David Gillespie (Lyne, National Party) Share this | Hansard source

This bill, the Renewable Energy (Electricity) Amendment Bill 2015, amends the Renewable Energy (Electricity) Act generated in 2000. The major things that these amendments will achieve are as follows. Firstly, the target of 41,000 gigawatt hours will reduce to 33,000 gigawatt hours by 2020. It also increases the partial exemptions for all of the emissions-intensive trade-exposed industries to full exemptions. Currently, they are sitting at 60 per cent or 90 per cent to, roughly, overall, across the emissions-intensive trade-exposed industries, 70 per cent. Finally, it will also reinstate biomass from native forest wood waste to be an eligible source of renewable energy. Two other features are that it removes the requirement for biennial reviews of the RET—which is great because this current review seems to have taken forever, and we would have to be starting again in another six to 12 months time if we were left with that—and also that 850 gigawatt hours of energy from waste coalmine gas generation will remain as a separate requirement annually until 2020.

Next, I would like to bring to the attention of the House some popular misconceptions about the RET and these changes, and to document the serial changes in the RET since its inception in 2001. When you look at the history you can see why some of the illogical issues that we have to deal with now have come to be. Also, I would like to confirm that the large-scale renewable energy target of 31,000 gigawatt hours represents 23½ per cent, which generously exceeds the stated target of 20 per cent of all energy generation. The small-scale energy rollout currently has exceeded projections which were originally for 4,000 gigawatt hours by 2020. But already there are about 7,000 gigawatt hours—and it is projected to reach 13,000 to 14,000 gigawatt hours by 2020.

Also, the RET, or the renewable energy target, which is not to be confused with the renewable energy certificate, is quite different from feed-in tariffs, which many of my constituents get confused with. Feed-in tariffs are run by state governments and are a payment by the energy producers for the energy that is produced. One renewable energy certificate represents one megawatt hour of power. The renewable energy target originally was initiated by John Howard's coalition government in 2001. It was designed to produce another two per cent or at least 9½ thousand gigawatt hours of extra renewable energy on top of the existing baseload renewable energy, so that by 2010 we would have 12.7 per cent of our energy coming from renewable sources, with the original baseload of renewable energy coming from Snowy and Tasmanian hydro systems.

Liable entities—namely, energy retailers and some high-energy producing entities, which cover about 50 industries, including things like smelters and big LNG producers—were compelled to source renewable energy certificates to prove that the set percentage of their energy was generated by renewable sources. Originally, wind farms and sugar waste generated most of the early renewable certificates, but in 2007 the Labor Party and Prime Minister Rudd came along and overnight doubled the renewable energy target to 20 per cent of generation by 2020. At that time, with the current energy use, they estimated that, quite generously, at 41,000 gigawatt hours.

Around the same time they also started a fund, originally of $150 million, to give $8,000 grants to install photovoltaic solar panels. That was meant to run over five years, but within one year it reached $700 million. Along came the GFC and it appeared to keep going. When the need was obvious to remove the grants, they made another major change, which really created chaos in the renewable energy target and certificate market. Overnight, instead of one megawatt hour generating one certificate, or one REC, it created five RECs. Not too surprisingly, there were over 23 million of these phantom credits created without the proportion of energy that was originally intended. These phantom credits flooded the market and many of them still remain. So the renewable energy certificate price plummeted, effectively hobbling the large-scale renewable energy system, because the large-scale renewable energy producers, like wind farms, need $80 to $90 to break even. That is why they need a renewable energy certificate which gives them an extra income stream. I am sure they are quite happy now that the certificate price has gone up towards $60. It changes all the time. Back then, when they created the phantom credits, in typical Labor Party fashion they were trying to help a system that they destroyed. Only they could do something like that.

Also, since then, circumstances have changed dramatically, and that is why we have needed to readdress the 41,000-gigawatt-hour target. That estimate was wildly wrong as energy consumption has dropped dramatically. There are many reasons for this: the loss of many high-energy users, such as manufacturers of steel, aluminium and cement; high network costs; the explosion of photovoltaic solar panels with generous feed-in tariffs, as well as other state grants for things like solar hot water systems; along with building efficiency, lighting efficiency and heating efficiency. That all leads to lower energy consumption. So we have a market flooded with energy, a lot of it being subsidised. With the system being disrupted, so that even with the subsidy in place people were not expanding, there was a large likelihood that penalty payments would fall into place. If the targets are not met, the liable entities have to pay a penalty price, which is anything. Because it is not tax-deductible, it is up to $60 or more. There is a potential price that people would be paying for energy—wholesale prices of $90 to $95—and you can imagine what that would do to energy prices.

Baseload systems, which are cheaper to build and also much cheaper to run, have closed. Many industries depending on cheap energy have also closed. Small energy-dependent industries have struggled. It has become too expensive for many individuals and businesses. That is why we put in the adjustment to emissions-intensive trade exposed industries, as they are competing with producers in low-energy-cost markets. Whether you are an aluminium worker or a cement worker, or one of the many other high-end energy users that actually make and manufacture things, this is a matter of necessity. It is not a question of whether you like it or not; it means the industries will vanish if we do not correct the potential problems as well as the current problems.

Reinstating native wood waste is another issue which is entirely sensible. Some of the opponents of this initiative make out that there will be harvesting of primary wood sources just for generating biomass for bioenergy, but there are current state and federal agreements and legislation that prevent that. It is only the wood waste that will be eligible to be used as biomass. Also, the economics of the timber industry would mean that it would be a crazy waste of resources if they were using prime timber, which goes into our buildings, fencing, furniture and all those high-value things. What you get out of a renewable energy certificate would pale into insignificance compared with the value of the wood. So that legislation and pure common sense mean that it is only the wood waste—the sawdust, the offcuts, and all the other bits and pieces which will generate CO2 if they are left to rot or which, in many cases, are actually burnt because they are waste and every timber mill would fill up with waste if they did not dispose of it.

The legislation is also in keeping with the Kyoto protocol. It is quite sensible and, as I have mentioned previously, this is a sensible addition to the renewable energy certificate generating system.

I just want to say a few words about what we have achieved in Australia in terms of renewable energy. Our uptake of photovoltaic systems is exceptional and our target of 23½ per cent will put most countries in the world to shame. Yet we are criticised for not doing enough and not being generous in our support of renewable energy. They also say that renewable energy is cheap, but the economics of this RET scheme are incredibly generous. In fact, economically, it does not make sense it is so generous. But because we have a commitment to a renewable energy target we are running this system.

The cost of the subsidy in the RET, to 2030, is estimated at $17 billion. That is a huge subsidy and it is the electricity users of the nation, namely, the citizens who are paying for it. If penalty payments came in because the targets were not reached, that figure would rise to $35 billion. As I mentioned earlier, wholesale energy averages out at $30 to $40 per megawatt hour. It can go widely below to widely above. A two-megawatt turbine operates at 35 per cent capacity. So that would generate 6,100 megawatt hours of electricity per year. And if that turbine has a power purchase agreement with a certificate price of $60, that turbine would receive about $370,000 subsidy per year. If it dropped to $40 per megawatt hour, that would be $240,000 per turbine, per year. If you had a wind farm of 100 turbines—and there are some nearby that almost reach that number—the subsidy via the RET scheme would be half a billion dollars by 2030. That is a very generous subsidy.

When you look at the renewable energy target system to see whether it is a cost-effective way of carbon abatement, it probably is not. Before we got rid of the carbon tax, it was heading to $25.50 per tonne. And it was going to go up and up and up. With the recent Emissions Reduction Fund reverse auction we have achieved $13 a tonne—half the price. It is delivering six to seven years of reductions lock, stock and barrel. The cost of small-scale renewable energy via the RET—if you do the sums, the carbon accounting and the economics of prices and subsidies—is $95, up to $175, per tonne. Large-scale systems are slightly more efficient, at $32 to $62 per tonne.

So Australia is doing an exceptional job, compared to other places in the world like Europe that are held up by our political opponents, the Greens and the Labor Party. It is gold standard. We are streets ahead. Even the US has some large-scale systems but it, too, relies on extensive tax or physical subsidies. And the same in Britain. It is good to have a broad mix of energy production, but we do not want to blow up the whole system and have our baseload energy producers remove themselves from the market. We will then be like other countries that have brownouts or blackouts. This is a sensible bit of legislation that puts a bit of common sense into a very complex system and that meets our requirements to do our part for the environment.

See this speech in context