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Tuesday, 22 June 2010
Page: 3872

Senator MILNE (1:21 PM) —I move Australian Greens amendment (2) on sheet 6114:

(2)    Schedule 1, page 35 (after line 9), after item 65, insert:

65A  After section 40


         (1)    The required GWh of renewable source electricity in section 40 for the years 2011 and 2012 must be increased as specified in declarations made under subsection (3) for the relevant year.

         (2)    The Regulator must, by 10 May 2011, make the following calculations in respect of the large-scale generation certificates on the register of large-scale generation certificates as at 30 April 2011:

              (a)    the total of the number of registered large-scale generation certificates and the number of large-scale generation certificates that are pending registration in the register (total A);

              (b)    the number of registered large-scale generation certificates that are pending surrender (total B);

              (c)    the number of registered large-scale generation certificates that are pending voluntary surrender (total C);

              (d)    the number of registered large-scale generation certificates that have been created on or after 1 January 2011 under Subdivision A of Division 4 of Part 2 (total D);

              (e)    the number of registered large-scale generation certificates that are subject to eligible pre-existing contracts for transfer from one party to another party (total E);

               (f)    the figure (total F) that is the result of:

                            total A - (total B + total C + total D) + total E;

              (g)    the figure (total G) that is the result of:

                            total F - 16,200,000;

              (h)    the figure expressed in megawatt hours (total H) that is the result of:

                            total G ÷ 2;

and publish the results of those calculations on the Internet.

         (3)    If total G is greater than zero, the Regulator must, within 5 days of complying with subsection (2), make a declaration increasing the required GWh of renewable source electricity in section 40 for 2011 and 2012 by total H (converted in gigawatt hours).

         (4)    A declaration made under subsection (3) is not a legislative instrument.

This amendment refers to the issue of banking. As we know, each year there is a surplus of renewable energy certificates that are banked or saved for future years. This surplus equals about a year’s worth of demand and it helps the liable parties, the electricity retailers, manage their obligations.

By splitting the renewable energy target into large-scale renewables—that is, essentially wind and small-scale schemes—the bill we are dealing with, the Renewable Energy (Electricity) Amendment Bill 2010, ensures that the RECs from the small systems do not crowd out investment in the large renewable energy systems. But the problem is that between now and the end of this year there will be a lot of renewable energy certificates produced from the small systems and they will be eligible to be used towards the large-scale target. So the real question is: how many of those certificates are going to be generated between now and the end of the year and what will that do to the price of certificates in the large-scale system?

The government modelling suggests there will be 16.2 million renewable energy certificates banked by the beginning of next year. If that is roughly correct it would be fine; it would provide the liquidity that is required in the large-scale market. But the trouble is that the industry calculates the number of banked renewable energy certificates will more likely be 23 to 25 million, with AGL saying that it could be as high as 32 million certificates. If the number is that high then you will see exactly the same situation as we have now. We will have a collapse in the price, and so there will be a further delay in investment in large-scale renewable energy. We do not want that to occur. This amendment basically says that if the number of banked renewable energy certificates is higher than the government expects as a result of its own modelling—that is, higher than 16.2 million RECs—the target in the subsequent two years will be increased. For example, if 24 million RECs were banked that would be an excess of 8 million RECs, so the target would be increased by 4 million in 2011 and in 2012 to deal with the problem.

I have raised this matter with the government several times. I am really concerned about the modelling. The government modelling got it so wrong last year that we have ended up in the situation of being back here. At the time when this legislation to increase the target to 20 per cent first came in, I pointed out that all of the renewable energy certificates from the small system would crowd the market and collapse the price and that there would be no incentive for large-scale renewables. I moved an amendment to put those on top of the target, and that was voted down by the coalition and by the government. Nobody actually challenged the government’s modelling, and the government got it wrong.

I am really worried that the government’s modelling of 16 million RECs is wrong again, and that is why I have moved this amendment. I am grateful to the minister for the discussions that we have had in this regard. I believe that the baseline here should be the government’s modelling, 16 million, and anything above that should be added on to targets in future years, so I am moving the amendment to that effect.

I am aware that the minister has had some discussions around this and is thinking of maybe 20 million. The question I would like to pose to the minister is: since the government’s modelling is 16.2 million, why is the government thinking of 20 million as the threshold? Is the government’s modelling wrong? Is industry right? Why has the minister settled on that figure, if indeed she has? I wish to foreshadow that if the government does move its own amendment in this regard then it is likely that I will be seeking leave to withdraw mine. I want to give advance warning to the chamber that that is under consideration.