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Wednesday, 19 August 2009
Page: 5456


Senator XENOPHON (5:56 PM) —by leave—I move my amendments (1) to (3) on sheet 5875:

(1)    Schedule 1, page 4 (after line 14), after item 2A, insert:

2AA  Subsection 5(1)

Insert:

air source heat pump water heater means a device that uses a vapour compression cycle incorporating a compressor, an evaporator that collects energy from the latent and sensible heat of the atmosphere and a condenser that delivers heat either directly or indirectly to a hot water storage container.

(2)    Schedule 1, page 7 (after line 14), after item 3Q, insert:

3R  At the end of subsection 21(3)

Add “which must not be before the actual date of installation”.

3S  At the end of section 21

Add:

         (4)    Certificates must only be created for the installation of an air source heat pump water heater having a volumetric capacity of not more than 700 litres.

(3)    Schedule 1, page 7 (after line 14), after item 3Q, insert:

3U  At the end of Subdivision B of Division 4 of Part 2

Add:

23AB  Regulations to phase out air source heat pump water heaters from scheme

         (1)    The regulations must provide for air source heat pump water heaters to be phased out of the scheme constituted by this Act by the end of 16 February 2010.

         (2)    For the purposes of subsection (1), the regulations must provide that each month the number of certificates that can be created for the installation of an air source heat pump water heater having a volumetric capacity of not more than 700 litres are proportionally reduced, so that no certificates can be created for such an installation after the end of 16 February 2010.

These amendments relate to what is clearly a rort. The amendments define air source heat pump water heaters, stop the RECs multiplier for commercial heat pump installations and introduce a six-month phase-out of air source heat pumps.

Amendment (1) inserts a definition for air source heat pump water heaters. The reason that this is important is that there can be some confusion as to the different types of water heating. A common form of water heating is solar hot water units. These units run water through a solar collector panel on a roof where the water is heated before being stored in a tank. Where there is not enough sunlight to heat all the water, either electric or gas powered boosters can be used. These units will not be impacted by this amendment. Another form of water heating is heat pumps. Broadly speaking, heat pumps use ambient energy to collate and deliver heat to water in a storage container through a condenser.

By contrast, air source heat pumps, as this definition indicates, use an air source evaporator which runs on electricity to collect both latent and sensible heat, as it is defined, to collect ambient energy. For the sake of clarity, ‘sensible heat’ refers to the heat that can be sensed or measured. Without a solar attachment this form of heat pump is little more than an inefficient electrical appliance which uses a refrigerator to create a differential that draws in heat from the atmosphere around it. It is this specific heat pump that is the target of the following amendments. The amendments make it clear that this is about closing a loophole. I think it ought to be acknowledged that this is not what the RET scheme should be about and that it has been rorted. The amendments, by the linking of the REC to the installation date, mirror other provisions for REC calculation in the bill and give some clarity and a time frame in which to phase out these heaters.

The amendments also relate to domestic heaters. My first preference is to get rid of all of these air source heat pump heaters but also to have an alternative amendment with respect to commercial heaters over 700 litres. I note that the coalition has expressed concern in relation to this as well, as has the government. My concern, based on the evidence that was given to the Senate committee hearing in relation to this recently, is that this has been the subject of considerable rorting and abuse. That is something that we ought to stop. There have been real problems with this, particularly in relation to commercial water heaters over 700 litres. In the evidence given to the Senate inquiry recently we heard that, for instance, it might cost $2½ million to install multiple units and there are RECs of double that amount. They are being installed by one particular installer, from the information that I have been given, simply for the purpose of rorting the RECs. That crowds out installers of other, genuine renewable forms of energy and prevents them from availing themselves of this scheme.

These pumps do not create energy. They use electricity to create hot water. They have been abused on a widespread basis. It is important that we act on this to get rid of the commercial pumps immediately, and that is what this amendment seeks to do. By way of context, my office was recently contacted by Dr Hugh Saddler, Adjunct Professor at ANU and Managing Director of the Sustainability Advice Team. His organisation was previously involved in modelling the energy efficiency performance of all water heaters, including heat pumps. He has expressed concern that the modelling that he did previously for the department of the environment, which used preliminary assumptions about heat pump performance, has been used as the basis for the continued inclusion of heat pumps in the RET. He is also concerned that the modelling used by the Office of the Renewable Energy Regulator to calculate RECs entitlements for heat pumps compounds the problem of incorrect performance assumptions by using inappropriate climate assumptions. He believes that when modelling is carried out to take into account what is now known about the lower performance of heat pumps in cool climates, where the ambient temperature is lower—that is, where the appropriate climate data is used—it shows that heat pump water heaters are provided with far more RECs than their actual energy efficiency should allow. He suggests that the amount of energy purchased to meet the set demand for water heating varies greatly by city, time and season and that this should be factored into the REC calculations.

I have raised with the minister’s office what Dr Saddler has put forward, so I would be grateful if I could get a response from the government in relation to that. I would also like to know their attitude—and the opposition’s attitude, for that matter—towards what is clearly a rort in the system. The sooner we get rid of this rort, the more viable the renewable energy target will be.