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Monday, 26 November 2012
Page: 9765


Senator BOSWELL (Queensland) (19:30): I speak tonight on the green policies currently hurting the pockets of Australian power users, the carbon tax and the renewable energy target. The energy white paper recently released by the government has made several recommendations to alleviate rising power bills. If the government were serious about easing energy prices, and pressures on families and businesses, they would do better to address the cost impact of the carbon tax and the RET.

The carbon tax is placing an $8 billion a year burden on Australia and must be abolished. Not far behind it is the $5 billion a year RET, which Labor's Chief Whip, Joel Fitzgibbon, has rightly questioned. The RET is lowering electricity demand and pushing up electricity costs. These costs will only go higher as the percentage of our power sources from renewables goes from 10 per cent now to the 20 per cent target in 2020. The RET is foisting expensive and unreliable power on us and driving out the cheap, dependable and abundant energy sources we have relied on for decades.

But if Fitzgibbon is truly concerned about the rising electricity costs, he should also criticise the carbon tax, which is the major contributor to the higher power bills. Every day we are seeing power companies shutting down units and slashing jobs. This is due to current low electricity demand and falling demand forecast resulting from the RET and now the carbon price, which is creating an oversupply in the market. The low price this creates, as electricity regulator AEMC Chairman, John Pierce, demonstrates, is temporary and must give way to a renewed price surge. As prices go up due to the RET, more and more manufacturers are being put under pressure or going out of business, which is further driving down the demand for electricity.

The fall in demand has depressed wholesale electricity prices, but because the increase in supply has been from intermittent renewable sources, the energy retailers have had to contract for more of their supplies and they can only do this at a premium. Ironically, the forced replacement of fossil fuel-driven electricity by renewables has therefore increased costs to the consumer. This is a major point that John Pierce, the Gillard-appointed Chairman of the Australian Energy Markets Commission, made last month about the distortion created by the RET.

Every industry in Australia faces higher electricity bills due to the RET and the carbon price. The target of 45 terawatt hours being sourced from renewables annually from 2020 to 2030 will require businesses to surrender an increasing number of renewable energy certificates through electricity retailers each year at considerable cost to their bottom line. In its submission to the Senate Committee on Electricity Prices, Ergon Energy estimated that the carbon price would add approximately $164 million to its electricity costs in 2012-13 alone.

The current and estimated future price hikes caused by the RET and the carbon price are sizeable. One industrial user in the state—an abattoir—told me it recently got a bill for $244,000 for electricity. Of that, $32,500 came from the RET and $45,000 came from the carbon price. This is a 50 per cent increase from this user's costs last year due to the combined influence of the RET and the carbon price.

The average cost of electricity for Queensland industrial users whose total annual consumption amounts to between 20,000 and 100,000 megawatt hours is $112.87 per megawatt hour. Of that, $21 per megawatt hour comes from the carbon price and $14.33 per megawatt hour comes from RET compliance. That means for an industrial site that consumes 50,000 megawatt hours a year with an average $5.6 million electricity bill, an average of $717,000 is due to the RET and approximately $1 million is due to the carbon price. How can anyone compete against overseas imports when saddled with this?

For smaller middle-of-the-range Queensland users who use between 1,000 and 5,000 megawatt hours per annum, the average electricity cost is $147.90 with $21 per megawatt hour coming from the carbon price and $14.62 per megawatt hour coming from renewables. These users have annual energy bills ranging from $148,000 to $740,000. Of that, the RET puts up prices between $14,620 and $73,100, while the carbon price puts up prices between $21,000 and $105,000.

Future estimates of the price impact of the RET and the carbon price on industrial users paint the same grim picture. A cost projection prepared for one industrial user in the Queensland electricity market which has an annual energy consumption of 46,304 megawatt hours, shows that in 2013 it will pay $124.85 per megawatt hour of electricity. Of that, $10.69 per megawatt hour will be due to the RET and $21.72 per megawatt hour will be due to the carbon tax. That means of its $5.78 million electricity bill next year, $495,000 will be attributable to the RET and approximately $1 million will be attributable to the carbon price.

This is in line with modelling done for the Queensland Competition Authority, which shows that complying with the LRET scheme in 2012-13 will cost $4.10 per megawatt hour, while complying with the SRES will cost $6.38 per megawatt hour, bringing the total estimated cost of the RET to $10.48 per megawatt hour.

These costs have seen industry groups like the Australian Chamber of Commerce and Industry, the Business Council of Australia, the Minerals Council of Australia and the Coal Association speak out against the RET and call for its abolition.

The National Farmers Federation has singled out the RET for driving up energy prices for our agricultural sector. The NFF has criticised the target for increasing costs for farmers, particularly irrigation, dairy and grain farmers and abattoirs, who are unable to pass the costs of renewables on to their customers. It supports the removal of the RET on the grounds it will continue to push up power prices with no corresponding environmental benefit.

The RET's price impact on households has been substantial. Much of it is due to the poorly designed Small-scale Renewable Energy Scheme, SRES, which will cost us $3 billion for 2012 and 2013 alone. The recently released consumer price index figures show a 15.3 per cent increase in household electricity prices in the September quarter alone, the biggest quarterly increase since records began in December 1980. ACIL Tasman modelling done for EnergyAustralia estimates that, if the fixed large-scale RET remained unchanged, the cost to the average householder will rise from around $22 a year currently to $123 a year by 2027.

According to the modelling done for the Climate Change Authority for its recently released RET discussion paper, taking away the RET would save the average Australian householder $65 a year, while abolishing the carbon price would save the average household $185 a year. This matches estimates from IPART and the Queensland Competition Authority and the New South Wales and Queensland respective energy regulators, who have said that the RET and the carbon price together will add approximately $270 a year to typical household bills in each state. This, IPART notes, is because Australians are subsidising more renewable energy than is currently being produced. This is due to the solar credit multiplier, which gives householders back a multiple number of STCs per kilowatt hour of small-scale energy they produce. This has pushed phantom small-scale technology certificates onto the market, creating a huge oversupply. Because the SRES is uncapped, businesses are being forced to buy these phantom STCs and pass on the cost to their customers. In effect, we are paying for more energy than is actually generated by these renewable technologies.

The federal government has admitted that the solar credits scheme has driven up electricity prices for businesses and householders and it has decided to phase out the multiplier six months earlier, on 1 January next year. That is a good start, but the government should also heed IPART's call for the complete scrapping of the SRES, or at least a limit to the number of STCs businesses must buy each year. The Queensland Competition Authority has also cited concerns about the costs of solar. The Queensland Competition Authority's most recent modelling shows that by 2015-16, almost 15 per cent of the total average household power price will be used to fund solar feed-in tariffs—that is, $240 a year for each household to pay for the rooftop PV systems. These costs are made all the more staggering by the fact that solar makes up less than one per cent of Australia's electricity production. In fact of the 10 per cent total renewables that are on the market at the moment, seven per cent comes from relatively reliable hydro sources, while three per cent comes from intermittent, unreliable wind and solar power sources.

Other countries with higher intermittent renewable percentage shares have experienced much higher household electricity prices. By comparison, the household price in Australia in 2011 was US14c per kilowatt hour; Ireland, with 17 per cent wind and solar, was 22c per kilowatt hour; Portugal, with 20 per cent wind and solar, was 28c per kilowatt hour; Denmark, with 29 per cent wind and solar, was 28c per kilowatt hour; Spain, with 18 per cent wind and solar, was 30c per kilowatt hour; Germany, which has a 35 per cent renewable target for 2020 and with 11 per cent wind and solar, was 32c per kilowatt hour.

Electricity prices in these countries and the rest of the world are expected to rise by 15 per cent on average over the next decade, according to Maria van der Hoeven, the Executive Director of the International Energy Agency. She said this week that one of the key reasons for this increase was renewable energy subsidies. At the same time, she said renewables had received $88 billion in subsidies in 2011, 24 per cent more than the previous year. Renewables are driving up electricity prices more and more, and the world is pouring more and more into them. It is madness we should not follow.

In Australia, the RET is already likely to exceed its 20 per cent original goal and for this reason alone even its most passionate supporters ought to call for its reduction. Reining in the blow-out would, according to ACIL Tasman, reduce the measure's burden from $53.3 billion to $28 billion. But this is not enough. I recommend that the parliament examine the views of the Labor Party think tank the Grattan Institute, the Productivity Commission and a number of industry groups which have demonstrated a very strong case for the RET's removal. Modelling done for the Climate Change Authority shows that removing the RET altogether would save $7.8 billion in resource costs more than if the current target were retained. Unfortunately, the Climate Change Authority did not even consider in its discussion paper the cost benefits of removing the RET.

In short, renewables and the carbon price are driving up electricity prices for consumers. The current renewables target will cost $53.3 billion by 2030. Energy retailers are cutting jobs in response to the pressures created by the RET and the carbon price and, going by hard research conducted in Spain and Germany, green jobs created in our renewables sectors will fall far short of making up for these losses.

In fact, the total number of full-time green jobs in the Australian renewable energy industry has decreased from over 10,000 in 2008 to around 8,000 at present.

We can talk all day about reducing the RET figure to a 'real 20 per cent'. It would certainly help, but at the end of the day one man's subsidy is another man's penalty and we will still be saddled with a policy that lowers electricity demand, drives up prices and pushes out cheap, reliable energy for intermittent, unreliable power that is still dependent on back-up generation from coal and other power sources. Renewable energy is an expensive and ineffective way of reducing carbon emissions. The Productivity Commission estimates abatement costs to be $473 to $1,043 per carbon tonne for solar technologies and $60 per carbon tonne for wind. The Electric Power Research Institute estimates that wind-powered electricity costs $150 to $214 per megawatt hour and medium-sized solar PV systems cost $400 to $473 per megawatt hour—with smaller domestic PV systems costing even more—compared to coal-fired electricity, which costs just $78 to $91 per megawatt hour.

In the 1970s, Australia became a manufacturing country and gained an aluminium industry and other heavy industries because of the low-cost energy available in abundance in this country. We are losing these industries now because of the RET and now the carbon tax. While we cannot and should not abolish the subsidies given to those like the sugar industry and other industries that have invested in renewables—on the bipartisan support that we have offered—they should be grandfathered. Every day the RET is left unchecked the more electricity we source from expensive and inefficient renewables, and the more the cost goes up and the heavier the burden gets on industry and households. It is time Australia played to its strengths. We have got so much low-cost and reliable power in abundance here that we should be taking advantage of it. Australia is in an expensive energy hole right now because of the RET and the carbon tax, and it is time we stopped digging.