Mal Washer (Moore, Liberal Party) Share this | Hansard source

May I first acknowledge the terrific job which the member for Throsby does on the Standing Committee on Environment and Heritage. The Renewable Energy (Electricity) Amendment Bill 2006 will implement the government’s agreed response to the review of the operation of the Renewable Energy (Electricity) Act 2000. The Renewable Energy (Electricity) Act 2000 established the mandatory renewable energy target measure which came into operation in 2001 and is scheduled to end in 2020.  The mandatory renewable energy target is the first of its kind in the world. The UK’s Renewables Obligation scheme, which began in 2002, is similar. However, it is not mandated through legislation and there are no penalties for noncompliance.

The mandatory renewable energy target places a legal liability on Australian electricity retailers and other large buyers of electricity to contribute proportionately towards annual targets for additional renewable energy. This annual target will increase to 9,500 gigawatt hours in 2010 and remain at that level until 2020. This is expected to push the amount of renewable energy used in electricity generation from 10.7 per cent in 2000 to 12.7 per cent in 2010.

How does the scheme work? The key features of the Mandatory Renewable Energy Target scheme are renewable energy certificates. These certificates are created by accredited power stations that generate power from renewable energy sources in excess of a baseline amount. This baseline amount was calculated on power stations which were operating before the act came into effect in 2001 to encourage generation of power above their existing level of production. One renewable energy certificate is created for every one megawatt hour of renewable energy power generated above this baseline.

Some installations of solar hot-water heaters and small renewable energy generation units may also be eligible for renewable energy certificates. Deemed renewable energy certificates for both solar water heaters and small generation units may be either created and traded by the owner of the system or assigned to a registered agent. That means that, when you purchase an eligible hot-water system, the associated certificates may be registered and sold at a later date by you or passed on to the seller of the hot-water system who will give you a rebate or price reduction of some kind. In this case, the seller will then own the certificates. These renewable energy certificates are the ‘currency’ of the Mandatory Renewable Energy Target. Once created they are registered with the Office of the Renewable Energy Regulator and placed on the green electricity market or sold via bilateral deals. The certificates are in an electronic format and each has its own unique code. Any organisation or individual can purchase renewable energy certificates on the market. Once registered, these renewable energy credits can be ‘banked’ indefinitely in anticipation of an increase in market value. The final act in the life of the certificates is when they are surrendered to the renewable energy regulator. 

Out of interest, the trading price of a renewable energy certificate in March this year was $20.50 and as of January 2006 approximately 14.6 million renewable energy certificates had been created since the start of the scheme—5.3 million of these from hydro power, three million from solar hot-water heaters and 2.6 million from wind power. Australian electricity retailers and other large buyers of electricity are required to meet targets of renewable energy acquisition by purchasing certificates through the market. For example, if an electricity retailer purchases 10 per cent of all electricity available nationally, they must meet 10 per cent of the graduated target for that year. They discharge this liability by surrendering the required number of certificates to the renewable energy regulator.

The graduated target is issued by March each year and a renewable power percentage is calculated for that target to be reached. The renewable power percentage effectively determines what an electricity retailer’s liability is for that year. For example, in 2006 the target is 4,500 additional gigawatt hours of power from renewable energy sources. In order for this target to be reached, the renewable power percentage has been calculated at 2.17 per cent. So if an electricity retailer, the liable party, purchases 100,000 megawatt hours of electricity in 2006, they must surrender 2,170 renewable energy certificates to fully discharge their liability.

As the renewable power percentage is calculated in advance, it is based on estimates of the total amount of liable electricity in upcoming years. In some years the percentage may result in more certificates being surrendered than the specified target; in other years the percentage may be set too low, resulting in fewer certificates being surrendered. This underachievement or overachievement against the interim target is corrected by adjusting later years’ renewable power percentage.

If liable entities do not surrender sufficient renewable energy certificates, the shortfall charge is $40 per megawatt hour. So if the retailer were to be short 1,000 renewable certificates, they would be liable for a charge of $40,000. However, if the shortfall is less than 10 per cent of the total liability they may make up the shortfall in the next year.

In March 2003 the mandatory renewable energy target scheme was put under detailed scrutiny by the Tambling committee, with the findings being presented in September 2003. Many of the recommendations dealt with refinements to the mandatory renewable energy target scheme to allow it to work more effectively and transparently, as well as supporting many of the recommendations that were included in the Renewable Energy (Electricity) Amendment Bill 2002. The 2002 bill sought to improve the administrative integrity, effectiveness and efficiency of the scheme, but it was stalled in the Senate in late 2002.

The government has agreed to many of the recommendations to improve the scheme and is implementing these improvements in this bill. However, the government did not agree to the recommendation of extending the scheme from 2010 to 2020 and of increasing the target to 20,000 gigawatt hours for 2020. Why? A target of 20,000 gigawatt hours in 2020, whilst providing a subsidised growth path for renewable energy, would impose significant economic costs through higher electricity prices. The recommendation would double the current projected cumulative economic cost of the scheme to over $5 billion by 2020 in net present value terms. The Australian government does not believe these costs can be justified. As stated in the June 2004 energy white paper, Securing Australia’s energy future:

MRET will continue to play a significant role in supporting the renewable sector, and will underpin $2 billion in renewable energy investment in the period to 2010. The scheme has played a important role in demonstrating the potential for renewable technologies, in reducing renewable energy project costs and facilitating the development of ‘soft’ infrastructure such as regulatory and market structures. In increasing renewable capacity, the scheme has largely supported currently available technologies, and provides little direct support for the development of new low-emission technologies.

The Australian Government considers a better path is to build on the successful outcomes of MRET to more directly promote the development and demonstration of a broader range of low-emission technologies, and more aggressively address the impediments to the uptake of renewable energy. The $500 million Low-Emission Technology Development Fund and the $100 million in funding to promote the strategic development of renewable energy technologies are key parts of the strategy, as are the Solar Cities Trials.

What are the recommendations of the review being implemented in this bill? The bill contains measures that will improve market transparency and business certainty by: introducing a time limit following renewable energy generation during which the certificate for that generation must be created; allowing the publication of additional data relating to renewable energy generation, the baselines allocated, and certificate shortfalls of liable parties; and providing a process for granting of provisional accreditation for power stations before they are built. This will enable participants to make better informed investment and trading decisions. The review also reported that the uptake of bioenergy under the measure was lower than expectations. To assist with this the bill simplifies the eligibility requirements for energy crops and plantations, and removes any anomalies that have occurred in the treatment of municipal solid waste.

The bill encourages the greater participation of solar technologies by broadening the eligibility of solar water heaters and by simplifying deeming arrangements for solar small generation units. The bill also provides for the surrender of renewable energy certificates by persons who do not have a liability. Individuals or organisations may purchase certificates and voluntarily retire them from circulation. This could be done for a wide range of reasons, including for philanthropic purposes, and will encourage additional renewable energy generation. The bill allows the minister to determine the eligibility of new renewable energy sources to encourage emerging new technologies.

This bill clarifies the list of eligible energy sources by removing some items which were not sources as such but rather processes and technologies for transforming energy sources into electricity—for example, fuel cells are removed. The eligible sources list will now include: hydro; wave; tide; ocean; wind; solar; geothermal-aquifer; hot dry rock; energy crops; wood waste; agricultural waste; waste from processing of agricultural products; food waste; food-processing waste; bagasse; black liquor; biomass based components of municipal waste; landfill gas; sewage gas and biomass based components of sewage; and any other energy source prescribed by the regulations.

My electorate of Moore, like that of the member for Throsby, is involved with a renewable energy power station which is accredited with the scheme. The waste disposal facility at Tamala Park uses biomass from the electorate of Moore as well as from other electorates as its energy source and it taps the landfill methane to generate electricity via a reciprocating engine.

There are many fascinating technologies being developed to harness renewable energies, and I am sure that our energy mix in the future will involve many of them. We are also seeing some of these technologies combining with current energy sources. Rather than the current debate of fossil versus renewable we will see in the future a combination of best technologies and resources to produce cost-effective energy with next to zero greenhouse and pollution emissions.

An example of this is solar thermal energy. Solar thermal power plants generate heat by using lenses and reflectors to concentrate the sun’s energy. Solar thermal energy is emerging as a cost-competitive source of electrical power, especially as it can combine beneficially with current energy sources such as coal, gas, biomass, photovoltaics and wind power. As you are all aware, Australia has abundant reserves of both brown and black coal, and we derive 85.5 per cent of our electricity from this energy source. In view of this, any other energy source that can combine with coal power in a beneficial way is exciting news.

Solar thermal power is suitable for base and peak load power and for distributed or stand-alone generation. In contrast to other types of renewable energy generation, the energy from solar thermal energy can be stored far more cheaply in the form of heat, as well as providing more continuous power. It can provide supplementary steam energy to bolster the efficiency of coal fired power plants and cut greenhouse emissions. It can also give the low grade energy needed to filter CO out of the exhaust gases of existing coal and gas fired power stations for long-term storage.

A major solar-coal trial is taking place at Liddell power station in New South Wales for extra steam production, and CSIRO’s National Solar Research Facility in Newcastle is exploring the use of concentrated solar thermal technology to reform methane from natural or coal bed gas to make synthesis gas. Synthesis gas is a mixture of hydrogen, carbon monoxide and carbon dioxide. This process is being used for power generation, for production of industrial chemicals or transport fuels and for generating hydrogen for power production. It also has the added bonus of taking off the CO in a pure stream for long-term sequestration.

The innovative mandatory renewable energy target scheme has been successful to date, and there has been significant investment in the renewable energy sector as a result. This bill helps streamline the operation of the scheme, ensuring that it will continue to be successful in encouraging further generation of electricity from renewable energy sources.

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