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Thursday, 21 June 2007
Page: 23

Senator MILNE (10:07 AM) —I move:

That the following matter be referred to the Economics Committee for inquiry and report by 6 October 2007:

An assessment of the benefits and costs of introducing renewable energy feed-in tariffs in Australia, including an evaluation of:

(a)   barriers to the expansion of the renewable energy industry in general and within the electricity market in Australia in particular;

(b)   the likelihood that carbon prices generated by an emissions trading system will be insufficient to overcome these barriers in the near term; and

(c)   options to link the Mandatory Renewable Energy Target scheme (with an increased target) with feed-in tariffs to guarantee a viable return on investment for investors in a range of prospective renewable energy technologies.

I understand the current workload of Senate committees. However, if the other parties would agree to it, I am certainly open to an expression of interest in supporting such an inquiry and changing the reporting date, because I think this is an absolutely critical matter for us to consider. It was obvious to me in the Senate last week that, currently, the government has not given any thought to feed-in tariffs. I think it is essential that we do. I understand the time pressures of today, so I will speak on this as briefly as I can.

If we agree that we need to constrain a rise in global temperatures to below two degrees in order to avoid catastrophic climate change—and, as yet, there is no agreement; there is global consensus but not consensus by parliament—then we need to set deep emission-cut targets. The Greens have said that we need to go with 80 per cent below 1990 levels by 2050 and 30 per cent below 1990 levels by 2020. That is based on the need to reduce emissions globally and on more of an effort by industrialised countries. Those targets are realistic in that context, especially since the CSIRO has said that we need to have emission reductions somewhere between 60 and 90 per cent. We need to have deep targets and, in order to meet those targets, we will need several things. We need to reduce our energy use but, at the same time, recognise that overall we will need more renewable energy as well as energy efficiency. This goes to the heart of the conversation about feed-in laws. We need to maximise the contribution of renewable energy to achieve those deep cuts in emissions.

Currently, the government is considering the Prime Ministerial Task Group on Emissions Trading report on an emissions trading scheme. What is not clearly understood is that an emissions trading scheme on its own will do nothing to expand renewable energy. That is because the permit price is likely to be too low to stimulate the commercialisation of renewable energy generation. It may stimulate some investment in research and development, but it certainly will not go to commercialisation in the short term. If we are to achieve deep emission cuts quickly, we need to rapidly install renewable energy generation. The likelihood is that an emissions trading scheme will lead to conversion to gas and to greater efficiency in existing energy generation but it will not support the renewables. After we use up our energy efficiency options and move rapidly on those, and while we make some conversions to gas, we also need to build up renewable energy generation so that it can take on more of the load. Currently, we have a mandatory renewable energy target, which is good because it provides certainty about achieving those targets as set, but the problem with the current mandatory renewable energy target is that it is way too low. As it was so successful, we achieved the target rapidly and so that has ended the investment in renewable energy. If we are to reach a real target for renewable energy—and the Greens believe we should reach about 25 per cent by 2020—then we need a rapid rollout of renewable energy.

The problem with the mandatory renewable energy target, which the feed-in laws solve, is that only the cheapest types of renewable energy, such as wind, are actually installed. Because there is a target, people will of course invest in the most competitive renewable energy options. So there is nothing currently that supports more prospective options, particularly in some areas of Australia, such as solar, yet in the longer term these may be better options for the country. This is where feed-in laws come in. What is a feed-in law? For the benefit of Senator Minchin, but also for general awareness, a feed-in law is the world’s most successful policy mechanism for stimulating the rapid development of renewable energy. Sir Nicholas Stern also made that clear in his report last year. They are also the most egalitarian method for determining when, where and how renewable energy generating capacity will be installed. These renewable energy tariffs, or feed-in laws, enable home owners, farmers, cooperatives, Indigenous people et cetera to participate on an equal footing with large commercial developers of renewable energy. They permit the connection of renewable sources of electricity with the electricity utility network and, at the same time, specify how much the renewable generator is paid for their electricity. In other words, the utility is required to take renewable energy, from whoever is generating it, from their wind generator—from their home, from their barn or from their warehouse roof—and buy it at a fixed price, for a fixed period. You can borrow money to invest in renewable energy because you know precisely what return you will get on that investment, so banks will lend you the money. That is the basis on which the renewable energy boom has taken place in Europe.

Feed-in laws are not experimental and they are not pilot; they are now being used by many countries in the European Union and they are being used in some states in the US. They have been hugely successful, and particularly successful for farmers who have a lot of roof space by virtue of their facilities. They can actually generate additional sources of income to the traditional farm networks. They are also a mechanism for stimulating jobs in manufacturing and rollout in rural and regional Australia. I will give you an example. Currently we have irrigated cotton at Moree in New South Wales. It is not sustainable in the long term for Australia, a desert nation, to be growing irrigated cotton. At the same time, Solar Heat and Power says that it could roll out 300 megawatts of solar thermal power right now if the price were right. So theoretically a farmer at Moree could switch from cotton growing to the establishment of a solar thermal generation facility on the same area of land. They could do so if there were a feed-in law because that would give them the opportunity to go into partnership with a renewable energy generator, and so on.

Feed-in tariffs can be made differential. So you can say, ‘We think that in the long term this area of Australia has the best wind potential, therefore we will set a feed-in tariff at X for that area.’ It might be less for somewhere else. We are already doing that with solar hot water—in some parts of the country we pay more because we offset more in terms of coal electricity than in other places. This means you can look at areas around Australia with the best potential for solar, the best potential for wind and the best potential for geothermal and set a tariff that will guarantee investment in those renewable energy sectors in those parts of Australia. That has to be good for rural and regional Australia in terms of investment and jobs and it has to be good in terms of putting the manufacturing sector back into communities from which it has been taken because of competition with low-price manufacturing overseas. It is a win-win situation all around.

I cannot see a downside to Australia adopting feed-in laws. It is complementary to emissions trading. It is complementary to MRETs. I certainly do not want to see the MRET lost, as has been recommended by the emissions trading task force. I was surprised when the Labor Party supported the government last week in relation to this and I am concerned that there is a move on to change from a mandatory renewable energy target to a mandatory low-emissions technology target. What that is code for is including clean coal in renewable energy. If that happens, it will completely collapse the market in the long term for those real renewable energy technologies like wind, solar, geothermal and so on. So I certainly hope that the rumours being circulated that Labor is about to abandon the MRET for an MLET are not true, because low-emissions technology is a code word for clean coal. We need to start being very clear about that, actually stop using that euphemism and start calling it what it is. I want to make that very clear.

Some of the hardline economists might say that the problem with feed-in laws is that they rely on picking winners. You have governments and those hardliners sometimes saying that this is a bad thing. But that is precisely what they are doing when they subsidise clean coal, as they do. I would like to remind the Senate that during the 2005-06 financial year renewable energy received $326 million—that is, three per cent of the total subsidy allowance provided to all fuels. In that same year, oil received 76 per cent of those subsidies, worth $7.4 billion, and coal received 17 per cent, worth $1.7 billion. We have already had policy announcements from both the government and the opposition in relation to spending $500 million on clean coal and nothing like that on various renewable energy sectors.

I am strongly arguing here that the overseas experience says that if you want to get significant cuts in emissions then you need to have a combination of energy efficiency and renewable energy as well as the conversion and phase-out of existing energy production in coal and so on. To do that you need all these mechanisms. You cannot rely on emissions trading; it will do nothing for renewables. I strongly urge the Senate to support a reference to the economics committee so that there can be an analysis of how feed-in laws in Australia could be used to cost-effectively roll out renewable energy to create jobs and new manufacturing investment in rural and regional Australia. This would be a win-win all around. We have plenty of overseas experience we can draw on for feed-in tariffs. I think there would be huge excitement in Australia if the community knew that it could go and borrow to invest in renewable energy because it had a guaranteed fixed price over a fixed period of time for the purchase of that energy. It would be a huge boost because, as I said, it is a flexible mechanism whereby you can set different tariffs for different technologies and essentially give a real boost to all of your renewables at the same time. I urge the Senate to support this reference to the committee. As I indicated, I am perfectly open to an amendment to the motion in terms of the date for a report. I am happy to take the reporting time out longer than that proposed because of the workload. But I would be really disappointed if the Senate did not support the idea of sending this to the committee for an evaluation of feed-in tariffs. I will wait to see what other members of the Senate think about this reference, but I urge senators to support it.