National secretary of the Electrical Trades Union Michael Wright and McKell Institute chief economist Alison Pennington address the National Press Club to call for “government to build, own and operate renewable energy generation to power Australian industry at cost”. Following is a lightly edited transcript of their speech on Wednesday.
MICHAEL WRIGHT:
A year ago the Prime Minister told the press club that not every challenge can be solved by government stepping back. That ours is a time when government has to step up.
Mere months ago the Industry Minister said we must make Australia stronger, smarter and safer. More resilient to the shocks that keep coming.
We have come with the “how”.
A plan for a country where industry – and the workers who keep it running – have a launchpad for the future instead of limping between bailouts.
This is how we can, as the Prime Minister said, “embrace the opportunities of cleaner, cheaper renewable energy and the new generation of jobs and industries it can power”.
Where Australia locks in key materials like steel, aluminium and critical minerals.
Where our industries can plan, invest, train and innovate.
Where working Australians have the skills for secure, rewarding industrial careers.
We can choose this future of opportunity, sovereign capability and energy abundance.
Or we can manage decline, with dependence and decay.
Today we will say a few sensible things you don’t hear that much. Here is a preview:
Energy systems are as fundamental to the economy as financial systems.
“Energy abundance” means building energy generation.
A future made in Australia must be powered by Australia.
Private energy markets aren’t delivering on time for Australian industry, or to our national interest.
And that’s why the Australian Government should build, own and run a renewable energy platform for industry.
Backing Australian industry is always popular, but this is the plan to do it.
Protecting our national capability through the biggest geopolitical realignment since World War II is do-or-die.
We are a trade-exposed nation at the far end of fragile supply chains.
In the past 10 years we have all become experts in virology, in supply chains and in geopolitics.
We have been hit by shock after supply shock.
These have a real human impact.
Higher costs, interest rate rises, and material shortages.
And these curveballs have come as we simultaneously go through two energy transitions.
What historians will see as the defining challenge of our age.
We are overhauling what powers our grid, with renewables and batteries.
We are also expanding what is powered by our grid – which is everything.
Passenger vehicles, rail, mining, heating, cooking, hot water and even, with AI, thinking.
More is coming onto the grid every day.
This moment demands two urgent actions.
First, we must expand our industrial capability to make more of what we need here.
This makes us more self-reliant, less dependent on global markets for our basic needs.
It provides jobs, opportunities, training and prosperity.
Second, we must insulate our economic systems, and the people they serve, us, from price shocks driven by global events.
These sound like jobs for central agencies, and we must think of energy as a central agency.
Electricity is now core to our economy, alongside the Tax Office and the Reserve Bank.
Electricity is as critical to economic progress as money.
Australia’s fortunes for the next 100 years will live or die on the flow of electrons.
Our energy systems will determine business conditions, industrial output and living standards at least as much as our financial systems.
Energy is no longer a “sector vertical” nor is it substitutable.
It is the platform on which every industry, sector, process, operation and venture depends.
The precondition for everything from fertiliser to iron ore to data.
Energy abundance IS economic resilience, it is wellbeing.
Energy dependence or energy scarcity IS economic and social sabotage.
Australia must renew our generation assets.
Our coal and gas fired power plants have served our nation well, but they are old and they are breaking.
They are held together by little more than the hard work and hope of ETU members and their workmates.
They no longer produce low-cost reliable energy.
Soon they will not produce any energy, for any price.
We must urgently replace them, and much more.
Angus Taylor’s plan to run this ancient fleet into the ground is a failed plan for the failing leader of a failed party.
Demand for electricity has exploded.
And that’s what often gets lost, we’re not building to 82% renewables or even 100% renewables, as more and more demand comes onto the grid – as gas and petrol and diesel etc gets substituted for electricity – we’re building to something like 700% of the grid.
We need the fastest, most reliable, lowest cost electricity we can build.
A future made in Australia must be powered by Australia.
The private electricity market alone cannot power Australian industry.
Our generation assets are increasingly owned by foreign governments with their own national interests.
Private market contracts are too small, too short-term and too high-priced to deliver the industrial capability we need right now.
It is hard enough to keep the lights on, we cannot let industry fall through the cracks.
Government can step up.
It can break the industry bailout cycle and create conditions for success.
This is how.
Create a new government entity with a simple job: Build, run and own renewable energy generation to power Australian industry, at cost.
We have called this entity Sovereign Power.
Sovereign Power makes reliable, affordable, long-term energy for industry.
This builds a resilient, capable country where working people and their communities have skills, opportunity, and security.
Industry has the certainty to innovate, invest, value-add and expand.
It has the platform to train the next generation of workers in next-generation skills.
Sovereign Power means we can refine more of what we dig up, creating value instead of exporting it.
This is how we take Australian industry off life support and put it at the centre of economic progress.
We go upstream to expand capability, instead of merely preserving it.
How novel.
Have countries tried this before?
Yes.
The example that springs to mind is, well, Australia.
Public energy grew Australian industry.
It’s why Tomago is in the Hunter.
It’s how we electrified our country in the first place.
Around the world, in the US, the UK, New Zealand, Canada and most of Europe, heavy industry runs on low-cost public energy.
This is why energy costs are existential for Australian industry.
Our competitors and allies have aligned their energy platforms with their sovereign industrial interests and it is time for Australia to do the same.
Sovereign Power solves the critical blockage in industry-policy: it solves how to pick winners and losers.
To reboot Australian industry, you don’t have to pick winners.
Pick electricity.
It’s enormously popular.
Pick the lowest cost way of producing it.
Pick it soon, commit and go big.
If you pick electricity the winners will pick themselves.
Sovereign Power creates the conditions for victory.
The winners are downstream.
The winners are us.
This is the part of the speech where I’m supposed to tell you we are doomed if we don’t.
But it’s not true.
What’s more likely is that we muddle along.
One or two percent growth.
Piddling productivity.
Skills crises galore.
The warp and weft of social cohesion separating in ways you don’t see until it’s too late.
In the rearview mirror will we see how we lowered our sights.
How we gradually but completely wasted our children’s opportunities.
Australia must not settle for that.
We must aim higher.
This is not a nation that clings to ideas past their use by date.
We find the right idea at the right time.
The time for Sovereign Power is now.
Sovereign Power is what Kurt and Joseph need in Whyalla.
It’s what Sprocket needs in Collie.
It’s what we need in Bell Bay, and in Boyne, and in Tomago.
We need Sovereign Power in Canberra, and in classified locations where clever people with secret jobs model our geopolitical future.
Sovereign Power is what Australia needs.
ALISON PENNINGTON: The courage to grasp new opportunities is what separates leadership from management.
When Nugget Coombs – trusted advisor to both sides of politics and eventually the RBA’s first governor – was put in charge of post-war reconstruction by John Curtin, he saw that history demanded new ideas.
With the nation’s access to trade, fuel and manufactures closing, inflation mounting, and an economic hit threatening to reopen the scars of the Depression, Coombs said the “confusion and inflexibility of the situation was in fact an opportunity to move consciously and intelligently towards a new economic and social system.”
Today, history again demands new ideas.
To heed its call, we must discard ideas that no longer work.
That government should step back.
That privatisation always delivers lower prices and better outcomes.
That manufacturing is ‘dying’ and should live offshore, while we ship, dig and depend on trade for all we need.
That tearing down public institutions that supported Australian industry, and the people who sustain it, would deliver higher productivity.
That living standards could be upheld indefinitely by offshoring industry and liberalising trade.
That private markets alone could power a renewal of Australian industry while pulling off an entire energy system transition.
These ideas are a dead end that will only get deader.
Public energy built Australian industry.
In reconstruction, it delivered us self-sufficiency from a rural base.
Bill McKell, for whom our institute is named, established the Joint Coal Board to power industry.
For most of the 20th century, state electricity commissions coordinated grid expansion and delivered some of the lowest prices in the world.
During the last oil crisis in the 1970s, we invested in publicly owned coal power to support industrial expansion and an export boom.
In each global crisis, we chose the opportunity.
The opportunity to be better, smarter, to continue evolving from colony to independent and prosperous nation.
But we only had this choice because we invested directly in public energy generation.
Because we were willing to roll up the sleeves and do it ourselves.
The biggest risk to Australian industry, is the belief that private markets can deliver the energy transition alone.
Industry cannot remain competitive under the conditions the private market imposes.
Private asset owners face higher borrowing costs and demand higher returns.
They will make those returns whether industry buys their energy or not.
Foreign investors own a rising proportion of generation to the NEM.
Increasingly, so do foreign governments – the governments of China, Saudi Arabia, Qatar, Thailand, Malaysia and Singapore all own more of Australia’s renewable energy generation than our own federal government.
With our energy system on the menu for global markets, Australian industry pays three times more for energy than their US competitors.
This fact led Bluescope CEO Mark Vassella to say here, six months ago, correctly, that foreign energy companies were undermining Australian industry.
Beyond high prices, new generation for heavy industry isn’t happening at all.
Power supply contracts with legacy generators are reaching expiry, and industry is discovering there’s no replacement on offer.
The lives of thousands of workers, their families and entire communities dependent on these industries, suspended.
Waiting on their future.
Just when securing our domestic base is an urgent priority, the same factors are throwing capital markets into “wait and see” mode.
But we don’t have time to wait and see.
If building renewables to power industry doesn’t make ‘market sense’, then it’s clear the market mechanism is dysfunctional, and we need another solution.
Sovereign capability is not high-vis vests, hard-hats and photo-ops.
It means controlling all the inputs critical to the functioning of the economy.
Right now, Australia has control over two critical inputs: raw materials, and labour.
But electricity, the third critical input, is the big gap.
Taxpayers have bailed out five sites of key industrial capability in the past three years, because the market could not supply long-term, well-priced industrial-scale power.
This is undermining the foundation on which our collective capability is built.
A future made in Australia must be powered by Australia.
That is why we need Sovereign Power.
Sovereign Power will be a new Commonwealth entity established under standalone legislation, funded by direct Commonwealth equity injection.
It builds and owns renewable generation project, selling electricity at long-term, low prices.
Sovereign Power is not a market maker, or a retailer, or a wholesaler.
It is not a government business enterprise with a profit-seeking purpose.
It has one job and that job is to power Australian industry at cost.
It can do this because Sovereign Power is liberated from the constraints of private financing.
Where private developers have a weighted average cost of capital of about 7 percent in real terms, the cost of capital for the Commonwealth is nearly a third lower.
On a given $23 billion in investment, that’s around $19 billion more in capital costs alone over the life of a project.
Not for better infrastructure or more reliable supply, but just for investors and banks to justify their risk.
Sovereign Power passes its lower financing costs on to industry, selling electricity at around $65 per megawatt hour – 44 percent cheaper than the market average of $117 per megawatt hour.
By carving off energy-intensive facilities Sovereign Power means households stop competing with smelters.
More electricity is available to meet wider demands on the grid, pushing down prices for households and business.
Taxpayers own what we fund, with new generation assets on the public books, lifting our in-house expertise in designing and managing the energy system.
Australia’s heavy industry provides a secure source of the structural steel, aluminium, cement and copper we use to build homes and essential infrastructure.
They’re used directly in the manufacture of defence products like land vehicles and naval ships.
And since so many things across the economy are made with these products, their prices affect how much we pay for lots of things, pushing up inflation or dampening it.
If they become unavailable, whole sections of our economy come to a halt.
This is what we mean by sovereign capability.
But it is only the baseline.
It’s not enough when we rely so heavily on international conditions staying the same to get the manufactures we need.
That’s why Sovereign Power serves a second group of strategic industries, which can upgrade Australia’s industrial base, helping us climb the value-added ladder to make more stuff on home soil.
Imagine, just on the horizon: we are no longer world leaders of shipping raw iron ore.
Cheaper stabilised power supply makes long-term investment in skills, innovation and value-adding viable.
Industrial upgrades allow us to refine iron and make our own green steel for our buildings, bridges, rail networks, and wind turbines.
No longer stuck providing the raw product while other countries pocket all the value-added, we process raw spodumene into battery-grade lithium, making our own batteries.
A generation of young people have hope for a future of skilled, interesting, secure work.
Sovereign Power enables maximum benefits with new local supply chains, and high-skilled, well-paid and meaningful jobs.
The benefits continue.
Because the onshoring process through cheaper reliable power also means lower international shipping and transport costs.
Lower costs for key inputs help stabilise prices that flow through the economy.
This protects Australians from inflation driven by energy price shocks, while all monetary policy can do is punish them.
Lower inflation means more economic space for new investment, growth and higher incomes – more ‘runway’.
It means higher revenues for our services.
This is the virtuous cycle we can unlock through Sovereign Power.
Australia is building ambition, capability and resilience in an era of growing uncertainty.
That requires a solid foundation – one that enables us to build the world we want, on our own terms – and Sovereign Power is that foundation.
Our current electricity market cannot provide electricity at the right price, horizon, scope or scale for Australian industry.
Key industries are limping between ad-hoc bailouts and restructures because they don’t get what competitor nations provide to their own heavy industry. – cheap power.
Sovereign Power can change the game and give us control over our industrial future.
We have the raw materials, we have the skills, we have the stable institutions and robust R&D.
Now we have the missing piece – electricity.
The capacity of Australians to work, produce and care for each other will survive this global turmoil.
And our capacity to work, produce and care is the only constraint on what we can do.
All we need is leadership and purchasing power to put those capacities to full use.
Sovereign Power is the choice of governments who step up – who know that global capital markets cannot solve this problem for us.
It is a choice to create a future made in Australia, powered by Australia, whose benefits are shared by all who call our country home.
