Concetta Fierravanti-Wells (NSW, Liberal Party, Parliamentary Secretary to the Minister for Social Services) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Renewable Energy (Electricity) Amendment Bill 2015 will implement changes to the Renewable Energy Target to better reflect market conditions and allow sustainable growth in both small and large scale renewable energy.

The bill will lead to more than 23.5 per cent of Australia's electricity being sourced from renewable energy by 2020.

It also addresses problems which emerged more than three years ago with the Renewable Energy Target. Despite the presence of the 41,000 GWh target, it was unlikely that it would be met.

First, there was a significant drop in electricity demand which occurred following the Global Financial Crisis and coinciding with the closure of energy intensive manufacturing plants played havoc with wholesale electricity prices.

This was compounded by rising retail electricity costs associated with the carbon tax, network charges and feed-in tariffs resulting in households and industry changing their consumption patterns.

Second, the changes to the Renewable Energy Target introduced by the Rudd Government and the subsequent creation of the phantom credit bank of 23 million certificates is still being felt today. This overhang continues to suppress demand for Renewable Energy Certificates and stymie the signing of power purchase agreements.

These combined to make it increasingly difficult for renewable energy projects to attract finance.

Add to this, the increasing realisation that new subsidised capacity was being forced into an oversupplied electricity market made it likely that financial institution would be approaching the new investments in the renewable energy space with some caution.

It is in this context that we have sought to place the Renewable Energy Target on a sustainable footing.

The revised Renewable Energy Target scheme

The Renewable Energy (Electricity) Amendment Bill 2015 amends the Renewable Energy (Electricity) Act 2000 to:

These changes will ensure that there is continued support for sustainable growth in the large scale renewable sector. And, the 33,000 GWh target is higher than the originally conceived objective of 20 per cent.

There will be no changes to the Small Scale Renewable Energy Scheme. The scheme will continue in line with household and small business demand.

The removal of Labor's phantom credit scheme federally and the rationalization of feed-in-tariffs at the state level have reduced many of the distortions outlined in this week's Grattan Institute report.

Key features of the revised Renewable Energy Target

The Large Scale Renewable Energy Target

This bill will reduce the LRET from 41,000 GWh in 2020 to 33,000 GWh in 2020. It will adjust the profile of annual renewable generation targets from 2016 to 2030 so that the target reaches 33,000 GWh in 2020 and is maintained at 33,000 GWh from 2021 to 2030. This target is separate to the 850 GWh that is to come from waste coalmine gas generation each year until 2020 under pre-existing transitional arrangements.

As highlighted in our Energy White Paper, Australia has an over-supply of generation capacity and some of that is aged. From 2009-10 to 2013-14, electricity demand has fallen by about 1.7 per cent per year on average.

This is due to many factors: declining activity in the industrial sector, increasing energy efficiency, and strong growth in rooftop solar PV systems which reduce demand for electricity sourced from the grid.

While the Government welcomes a diverse energy mix in Australia, it also recognises that circumstances have changed since the 41,000 GWh target was set.

This new target of 33,000 GWh directly addresses these issues. It represents a sound balance between the need to continue to diversify Australia's portfolio of electricity generation assets, the need to encourage investment in renewables while also responding to market conditions, the need to reduce emissions in the electricity sector in a cost-effective way, and the need to keep electricity prices down for consumers.

Most importantly, this new target of 33,000 GWh by 2020 is achievable. It will require in the order of 6 GW of new renewable electricity generation capacity to be installed between now and 2020.

Even at the reduced level of 33,000 GWh, the renewable sector will have to build as much new capacity in the next five years as it has built in the previous fifteen. This will not be an easy task, but it is at least achievable.

This new target will be good for jobs in the renewable energy sector and lift the proportion of Australia's electricity generation to approximately 23.5 per cent by 2020.

Assistance to emissions-intensive trade-exposed industries

When the RET scheme was expanded in 2010, partial exemptions were introduced for electricity used in emissions-intensive trade-exposed activities. The exemptions only apply to the additional RET costs that were incurred as a result of the expansion of the scheme.

The RET scheme regulations currently prescribe that electricity used in activities defined as highly emissions-intensive and trade-exposed is exempted at a 90 per cent rate and electricity used in activities defined as moderately emissions-intensive and trade-exposed is exempted at a 60 per cent rate.

This bill will increase support for all emissions-intensive trade-exposed activities to full exemption from all RET costs, that is, from the costs of the original target as well as the costs of the expanded target. A full exemption will protect jobs in these industries and ensure they remain competitive.

The reduction in the direct costs of the RET, resulting from the lower Large Scale Renewable Energy Target, will more than offset the impact on other electricity users of the increase in assistance for emissions-intensive trade-exposed activities.

Reinstating biomass from native forest wood wane as an eligible source of renewable energy

Native forest wood waste was in place as an eligible source of renewable energy under Labor's own legislation until November 2011.

The use of native forest wood waste for the sole or primary purpose of generating renewable electricity has never been eligible to create certificates under the scheme. Eligibility was subject to several conditions including that it must be harvested primarily for a purpose other than energy production. This is about the use of wood waste—not about cutting down forests to burn.

Consistent with our election commitment, this bill reinstates native forest wood waste as an eligible source of renewable energy under the RET, basing eligibility on exactly the same conditions that were previously in place under the ALP.

One of the objectives of the RET is to support additional renewable generation that is ecologically sustainable. We are reinstating native forest wood waste as an eligible renewable energy source because there is no evidence that its eligibility leads to unsustainable logging or has a negative impact on Australia's biodiversity.

We believe that the safeguards that were in place previously were and still are sufficient assurance that native forest wood waste is harvested in a sustainable way. The regulations were underpinned by ecologically sustainable forest management principles which provide a means for balancing the economic, social and environmental outcomes from publicly-owned forests.

In all cases, the supply of native forest wood waste is subject to Commonwealth, and state or territory planning and environmental approval processes, either within, or separate to, the Regional Forest Agreement frameworks.

Burning wood waste for electricity generation is more beneficial to the environment than burning the waste alone or simply allowing it to decompose. Its inclusion as an eligible energy source is another contribution to the target.

Removing the requirement for biennial reviews of the RET

We understand that regular reviews of policy settings create uncertainty for investors, business and consumers. That is why this bill removes the requirement for two-yearly reviews of the RET. Providing policy certainty is crucial to attracting investment, protecting jobs and encouraging economic growth.

Protecting electricity consumers, particularly households, from any extra costs related to the RET, has been a priority from the start and the Government understands that the 33,000 GWh target remains a challenging one for the industry.

For these reasons, instead of the reviews, the Clean Energy Regulator will prepare an annual statement on the progress of the RET scheme towards meeting the new targets and the impact it is having on household electricity bills.

Again, this bill is about appropriately balancing different priorities; replacing the biennial reviews with regular status updates better meets the needs of industry and the needs of consumers.

Importantly, both the Government and the Opposition have agreed to work cooperatively on a bipartisan basis to resolve any issues which may arise with the operation of the Renewable Energy Target through to 2020.

Conclusion

This bill is consistent with the Government's conviction that policy decisions must be based on sound economic principles. It also represents the Government's commitment to maintain stable and predictable policy settings that encourage growth, competitiveness and efficiency.

The RET had to be reformed in response to changing circumstances. This bill achieves balanced reform. It will provide certainty to industry, encourage further investment in renewable energy, and better reflect market conditions. It will also help Australia reach its emissions targets, and it will protect jobs and consumer interests.

As the Energy White Paper points out, Australia has world-class solar, wind and geothermal resources and good potential across a range of other renewable energy sources. In addition to the support for small and large scale renewables which this bill provides, the Government is providing over $1 billion towards the research, development and demonstration of renewable energy projects.

This bill recognises that renewable energy is an important part of Australia's future, while also recognising that its deployment must be supported in a responsible way with minimal disruption to our energy markets.

I commend the bill to the House.