Profile: Grant King
Origin Energy CEO Grant King is naturally disappointed with both the political limbo in Australia and because there’s no definitive commitment for the introduction of a carbon price. A carbon price clearly will cause fuel substitution, from more carbon intensive to less carbon intensive fuels – and that is the one shift that our economies have to make. Canberra might be in gridlock, but that isn’t stopping Origin from snapping up enough renewable energy certificates at bargain prices to last them up to three years.
By Giles Parkinson in Climate Spectator (25 August 2010):
Origin Energy managing director Grant King tells Climate Spectator editor Giles Parkinson that Canberra might be in gridlock, but that isn’t stopping the company from snapping up enough renewable energy certificates at bargain prices to last them up to three years.
But King warns that his company and all companies are likely to take the debatable course of ‘the lowest risk decisions’.
Meanwhile, King is convinced of the immediate potential of gas to provide baseload power in conjunction with renewables, pointing out that geothermal baseload power is still up to four years away.
He also argues that while warnings about electricity consumption in the advent of electric cars have merit, concerns about capacity are probably overblown.
Giles Parkinson (GP): Grant, thanks for joining us. What’s your reading on the current political situation and the implications for your business?
Grant King (GK): Look, without being too sort of evasive, clearly the electoral task is not yet done, and that’s extraordinarily unusual in an Australian context. So, we don’t know who the next government is and, frankly, I’m not going to speculate. I have no idea how it plays out. I only know what I read in the papers. So, clearly the electoral task is not yet done. It is possible that there are different outcomes which could have different implications for important public policy issues like climate change and carbon emissions, at large, and specifically in relation to the company. But to speculate today how they play out is just not possible because, as I say, the electoral task is not yet done.
GP: Sure. But you’ve argued strongly for a carbon price in the past and been fairly consistent about that.
GP: Neither mainstream party came to the election with a carbon price proposal. Were you disappointed in that?
GK: By definition we are because it’s impossible to advocate that that’s the most efficient solution and then be sanguine when it’s not implemented. But equally, you know, we do respect that the community elects its politicians and they make our policies. So, from my point of view, you look through the carbon price into the commitment that is bipartisan and that is that both parties took to the election a reaffirmation that they desire to reduce carbon emissions by 5 per cent on 2000 levels by 2020. My inclination is always to look to the area where there is bipartisan support and recognise that the difference between the parties is as to means rather than to end.
GP: Yes, but you’ve said in the past that important investment decisions need to be made now for the investment in Australia’s energy industry, and whether we have or don’t have a carbon price is going to influence what sort of decisions are made and what sort of costs are imposed.
GK: And that’s correct, so hopefully make some sense of that comment… I don’t believe it makes sense to argue nobody will invest in the face of uncertainty. Now, what people do when faced with uncertainty is make those decisions which risk the least amount of capital. In other words, you make the lowest risk decisions you can. And so to the extent that our governments have chosen a particular policy position, we will still see investment, but it will be different investment than that which would otherwise occur under some different policy setting, and the risk that we’ve always pointed to is that under the current policy settings, for example, we will build a system that has a lot more renewables, arguably a lot more wind. We’ll build into that system a lot more intermittency. We’ll put a lot of open cycle gas in to balance that system out. We’ll have much more volatile pricing as a result of that. And with renewables like wind, you know, the wind can blow all night when we don’t need the power for example, so we’ll have long periods of maybe even negative prices which will make subsequent investments in different forms of base load generation much more difficult.
So, there will be a set of consequences that arise from the current policy settings, but at the end of the day people will still invest and we’ll still have our power. You know people will still get electricity for example, but whether it would be the least cost, most effective system that you could have otherwise had is highly debatable.
GP: And with a carbon price, I think you argued that then you can actually go ahead with some of these baseload gas facilities, for instance.
GK: Well, we will, inevitably, because a carbon price clearly will cause fuel substitution and that’s from more carbon intensive to less carbon intensive fuels – and that is the one shift that our economies have to make. At the moment, to the extent that politicians are not doing that through a carbon price, they’ll try and do it through other means like efficiency or mandatory schemes like the renewable scheme. In my view there’s little evidence that people or policymakers can connect the costs that that will cause to incur in the system, compared with the costs that a carbon price might have caused in the system.
For the full interview with Grant King, go to climate spectator.
Grant A King
Grant King was appointed Managing Director of Origin Energy at the time of its demerger from Boral Limited, in February 2000, and was Managing Director of Boral Energy from 1994. Prior to joining Boral, he was General Manager, AGL Gas Companies. Grant is Chairman of Contact Energy Limited (since October 2004), a councillor of the Australian Petroleum Production and Exploration Association, a former director of Envestra Limited (1997-2007) and former Chairman of the Energy Supply Association of Australia Limited. Grant has a Civil Engineering Degree and a Master of Management.