Morwell
* Check against delivery
Thank you for the introduction Angus.
Ladies and Gentlemen, it's great to be back in the Latrobe Valley on the occasion of this SKM function.
When I was here in August, I had the opportunity to listen and discuss the future of the Latrobe Valley with a number of stakeholders.
Tonight I want to continue this discussion and elaborate on the role of government as the Latrobe Valley transitions over time following the introduction of a carbon price.
Victoria's Powerhouse
Since coal was discovered in the Latrobe Valley in the1870s, it has been central to the economic development of the region.
The huge contribution the Latrobe Valley's cheap and stable supply of power has provided by way of growth and development for all of Victoria cannot be underestimated.
It was the establishment of the State Electricity Commission of Victoria (SECV) in the 1920s, under the stewardship of Sir John Monash, which transformed the Latrobe Valley into Victoria's powerhouse.
And during the Second World War, Australia too relied on Latrobe Valley coal to fuel its war effort.
As we move to more modern times the Latrobe Valley has had to transition.
The privatisation of Victoria's power assets by the Kennett Government represented a tremendous challenge for the Valley.
While privatisation has delivered benefits for consumers and businesses throughout Victoria, it must be acknowledged that the Latrobe Valley carried the weight of this change.
From a workforce of approximately 10,000, about one fifth of those directly employed in the Latrobe Valley remained following privatisation.
As a result, this region suffered the highest levels of Victorian unemployment for a decade.
There is no denying the impact this has had on the community.
I am a supporter of privatisation and the efficiency it brings to all energy consumers, but as governments we bear a responsibility to ensure these transitions are managed carefully and that workers are supported.
I think all governments can learn from the reforms of the Kennett Government and do things to help regions like the Latrobe Valley cope better with change.
Reform with Government support
Much like privatisation, the transition to a low carbon economy is an economic reform that will challenge the Latrobe Valley's economy.
The carbon price will have implications for this region – I am up front about that.
But what we must be clear on is the scale and timing of this impact.
As you would all be well aware, the carbon price package has now passed both houses of Parliament and will come into effect from 1 July next year.
This will put a price on carbon and change the relative competitiveness of brown coal-fired power stations here in the Latrobe Valley.
Recognising this reduced competitiveness, the Government is providing assistance – particularly targeted at emissions intensive generators such as those found here in the Latrobe Valley – through the $5.5 billion Energy Security Fund.
In fact, the Government's legislated carbon price package provides more assistance in real terms to Latrobe Valley generators than the proposed 2009 Carbon Pollution Reduction Scheme – something that the Australian Greens Party has not been overly keen to explain to its supporters given they voted against the previous scheme.
This will help heavily affected generators adjust to the changing dynamics in the energy sector.
We know the transition to more low emission forms of electricity generation will not happen overnight.
The carbon price will transform the energy sector over time so consumers and industry alike can adjust.
In return for transitional assistance, generators will have to develop Clean Energy Investment Plans.
This is about generators indicating to the Government what investments they will make and the action they will take to lower emissions.
Contract for Closure
A second plank of the Government's Clean Energy Future package is the Contract for Closure program.
The program is designed to provide certainty to the market around closure of participating generators and when this will happen.
However, it is far too early to say what the outcome of this program will be.
Under this program a capped amount of funding has been set aside to support up to 2,000 megawatts of highly emissions intensive generation capacity to close.
Participation in this program is voluntary.
And the Government has stated that the expected closure timeframe is between July 2016 and 2020.
Again I say, any closure will not happen overnight.
The Government is cognisant of the risks to energy security associated with any early, unplanned retirement of existing capacity, and the Contract for Closure program is designed to send a clear signal to the market to invest in replacement capacity and help manage this process.
Ultimately it will be up to the market to decide how and when this new investment occurs.
We are determined that any retirement of existing capacity will be gradual and orderly.
Expressions of Interest in the program are currently being assessed by my department and I expect more detailed negotiations to be underway with generators before the end of the year.
Building the skills set of the Latrobe Valley
The Government recognises the need to ensure any generators that may be seeking to close first meet their obligations to their workers.
It is the Commonwealth's intention that a final payment will only be made once all obligations under the Contract for Closure have been discharged, including arrangements to preserve workers' entitlements and other legal obligations.
The Latrobe Valley's workforce will again undergo a transition but we have time to ensure we manage this properly.
As with the economic reforms of 1980s and 1990s, if we want to prosper then we need to invest in skills and human capital.
That is why the Australian Government announced a $3 billion investment in new skills measures as part of this year's Budget.
There are profound changes taking place in the Australian economy, and the Australian Government recognises the need to invest in skills and training initiatives to deliver the skilled workers the economy needs for our growing prosperity.
Of course as this transition gets underway, the Government will monitor the impact to identify any regions that may require additional structural assistance.
The $200 million Structural Adjustment Fund will be important in this regard.
The Australian Government is committed to engaging with the Latrobe Valley community.
That's why Simon Crean, as Regional Minister has also recently visited the Latrobe Valley region.
It's about building trust and good faith and hearing from those on the ground.
This is about understanding how you are positioned, as a community, to meet the challenges ahead.
The future of brown coal
The future of the Latrobe Valley's economy will depend on diversification.
The transition to a low carbon economy will bring new opportunities to the Latrobe Valley in this regard.
I think finding alternative uses of brown coal could be one such opportunity.
It's worth remembering that in the 1950s and 1960s, Latrobe Valley brown coal was gasified.
This gas actually supplied Melbourne before Bass Strait was developed.
Today we are continuing to investigate how, in a carbon constrained environment, we can continue to make use of the 500 years of Latrobe brown coal at our disposal.
To this end, my Department and the Victorian government are collaborating on a range of projects and a Coal Road Map.
This will set out sustainable and long term opportunities for brown coal – but more importantly ensure the Latrobe Valley remains an energy rich powerhouse.
One of these opportunities is the development of carbon capture and storage technology.
Last week the International Energy Agency's World Energy Outlook 2011 reminded everyone of the importance of CCS in the world's future energy mix.
While coal is expected to decline in favour of alternative fuel sources, fossil fuels will continue to provide most of our energy requirements well into the future.
Accordingly, CCS is essential if we are to reduce emissions globally.
In Australia, Government and industry are still working on the demonstration phase of CCS.
The CarbonNet project in the Latrobe Valley is a good example of this.
If successful, it may be one of the world's first industrial-scale and multi-user foundation CCS networks.
The Latrobe Valley could become a world leader in CCS.
And, along with the development of new drying, gasification and liquefaction technologies, CCS might even open up brown coal to export markets.
It's our hope that, together with industry, the Latrobe Valley will continue to create high value products from your brown coal.
Conclusion
Ladies and gentlemen, the Latrobe Valley has undergone significant change in the last two decades.
As I hope is clear, this Government has no intention of abandoning the Valley during its transition to a low carbon economy – you have our full support.
The Government, my Department and I are committed to working with the local community to understand how this change is impacting on the region.
There's no point pretending it will be easy but, with hard work and cooperation, the Latrobe Valley will continue to be central to Victoria's future.
Thank you