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Thursday, 12 December 2002
Page: 8041

Senator MACKAY (12:05 AM) —I seek leave to have my speech on the second reading of the Renewable Energy (Electricity) Amendment Bill 2002 incorporated in Hansard.

Leave granted.

The speech read as follows—

I rise to speak today on the Renewable Energy (Electricity) Amendment Bill 2002. As a Tasmanian Senator I have a strong interest in this Bill, as renewable energy generation is a significant part of Tasmania's economy, and therefore, this has great significance for my state. As Deputy Chair of the Environment, Communications, Information Technology and the Arts Senate Legislation Committee I was present at the Senate Inquiry into this Bill. The subsequent Senate Report outlines the findings of that Committee, which I intend to canvass today.

This bill amends the Renewable Energy (Electricity) Act 2000, and aims to clarify important definitions in the original legislation, and to provide for greater efficiency and effectiveness in the administration of the legislation. There have been a number of minor complications in the operation of the legislation that have been revealed by the Office of the Renewable Energy Regulator. These need to be dealt with to ensure the consistency of the legislation and the accomplishment of its objectives.

The purpose of the Act was to establish the Mandatory Renewable Energy Target, otherwise known as MRET. This target is to generate an additional 9,500 megawatts of renewable energy by 2010. This was to mean that renewable energy based generation would rise from 10.7 per cent in the late 1990s to the projected 12.7 per cent by 2010.

The scheme, therefore, was designed to increase investment in the renewable energy market and to potentially decrease greenhouse gas emissions by approximately seven million tonnes per annum by the target year of 2010.

This target has become problematic, as the predicted energy consumption of Australia was actually too low. We are consuming more energy than anticipated. Therefore, 9,500 megawatts does not equate to a 2 per cent increase as forecasted. Rather 13,500 megawatts would produce a true 2 per cent increase of renewable energy.

My colleagues in the House of Representatives have spoken of increasing the MRET to 5 per cent. I am in support of this as it would stimulate an increase of new renewable energy projects.

The objective of the MRET scheme is to accelerate the uptake of renewable energy—that is, energy that does not come from fossil fuels—so as to reduce greenhouse gas emissions and to provide an ongoing base for the development of commercially competitive renewable energy. Furthermore, the scheme is designed to contribute to the development of internationally competitive industries which could participate effectively in the Asian energy market. An increase of the target to 5 per cent would surely provide the industry incentive and therefore, achieve these objectives.

The MRET scheme has enabled Tasmania to upgrade its aging hydro plants which are on average 45 years old. These upgrades will enable the plants to become more effective in their generation of renewable energy. The scheme has also underpinned development of new mini hydro projects and wind farms in Tasmania.

Hydro Tasmania has secured development approval for a substantially large 130-megawatt wind farm at Woolnorth in northwest Tasmania. The first 10.5 megawatts have recently been commissioned. Two other sites, Heemskirk, on Tasmania's west coast, and Musselroe, in the northeast of the state, are at an advanced stage of investigation and development applications have been submitted for them. These two projects will have a total installed capacity of around 300 megawatts. Furthermore, Hydro Tasmania is continuing with interstate wind development opportunities in South Australia and in Western Australia. In conjunction with Basslink these projects will make Tasmania a significant contributor to energy production in Australia. The most impressive part of this is that this energy will be renewable. The MRET scheme has provided incentive for this growth and investment to occur.

The current commitments by Hydro Tasmania to develop 420 megawatts of wind farm capacity in the state—and up to 1,000 megawatts could be developed—have been used to encourage investment in the local manufacture of wind turbine components.

An example of this is Vestas, a Danish company, which is in final negotiations with the Tasmanian Government and already there is a site chosen at Burnie for a Nacelle assembly plant. This equates to regional jobs and local investment in Tasmania.

MRET has contributed to this investment in Tasmania as the scheme stimulates further renewable energy generation and, from that, the stimulation of economic development, both directly and indirectly. The MRET driven renewable energy capital expenditure to 2010 in my home state, as I understand, will involve plant upgrades of $208 million, $5.5 million in mini hydro projects, wind farm projects of $620 million—that is just those involving Hydro Tasmania, not other private players—and wind farm developments on the mainland totalling approximately $440 million.

This highlights the significant investment undertaken in the renewable energy sector by Hydro Tasmania.

A number of submissions and witnesses at the Inquiry into this Bill suggested that Hydro Tasmania, in particular, generated renewable energy certificates, known as RECs, without any additional investment in renewable energy.

MRET requires liable entities to surrender to the Renewable Energy Regulator sufficient tradable RECs to cover their required purchases of electricity generated from renewable sources. RECs are produced by renewable energy generators and are sold to liable entities. The purpose of RECs is to enable liable entities to avoid or adjust the amount of any renewable energy shortfall charge that they would otherwise have to pay when they acquire electricity from non-renewable sources.

I disagree with the suggestion that Hydro Tasmania is in receipt of some kind of windfall arrangement. These submissions and witnesses seem to negate that the intention of the Renewable Energy (Electricity) Act 2000 was to generate additional renewable energy from both new plants and existing ones.

To ensure this would run smoothly the Renewable Energy Regulator set up baselines which for existing hydro generators were based on the previous 14-year average. Renewable energy produced above this baseline would generate RECs. Hence, production above the baseline is regarded as additional renewable energy.

Hydro Tasmania's ability to create RECs has enabled upgrades of plants and investment in new projects. Hydro Tasmania is, therefore, doing the right thing by Australia in generating and investing in clean, green energy.

This is possible through MRET and any fundamental changes to this scheme that were suggested in the Inquiry should be left until the Review which is to commence in January 2003.

The scheme is only 0.25 per cent completed. It is impulsive to make substantive amendments at this stage. Significant changes to the scheme so early in its implementation could severely undermine industry investment as the potential is there to create market uncertainty. Particularly when the Review will examine the policy issues regarding this Act in great detail. The Bill is for administrative changes only in which I give my support.

I further support, as mentioned earlier, the raising of MRET to 5 per cent. This will significantly generate new investment in the renewable energies industry.

I am proud to be living in a state which is committed to the renewable energy sector. Tasmania contributes over 60 per cent of Australia's renewable energy. This clean, green energy is helping to reduce greenhouse gas emissions. The MRET scheme contributes to this and I am not in support of the CoAG Energy Market Review Panel, chaired by former Liberal minister Warwick Parer, that MRET should be abandoned.

This recommendation if implemented would be disastrous for the renewable energies industry in Australia, especially for the main renewable energy generator, my home state of Tasmania.