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Tuesday, 29 May 2012
Page: 6068


Dr MIKE KELLY (Eden-MonaroParliamentary Secretary for Defence) (20:14): How exciting it is to be able to speak on this visionary bill, and how disappointing it is to hear what should be the bright young future of the Liberal Party lining herself up with the dinosaurs on the front bench. What a giveaway it was to hear the member for Goldstein talk about this bill and lump it in with the NBN. Nothing could explain or illustrate to you better the lack of vision, the lack of imagination, that this coalition demonstrates. It is the sort of issue we face with a party and a coalition that is unable to meet the challenges that confront this country not only in relation to climate change but in relation to the economic needs of this country in being able to diversify our economy into the future. We heard reference to the consultation and development of this project. It makes me laugh when we think back to the Howard government's $10 billion water plan on the beer coaster that did not even go through cabinet compared to the extensive development that went into this project. We also heard the member for Flinders talk about the Howard government's record in introducing a mandatory renewable energy target. The shame of the Howard years was that through that 12-year period we saw our renewable energy generation capacity decline from 10 per cent to nine per cent. That was an incredibly shameful record of lost opportunities.

This bill is not just about climate change. In fact, you do not even have to believe in climate change to support this bill, because this bill is all about tackling those economic challenges we face, the challenges that are generated by the mining boom and the need to have an economy where we are investing in infrastructure, skills and innovation. This bill really addresses the innovation aspect of that trifecta. It also addresses the needs we will have in energy security and the needs we will have to improve the health of our population. We have the health minister here with us tonight. There are significant benefits to be had from cleaning up the air in our major cities and from getting to renewable energy. Remember, this is the move from non-renewable energy—in other words energy that will expire—to renewable energy.

In every development, every technological advancement and market improvement in human history there is always a period where price competitiveness is an issue in the introduction of new technologies. The first time you went out and bought a plasma TV they cost $12,000. They are now pushed out the door for less than $1,000. What we intend to do with measures like these is get that impetus, the strategic weight behind the shift to renewable energy. And then, as the market share increases, the volume increases and the technology improves so the price comes down. In effect, what we are doing for Australians through measures like these is delivering them a future of cheaper energy in the long-term, as renewable energy sources will inevitably be. It is the coalition that would deny them that future security and cheaper power.

It is important we get involved in innovation, as I mentioned. That is the challenge we face. We can see the impacts on our economy of the mining boom. I look to the example of Israel. I have been to visit Israel and looked at the way it has addressed innovation with similar constraints to Australia of not being able to compete with cheap labour from sources such as Asia. Innovation was the way it drove an economy that is leading the world in technological advance. This is a country that, I might point out, is 7,000 square kilometres smaller than my own electorate of Eden-Monaro yet has a venture capital pool of $16 billion. Certainly this has been driven by government policy creating a program very similar to this that stimulated co-investment from the private sector into innovation.

We heard the member for Higgins talk about the risk component of this project. It is precisely the fact that the culture of venture capital and risk-taking in Israel has delivered the economic benefits achieved. There is a need in this country to generate a culture of taking risk in innovation and in start-ups. This Clean Energy Finance Corporation Bill will help deliver that. What am I talking about? I have an example in my own backyard of Spark Solar, the company of the wonderful young scientist Michelle McCann, who had done lots of research into more efficient solar cells. Spark Solar had proposals to develop a company in Queanbeyan which would have eventually been looking to export into our region. For the want of $2 million as a final piece of investment in that company, the whole project fell over. We cannot afford to see those sorts of projects fall over. We are seeing over a billion dollars worth of investment in my region in renewable energy projects but it is into these value added, high-tech companies that we also need to diversify. This is critical. We must get behind those entrepreneurs who we have seen bleed overseas in the past.

I am also concerned that this is an aspect of our energy security. When I was in Defence and had the Middle East desk I tracked the sources of funding coming into our region to fund radical madrassas and terrorist movements as coming from some unhealthy sources of petrodollars. We know that our country is currently 80 per cent self-sufficient in fuel supplies but within 15 to 20 years that figure will flop over. We will become 80 per cent dependent on foreign supplies, which means we will be at the mercy of OPEC and conglomerates and cartels such as that, which will add to our balance of payments deficit and fuel the sources of income to some of those unhealthy influences in our region. So it is important for us to get behind transitions as quickly as possible from fossil fuels.

There is a wonderful company near my region in the Shoalhaven called Algae Tec, which is developing brilliant technology for biodiesel fuels, and this very exciting. Projects like that will have a significant boost from these sorts of finance corporation measures. We know that these measures are intended to overcome the financial barriers to commercialising and deploying cleaner energy technologies. To move us through this process we know will take us to a 40 per cent generation figure by 2050. We are on track to achieve our 20 per cent target by 2020. These measures will get us over some of those hurdles we have experienced in investment and the timidity we have seen in investment in these sorts of industries and technologies in the past in this country.

But there are lots of measures in this bill that are to be admired for their elegance. For example, what we see with the requirement to apply a commercial filter is the combination of private sector skills and disciplines married to public policy guidance. With the funds that will be generated and that will be deployed through the appropriations, we will eventually see a self-sustaining finance mechanism. A special account will be created to manage surplus funds and to limit the corporations' need to undertake a cash management function. There will also be a mechanism whereby the board will be governed by an investment mandate from government. This will be where the public policy guidance will emerge even though there will be a high degree of independence. The sorts of directions that will appear in that mandate will deal with the issues of risk and return, eligibility criteria, investments in renewable energy technologies, low-emission technologies and energy efficiency projects, the allocation of investment, limits on concessional investments and types of financial instruments in which the corporation may invest in broad operational matters. And, very importantly, we intend to apply the Australian Industry Participation Plan framework to the corporation through this investment mandate with the objective of ensuring that Australian industry is afforded full opportunity to participate in these projects. And so this investment mandate will be in the form of a legislative instrument.

How is this being received by the business world? We know that a Deloitte study of over 40 senior executives from Australian banks, super funds, venture capital firms and major investors found that they overwhelmingly support this mechanism. Certainly, we have seen comments from the Clean Energy Council, which stated through the chief executive, Kane Thornton, that this will help bridge that gap between early research and development and the commercial rollout of clean energy technologies. The Australian Solar Energy Society said that the CEFC is set to help unlock substantial investment in community-scale, commercial-scale and large-scale solar energy. In fact, they called on the federal opposition to back the CEFC. They said that the CEFC is effectively helping to meet some of the goals that would normally be part of the philosophy of the Liberal Party—a coalition alignment—in relation to tackling climate change through commercial mechanisms and commercial filters. But, of course, we have seen the abandonment of those principles by the coalition and we have seen them so reluctant to adopt measures which actually promote business and investment through all of the propositions that we have put.

But certainly the corporation, through loans, loan guarantees and equity investment support, will begin operation, based in Sydney, in the period from about 2013-14. Of course, there is the potential through the $10 billion that this fund will have at its disposal to leverage something upwards of perhaps $100 billion in private investment through the co-investment strategies and requirements of the scheme.

I would draw the attention of members to an excellent article in the Sydney Morning Herald by the economist Simon O'Connor, who pointed to other mechanisms like these: the UK Green Investment Bank, the German development agency and the China Development Bank's $30 billion clean energy investments. We have been falling behind in this space, and the analysis that he put together is very instructive. Whereas the rest of the world is embracing this method of accelerating renewable energy investment at a time of intense global spending pressures we have been falling behind. He said:

Renewables are one of the few global industries that registered continued growth throughout the GFC. Clean energy investment is up 500 per cent since 2004.

Couple this with longer term energy forecasts and the necessity becomes very apparent. He continued:

Investing now in diverse sources is critical for the holy trinity of power: energy security, insurance against price shocks and lower energy prices.

He also stated:

Most energy analysts believe it is only a matter of time before our cheap fossil fuels inflate to international prices, all because of that very successful LNG and coal export program we've got going.

He points out:

Solar costs dropped by 50 per cent in 2011 alone.

So we are seeing that clean energy can indeed be cheaper, as I highlighted earlier with how we transition from one form of technology to the other. He also pointed out that another reason is the investment case. He stated:

Australians have more than $1 trillion invested in super funds, the majority of which is being battered by overexposure to global and domestic equity markets.

So:

… part of the solution relies on a more diverse asset allocation in pension fund portfolios.

He stated:

Indeed, when the global asset consultant Mercer investigated the overexposure of pension funds to climate risk, it came to the conclusion that 40 per cent of portfolios should be reallocated to climate-sensitive assets—such as clean energy.

The Clean Energy Finance Corporation, like its global cousins, responds to these challenges by broadening the energy infrastructure assets accessible to institutional investors. The corporation will help package these clean energy assets into something that a super fund, or other large investors, can finally take a stake in.

Super funds in Australia have shown some desire already to go down this road:

Industry Funds Management owns Pacific Hydro on behalf of the industry super funds, VicSuper seeded the Cleantech Australia Fund and REST super is a cornerstone investor in a major wind farm development in Western Australia.

This, as Simon points out, is a far better mechanism than a so-called direct action policy that would require bureaucrats to pick winners. He states:

… the CEFC is a commercially driven co-investment vehicle, run by independent, financially experienced staff, chaired at this point by the impeccably credentialled Jillian Broadbent—

as he describes her. He describes this as:

… the winning strategy for mums and dads with their money in super and the investors who oversee it.

I would also like to point out, while we are at it, that in relation to the health benefits motor vehicle emissions, for example, are the main cause of outdoor pollution in Australia, accounting for about 75 per cent of that. We know that all of these particulates and pollution from the current source of non-renewable energy cause upper respiratory irritation, chronic respiratory and heart disease, lung cancer, acute respiratory infections in children and chronic bronchitis in adults, aggravating pre-existing heart and lung diseases or asthmatic attacks. In addition, short- and long-term exposures have been linked with premature mortality and reduced life expectancy.

What we can benefit from in this measure is an energy-secure and healthy future, and something that will meet the energy needs of future generations of Australians well into the future. It is this sort of creative solution to stimulate innovation and the diversified economy that this nation must have and which is long overdue. It will provide us with a potent sword to complement the shield of other measures we have introduced to slay our carbon emissions dragon. It will help us to provide the energy security, prosperity and rewarding jobs that our children have the right to expect. And it is within the gift of this generation of Australians to deliver. I commend the bill to the House.