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Tuesday, 29 May 2012
Page: 6082


Ms PARKE (Fremantle) (21:11): I am very pleased to support the Clean Energy Finance Corporation Bill 2012 and related bills and to welcome the era of new technology development that they surely herald. I welcome this instalment in the government's carefully designed and far-reaching program for addressing carbon pollution, for addressing our reliance on hydrocarbons, and for setting up Australia as a leader when it comes to renewable energy and related technologies. This is a focused, forward-looking reformist Labor government, and we are getting things done, notwithstanding the vicissitudes of a minority parliament and a hostile coalition opposition, and we have just heard an example of that from the member for Forrest.

The policies and decisions of this Labor government, taken hand in hand with the resilience and creativity of Australian individuals and businesses, have made Australia a leader in economic management, and it is from that position of strength that we are leading this country through big-picture reforms in the areas of renewable energy and energy efficiency, in the areas of health and disability support, and in the areas of marine protection and transport infrastructure and reform. The clean energy legislation is a big part of that broad and deep reform effort, and it is a credit to the minister and the parliamentary secretary, to their staff, and the staff in the Department of Climate Change and Energy Efficiency that we stand on the brink of a new and promising trend of technological innovation in Australia.

Every day it seems there are events and challenges, both here in Australia and overseas, that can make it difficult to be optimistic about the world and our place in it. Terrible things happen and wicked problems persist. Economic crises are prompted by short-sightedness, poor regulation and greed. Economic successes are still too often characterised by inequality, selfishness and waste. Maybe that is an unnecessarily dark view, but it is one that can be hard to resist. And it is partly for that reason that we should recognise when we can the good things that we are capable of. In saying that, I strongly believe that the global effort to address the problems we have made for ourselves in the form of carbon pollution and hydrocarbon reliance will draw out some of the best human qualities. Like many people, I find it a bit sad that adversity is sometimes required to provoke the best in us, but I guess the best in us is worth having in any circumstances. The creation of the Clean Energy Finance Corporation is a significant development in our history, the point at which a great flourishing of new low-carbon or no-carbon energy sources and other energy efficiency measures will be developed as the mainstay of Australia's electricity needs in the decades to come.

Australia is far from alone in this effort, and indeed I have spoken before in this place to highlight the massive expansion of renewable energy investment and capacity that is occurring across the globe. As part of that global effort, this legislation is something that should make us all feel more positive and more optimistic about the direction in which we are headed as a nation. As a key component of the clean energy future package of reforms, these bills fit within a worldwide policy effort that gives me renewed hope in the idea of human progress and in the idea that we can learn from our mistakes and even outgrow the historical limitation of governing without enough regard to intergenerational needs or our shared international wellbeing.

The Clean Energy Finance Corporation, CEFC, is the part of the clean energy future package that will create an Australian economy that is more responsive to the needs of our burgeoning clean energy and energy efficiency industry. The government's $10 billion investment will play a supercharged enabling role in kick-starting new initiatives and in opening new private investment opportunities for low-carbon and no-carbon renewable energy projects. What is more, the CEFC will have the broader benefits of underwriting the improved design and construction of clean energy technology and the indirect benefit of creating lower cost technology. With the Australian clean energy market still in its early development, major obstacles exist in the currently limited and constrained allocation of capital for such initiatives. A number of these barriers were identified in the expert review chaired by Jillian Broadbent, and the structure and operation of the CEFC respond to the recommendations of that review.

The CEFC will function to stimulate private sector investment and financing for clean energy technologies. It will use a range of mechanisms to overcome the kinds of barriers identified by the expert review. For example, it will have the ability to provide direct funds, offer concessional cost funds, lengthen the available tenure of private sector loans, and favourably alter the allocation of risk amongst lending participants. By taking the lead in clean energy technology investments, the CEFC will act as a catalyst for the industry and for private market funding of new entrants. The corporation is not a grants program and the intention is not to compete with the private sector but, rather, to foster private sector energy growth in the clean energy market and associated industries by acting to overcome those existing private lending obstacles that are not really based on investment viability per se yet are real obstacles nonetheless in the current tight capital lending environment.

The board of the CEFC will be responsible for decision making and investments, and its operations are structured to avoid risks by being both transparent in its processes and of course fully accountable in relation to all individual investment decisions. The dividends from the CEFC earnings will be paid to the Australian Renewable Energy Agency. The funding provided to the CEFC will be a special appropriation of $2 billion per annum for five years from 1 July 2013. In addition, the corporation will receive operational and start-up funding through the budget of around $60 million over three years. The intention is that the CEFC will become financially self-sufficient, using its earnings to fund its operational expenses without further supplementary funding.

Appropriate capital finance support to underwrite the development of the emerging renewable energy sector is critical. Without such assistance, the huge potential of Australian inventors, innovators and entrepreneurs will be lost or, at best, it will go elsewhere. The importance of support in the form of capital finance is even greater now than it would normally be because capital markets are tight and constrained.

On that point, people need to remember what it is we are seeking to foster here. As Michael Ottaviano, the CEO of Carnegie Wave Energy in my electorate, has pointed out, the existing energy generation technologies and infrastructure that we all rely upon were not only developed with government support but wholly owned and run by government through almost all of the time in which electricity has been provided as a basic service to households and industry.

It is also salient to again emphasise that, where the Clean Energy Finance Corporation provides funding support, it will look to do so in a way that opens up avenues of private investment. This is the right and proper enabling role of government: first, to identify the country's long-term and strategic future needs; second, to recognise that these go above and beyond a much tighter horizon and profit frame in which business operates; and, third, to weigh both the wider costs of market inaction and the wider benefits of carefully rated risk and innovation.

I was very taken with a summary of the renewable energy development challenge that confronts all governments in an article by James Surowiecki in the 10 October 2011 edition of the New Yorker. In that piece he wrote:

… there are few industries where it makes a lot of sense for the government to complement the market by subsidising research and development. Renewable energy is one of them. That's because the energy market is not like most other markets. Indeed, the economics of alternative energy are such that private investors, left to their own devices, are bound to under-invest in it, since the considerable social benefits—cleaner air, fewer greenhouse emissions—accrue to everyone, not just to direct customers. That means that the economic rate of return is significantly less than the social rate of return. Energy markets are also dominated by entrenched, regulated companies, and that reduces the incentive for investment. Despite the immense size of the energy market, as of 2005 spending on energy R&D accounted for just 2 per cent of spending on R&D in the U.S. This creates an opportunity for the government to add value by investing smartly, just as it can add value by spending money on education or infrastructure, other areas where the social returns are greater than the economic ones.

That view is very much a part of how we have approached the task of setting Australia on the path to a cleaner and more sustainable energy future, with all the economic, environmental and social benefits this will deliver.

It is the same approach that the Labor government has taken with great success in first launching the incredible boom that we have seen in household solar PV systems, then gradually tapering our support as the industry's growing strength and the well-established private demand have made that higher level support unnecessary.

I am extremely pleased to support these bills and I am proud to be part of a Labor government that has fully applied itself to the challenge of reform, with all its difficulties but also most importantly with all its long-term rewards. I believe Australia will have a clean energy future. It is absolutely essential that we do and it begins with the work of this government in partnership with all the many and varied Australian innovators, inventors and entrepreneurs that we are seeking to support.