Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Energy and Resources) Share this | Link to this | Hansard source

I rise today to speak on Australian Renewable Energy Agency Bill 2011 and the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011. The Australian Renewable Energy Agency Bill 2011 establishes the Australian Renewable Energy Agency, known as ARENA—I do not know where they got the 'N' from! ARENA is designed to centralise the administration of $3.2 billion in existing federal government support to the renewable energy industry currently managed by the Australian government and by Australian government funded bodies such as the Australian Centre for Renewable Energy, known as ACRE, and the Australian Solar Institute, the ASI.

ARENA will also assume the work of ACRE in establishing and maintaining links with state and territory governments and, with the ASI, in fostering and developing collaborative research partnerships internationally. ARENA will also be responsible for the policy advice to the Minister for Resources and Energy and Minister for Tourism and will take over and expand the activities of ACRE in this regard.

The bill also establishes the members of the ARENA board, its chief executive officer and its chief financial officer, and sets out how ARENA will operate and be funded. Funding to be provided to ARENA each year is prescribed in this bill until 2020 and will be held by the government until required by ARENA. Around $1.7 billion of the funding allocations to be made by ARENA is currently uncommitted and will be available for ARENA to provide financial assistance for the research, development, demonstration and commercialisation of renewable energy and related technologies, the development of skills in the renewable energy industry and the sharing of non-confidential knowledge and information from the projects it funds.

The Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011 complements the main ARENA bill by providing the transition and consequential activities that—

Dr Emerson interjecting—

Dr Leigh interjecting—

Can you guys knock it off? I am trying to do a speech here! Thanks. It provides the transitional and consequential activities that need to occur in order for ARENA to take over funding and administration from the existing programs and projects transferring from the Department of Resources, Energy and Tourism to ASI and ARENA. The coalition believes these bills create a better vehicle for the delivery of renewable energy technology project funding and support, and the coalition's position with respect to these bills is an entirely separate matter from the position the coalition may adopt on any project ARENA may inherit or later consider or support.

While the coalition does not oppose the establishment of ARENA, as it will allow for streamlining of procedures and for appropriate corporate governance in the sector, this non-opposition should not be taken as carte-blanche approval of some of the programs to be administered by the proposed ARENA. It is a matter of public record that the government has not covered itself in glory when it comes to the implementation and operation of energy projects, including renewable energy projects. There is a long and chequered history of failure, as there is on most things in the performance of the current Gillard and prior Rudd governments on a whole range of programs that they have attempted to administer.

We need look no further than the item that is still before the parliament, the establishment of a carbon tax, to again see a program and a policy that has been all over the place. We now see of course, as a result of a breach of promise, a carbon tax that will be introduced into Australia and will be far deeper, far broader and far more economically damaging than any other tax of its type in the world. It is a tax which will drive up the cost of living, put more pressure on electricity prices and make Australia's energy and resources industries less competitive than their global counterparts.

This is a hallmark of this government, as is the incompetent management of a whole range of programs, including its renewable energy programs, which I will come back to in a moment. There are reams of economic modelling that have shown that the carbon tax will put a significant burden on the Australian energy and resources sector and expose it to disadvantage in terms of competitiveness. Yet the members of the government have shown us, on the passage of that legislation through this House, that they would rather celebrate than think about the damage that it is going to cause to our competitiveness and to this economy.

That carbon tax is designed, they say, to try and lower carbon emissions. In reality, of course, it goes nowhere near driving the sorts of fuel switches and energy efficiencies that we need. At least with the bill we have in front of us there is a structure and a corporate governance and an outcome. You do not see the same thing in the carbon legislation.

We have also seen in recent times this government, through its renewable energy and carbon reduction programs, demonstrate the incompetence that we have grown used to across the board. We saw last week the announcement by ZeroGen that it was in receivership and would soon disappear off the face of the earth, and hundreds of millions of dollars—a good proportion of which have been attributed by this Labor government—will disappear with it for no outcome. I am no fortune teller or visionary with a special gift, but four years ago I warned this House that this project was on the road to self-destruction. In fact, another Labor luminary—none other than Peter Beattie—said publicly and in the newspaper that I was on drugs to suggest that the project was going to fail. I hope, Peter, that whatever you were on then you are not on now, when you see what happened to that project. Another failed federal Labor government-state Labor government program literally evaporates into thin air. With it goes taxpayers' dollars that this government had so unwisely invested in it.

The investment is part of the whole Labor government's smoke-and-mirrors approach to clean energy, where it promises the world but delivers absolutely nothing. Given that ZeroGen is now in receivership and $40 million of federal taxpayers' money—and a substantial amount, perhaps double that, of state Queensland government taxpayers' money—has disappeared and gone down the drain we need to ensure, as much as is possible when you have a Labor government in power, that those sorts of things do not happen again.

That is why the coalition is not opposing this legislation. We hold out some hope, through the structure of ARENA, that they will not appoint their mates to the board of ARENA but will get the expertise they need to ensure that the make-up of the board is men and women who understand the importance of renewable energy projects and understand how to invest money. On the second count, there is no-one on that side who has the faintest idea.

ARENA will be made up of six appointed members plus the secretary of the board and there will be at least one person from the field of renewable energy technology, another from commercialisation, another from business investment and another from corporate governance. There may be, unfortunately, a cross-membership with the $10 billion Greens slush fund that the Labor Party has set up—let us see how this all works, but it is hard to imagine it is going to work well—so the person who runs this country, Senator Bob Brown, can get what he wants out of the project. It is money poured into projects that will probably end up in the same spot as ZeroGen.

We do not oppose this legislation. We understand the reasons for setting up ARENA and will watch very closely as it is done. Whilst it is reassuring that renewable energy issues—and energy in general—are going to be oversighted by this body, it is somewhat disappointing that we have still not seen the framework for Australia's energy in the form of a white paper. We are of the view that it is very difficult to invest in any form of energy, particularly renewable energy, in the complete absence of a policy or structural framework on energy policy going forward. The last energy white paper was delivered by me, as the Minister for Industry, Tourism and Resources, in 2004.

Ewen Jones (Herbert, Liberal Party) Share this | Link to this | Hansard source

Seven years ago!

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Energy and Resources) Share this | Link to this | Hansard source

Seven years ago—thank you for doing the maths—the member for Herbert has just reminded me. And in that time, the world has changed dramatically. In that time we have seen the growth of China and the expansion in emissions that that has caused. We have seen a huge shift in energy demand as countries develop their economies. We have seen in Australia not only a huge focus on only supplying that demand through coal or liquefied natural gas but also an energy shift that has seen an expansion of the wind-energy industry. Without an energy white paper it does not matter how good ARENA is, the energy sector will still be staring in the dark as to which direction it should take.

For that reason, the government has left the industry guessing. Whilst the government has not addressed this issue in any shape or form, I use today and this bill as another opportunity to ask my colleague the Minister for Resources and Energy and Minister for Tourism to do something about his recalcitrant colleagues—to stop them viewing the resources and energy sector as just another milking cow for their wasteful spending—and to do something about putting in place a framework that will ensure that not just renewable energy but all energy investments in Australia have some direction and framework.

Once ARENA has been established, the proof will be in how the funds are administered by government. This is the same government, as I said, that has set up a $10 billion Greens-dictated slush fund as part of its new carbon tax. The cross-representation between the ARENA board and that capital fund will make for some interesting watching and reading. I suspect that if the government establishes the ARENA board properly with people who have expertise there is going to be some real tension between the way ARENA operates and the way the board of the slush fund operates.

This government has put $10 billion out there for these projects without even identifying a specific need. It already has some $3.193 billion allocated to the renewable energy and low emissions technology funds to do work on renewable energy, yet it says it needs these extra funds. The Australian people are not prepared to just take the word of this government on the Clean Energy Finance Corporation, or whatever you want to call it, and they are not convinced that it will be successfully administered—and the record shows that their concern is well placed. The people of Australia have seen how this government has wasted their money on a whole range of renewable energy and emission reduction programs.

Let us not forget where we started with this—the pink batts program and billions and billions of dollars. A constituent rang my office in Toowoomba this week and said that the people had arrived to take out her insulation. She has had that insulation in her roof and she has been living in fear that her house will become electrically live or that it may catch fire. At last, they have come to take it out. Are they going to replace it? Of course not; they are just going to take it down to the dump and bury it, along with billions and billions of Australia dollars. On top of that we have had the Green Loans program. Again, there was another great public announcement, another flash of public relations and another promise from this government in relation to renewable energy and lowering emissions. And what happened? It collapsed.

More recently, we have had the collapse—again in my electorate but right across eastern Australian—of photovoltaic installers' businesses, where those businesses have installed photovoltaic cells for customers and they then in good faith acquired the credits and sold them to a company which has just disappeared, along with the money of course. Husband and wife businesses—mum and dad businesses, as they are called—small businesses and people my age and younger who have basically mortgaged their houses and gone into business to install these photovoltaic renewable energy cells on the roofs of houses on the say-so of the government, in a program administered by the government, not only have lost their money but also, unfortunately, in a couple of instances, I suspect they are going to lose their houses. Such is the record of this government when it comes to administering renewable energy projects. It is just one disaster after another—constant mismanagement, constant hyperbole, constant spin, constant smoke and mirrors, no outcomes, lives destroyed and jobs lost—because they cannot administer anything.

This week, in the oil and gas energy space, we are going to see the introduction of another new tax. Because we have a tax-and-spend government, we are going to see the introduction of the minerals resource tax. And what a disaster that has been! Can anyone remember what RSPT stands for? It stands for resources super profits tax. The reality is that that tax was so badly put together that they had to retreat to the MRRT—and now we hear that even the MRRT is not ready for introduction. But, because this government are so desperate for money—because they can never get it right no matter how long they take—we expect that tax to be introduced into this House before it is in a proper state to be administered.

This is just another example of how, when it comes to the energy space—whether it is renewable energy, fossil fuel energy, energy for export or energy for domestic use—this government cannot get their policies right, and, when they put policies in place, the administration of those policies is a total and complete disaster. I could go on for some time. There is a long and appalling list of failures in the resources, energy, renewable energy and carbon reduction area. In fact, this whole area of energy and carbon reduction is just a political game for those who sit opposite. It is an area that they continually play in and continually mess up.

It is long overdue that the Gillard government take the energy and resources industry seriously, instead of flippantly assuming it will just continue to underpin our economy—regardless of what atrocious policies this government inflict on it and regardless of the failed programs, particularly in the renewable energy area, this government put in place only to watch them crumble and fall to pieces. We believe that there needs to be a far sharper focus by the government and some economic competence to actually manage these programs. That is why we will not be opposing the ARENA bills.

We do support renewable energy. We do not support some of the programs that the government have in place—and at an appropriate time we will go into that in detail. The renewable energy industry was started by the coalition. I know that those who sit opposite like to take full credit for everything, but let us get a few facts on the table. The mandatory renewable energy target, the MRET, was introduced by a coalition government. It was put in place and was up and running. It was the first in the world. It was a coalition government that established the photovoltaic industries in Australia. It was a coalition government that funded the first wind projects in Australia. It was the coalition government that funded the first photovoltaic large-scale generation programs. It was the coalition government that put money—and I was the minister partly responsible—into the first solar thermal projects. It was the coalition government that continued to ensure that we had projects that worked.

So we in the coalition do have a strong basis on which to support renewable energy and we do have a very strong interest in making sure that we put in place a structure that will be able to administer the programs that the government put in place to bring about an outcome that actually produces lower emission energy and is renewable. The problem that we have is that this government continually come up with bright ideas and then comprehensively bungle them through bad administration and failure to oversight policy development properly. The coalition will make sure that the onus is put on the government, by the establishment of ARENA, to be effective and efficient in their management of policies and projects as this money is rolled out. Who knows when the election will be? But between now and then there is going to be a sizeable amount of money put into this sector and if it is managed properly it will have a positive outcome. It may not create headlines and it may not give photo opportunities, but the goal is to make sure the money that is spent is spent well. When we have a government that cannot deliver the most fundamental things such as energy white papers or even put insulation bats in ceilings, we do hope that with this legislation and with ARENA we can get a policy and a structure which actually works.

I hope that this government uses the establishment of ARENA as another chance and a turning point in its poor planning and policy implementation, but I have to be a little bit pessimistic about whether the government will do that. I doubt that it will—though we live in hope—because this government has not heeded any of the wide-reaching warnings from the industry or from the coalition to date. The coalition will not object to the introduction of appropriate policies that can assist and not impede the energy resources sector, including the renewable energy sector. But examples of success have been few and far between in the life of this government. We will not stand in the way of a government that pushes ahead with good policy, but we will stand in the way of policies which are destructive or based on a poor agenda.

The coalition will not oppose this bill. We would in our time, had we had the opportunity—or when we do get the opportunity—have established a structure perhaps even similar to this one. But the crux of this bill is that it is a second chance for the government. It will be another chance for the government to demonstrate not only to the energy industry but also to the people of Australia that it actually can manage money. To date we have not seen that. ARENA will not only have to administer the renewable energy sector; it will also have to be a miracle worker to give the government a lead and show it how it should manage money and not waste billions and billions of dollars, almost on a monthly basis.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

Clean energy markets are the high-growth sectors of the future. By encouraging investment and innovation, they will transform our energy sector. In the process, Australia will become a market leader in clean energy innovation. Climate change is already shaping the world economy. The world, whether the opposition likes it or not, is shifting to a clean energy future. It might be slower in some countries, such as the United States, where Tea Party intransigence is standing in the way of good policy, and it might be politically fraught in other parts of the world too; but the emergence of clean energy markets is undeniable. In 2008 Europe spent nearly $50 billion in clean energy investments, China has announced a $400 billion clean energy technology investment program, and global investments in energy markets are predicted to reach up to $424 billion a year by 2030.

Australia has a great opportunity to take the competitive edge in two big renewables markets. The first market is the high-tech, high-skilled global market of technologies for renewable energy generators. We can be at the forefront of innovation. We have the scientists and the researchers. The second market is the energy market. As a major user of energy, Australia can implement renewable energy technologies. We have natural resources in abundance. To be a market leader, Australia must have the market conditions for clean energy industries to establish a foothold. Once an industry has an initial foothold in a region, that region is much more likely to become a hub for future growth. This effect has been called a cluster. It is a powerful way of organising firms to increase innovation, productivity and economic growth. The dominance of Stuttgart in the performance car market and Los Angeles in the entertainment industry demonstrates the growth benefits of clusters.

The Gillard government brought 18 bills to this House to establish the carbon price. I spoke on these bills on 14 September this year. This bill addresses renewable energy technology development. I am grateful to Angela Winkle, an intern in my office, for assistance in preparing these remarks. The government has already established a guaranteed market for renewable energy development through the renewable energy target. The Australian Renewable Energy Agency, ARENA, complements the renewable energy target. It encourages research and development of technologies. The Clean Energy Finance Corporation will then provide leverage for private investment in the commercialisation of clean energy technologies. These mechanisms complement the carbon price. They will encourage rapid investment in innovation in clean energy technologies. They will encourage the transformation of the energy sector on the scale required. They will enable the broadest range of inquiry into new technologies. These policies will mine the ingenuity of the market and encourage investment in renewables.

On 19 September Senator Kim Carr announced finalists in the Australian Clean Technologies Ideas Competition. The range of ideas proposed highlighted the inventiveness of Australian businesses and entrepreneurs just waiting to be tapped. Finalists proposed ideas ranging from silent wind turbines and improved wave energy systems through to centrifuge technology for cleaning oil and lime calcination for energy storage. Supporting the development and commercialisation of innovative ideas will transform the Australian economy. It will provide Australian businesses with the competitive edge in emerging global clean energy markets. By creating market incentives, the most innovative and cost-effective technologies will emerge. Those technologies will include those we have not even thought of yet—those with unexpected benefits, those that emerge from the ingenuity of the market and those that would remain undeveloped with a direct action plan.

The opposition proposes climate policy with tunnel vision. It picks technologies to support and excludes new ideas. Yet projections of renewable energy have been notoriously bad at projecting which technologies will succeed. Pre-2000 modelling projected that in 2010 wind energy would be nothing in Australia's renewable energy mix. But in 2010 wind actually accounted for 44 per cent of the renewable energy mix. Bagasse was projected to be two-thirds of the renewable energy mix by 2010 but in reality accounted for less than 10 per cent. The opposition's insistence on selecting technologies to support ignores the role of a market in identifying the most cost-effective solutions.

The opposition's insistence on a 'Moscow on the Molonglo' approach to climate change is clear in their focus on soil carbon. The direct action plan identifies soil carbon as the single largest opportunity for CO2 emissions reductions in Australia, but that is misleading. Soil carbon has potential for short-term carbon sequestration, but soil has a carbon saturation point which limits sequestration potential. There is a point at which soil cannot absorb more carbon. The CO2 will remain in the air, raising the concentration of CO2. CSIRO has found that carbon sequestration diminishes to almost zero after 40 years. Soil carbon can be used as a 'time buyer' while other technologies are developed, but the opposition provide no policy to ensure technology development. Their plan is short-sighted and designed—as the member for Wentworth has pointed out—to be withdrawn at the first possible moment.

In place of the coalition's command-and-control approach, the government's portfolio approach backs multiple technologies. It generates the broadest platform for innovation. It is a broad platform that enables cross-pollination of ideas and creates a foothold for clean energy industries in Australia. ARENA will be an independent statutory agency. ARENA's board will consist of industry leaders in technology, commercialisation and business generally. The board will direct investment in renewable energy and enabling technology projects. In supporting early-stage technology development, ARENA will fill a market gap. The public-good nature of clean energy technology innovation warrants government support. Successful technologies developed through ARENA funding can be commercialised through the Clean Energy Finance Corporation.

We have the opportunity to take a leading role in research and innovation and to develop a competitive advantage in high-tech, high-skill, clean energy industries. As market leaders, Australian businesses can partner with manufacturing countries. Earlier this year I was with the Minister for Resources and Energy, Martin Ferguson, at the Australian National University for a launch of a major project researching the efficiency of photovoltaic solar cells. China has the world's largest solar panel manufacturing industry. As a result, a Chinese company, Trina, has committed to investing in ANU's endeavour. ARENA and the CEFC will encourage more relationships like this one.

Transforming our energy sector will not be easy. For example, one report, the Beyond Zero Emissions Zero carbon Australia stationary energy plan, claims that we can get to zero emissions by 2020. This plan describes a complete phase-out of all fossil fuels by switching to electric systems. It envisages all Australian energy demand being supplied by wind power and concentrated solar thermal power with a minor contribution from biomass and hydroelectricity. The plan is a $370 billion investment program. It requires energy efficiency measures, the transfer of half the road transport to electric rail, the replacement of the current car fleet with electric vehicles and the transfer of all domestic air travel to rail—all by 2020. The zero emissions plan suffers from impractical time frames for investment, infeasible costs and an underestimation of Australia's energy requirements in 2020. I do admire the authors' optimism, but the task is hard.

More worrying is the so-called plan put forward by the opposition, so in writing this speech I decided I would do what no-one has yet done in this House: explain direct action. So I got their policy and their talking points and set to work. While the government's policy encourages innovation and positions Australia as a market leader, the coalition would have us in the back blocks of clean energy innovation. As well as stifling innovation, direct action is far more expensive than a market solution. The Grattan Institute said that a:

… carbon price … can achieve the scale and speed of reductions required for Australia to meet its 2020 commitments without excessive cost to the economy or taxpayer.

But in their direct action plan the coalition propose an emissions reduction fund that operates as a grant-tendering program. Analysing past policies, the Grattan Institute found that, for every dollar a government commits to grant-tendering programs, only 3c worth of operational projects result within five years, and only 18c worth result in 10 years That means that for a direct action plan to meet the 2020 emissions target it would need a fund of $100 billion. That is a big, whopping new tax.

Another component of the direct action plan is rebates for renewable energy projects. But the Grattan Institute also found that rebate programs produce little abatement for their cost. Using rebates to achieve the 2020 target would require $300 billion over the next 10 years. The coalition claim that they can reach the bipartisan 2020 emissions target largely through grant-tendering and rebates for only $3.2 billion is absurd. From my primary school days, I recall going to the tuckshop with 50c and asking for a meat pie, a chocolate Breaka, a Paddle Pop ice cream and some red frogs to top it off. I was surprised when I was told that my 50 cents would buy me only half the Breaka.

Opposition Members:

Opposition members interjecting—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

Order! I advise the members interjecting, one of whom had an experience at question time that he obviously did not learn anything from, that there are ample opportunities in this place to have your say, and I see that the member for Herbert will have his say directly after the current speaker as he is on the list to speak. I suggest that what happened at lunchtime be taken into account and that the interjections cease.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

As an eight-year-old I learned that my 50c would not buy me everything I wanted. The members opposite do not seem to have learned the same lesson on the value of money.

The coalition's plan also costs more because it does not deal with international action. It does not matter where the emissions occur; they all have an equally detrimental impact on the environment. Each tonne of abated CO2 reduces the chance of bleaching the Great Barrier Reef, whether abated from Australia or elsewhere. Abatement is available at lower cost overseas. By forcing all abatement to take place in Australia, the coalition is choosing to pay more for the same environmental benefit. The coalition is choosing to increase the burden on Australia and therefore on Australian taxpayers for the same environmental outcome.

On the topic of the coalition's direct action plan's price tag, I note that on page 17 of the coalition's talking points they claim that direct action has no cost to families, yet page 18 states that direct action will cost $3.2 billion over the first four years. The coalition seem to be confused as to where funds for government expenditure come from. In fact, Treasury modelling estimates the cost of direct action at $1,300 per household per year. The opposition's approach to renewable energy uptake is to provide minimal funding for limited projects such as solar roofs and just 25 geothermal or tidal towns. If we could predict the future and know that solar and tidal are the best technologies, this would be a credible approach; but, given that crystal balls are notoriously unreliable, the opposition's desire to micromanage industry is mind boggling. The approach picks winners, is inefficient and has been demonstrated to be cost ineffective when compared with market based mechanisms.

I also note the opposition's regular complaint that Australia should not act because the world is not acting—that we do not want to get ahead of the pack. This complaint is curious because page 8 of the direct action plan states, 'Most developed countries have undertaken action on climate change.' The opposition go on to state there that the action taken by most developed countries are national emissions trading schemes, taxes or a mix of the two. Also curious is the direct action plan's labelling of Nordic countries' electricity tax incentives as direct action. Page 8 of their plan states:

Many of the Nordic countries have taken more direct action by introducing electricity tax incentives for most users to use less electricity and extensive subsidies for public transport.

Should this be taken to mean that the opposition views taxes as direct action?

The confusion is illustrative of the direct action plan generally. As a Labor Party member I cannot believe I have to explain this to the coalition. Markets work well; but, rather than use the market, the coalition want to micromanage business. Rather than use the market, the opposition want to pick their favourite technologies. Rather than the market, the coalition want an ineffective and expensive grant-tendering fund. Rather than use the market, the coalition want an ineffective and expensive rebate program. Rather than use the market, the coalition want to pay for promised projects, not actual reduced emissions. Rather than use the market, the coalition want direct action—an expensive, ineffective and confused scheme. The coalition's direct action plan will result in either very high cost to taxpayers or the 2020 emissions target not being met. Direct action will not promote innovation and will leave Australia locked out of the world's clean energy markets. The government's renewable energy policies encourage innovation, research and development, and commercialisation of technologies. ARENA and the Clean Energy Finance Corporation— (Time expired)

Rowan Ramsey (Grey, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Australian Renewable Energy Agency Bill 2011 and the Australian Renewable Energy Agency (Consequential Amendments and Transitional Provisions) Bill 2011. I welcome the government's move in establishing ARENA. There is no doubt that government expenditure in the area of renewables is in need of better oversight, and it is my hope that the ARENA body will provide this. It is to be given a role of developing a strategy to provide a common purpose for what at best would have to be described as a haphazard approach to the use of taxpayers' money in this area in the recent past.

Emerging technologies are likely to need support even though the government is in the throes of introducing an $8½ billion per year tax which is designed to make conventional energy more expensive in order to enable renewable energies to compete in that space. But the government's record in this area has been pretty poor: the pink batts, the green loans, the ZeroGen investment so colourfully described to the House by the member for Groom—along with his account of the accusations from the former Premier of Queensland, Peter Beattie, that the member for Groom was on drugs when he pronounced it a poor investment by the government—and, in my own electorate, a $7 million solar farm which was announced for Coober Pedy with great fanfare and which has disappeared without a trace with no similar announcement from the government. Trust me: it has disappeared. With that kind of record, I was surprised to hear the member for Fraser just a few moments ago reckoning that the coalition could not handle money. I think he should look to his own government before he starts to criticise others in that area.

In my electorate of Grey there are a number of current investments that the government has made to support the development of renewable energy, and basically they are welcome. There are two hot rocks projects in the north of the state and the SolarOasis project at Whyalla, which at this time is, unfortunately, almost 18 months behind schedule. I remain hopeful that this project will be successful, but delays and cancellations show just how difficult the task of trying to pick winners is. Once again I refer to the member for Fraser, who says that the coalition is in the business of picking winners and that, of course, the Labor government is not. Investment in any of these programs is in fact evidence that this government has tried to pick winners. I hope they have backed some winners, because while not every investment will be a winner, it is clear that we need a winning ratio. I am hopeful that that is what ARENA will deliver. ARENA will administer $3.2 billion worth of projects, and $1.5 billion of that is already committed. Their role is to develop a strategy, and that is what I am interested in.

The government is to put together this expert body called ARENA, which is not to be given the task of administering the $10 billion slush fund which is the Clean Energy Finance Corporation. It is suggested in the legislation that there will be a possibility of cross-membership, but if we are to have cross-membership and an expert body in ARENA the question needs to be asked: why do they not just give the role to the expert body? Perhaps the reason for not doing so comes back to the time when this fund was announced by the Greens. It is likely that the government will cede responsibility to the Greens, and what a disaster that would be.

There are some other matters which I would like to get on the record in relation to the electricity grid in my state of South Australia—some of the ramifications of the shift to renewable energy which I hope ARENA will consider. While the operations of the electricity grid in South Australia may not be the prime purpose of ARENA, almost certainly ARENA will be asked to back projects which will feed into that electricity grid. South Australia has 51 per cent of Australia's installed wind capacity, at 1,018 megawatts. That is about 35 per cent of the state's total installed generation capacity. During the last year for which I have figures, 2009-10, those wind farms actually supplied 18 per cent of all the electricity in the state. That is a pretty good performance for wind farms. The bulk of the baseload electricity comes from the gas fired Torrens Island station, which provides 47 per cent of the state's electricity, and the coal fired stations at Port Augusta in my electorate of Grey deliver about 33 per cent.

This does present a couple of issues which I am not sure our state legislators fully understand. I am not sure our federal legislators fully understand them either, but I hope that the expert body, ARENA, does understand them. First, there is the effect of wind power—opportunistic wind generation; unreliable wind generation—on baseload suppliers. In the last 12 months there have been a number of days, my information is that there have been about five, when the wind has blown strongly and when all generators have been in operation, and the price of electricity has dropped to virtually zero. That leaves the coal fired power stations in a position where the power has already been generated but they cannot sell it, so they jam it through capacitors and dump it as heat. Of course, in this situation, the wind generators can still sell their electricity because the 20 per cent renewable energy target, the MRET, means that electricity suppliers will use the opportunity of cheap energy to purchase that wind power. That provides a problem for the baseload generator.

There is a second problem that has happened in that time space, and I will use 31 January of this year as an example. It was a high-demand day, and high-demand days in South Australia are always in summer. The state was becalmed. We had 60 megawatts of electricity generated from the total capacity of 1,018 megawatts of wind generation. That is just six per cent of its capacity, and that is all that the wind generation network was able to deliver on that day. So, until we conquer the quest for an economic storage of electricity, we need to retain the capacity in the network to be able to generate the state's full load, virtually 100 per cent, on demand—and that means baseload generators. Until we nut out the issue of being able to efficiently store renewable energy, we must retain that capacity.

Of course, the first scenario I outlined, where the price of power dropped to virtually zero on a number of days, actually threatens to produce the second scenario, where we do not have enough baseload electricity. If the baseload electricity generator has too many days within the year when the baseload generator cannot operate economically, it will not be there anymore. If wind power in South Australia is to expand by 50 per cent—that was the aim and proposition put by the now former Premier, Mike Rann—it seems certain that there will be more days when the power is essentially worthless and will be dumped. If four or five days a year becomes 40 or 50 days a year, then the ability of the baseload generator to survive will be severely threatened. That is when the sustainability of the grid comes into question. Over-reliance on fluctuating and low-reliability power threatens the grid's ability to deliver power 365 days a year.

I am not forecasting doom; I am just advising caution. I hope that ARENA has a role in developing a strategy which will avert these problems. I raise the issue in the hope that those who are making the decisions in shaping our future will take all these factors into consideration. This is important. A state that cannot supply power on a regular and fully predictable basis will be in grave economic circumstances and, of course, the chance that the regulator will have to operate brownouts across the metropolitan area is likely to go down very poorly with voters. In that same time space over the next five to eight years, the power demands of Roxby Downs are predicted to go from around about 125 megawatts to, from memory, about five times that—that is, about 650. There will be an increasing demand as well, and that will also require baseload electricity. While all this is happening at one level, at another level the government is attempting to bludgeon Australian industry into renewable energy with the most punitive CO2 tax in the world. We debated the CO2bills in this House only two weeks ago.

There have been some recent developments which I would like to report to the House. The Canadian Foreign Minister has come out and said that there is no way Canada will be adopting a carbon tax. The news from Japan in the wake of the Fukushima disaster is that it is likely to miss its CO2 reduction targets by 16 per cent. The US is clearly not proceeding down the tax path, because President Obama has said as much. I guess we will look forward to the next two weeks when the President will be visiting Australia, and perhaps he might have a discussion with our Prime Minister about what the US is doing in that space.

The Europeans, of course, are held up by the government as exemplars in this space, so it is interesting to know what is happening there. I have an article by Alessandro Torello from the Wall Street Journal. I will not read the whole article, but I think it is worth highlighting a few paragraphs. It says:

The European Union is for the first time clearly questioning whether it should press ahead with long-term plans to cut greenhouse-gas emissions if other countries don't follow suit …

It goes on:

'If coordinated action on climate among the main global players fails to strengthen in the next few years, the question arises how far the EU should continue with an energy-system transition oriented to decarbonization,' the commission says in a draft of its Energy Roadmap 2050.

These are exactly the same issues the opposition raised in this place two weeks ago. It says further:

The EU's doubts come ahead of a climate-change summit in Durban, South Africa, which is thought to be unlikely to deliver a significant global climate-change deal.

Finally it says:

'It has to be seen clearly that there are risks associated to unilateral EU action,' the commission says in its draft. 'There is a trade-off between climate-change policies and competitiveness. Europe cannot act alone in an effort to achieve global decarbonization,' the paper says.

Of course that is so. They are not acting alone, are they? We are showing them the way! If the government's rhetoric is to be believed, when we arrive in Durban towards the end of this year the Europeans will be over this crisis of confidence because they will not be worried that the rest of the world is not accompanying them on the same course, and they will be greatly reassured that Australia is out in front of them. This will be a wake-up call for the government, because then they will realise that we are a country of 23 million people on the other side of the globe from Europe, and that we are responsible for just 1½ per cent of the world's emissions. For the government it will be: welcome to reality. Before the CO2 tax is even passed through the Senate, it seems as good as certain that we are trying to lead the world to a place where they clearly have no intention of following.

In closing, I will come back to the ARENA bill and say that I hope that ARENA will supply rigour to government's decisions and that it will give them the ability to pick the winners; because, in the end, when you give out public funds you do have to make a value judgment on which technologies are likely to succeed and which technologies are likely to fail. I hope this expert body will address that and that it will be given a lot of responsibility for dealing with the larger $10 billion fund as well.

Debate adjourned.