Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Hansard source

by leave—I, and also on behalf of Senators Cash, Back, Eggleston and Adams, move amendments (1) to (4) on sheet 6025 in relation to the western electricity market:

(1)    Page 216 (line 28), after “section 182”, insert “and 182A”.

(2)    Heading to clause 182, page 225 (line 1), at the end of the heading, add “in the National Energy Market”.

(3)    Clause 182, page 225 (line 4), after “asset”, insert “in the National Energy Market”.

(4)    Page 227 (after line 11), at the end of Division 3, add:

182A  Annual assistance factor in the Western Electricity Market

The annual assistance factor to be specified in a certificate of eligibility for coal-fired generation assistance in respect of a generation asset in the Western Electricity Market is the Authority’s reasonable estimate of the number worked out to 3 decimal places using the following formula:

where:

emissions intensity has the meaning given by whichever of subsection (2), (3), (4) or (6) is applicable.

historical energy means:

             (a)    if the generation asset is a generation complex that entered service on or before 1 July 2004—the total number of gigawatt hours of electricity generated by the generation complex during the period beginning on 1 July 2004 and ending on 30 June 2007, as measured at all generator terminals of the generation complex; or

             (b)    if the generation asset is a generation complex that entered service after 1 July 2004—21.024 multiplied by the number of megawatts in the nameplate rating of the generation complex as at the day the generation complex entered service; or

             (c)    if the generation asset is a generation complex project—21.024 multiplied by the number of megawatts in the proposed nameplate rating of the proposed generation complex, worked out as at the start of 3 June 2007.

Emissions intensity

For the purposes of subsection (1), the emissions intensity of a generation complex that entered service on or before 1 July 2004 is the number worked out to 3 decimal places using the formula:

where:

carbon dioxide equivalence of emissions means the total number of kilotonnes of the carbon dioxide equivalence of the greenhouse gases emitted from the combustion of fuel in the generation complex for the purposes of the generation of electricity during the period beginning on 1 July 2004 and ending on 30 June 2007.

gigawatt hours of electricity generated means the total number of gigawatt hours of electricity generated by the generation complex during the period beginning on 1 July 2004 and ending on 30 June 2007, as measured at all generator terminals of the generation complex.

        (3)    However, the emissions intensity of a generation complex that entered service on or before 1 July 2004 is taken to be 0.7 if the number worked out to three decimal places using the formula in subsection (2) is less than 0.7.

        (4)    For the purposes of subsection (1), the emissions intensity of a generation asset not covered by subsection (2) is the number that, in the opinion of the Authority, should be treated as the emissions intensity of the generation asset, having regard to the following matters:

             (a)    any documents relating to the design of the generation asset;

             (b)    any contracts for the supply of fuel for combustion in the generation asset for the purposes of the generation of electricity;

             (c)    if the generation asset is a generation complex that has entered service—the number worked out to 3 decimal places using the formula set out in subsection (5);

             (d)    the report mentioned in paragraph 178(1)(f);

             (e)    such other matters (if any) as the Authority considers relevant.

        (5)    The formula mentioned in paragraph (4)(c) is:

where:

carbon dioxide equivalence of emissions means the total number of kilotonnes of the carbon dioxide equivalence of the greenhouse gases emitted from the combustion of fuel in the generation complex for the purposes of the generation of electricity during the period when the generation complex was in service.

gigawatt hours of electricity generated means the number of gigawatt hours of electricity generated by the generation complex during the period when the generation complex was in service.

        (6)    However, the emissions intensity of a generation asset not covered by subsection (2) is taken to be 0.7 if the number worked out under subsection (4) is less than 0.7.

The background to these amendments is a result of the very eastern-states-centric approach in the Rudd government’s Carbon Pollution Reduction Scheme legislation. I place on record again that the five Western Australian senators moving these amendments have been consistent in our view that this legislation should not be finalised before Copenhagen; that we should be opposing it if it is put to a vote before Copenhagen. In the absence of an appropriately comprehensive global agreement, it will not help to reduce global greenhouse gas emissions and would put significant pressure on our economy for no environmental benefit.

Having said that, given the prospect that this legislation might get up, we were very concerned about some extreme unfairness for the state and the people of Western Australia enshrined in this legislation, because the Rudd Labor government has taken an eastern-state-centric approach in the design of this Carbon Pollution Reduction Scheme. Do not just take my word on that. When the Senate Select Committee on Fuel and Energy held a hearing in Perth in February 2008, the Carpenter Labor government pointed out to the committee that, in designing and modelling this scheme and in assessing the impact of this scheme, the Rudd government based its design on the national electricity market arrangements. Perhaps the Rudd Labor government, from its ivory towers in Canberra, thought that a national electricity market includes the great state of Western Australia. The reality is that it does not. Western Australia has its own electricity market: the western electricity market. Western Australia is an energy island and it has to be self-sufficient from an energy point of view. I happen to know that the Carpenter Labor government, through its Treasury officials, put a series of questions and issues to the Rudd Labor government without any effect. Treasury officials appeared twice before the fuel and energy committee and they made the point that all the issues raised in relation to this were ignored. If a state Labor government cannot get any feedback from the Rudd Labor government, what chance do the rest of us have?

Our overall concern is that electricity generators in Western Australia are being unfairly treated, that the financial viability of electricity generators in Western Australia is at risk and that, consequently, our energy security in Western Australia is at risk. The Rudd Labor government have been looking after energy suppliers in the eastern states of Australia, but they have completely ignored the specific circumstances in Western Australia. If this scheme were to go through, it would create serious issues for the viability of energy suppliers in Western Australia and, as such, the energy security for the people of Western Australia.

The first problem is that the assistance to WA generators under the Electricity Sector Adjustment Scheme in the CPRS legislation is absolutely negligible due to the brown coal bias of the much larger national electricity market. We have been advised by industry analysts that around 90 per cent of the assistance would go to brown coal generators in Victoria and South Australia and less than one per cent of the assistance would go to WA black coal generators. In the national electricity market brown coal generators are affected more, relative to black coal generators, as they have the highest relative emission intensities in that market. In the western electricity market, however, there are no brown coal generators. As such, black coal has the highest relative emission intensity.

Also, black coal generators in the western electricity market have struck long-term contracts over the past few years in order to compete with gas. This legislation does not recognise the WA scenario at all. The national electricity market is a spot market. There is a capacity effectively to pass on the carbon costs which are imposed under this legislation, which is a very different circumstance to that in Western Australia. In Western Australia there are long-term contracts in place, and the capacity to pass on those increased costs is limited.

I have already mentioned that the WA electricity market is an energy island. We will have to rely on black coal for our energy security for some time to come. Yes, there is obviously the intention to increase the use of gas—and, hopefully, through the increased use of renewables et cetera, we will be able to diversify further our energy mix; however, over the next five to 10 years we will continue to be gas constrained and will continue to have to rely on black coal. There is already, as a result of the legislation pending and in the context of what is likely to come down the road, less investment in more environmentally friendly black coal fired power stations. This is only going to get worse. In fact, in recent times some of the old, less environmentally friendly coal fired power technology has had to be brought back on stream. There is an expectation that that will have to continue into the future as a direct result of this legislation. So, rather than creating a more environmentally friendly outcome, the government is actually creating a more environmentally unfriendly outcome.

These amendments seek to address this inherent unfairness for electricity suppliers in Western Australia in the very eastern-state-centric, Rudd Labor government Carbon Pollution Reduction Scheme. We really do hope that the Senate will support these amendments. The circumstances in Western Australia are very different, based on the fact that we physically cannot be part of the national electricity market. We are concerned that when the government started putting together the design of this scheme they did not even understand that Western Australia was not part of the national electricity market. These are not my comments, Minister; they are the comments made by state Labor government officials before the Senate Select Committee on Fuel and Energy. They said to us that they were extremely concerned that the Rudd Labor government did not even seem to understand that Western Australia was not part of the national electricity market when they put together the design of this scheme. We have gone through a green paper, a white paper, exposure drafts and all sorts of other processes, but these issues still have not been addressed.

These amendments are critically important to making this scheme, if gets up—and we of course hope it does not—less unfair for the people of Western Australia and to ensuring our energy security in Western Australia moving forward, given that we are not part of the national electricity market.