Ian Macfarlane (Groom, Liberal Party, Minister for Industry and Science) Share this | Hansard source

In rising, can I thank the shadow minister for the environment, and other shadow ministers, for their participation in the negotiation. As is always the case, there was a fair amount of useful and helpful discussion to ensure that we did clean up the mess that had been left by the previous government in relation to the renewable energy target, as we do in a whole range of areas—I mentioned the Home Insulation Program yesterday, and of course we know about the mess left in the budget.

This renewable energy scheme, as the shadow minister quite rightly identified, was originally introduced by this government. In fact, I lay claim to being one of the few people, as a minister, who has been involved in this issue since it was first instituted, in 2001, when I was the Minister for Industry, Tourism and Resources. This scheme was heading for the rocks, and it was in a state where the target was no longer sustainable. We set out as a government to make sure that the renewable energy target was a sustainable target, and that the renewable energy industry itself was sustainable, because it relies very heavily on this scheme—very heavily. We are getting close, particularly on rooftop home solar, to a scheme that may be able to stand on its own two feet without others subsidising the cost of those things—and we are close in a number of other areas—but renewable energy in Australia, and in fact globally, still requires a subsidy from electricity consumers. We need to be sure that we have the balance right.

We said in opposition— as members of the Clean Energy Council would recall if they thought about it, because I said it on three occasions in front of them—that the coalition, in government, would support a renewable energy target of 20 per cent. My view was that the target should be more aligned to the original aspiration, which was 20 per cent of the energy consumed in the form of electricity. The target of 45,000 gigawatt-hours that we were confronted with when we came to government was more like 27 per cent, and there was a real question mark as to whether or not this scheme was sustainable from the perspective of even building that amount of renewable energy. As we know from experience, and a little bit of disappointment, that target will be achieved only through one technology, and that technology is wind.

I heard the shadow minister talk about jobs, and jobs are important in the renewable energy industry, but we need to remember that those jobs are subsidised to the tune of $200,000 each. No job that requires the support of electricity consumers to that degree can be given without some questions being asked about how we want this industry to take shape.

There has been, at the bottom of this, a discussion about the changing shape of energy markets—and cue a joke about economists, but I will not tell the House the same joke again, although it is very funny! The reality is that the economic forecasts made in 2009 about the amount of electricity we would be consuming in 2020 were wildly inaccurate. That is for a whole range of reasons, not all of them because of a change in the economy and the change in industry. The reality is that we have felt a significant impact from things like rooftop solar, and more particularly from energy efficiency, with the introduction of smart meters, and with consumers understanding how they can save electricity and not only benefit the environment but also benefit their own pocket. This has seen a significant change in energy consumption and energy consumption forecasts. That is why a target of 41,000 gigawatt hours for large-scale, combined with what we quite happily saw was an explosion in the number of houses that were fitting rooftop solar, would have meant that the renewable energy scheme was going to far exceed not only the expectation, but, in the case of large-scale, the ability of the industry to build a scheme that would have been 27 per cent of electricity consumed.

The other fundamental issue is that as a result of the change to energy demand Australia is suffering from a massive oversupply of generation capacity. We currently have in Australia around 9,000 megawatts of over-capacity in generation, or about 15 per cent more generation than we need. That position makes managing the energy market in Australia particularly difficult. It also means that adding another 5,000—I heard the shadow minister say 6,000—megawatts of generation to the target is going to put further pressure on that market. So getting people to buy the electricity that was being generated by the wind farms was proving to be impossible. I heard all the conspiracy theories—I have heard them all before. With all respect to the shadow minister, perhaps he should talk to the shadow minister for resources and energy and actually get an insight into how the energy market works, because it was the inability of renewable energy components to get off-take agreements, or someone to actually buy their electricity, that was grinding these projects to a halt. There was still plenty of room—anything that had been built in the time that we had been in government would have been grandfathered under whatever the outcome was. The industry knew that the minimum position was 26,000 gigawatt hours. So that is an excuse from the shadow minister and, I dare say, a political point which does not become him, because the reality is that without a clear path on the Renewable Energy Target set out in a bipartisan way then there was just not the confidence in the market for people to actually commit themselves to buy the electricity from these wind farms for the next 15 years.

I did also say that there has been an enormous penetration into the market—and it is a great thing—of rooftop solar household renewable energy. A prediction—cue the economist joke—of 4,000 gigawatt hours of generation from rooftop solar is, again, wildly incorrect. In terms of the capacity in generation that is coming from rooftop solar at the moment, 7,000 gigawatt hours has already been achieved. It looks to us—as in the collective wisdom of economists, departments, government and people in the energy industry—that that number will actually double in the period between now and 2020 as rooftop solar becomes a viable proposition with the Renewable Energy Target because you can buy a rooftop solar system and have it pay for itself sometimes in as little as five years, and the coming advent of battery technology will make that even more viable.

We have seen a massive acceleration in generation from rooftop solar. So, when people talk about what the target is, the target is still 45,000 gigawatt hours, but the mix has changed. In terms of how much will come from large scale, we know that number is now going to be 33,000 gigawatt hours. How much will come from rooftop solar? Probably another 14,000 gigawatt hours, and you only have to do your maths to know that that is 2,000 gigawatt hours more than the 45,000 gigawatt hours that was originally agreed to in 2009, and, as I said, the revised target is now about 23 per cent of energy consumption.

We are confident that not only do we have a scheme that now gives the best opportunity to put the renewable energy industry in Australia on a sustainable level but we also have a scheme that householders and industry can afford, because someone has to pay the cost of this scheme, and it is substantial. It is not $1 billion. It is not $10 billion. It is at least $20 billion, and that has to be paid for by industry. In terms of the impact of that, we want to make sure that we are getting the result that we as a nation want.

Australia has a lot to be proud of in terms of renewable energy and in terms of our position in the world. Although sometimes you would think that we were absolutely back in the stone age, we are, in fact, amongst the world leaders. In fact, if you would look at rooftop solar, it is us first, daylight second and, I think, Hawaii third. Then we have those people who like to look down their noses at us from perhaps the EU or somewhere like that who are way behind us. Australia leads the world by a country mile in rooftop solar. So this nonsense that goes on about us not pulling our weight or doing what we should or taking advantage of our position is just that: nonsense.

We are facing a bit more of a challenge in terms of getting commercial large-scale solar up. We are seeing a great project, as the shadow minister mentioned, that will be completed under this government at Nyngan. I have to commend the proponents of that, and I also have to commend the local community for not only what they have done in supporting that project but also being part of that project. It has already begun. I think the first panels have been erected. With the other large-scale solar project being put in place at Broken Hill, we will see a second scheme.

These schemes are being deliberately put in the outback not just because it is great sunshine but because they are on the end of the grid. At the end of the grid is where solar really shines—excuse the pun—where solar really comes into its own, because the cost of electricity is not just in the generation. It is in the transportation to where it is consumed. So, when you are on the end of the grid, you are paying huge transportation cost. It just makes sense to generate it there. As I said earlier, we are looking at where the next generation of batteries will come from—and I know from visiting companies like RedFlow in Brisbane, who are working on some great technology—that battery storage is just around the corner.

There are a number of parts of this bill that are important, but one part is, of course, the 100 per cent exemption that will come under these amendments to energy intensive trade exposed industries. We are keen to make sure that those industries, which face international competition for their products and from countries that do not do anything like what we do in terms of renewable energy, are still competitive. The shadow minister did mention the challenge that faces the renewable energy industry, and the challenge to meet this target is significant. They have to build in the next five years as much as has been built in the last 15. The low-hanging fruit, in terms of the good sites for wind, in particular, have gone, and the alternate technologies to wind, unfortunately, have not come to fruition, although Carnegie Wave Energy in Western Australia have done a fantastic job. They have always been modest in their claims. In terms of what they have achieved, whilst they have exceeded what they expected to do, it is still modest and a generation capacity of more than four or five megawatts is still quite a challenging proposition.

If we look at the challenge for the wind energy industry as the industry that will fill this target, they have plenty to get busy with. The challenge is that, if they do not meet that target, the scheme defaults. It has always been the coalition's fear that, if the scheme defaults, the cost of the renewable energy credit will rise threefold—or twofold now because it has obviously lifted a bit in recent times since it has become clear that the scheme is sustainable. But the price of a RET will go to $93, and that is a high cost to consumers which will flow back into their household bills and into the industry bills. So we have asked that the Clean Energy Regulator make an annual statement to parliament in terms of the impact and potential impact of the renewable energy scheme on the cost of electricity. We look forward, during those reports, to a bipartisan approach from the opposition in terms of making sure that the adjustments can be made quickly and effectively to not only preserve the scheme but also protect households from extraordinary costs, or unreasonable costs, from the new renewable energy scheme.

In conclusion, I was disappointed that the shadow minister persisted in this idea that the coalition's position on wood waste was something new. Our note takers will show quite categorically that this was raised not only at the first meeting but at several meetings and as recently as January. It is a good idea because the wood just lies on the floor of the forest. If he was the minister for science, he would know that it still emits CO2 as it decays. I commend the bill to the House.

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