Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

The committee is considering the Renewable Energy (Electricity) Amendment Bill 2010 and related bills as amended, and government amendment (1) on sheet CA252. The question is that the amendment be agreed to.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

To facilitate debate here, we are dealing with government amendment (1) on sheet CA252, but the Australian Greens seek leave to move an amendment that is complementary, about which I have consulted all other members. I am seeking your guidance, Mr Temporary Chairman, because I would like the debate on the government’s amendments to be a cognate debate on the government’s amendment and the Greens amendment, which is on sheet CA253. The government’s amendment deals with the minister’s ability to change the multiplier and the Greens amendment enables the minister to deal with the size of the system. So those two things go together.

Leave granted.

I move Australian Greens amendment on sheet CA253:

(1)    Schedule 1, page 63 (before line 30), before item 120, insert:

119B  Subsection 23B(3)

Omit “the first 1.5kW”, substitute “not more than the first 3kW”.

I have nothing further to add other than to reiterate my previous remarks. They were that the government is moving to give the minister the ability to alter the multiplier in the regulations. I am moving that the minister be also able to change the size of the system. They are complementary amendments and they address the issue that I was referring to before the break—that is, the differential around Australia in terms of feed in and support and the likelihood that we may end up with three systems and a bit of debacle in the market. This amendment is addressed at allowing the minister to manage that scenario.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

Very quickly, the coalition supports both the government amendment and the Greens amendment. I think the government amendment was a recognition of some of the issues raised in both the majority report of the Senate inquiry and the additional comments. There are real concerns about this industry. What happens if systems are priced too cheaply is that you end up losing quality and standards. As Senator Milne has alluded to, it is a dynamic industry. We need this flexibility for the multiplier to be adjusted, but there should be a recognition that if you are going to adjust the multiplier you should equally be able to adjust the size to which it applies, which is the relevance of Senator Milne’s amendment.

I note also that Senator Milne has highlighted the very real problem that state incentives and subsidies, and schemes such as feed-in tariff arrangements, are impacting on this and add to the proposition that payback periods for systems can become very short and very profitable unless you have some flexibility to respond. Indeed, as has been discussed previously, some level of uniform application of feed-in tariff arrangements, be that having none or some, would at least allow these types of incentives to operate more effectively across states rather than the current hodgepodge system between the states that only adds to some of these problems.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

First, I will just remind everyone that the government’s amendment really enables regulations to be made, if required. Obviously it would be the government’s intention, should they be required, to have consultation on those amendments. We think that Senator Milne’s additional amendment is sensible. It simply gives a little more flexibility without locking any particular policy proposition into the solar credits regime.

The Temporary Chairman:

The question is that government amendment (1) and the Greens amendment on sheet CA253 moved together be agreed to.

Question agreed to.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I now move Australian Greens amendment (5) on the second revision of sheet 6114:

(R5) Schedule 1, page 63 (after line 29), after item 119, insert:

119A  After section 23A

Insert:

        (1)    The regulations must establish a scheme for the inspection of the installation of small generation units for which certificates have been created.

        (2)    Without limiting subsection (1), regulations made under that subsection must provide, for small generation units installed after the commencement of this section:

             (a)    that each year a statistically significant selection of small generation units that were installed during that year must be inspected for conformance with Australian standards and any other standards or requirements relevant to the creation of certificates in relation to that small generation unit;

             (b)    that an inspection of a small generation unit is to be carried out by a person or organisation who:

                   (i)    is independent of the person or organisation who designed and/or installed that small generation unit; and

                  (ii)    does not have a conflict of interest in relation to that small generation unit or administration of the matters being inspected;

             (c)    for the transfer of information, about any failures to comply with standards or other requirements relevant to the creation of certificates in relation to small generation units, to State, Territory or Commonwealth bodies with responsibility for the enforcement and administration of those standards or requirements.

This goes to the issue of quality control. It is a measure for the government to be able to establish regulations to establish a scheme for inspection of new installations of small generation units. This is about quality control to make sure that an adequate number of small units can be inspected to ensure that we are meeting the appropriate Australian standards and any other standards or requirements relevant to the creation of certificates in relation to those small generation units.

Basically, this is a quality control program. We have learnt something from the insulation scheme, the green loans scheme and so on, and that is that you must have appropriate capacity to check and to audit installations and to make sure that the standards are met. I emphasise that the reason for the revision is that this goes to those units for which certificates have been created. That is the difference between the previous amendment and this one. I would recommend it because it is a quality control measure.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

It is the opposition’s belief that this amendment has some merit. We have concerns that standards be maintained. That has been addressed in some of the other amendments. We have sympathy for this amendment. Ensuring that there is a high standard for installations within the industry is important and maintaining those high standards will only be to the good of the industry. Indeed, we have seen terrible examples in other industry sectors, particularly the insulation sector, where the failure to maintain high standards has damaged everyone in the industry. That is why this is so important—to make sure that we do keep those standards very high.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

First, I indicate the government is prepared to support the revised amendment, and I thank Senator Milne and the Greens for their willingness to take on board some of our concerns about the original amendment.

I want to place on record that the government takes these safety issues very seriously. I can point to a number of reforms we have put in place to recognise the importance of these issues and to improve the safety measures surrounding this scheme. The act already includes new and enhanced compliance measures such as civil penalties, tougher financial penalties and more stringent compliance documentation requirements. That was an initiative of the government’s.

In addition, I announced changes this week to regulations which further enhance both the performance and compliance regime for solar PV and other small-scale generation technologies—it might have been last week; the 15th, I think. The weeks are blurring into one at the moment. These entered into force, I think, on 21 June and include additional requirements for installers to comply with state and territory regulations for siting panels, and to comply with building codes, including for panel mountings and connections. Obviously, the safety of electrical work on buildings is regulated by states and territories through a number of laws. Compliance with these state laws is the responsibility of states and territories.

In addition, I note to the Senate the Renewable Energy Regulator is also working with industry to deliver an enhanced program of compliance and performance inspections. These represent one element of a broader and longer term strategy to improve compliance and performance under the renewable energy target and the government’s solar programs. My department will be consulting with industry and other stakeholders on this comprehensive strategy, including post-installation checks. So the revised provision from the Greens is consistent with the government’s work in this area, and for this reason we are able to support the amendment.

Question agreed to.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Consistent with the undertaking I gave earlier in relation to the government’s agreement to move to the regulations that give the government the ability to act on the multiplier and consistent with the acceptance of my amendment regarding the size of the schemes, I am now withdrawing Greens amendments (6) and (8).

While I am on my feet, there is a further revision to Australian Greens amendment (7), which has not been circulated. We have asked for it to be circulated but it has not been circulated yet. With the agreement of the other parties, could I defer Australian Greens amendment (7) until it is circulated, hopefully in a few minutes, and move on to Senator Xenophon’s motion.

Leave granted.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

by leave—I move amendments (6) and (7) on sheet 6116 together:

(6)    Schedule 1, page 65 (after line 19), after item 121, insert:

121A  Subsection 39(3)

After “subsection (1)”, insert “for a year until the year ending on 31 December 2030”.

121B  After subsection 39(3A)

Insert:

      (3B)    Before the Governor-General makes a regulation under subsection (1) for the year commencing on 1 January 2031 and any later year until the year ending on 31 December 2040, the Minister must take into consideration:

             (a)    the required GWh of geothermal energy source electricity for the year; and

             (b)    the amount estimated as the amount of electricity that will be acquired under relevant acquisitions during the year; and

             (c)    for a year after the year commencing 1 January 2031—the amount by which the required GWhs of geothermal energy source electricity for all years from and including 2031 has exceeded, or has been exceeded by, the amount of geothermal energy source electricity required under the scheme in those years; and

             (d)    all partial exemptions expected to be claimed for the year.

      (3C)    If, at the time the Minister takes into consideration the matters referred to in subsection (3B), the amount applicable under paragraph (3B)(c) is not known, then the Minister may take into consideration an estimate of that amount instead.

(7)    Schedule 1, page 67 (after line 6), after item 124, insert:

124A  At the end of Division 2 of Part 4

Add:

        (1)    The required GWh of geothermal energy source electricity for a year is set out in the following table:

Support is currently being provided for emerging technologies, and this is positive recognition of the future opportunities that renewable technologies may provide. In the case of geothermal energy with geothermal hot rocks, which is when power is extracted from heat stored in the earth, drilling and exploration for such deep resources is very expensive. These are long-term projects spanning 20 to 30 years in terms of being able to pay it back. There is enormous infrastructure involved, and they require certainty to secure investment. It is for this reason that I move these amendments which will extend the renewable energy certificates for geothermal projects for an additional 10 years after the RECs are currently due to end in 2030.

This will see RECs for geothermal projects continue until 2040 and will provide the industry with the certainty it needs, the certainty it deserves, to secure investment so that these emerging renewable technologies can be advanced and maximised. In relation to this, geothermal hot rock technology has the potential to provide that baseload power that we need. Wind energy cannot do that. It is the one technology which can provide that 24/7 access to energy that we need, but they need that investment certainty. Given the scale of the projects, given the emerging technologies in relation to this, the RECs ought to be extended another 10 years.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

I have enormous sympathy for where Senator Xenophon is coming from. I recognise very much the issue that he raises and, particularly as a fellow South Australian, I recognise the importance of the development of the geothermal sector within our home state and of course the extraordinary importance of it as a potential reliable baseload generator of power into the future.

We very much agree with the sentiment, with the direction that Senator Xenophon is talking about, but are not convinced at present that it is wise to make this amendment in the context of this legislation. It is an issue that I would hope will be considered in future reviews of the operation of the scheme and a future review of the legislation. We have consistently argued to somehow set aside part of the RET, now the LRET, for baseload power. We think that would still be a positive but, in terms of identifying just one sector and attempting to provide it with the treatment at present, we are not sure that is the best way to go. We will continue to agitate and lobby that there should be a clearly defined target for baseload power generation capacity in areas like geothermal, wave or tidal, and others that could be considered in that sort of context. Please, Senator Xenophon, do not see our opposition as being an opposition to the principle. It is a matter of trying to find a better way to get that principle accommodated in future legislation.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I indicate the Australian Greens will be supporting Senator Xenophon in these amendments. I think they are really important. As for whether we will get a higher target or a longer regime, we will see, but in the meantime this is one way of going. I will never give up on a differential feed-in tariff to bring on these new technologies.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

The government is not intending to support these amendments. As I understand it, amendments (6) and (7) together extend the renewable energy target for geothermal out to 2030 and set an effective requirement on how much geothermal must deliver by the year 2031, essentially. Sorry—2040, I should say.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Don’t short-change me, Minister.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

I am sorry. We in the government have consistently said that what we are doing here is setting up a market. Renewable technologies can compete within that market. We recognise that there are some technologies which are more advanced and can come to market immediately or more quickly than others. I think the policy question is: how do you deal with the difference between technologies like wind or solar and technologies which are at a different stage of coming to market, such as geothermal? What I have said is I do not think you do that by simply loading up a market mechanism that is subsidised through electricity prices. You do what the government is doing, which is to put a very significant amount of assistance on budget into different technologies. 17:01:40

I, like you, Senator Xenophon, hope that we will see geothermal and other new technologies being able to compete in the renewable energy market. I think that some of the amendments that we have passed already here will hopefully enable the legislation to be flexible in the future to enable additional eligibility—for example, the amendment moved by Senator Milne in terms of the biennial review. We in the government have already put a very substantial amount of investment into other technologies. These are emerging renewable generation technologies. An example is the Solar Flagships program, which is $1½ billion, and we have committed more than $200 million to accelerate geothermal energy technology development, demonstration and deployment in Australia. We think that is a more sensible way of giving support to this sector, and particularly to emerging technologies, rather than trying to do so through a legislative mechanism.

Question negatived.

by leave—I move government amendments (1) and (2) on sheet CA251:

(1)    Schedule 1, item 124, page 66 (before line 3), before subsection (2), insert:

Adjustment of targets according to number of valid certificates as at the end of 2010

     (1A)    If, as at the end of the year 2010, the total value, in GWh, of valid renewable energy certificates exceeds 34,500, the table in subsection (1) has effect in accordance with the following paragraphs:

             (a)    the number of GWh specified in the table for each of the following years is taken to be increased by half of the excess:

                   (i)    the year 2012;

                  (ii)    the year 2013;

             (b)    the number of GWh specified in the table for each of the following years is taken to be reduced by one quarter of the excess:

                   (i)    the year 2016;

                  (ii)    the year 2017;

                 (iii)    the year 2018;

                 (iv)    the year 2019.

      (1B)    As soon as practicable after the end of the year 2010, the Regulator must publish on its website the total value referred to in subsection (1A).

Adjustment of targets if there is a WCMG start day

(2)    Schedule 1, item 124, page 66 (line 5), omit “has effect as”, substitute “has effect (after first taking account of subsection (1A))”.

This is an aspect of the policy position I think we made reference to earlier, which deals with the banked certificates issue that has been raised with us by industry and by others, including the opposition. In the event that the stock of banked RECs is substantially in excess of what we anticipate, as I think I outlined in an earlier part of the debate, these amendments would enable an adjustment of the target to take that into account. I suppose the best way to describe it is to say that it is a contingent power in the sense that it is a power to alter the targets but only in the circumstances that were previously outlined and that I think are outlined in the supplementary memoranda. I commend the amendments to the chamber.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

I would refer anybody interested in the opposition’s detailed position on this to the remarks I made yesterday in response to the first parcel of government amendments, in which I mistakenly canvassed these amendments in great detail. Suffice to say the opposition does support these amendments. We support them because we want to see some mechanism that deals with the issue of banked credits to provide some investment certainty for industries under the LRET, and we think that it is important that a smoothing-out mechanism is applied. We note that these amendments achieve that within certain parameters and we note that in doing so they will hopefully provide that certainty. We further note that the nature of the measure proposed may, of course, have some slightly earlier cost impacts but that they will be offset by slightly reduced cost impacts in the latter part of the scheme.

Question agreed to.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I move amendment (8) on sheet 6116, standing in my name:

(8)    Schedule 1, page 67 (after line 6), after item 124, insert:

124B  After Division 2 of Part 4

Insert:

                 The Minister may, by legislative instrument, determine that an emerging renewable energy technology that has demonstrated its energy efficiency is to be included as a renewable energy technology for the purpose of the scheme constituted by this Act.

This amendment relates to giving the minister a discretion to include proven emerging renewable technologies in the scheme. More and more emerging renewable technologies are being discovered, and I think we have a great opportunity to support these technologies so that they can be established and taken up by the market. For example, I recently read about ceramic fuel cells, which are not yet available, but based on testing conducted so far they will enable enough power to be produced in a year to run a standard home more than twice over. That goes to the issue of energy efficiency, which Senator Milne referred to, but I think the principle is still the same. For instance, the solid oxide fuel cell technology called BlueGen creates electricity and heat by passing natural gas over ceramic fuel cells. While that in itself is not renewable, it is indicative of the sorts of breakthroughs that are being made in new technologies. I think that is important in the context of the policy objectives of this bill, which are to support renewable technologies and to reduce the overall level of greenhouse gas emissions. It is important that the minister has a discretion to include proven emerging renewable technologies. I urge my colleagues to support this amendment. It gives the minister the flexibility and the latitude to embrace and adopt these new technologies as part of the scheme.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

The opposition is pleased to support Senator Xenophon’s amendment. We have done a number of things in the amendment of this legislation to improve the flexibility to allow the minister of the day to be more responsive while still being accountable to this parliament. I think this is another measure that would improve the responsiveness of the operation of the scheme.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I, too, will be supporting this legislation. I did ask in my speech in the second reading debate whether the government had given any consideration to RECs for evacuated tubes. It is particularly important for Tasmania, where evacuated tube systems are more suitable because of the cold nights. They give some certainty against cracking and breaking, which other PV solar hot water systems do not allow. The second thing is: has the government given any thought to thermal heat systems for domestic-scale houses, which are now online? If we are giving RECs for other things, are we looking at being able to provide for domestic heat from the ground in those thermal systems? I support the amendment, but I am interested to know whether the government has looked at those two technologies.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

Senator, I am not sure I can assist you, particularly in relation to those specific technologies, other than, I think, with regard to our previous discussion in relation to the COAG review—and I know you have put your views about that. We have some concerns in relation to the drafting of this amendment. It provides very little clarity around what the legislative instrument can do. We have some concerns also, Senator Xenophon, about the criteria for energy efficiency. I made the point that this is a renewable energy target and renewable energy legislation. While I understand the arguments that have been made about heat pumps, this is not energy-efficiency-support-mechanism legislation. Essentially, what you are doing here is to ask a minister to include as a renewable energy technology something that has an energy efficiency outcome. While I understand that the government does not have majority support on this, I really would invite the chamber to consider the provision that it is looking at. I am unclear as to what ‘has demonstrated its energy efficiency’ would mean and what the public policy benefit of it is. If the intent is to have some greater flexibility about eligibility under the legislation, we have already passed amendments which deal with a biennial review, which is precisely to look at some of those issues, as well as the 2014 statutory review, from memory, which is already in the legislation.

What you seek on top of all that is an additional regulatory process through which you table by regulation something in relation to emerging technologies. I believe that the scheme has to be flexible enough to recognise that over the life of the target we—the parliament—will not be able at this point to predict every technology that should be in this act for the next 10 years, for example. But I think that has to be balanced against the importance of looking at the scheme as a whole and the parliament and the government of the day being able to look at the various aspects of eligibility in toto. I would suggest that this amendment would simply privilege one type of technology, in terms of eligibility, when other types of technologies may well require—I do not have legal advice on this—an amendment to the legislation. I would ask: what is the public policy benefit of privileging one type of technology over another? We have processes that have been agreed to by the government today, including Senator Milne’s biennial review, which would enable a more holistic, careful assessment of these issues. I invite the chamber to reconsider their support for this proposition.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will address the minister’s concerns. I am shocked that she will not support this as it is a vote of confidence in the minister’s discretion to deal with these issues. The minister asks, quite reasonably, what the public policy benefit of this amendment is. It gives an additional level of flexibility in relation to the biennial reviews—and I commend Senator Milne for moving those reviews—that we have supported. It does not mean one form of technology or another will be favoured, but it does give the minister flexibility. If there is a new product on the market, such as a new, incredibly energy efficient renewable technology, then that ought to be the subject of this scheme, and of course there will be scrutiny through the parliament by regulation.

If there is an issue here with respect to the drafting, I would like to hear from the government. From a drafting perspective, however, it does seem to be quite straightforward in that it simply gives the minister discretion. It is not something that the minister has to exercise. The minister is not required to exercise discretion; it is simply that the minister can have this additional power to do so if there is an emerging renewable energy technology that has demonstrated its energy efficiency sufficiently to be included.

I know the minister has some concerns about other technologies. The fact is that the scheme is far from perfect—and I think we all acknowledge that—because of the inclusion of electric heat pumps, but I understand that they are included by virtue of their potential energy efficiency. This amendment is not inconsistent with what is in the scheme now in terms of current technologies. It does, however, give the minister that level of flexibility.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

It also means that the minister, should COAG do something dramatic by proving me completely wrong and becoming incredibly efficient—should it look at these issues and determine that evacuated tubes or the thermal heat technologies existing now, which are not new technologies but which are new to the scheme because they are not currently acknowledged—could immediately deal with it without waiting for the biennial review. That is precisely the issue because, frankly, these technologies have been around for a while. They have been asking the government to look at them. The COAG process is there and, while I have no faith in it, let us assume that it does deliver. This would give you the flexibility to immediately consider inclusion.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

I would make two points, Senator Milne. Firstly, you are on the record saying that this is not an energy efficiency scheme, and now you are supporting an amendment that is an energy efficiency amendment. Secondly, what is the point of the biennial review if you are now saying—and this is the problem where we just move amendments and people do not consider how the whole scheme operates—that all you want to do is give the minister power to change the way the act works? You may as well just put it all in the minister’s hands and forget about the biennial review.

There is no reference in this to what the outcome of the biennial review is. Earlier today you passed one amendment that says we will have a biennial review. The government agreed to that after discussions, and we are going to look at all these things as part of a sensible policy process. But now you are supporting an amendment that enables the discretion of the minister to do it with or without regard to the biennial review that you already passed earlier. I am just suggesting that we perhaps try and approach this in a more sensible way.

Senator Xenophon, I again ask what the point is of having a provision which only relates to technologies that demonstrate energy efficiency. I do not understand the public policy benefit of that. If you really want—and I do not think it is a sensible regime—to have a ministerial discretion that is abstracted from the review process we have just agreed to, why would you only have the discretion in relation to energy efficiency technologies and not other renewable technologies? I do not understand the logic in that.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I thank the minister for her question. It was drafted in this way to give the minister maximum discretion and it is not inconsistent with the issue of the biennial review. I do not want us to get bogged down on this particular amendment.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

The minister can ignore the review in the way it has been drafted.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My view is that it is not inconsistent with the way the review has been drafted. I think Senator Milne has pointed out that if, for instance, there is a new development, this gives the minister, between biennial reviews, that capacity. I would be guided by my colleagues as to whether the issue of energy efficiency is removed or not. I am ambivalent on that. It was merely meant as guidance in terms of the efficacy of a renewable technology measure. If the issue of energy efficiency is an area of concern for the minister, I am not particularly fussed by that, but the intention is to give the minister discretion between reviews with respect to a regulation-making power that would be subject to disallowance by this parliament.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

If you are intent on moving this—and I have indicated why I am not hugely keen on it—I would respectfully request that you consider removing the phrase in relation to energy efficiency. If we are going to expand this discretion, we should make it democratic—not just in relation to energy efficiency technologies but renewable energy technologies.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

In principle, the opposition supports this. The minister has raised some valid points there and I think Senator Xenophon has responded that it was not his intention to make this specific to a particular sector but to provide some flexibility. The minister asks why the chamber is not linking this to the biennial review. I would highlight that some of the other amendments that we have just passed in terms of the capacity to alter the multiplier and so on are equally not linked to the biennial review. However, I would expect that, as a disallowable instrument, the parliament of the day would be holding the minister to account for adhering to those regular biennial reviews and ensuring that it was in fact consistent with them.

If we are contemplating some amendment to this, could I further suggest that we equally require a statement of reasons to be laid out. That would also then ensure that ministers were far more likely to do this only as a result of the biennial review. I think the minister knows, as we all know in this place, that amending legislation is a slow process for any government. Getting priority on the list for bills et cetera is a slow process, so providing this level of responsiveness through legislative instruments is useful. I accept that it needs to be done properly but it is not inconsistent with other amendments that have been passed around the application of the multiplier and other things. It would still be disallowable by either chamber but I think there is some benefit in ensuring that it treats the industry fairly, but perhaps also that it is transparent in terms of the necessity to give some reason too.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

If Senator Xenophon is amenable to my suggestion about the bit of the amendment that I have most concerns about, which is the reference to energy efficiency, and is happy to hold that we could move to the next aspect of the debate. I have asked the department to look at the words, and perhaps we could come back to Senator Xenophon with a proposition around those words.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I seek leave to postpone consideration of amendment (8) on sheet 6116.

Leave granted.

That is a reasonable suggestion. I think the intent of this is to give that level of discretion and I am happy to discuss it with the minister’s officers and the department.

Simon Birmingham (SA, Liberal Party, Shadow Parliamentary Secretary for the Murray Darling Basin) Share this | Link to this | Hansard source

by leave—I move opposition amendments (3) and (1) on sheet 6154 revised together:

(1)    Clause 3, page 2 (lines 7 to 11), omit the clause, substitute:

        (1)    Each Act, and each set of regulations, that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

        (2)    The amendment of any regulation under subsection (1) does not prevent the regulation, as so amended, from being amended or repealed by the Governor-General.

(3)    Schedule 1, Part 2, page 80 (after line 4), at the end of the Part, add:

Renewable Energy (Electricity) Regulations 2001

138  Paragraph 22ZA(4)(a)

Repeal the paragraph.

These are amendments that seek to ensure that Australia’s trade-exposed industries that are extremely reliant on and heavy users of energy are not significantly disadvantaged by the renewable energy scheme that is being put in place.

This is something that was discussed at length when this legislation was considered last year. At that time, of course, it was discussed in the context also of the government’s CPRS legislation. At that time the government considered, argued for and put into the legislation a formula for the protection of those trade-exposed industries that was reliant upon the passage of the CPRS. Now, of course, we know in this place that the CPRS did not pass, and there is no need for us to revisit all of those debates. Indeed, its future is now quite uncertain as to when or if it may pass. But the issue for these trade-exposed industries remains quite true, and the issue is that they face paying a significantly disproportionate amount of the cost of subsidies through the renewable energy scheme because they are high electricity users, yet they operate—as we have recognised across the chamber—in a globally competitive environment. They are usually price takers rather than price setters and, as a result, they are unable to adapt their pricing to take account of the higher energy costs that a scheme such as this passes through to them.

As a result, negotiations around the expanded target last year increased or provided for an exemption from part of the requirement to purchase or redeem certificates. That started only for the expanded part of the target—that above 9½ thousand gigawatt hours. For the original MRET, below 9½ thousand gigawatt hours, the government said that it would provide compensation where the price of certificates went above $40 but only commensurate upon the passage of the CPRS. As I have noted, that legislation has been withdrawn; it appears nowhere in the government’s forward estimates and we do not know if or when it will be coming back. But the reality of what we have done here and are doing today in separating the renewable energy target and putting in place the LRET and the SRES schemes is that in providing that certainty to the proponents of major renewable energy developments we expect that the price of certificates—especially over the early years and, indeed, potentially in the late years if targets are not being met—could rise quite significantly. In particular, they could rise above that $40 mark regardless of whether a CPRS exists in the marketplace or not.

Why $40? It is $40 because that was, essentially, the level that companies were paying under the original MRET, when it was a five per cent mandatory renewable energy target. At that stage they were paying about $40; there was no compensation and that was a reasonable level it would seem. The target has been increased to 20 per cent—and now 20 per cent plus because of the establishment of the SRES—and we think it is reasonable to maintain the compensation above 9½ thousand gigawatt hours but to ensure that the exemption above $40 for that first 9½ thousand gigawatt hours is no longer dependent upon the passage of the CPRS. We know that the structure of this scheme means that it will go above the $40 mark.

I note that in debates last year even the minister acknowledged this, and said in this place:

… if the renewable energy certificate price increases above the level of around $40 then the increased renewable energy certificate price increases the cost impact of meeting the current mandatory renewable energy target liability of 9,500 gigawatt hours.

That was her statement in setting the $40 benchmark as a reasonable benchmark. Given that it is highly probable that the LRET price will move above $40, it is reasonable to provide these trade exposed industries, which cannot adjust their prices because of the global market in which they operate, the certainty of knowing that they only face a $40 price on that first 9½ thousand gigawatt hours, plus the 10 per cent or so that they are not exempted from, and the certainty of the exemption above that.

That is the approach that the coalition takes. It is about protecting jobs and industry in Australia, and that is the primary reason for doing this. It is about ensuring that the aluminium and alumina sectors, as well as other sectors that are emissions-intensive trade-exposed price takers, are fairly protected. We urge the chamber to support these amendments to provide those sectors with some certainty going forward and to not leave them dependent on the potential passage of a CPRS that may or may not come before this place. The price is likely to go above $40 and, if it does, for that first 9½ thousand gigawatt hours they deserve the same type of treatment—up to $45 and beyond.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I indicate the Greens will not be supporting the coalition amendments.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

The government will not be supporting these amendments. Senator Birmingham quoted my contribution to the chamber about the additional support, particularly to aluminium, that the government was offering in the context of the RET and CPRS. I want to say very clearly the government’s commitment to those arrangements stands if there is a price on carbon through the CPRS. That was an arrangement we negotiated with the opposition. We also engaged closely with various parts of industry, including the aluminium industry. That engagement reflected their view, put strongly to us, about the cumulative costs of both a price of carbon and the renewable energy target.

Let us also remember that the aluminium industry and other highly emissions-intensive trade-exposed industries receive 90 per cent assistance under the RET in respect of any RET liability above 9½ thousand gigawatt hours. In relation to moderately emissions intensive industries, those industries receive 60 per cent above the 9½ thousand gigawatt hours.

I again say we spent quite a substantial amount of time as a government, in the context of both the CPRS and the renewable energy target discussions, engaging with industry on this issue. We remain committed to the agreement we entered into, which is the one Senator Birmingham referenced. His difficulty, however, is that it is actually not applicable today because there is no price on carbon because the CPRS did not pass. The additional assistance being sought by the opposition’s amendments is effectively to put in place the additional assistance which was agreed to by the government in the context of the passage of the CPRS.

I also want to make this point: whether it is in relation to waste coalmine gas or these amendments, the opposition is putting forward amendments that reflect a willingness to see higher electricity prices. If there is a greater level of exemption under the renewable energy target, the target does not change. It just means the costs are borne by other users, and other users include households. That is part of the balance here, and on this issue we respectfully suggest that the opposition has got the balance wrong and is seeking to provide additional support that reflects an agreement in relation to passage of the CPRS and a cumulative cost increase, but that is no longer the case.

Essentially the opposition are asking other users of electricity to additionally cross-subsidise the emissions-intensive trade-exposed sector, and they are asking them to do that in relation to the renewable energy target component that was their policy. For some reason, you are now actually seeking to provide greater levels of assistance than you provided in government under that component of the renewable energy target policy. For those reasons, the government is not supporting these amendments.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I indicate that I will, on balance, support the opposition’s amendments, for the reasons outlined by Senator Birmingham. I have made that clear to the government and the opposition previously.

Question put:

That the amendments (Senator Birmingham’s) be agreed to.

Trish Crossin (NT, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time for this debate has expired. The question is that the remaining amendment on sheet 6116 circulated by Senator Xenophon be agreed to.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

by leave—I move amendment (8) on sheet 6116 in an amended form—that is, by deleting the words ‘that has demonstrated its energy efficiency is to’:

(8)    Schedule 1, page 67 (after line 6), after item 124, insert:

124B  After Division 2 of Part 4

Insert:

                 The Minister may, by legislative instrument, determine that an emerging renewable energy technology be included as a renewable energy technology for the purpose of the scheme constituted by this Act.

Question agreed to.

Trish Crossin (NT, Australian Labor Party) Share this | Link to this | Hansard source

The question is now that the Greens amendment (R7) on sheet 6163 be agreed to.

Question agreed to.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

by leave—I want it recorded that the government has opposed that amendment but we recognise the opposition and the Greens have supported that amendment, so we do not have the support of the chamber. I will not be calling a division.

The Temporary Chairman:

The question now is that the Renewable Energy (Electricity) Amendment Bill 2010 as amended be agreed to and that the Renewable Energy (Electricity) (Charge) Amendment Bill 2010 and the Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Bill 2010 be agreed to without requests for amendments.

Question agreed to.

Renewable Energy (Electricity) Amendment Bill 2010 reported with amendments and Renewable Energy (Electricity) (Charge) Amendment Bill 2010 and Renewable Energy (Electricity) (Small-scale Technology Shortfall Charge) Bill 2010 reported without amendments or requests; report adopted.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

The time allotted for the consideration of the remaining stages of these bills has expired. The question now is that the remaining stages of the bills be agreed to and they now be read a third time.

Question agreed to.