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Wednesday, 24 February 2010
Page: 1052


Senator MILNE (3:43 PM) —I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.


Senator MILNE —I table the explanatory memorandum. I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Lifting the Howard government’s Renewable Energy Target to a more ambitious level - one which would actually stimulate growth in this critically important sector - was one of Rudd Labor’s key climate change promises in the 2007 election campaign. However, after dragging its feet for 18 months, the government finally introduced legislation which was clearly not going to achieve its aims.

The renewable energy sector, energy experts and the Greens all warned at the time that including solar hot water, heat pumps and the ill-thought-out solar multiplier in the scheme threatened to undermine its ability to deliver. A large portion of the target would be met by energy efficiency measures and “phantom” certificates from the multiplier, not representing any renewable energy generation at all. This defeats the purpose of the scheme, which was to drive investment in large scale renewable energy generation, such as wind farms.

The Greens moved amendments at the time to avoid this problem. However, the government and opposition joined to reject the amendments, denying that there would be a problem.

What so many warned of last year has now come to pass and jobs and investment in industrial scale renewable energy are now at risk unless action is taken rapidly to fix the scheme. AGL has recently warned that they have built their last wind farm in Australia until the Renewable Energy Target is fixed. Roaring Forties has put its Musselroe wind farm development in Tasmania on hold until the scheme is fixed.

The Greens are now introducing the Renewable Energy - Electricity (Water Heaters and Phantom Certificates Bill) 2010 to redress the fact that the supply of Renewable Energy Certificates created by the installation of solar hot water systems, heat pump hot water systems and photovoltaic systems has exceeded demand and suppressed the value of Renewable Energy Certificates (RECs).

While ongoing Government measures to rapidly expand the efficient hot water and photovoltaic industries are essential, the low value of RECs has stalled investment in renewable energy power stations such as wind farms.

The current collapse in REC price was largely caused by:

  • The inclusion of energy efficiency measures in the Renewable Energy Target (due to the absence of a national Energy Efficiency Target Scheme), with the number of RECs created by solar and heat pump hot water systems boosted by generous rebates. 
  • The introduction of ‘small generation units’, which multiplies the number of RECs provided to roof-top photovoltaic systems in particular, thereby producing “phantom RECs”. This scheme is a short-term attempt to arrest a collapse in the photovoltaic industry after the ill-advised cessation of the Photovoltaic Rebate Program.
  • The overly generous methodology used to calculate how many RECs to reward to commercial scale heat pumps (which despite Government tinkering last year remains problematic).

In order to urgently restore the REC price to levels required for investment in renewable energy power stations, as well as provide longer-term certainty to the manufacturers and installers of efficient hot water systems, this Bill requires:

1. The Minister to develop and announce an alternative approach to support solar hot water systems and heat pump hot water system industries by July 2011, for commencement in July 2012. An obvious option would be a national energy efficiency credit trading scheme - effectively an energy efficiency policy equivalent of the renewable energy target.

2. That the Minister ensures that the phasing-out of electric resistance water heaters agreed by the Council of Australian Governments and included in the National Strategy on Energy Efficiency (dated July 2009) is completed by 30 June 2012.

3. That the number of RECs created by solar hot water systems, heat pump hot water systems and “phantom RECs” each year, starting with the year 2009/10, must be added to the subsequent year’s renewable energy target. The adjusted target must be determined by the Regulator by 30 September in each of the relevant years.

These changes will have two substantive effects. First, making hot water RECs and phantom RECs additional to the renewable energy target increases the target and therefore places upward pressure on the REC price in the near term. Second the removal of hot water RECs from the scheme in 2012 will substantially increase the demand for RECs from renewable energy power stations from that time onward.

Given the urgency to reduce greenhouse gas emissions, the government must ensure that appropriate, long-term and secure investment signals are provided to both energy efficiency and small and large scale renewable energy industries.

This bill would go some way to fixing the problem and I commend it to the Senate.


Senator MILNE —I seek leave to continue my remarks later.

Leave granted; debate adjourned.