas reserves by having state-owned companies taking the role of the
dominant gas producer and exporter.
Western Australia is the only state in Australia that has implemented gas reservation
policy. The Western Australia Government has been able to guarantee domestic
supply at attractive prices, while still allowing investment in the LNG industry and a
healthy level of exports.
Tasmanian consumers, both commercial and residential, have much to gain from
a national gas reservation policy.
In March 2001, Duke Energy first entered into a development agreement with the
State to bring natural gas to Tasmania and construction of a transmission pipeline
was completed in 2003.
Since that time gas has provided an efficient and economically viable alternative
for homes and businesses in Tasmania. Gas performs well in Tasmania's cool
climate and provides important competition within our domestic energy market.
To ensure that Tasmanians continue to enjoy the benefits of affordable natural
gas, a coordinated national effort is needed from all stakeholders to ensure a
sensible policy position on natural gas pricing is achieved.
A Second Bass Straight Interconnector
The construction of a second Bass Strait electricity interconnector should be central
to all future energy reforms in Tasmania.
An additional regulated interconnector will reinforce Tasmania’s strategic advantage
as the renewable energy powerhouse of Australia and drive jobs growth and new
investment in our state.
Tasmania has a natural competitive advantage in renewable energy and a
second cable across Bass Strait would significantly build on these strengths and
provide fresh opportunities to expand the Tasmanian economy.
The increasing urgency to expand renewable energy production across the globe
and address the economic and environmental impacts of climate change
presents significant opportunity for Tasmania. But we need to unlock Tasmania’s
full production potential by increasing our export capacity.
Labor’s clear and transparent vision is for Tasmania to be home to more wind farms,
new geothermal exploration and other renewable energy production across the state,
and to export our expertise and services in renewable energy around the world.
A full feasibility analysis of a second interconnector for Tasmania is urgently
needed to build the case for this nationally significant project. To successfully
progress this project, the Tasmanian Government needs to work closely with both
the Victorian and Commonwealth Governments.
By removing the price on carbon and threatening the future expansion of the
Renewable Energy Target (RET), the Federal Liberal Government is threatening
the viability of a new interconnector. The RET provides financial incentives that are
essential for businesses to build renewable energy infrastructure. The RET scheme
was central to the business case for the Musselroe Wind Farm and, without it,
future investment in Tasmania’s renewable energy infrastructure are at risk.
Supporting Tasmania's GBE's
Delivering power to Tasmanian consumers at the lowest possible price is central to
Labor’s energy reform agenda. However, it must be understood there is a trade-off
to GBEs and the broader Tasmanian economy when this occurs.
The profitability and success of hydropower has ultimately shaped Tasmania’s
industrial and social development for the last 100 years. The profits of our energy
GBEs are reinvested in the Tasmanian community to provide essential services and
important infrastructure used by the entire community.
Additionally, strong financial results from our energy GBEs enable infrastructure
investment that not only improves performance reliability - it also reduces the
operational cost base and lowers power prices.
The current Tasmanian Liberal Government has placed the future of both Hydro
Tasmania and Tas Networks on a less sustainable footing through the concurrent
removal of carbon pricing and by gouging record levels of funding from both
companies to pay for election commitments.
Labor strongly supports Forestry Tasmania recieving appropriate levels of
funding. However, the Hodgman Government's decision to break an election
promise and subsidise Forestry Tasmania by shifting equity out of Tas Networks
has further increased its debt burden and reduced Tas Networks’ ability to invest
in energy infrastructure improvements and lower power prices.
The performance of Tasmania’s energy GBEs is central to the performance of our
economy more broadly and Labor is deeply concerned that this government will
continue to raid GBEs to fund election spending and prop-up the Budget bottom line
for political purposes.
For more information on Labor's submission please contact:
Office of the Tasmanian Labor
Opposition Parliament House, Hobart
Ph: 03 621227
labor@pariliament.tas.gov.au