Senator Birmingham: (South Australia) (12:31 PM) -It is my pleasure to rise to contribute to this debate on the Renewable Energy (Electricity) Amendment Bill 2010, the Renewable Energy (Electricity) (Charge) Amendment Bill 2010 and the Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Bill 2010. At the outset, I restate the coalition’s strong commitment to the renewable energy sector and the types of reforms that are outlined in these bills. The coalition have a proud history of the type of direct action on climate change matters that this type of proposition develops. We have a strong history when it comes to the renewable energy target. It was the coalition that put in place the original renewable energy target for Australia that mandated a 9,500 gigawatt-hour mandatory renewable energy target. It was as a result of this that Australia’s renewable energies got the kick-start that they deserved, and we were very pleased last year to build on that and support the extension of that renewable energy target.
We went to the last election proposing an extension of the renewable energy target, as I know the government did, so we were pleased to be able to find the means last year to give effect to that increase in the renewable energy target and to see continued support and a continued mechanism to guarantee the growth of the renewable energy sector in Australia. But it is disappointing to be back here in this chamber less than 12 months later, having to fix up the mistakes of the changes that were made less than a year ago. That is what we are effectively on this week when it comes to these bills-it is a fix-up measure. It is to right wrongs that were identified and discussed at the time that the original expansion of the renewable energy target was passed, and that is extremely disappointing for us. It is disappointing because issues that we are fixing today are very similar to issues that were identified in the debate less than 12 months ago.
Particularly disappointing is the fact that what we are having to do in the legislation before us today is provide some certainty of opportunity for the major, large-scale renewable energy technologies. That is what the proposal before us today attempts to do: provide some certainty of investment opportunity for large-scale renewable energy technologies. The legislation does this by effectively splitting the renewable energy target. It creates, in a sense, two targets within one: a large-scale renewable energy target, which will now seek to produce 41,000 gigawatt hours by 2020; and a small-scale component which the government has proposed of, it says, around 4,000 gigawatt hours by 2020-but this figure is uncapped under its proposed small-scale renewable energy scheme. That is an issue to which I will return later.
Last year this parliament agreed to increase from 9,500 gigawatt hours to 45,000 gigawatt hours the target for renewable energy in Australia by 2020. We did so believing it would be a great fillip, a great boost, to the renewable energy sector. But there were particular warnings that the measures being proposed would not provide enough certainty for investment in the types of large-scale developments that are not only necessary to achieve that 45,000 gigawatt-hour target but critical if we are to transform Australia’s reliance on fossil fuels and non-renewable energy sources. What Australia needs if we are to transform that reliance on those traditional energy sources are major development and major advances in the technology of renewables like wind, solar, geothermal and biomass-the types of renewables that we hope can actually provide baseload power for Australia.
It is one thing to provide intermittent power but it is another thing to provide baseload power. That is why in the debates last year coalition members and senators highlighted again and again the importance of ensuring that, under this expanded renewable energy target, there was enough certainty to ensure there was investment in those potential baseload electricity sources-things like the geothermal opportunities that abound in my home state of South Australia and the major solar developments that have struggled under this government because of the ever-changing policy parameters that it has set.
I know that Senator Barnett will highlight wind and other opportunities like tidal and wave energy-the potential is endless. But what we have seen put in place from last year is a scheme that did not set aside any of the renewable energy target for large-scale developments and did not set aside any of the renewable energy target for developments that could provide baseload power. It just put in place one target which has seen a great surge in the amount of renewable energy certificates generated by those small-scale technologies because of the types of incentives that exist for small-scale technologies not just from the Commonwealth through things like the solar credits multiplier but also from state governments through their ever-changing and ever-developing policies, especially around gross feed-in tariffs and other such mechanisms. As a result of that surge, we have seen a drop in the price of renewable energy certificates. As a result of that drop in price and the surging abundance of certificates from small-scale technologies, we have seen reduced investment in the large-scale sector. This is precisely what this chamber and the other place debated. There was the fear that there would be not be sufficient incentive for large-scale projects, especially those that could provide baseload power, to get off the ground and be a key part of this renewable energy target.
The real disappointment in being back here today is that we had to come back and fix up a problem that was identified at the time. But I am pleased that we are attempting to fix it up this week, because it is important that we fix it. It is important that those large-scale projects have some certainty of investment and the knowledge that they can go forward and plan to develop their projects and be part of this renewable energy target-and I know that there will be a market for the certificates at a viable price when they are generated. Without those large-scale projects, we have no hope of the type of transformation in electricity generation that I know many people in Australia hope for in the years to come.
The coalition has concerns, however, about some of the detailed aspects of the legislation before us. between The coalition and the government have been negotiating over the last couple of weeks in an attempt to resolve our concerns and our points of difference before we get to a final vote and the committee stage of the legislation this week. They are eleventh-hour negotiations now, but I hope they can resolve some of the key issues we have concerns about. One of those issues relates to the unlimited liability that is placed on electricity users in Australia as a result of these changes. The Small-scale Renewable Energy Scheme is uncapped. It allows for the production of as many small-scale technology certificates, or STCs, as can be produced with a floor price of $40 through a clearing house. The clearing-house price of $40 applies no matter how many are produced. Year after year, the liable entities-the major electricity buyers and sellers of Australia-will be the ones that have to pick up the tab for that unlimited liability.
That has created great and legitimate concern throughout major industry and those who retail electricity to Australian households and businesses, because they are the ones who will have to pick up the tab. The concern for them is that, under this legislation, they may not know until March of each year what they will be liable for in that year. There will be an estimate of what they might be liable for the year after, and that is all the certainty they get. Potentially, they will not know until March of the following year whether that estimate was right, whether there is a carryover of STCs from the previous year and whether they are liable for much more than they ever thought they would be. It will not be until then that they get another estimate for the following year. For the liable entities who have to pick up the tab for the STCs, there is significant uncertainty about what it is going to cost them year after year after year. We hope the government can find a way to address that uncertainty. I know there are not easy ways to address it. The Senate committee inquiry into this canvassed whether you could place an annual cap on the number of STCs that could be generated. I recognise that the problem with placing an annual cap is that, when the cap is reached in September, October or November of each year, your market falls off the edge of a cliff for that last month or so.
There are real problems with how you reconcile the unlimited liability for those who have to buy the STCs and the risk of a highly volatile market for those creating the STCs. It should not be that hard. I hope that, whether or not it be through an appropriate pricing mechanism that allows the $40 price to fluctuate a little more, we can find a means to provide some certainty-maybe not total certainty but at least some-for the liable entities without risking what exists for the STCs. I highlight this issue in particular because even the government acknowledged in the second reading speech that the SRES, the Small-scale Renewable Energy Scheme, in creating its fixed price will have the potential to produce more certificates than needed for the 45,000 gigawatt-hour change to the target that was originally set. So industry concerns about this are real. Industry thought last year, when the scheme was put in place, that the renewable energy target was a 45,000 gigawatt-hour target. They now learn that it is uncapped, that the government expects that that original target will be breached and that industry will have to pay more as a result. That is why those concerns are extremely real.
I would also like to highlight the concerns that we have about changes surrounding the treatment of waste coalmine gas. Last year, in negotiating the passage of this legislation, the opposition in good faith agreed with the government to provide for the incorporation of waste coalmine gas in the renewable energy scheme. This year the government appear to be backing away from that deal and putting the inclusion of waste coalmine gas somewhere out on the never-never. That sector continues to have concerns about its coverage under GGAS in New South Wales, and the uncertainty which surrounds that scheme is a factor of the uncertainty surrounding the government’s plans for their emissions trading scheme. All those uncertainties mean that the existing incentives for waste coalmine gas are uncertain and unreliable. That sector argues quite strongly that it needs a long-term scheme with a fixed date at the end and some fixed targets so that it can have business certainty for its electricity generation from waste coalmine gas. The government appear to be pulling the rug out from under that sector and removing the certainty that it has longed for. We urge the government to look at how they can somehow provide a degree of certainty for that sector so as to ensure that it is not disadvantaged.
We equally have concerns about the way emissions-intensive trade-exposed industries are treated. There are some complexities in the formulae for how industries that are highly electricity dependent but highly trade exposed are given some offset treatment under this plan. In particular, the aluminium and alumina sectors have highlighted-and, again, their comments are recorded in some of the Senate inquiry material-their concerns that the current formula, whereby they receive a partial exemption for the amount above 9½ thousand gigawatt hours but then only a partial exemption for the amount below 9½ thousand gigawatt hours if the RET price exceeds $40, is a complicated approach and a complex system that does not provide them with certainty and ease of business operation or guarantee their ongoing competitiveness in a trade exposed environment. So again I look forward to hearing the government’s response to those concerns and to ensuring that they are also addressed.
In relation to other aspects of the small-scale technologies, we heard during the Senate inquiry some very valid evidence from those in the solar photovoltaic sector that the current solar multipliers have a risk of creating another unsustainable boom in the solar industry. We have seen what happens when you have booms in some of these industries. We saw it writ large with the Home Insulation Program. An unsustainable boom, where things are effectively given away, brings all types of charlatans, fraudsters and shonks into the business, and as a result the whole industry ends up suffering. The insulation industry today suffers as a result of the Home Insulation Program. It is an industry crippled and on its knees, and it is an industry whose public reputation is in tatters as a result of a giveaway program.
The concern of some of those in the solar sector is that the current five times multiplier for a 1½ kilowatt system is too generous now that costs in their industry have come down and that there is too much scope for systems to be given away or nearly given away, creating the risk of having too many people entering the industry selling products not up to the standards that they should be up to. The committee heard some evidence from that sector that we should look at shaving the multiplier-and it compelling evidence when industry operators who stand to actually lose something themselves in the short term come in and advocate to get less today for their long-term security. I urge the government during the committee stage to look at whether in fact they have got the balance on the issue of the solar multiplier wrong and whether that needs to be redressed during the debate on this legislation.
We are, of course, entering this debate in absolute good faith. We are committed to a renewable energy target. We want to see it work and we want to see this legislation pass. We want to see it pass in a form that means we will not be back here once again in less than 12 months. We want to see it pass in a form that will guarantee some stability and certainty for this important sector into the future. I implore the government to conclude the negotiations with the opposition in good faith to address some of the issues that I have highlighted today and to ensure that we can give some certainty and a strong and prosperous future to the renewable energy sector in Australia.