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Tuesday, 18 August 2009
Page: 5234

Senator HURLEY (5:10 PM) —Throughout the various inquiries that have occurred over the past year into Australia’s response to climate change one thing has been perfectly clear: if we as a nation are to move to reduce our carbon emissions at least cost to the economy and whilst maintaining energy security, we must fast-track investment and research and development into renewable energy alternatives. The renewable energy target will not, by itself, turn around Australia’s increasing emissions but it will play its part in a suite of measures to decrease Australia’s dependence on fossil fuels into the future, and it is certainly a fact that Australia has by world standards a very high dependence on fossil fuels.

Given the rejection of the CPRS in the chamber last week, the government has agreed to decouple both the Renewable Energy (Electricity) Amendment Bill 2009 and the Renewable Energy (Electricity) (Charge) Amendment Bill 2009 from the legislation in order to provide business certainty to the hundreds of renewable energy businesses and thousands of Australian consumers seeking access to renewable technologies. This is despite evidence from a legislation efficiency and environmental perspective that the bills made more sense operating together with joint transitional assistance.

Just last night, on Lateline Business, Mr Andrew Petersen of PricewaterhouseCoopers, when questioned whether the decoupling of the bills made sense, said:

I don’t think it does. I think they do talk to each other, there’s a language here in relation to elements of all policy around your greenhouse gas emission reduction, whether it’s energy efficiency, a carbon pollution reduction scheme, or whether it’s the mandatory renewable energy target.

Indeed, the Senate Economies Committee heard evidence that over 20,000 jobs will be created in the renewable energy sector due to renewable energy technology changes. Modelling by McLennan Magasanik Associates undertaken for the Department of Climate Change, modelling by Access Economics for the Clean Energy Council and research undertaken by the Climate Institute all support these estimates. The committee also heard that modelling undertaken at a sub-state level incorporated inherent biases. Modelling tools do not allow for disaggregation below a sub-state level to take account of any abatement opportunities generated and therefore do not take into account any of the new jobs created in the renewable energy sector. I think that is a very important point for people who do not understand that modelling is a useful but often inaccurate tool. The sub-state regional modelling figures quoted by some in the opposition do not actually make sense. It meant that the more negative modelling presented on this issue was fundamentally flawed in its projections regarding employment in regional Australia; we have heard a lot from the National Party on that issue. Modelling by both Treasury and the Minerals Council projects that real wages will continue to grow with both the RET and the CPRS.

Many submissions were received from the renewable sector, in particular the solar energy area, highlighting the potential damage to the industry and its job potential should the RET legislation be further delayed. The government was not going to allow the creation of more than 20,000 jobs in this area to be sacrificed because of the inability of those opposite to come to a united position on climate change. The RET bills implement an agreement on a renewable energy target reached by COAG on 30 April 2009. This agreement aims to have at least 20 per cent of Australia’s electricity supply coming from renewable sources by 2020.

This renewable energy technology bill expands the mandatory renewable energy technology scheme and replaces various state and territory schemes with one national scheme. That is also important for business certainty and for those businesses that have a national base. It continues many of the features of the mandatory renewable energy scheme, such as eligible sources and the banking of renewable energy certificates to encourage smoother investment.

At the 2007 election, the Liberal and National parties made a commitment to 15 per cent renewable energy targets by 2020. The Greens, as Senator Milne said, committed to 25 per cent and the government to 20 per cent. We have heard commitments from all sides that appear to support getting this legislation passed and operating, with a predictable divergence of views that the RET does not go far enough or goes too far. We have already had over the desk a number of amendments to these bills. But I think we must keep in mind the central fact here: we need this bill passed. I believe that the 20 per cent target by 2020 is achievable, but it will indeed present some serious challenges. The government, in designing this scheme, have worked very diligently to get the balance right. There are several factors in this. Let us have a look at some cold, hard facts about the transition we have to undertake.

Coal-fired power currently accounts for 80 per cent of Australia’s electricity generation. Australia is reliant on fossil fuels to generate electricity, and these account for over a third of Australia’s emissions of greenhouse gases. These are the facts that the government is grappling with in any realistic discussion about transitioning to a low-carbon economy. These are the facts that the government has taken into account when designing both the CPRS and the RET scheme, with the understanding that both will be necessary if we are to reduce our contribution to global emissions. At the moment, the production of baseload power from renewables is neither physically nor commercially viable. This is not to say that it cannot be viable and achievable in a relatively short time frame but that today it is simply not viable. So we do have to make compromises.

The CSIRO, in providing evidence to a recent inquiry, pointed out that geothermal, a form of renewable energy that has enormous potential in my home state of South Australia and indeed in other states, and which I think has universal support in this parliament, is looked on as a baseload technology. It does not have the intermittency and variability challenges faced by wind, wave and solar technologies. However, the technology is not yet up and running, and it is some years from being commercially proven on a large-scale basis. I have followed this technology for probably about 10 years. I know they always feel they are very close to getting it up and running, but I believe it is still some years away from being operational on a large scale. I watch with great interest the development of Geodynamics’s proof of concept operations with Origin Energy in the South Australian outback town of Innamincka, which is to progress to a commercial demonstration. Though only a very small town—if you blinked, you would miss Innamincka, I think—it will be a trial project to generate the town’s electricity entirely from geothermal energy supply.

Having noted the concerns regarding baseload generation and our current dependence on fossil fuels, there is also much to be optimistic about concerning our ability to fast-track renewable investment and development in Australia. Evidence provided by the Clean Energy Council highlighted the important contribution renewable sources could make to generating electricity. I think through Australia we have all seen the start of that, and it has been well canvassed. The committee heard that Australia is one of perhaps three or four countries with the potential to power itself entirely from renewables in the future. However, this will require diverse investment and commercialisation across a broad range of renewable technologies in really what is a fairly short time in our country.

The RET is only one measure the government have put in place to ensure Australia is well placed to take advantage of these opportunities. Other measures the government have introduced will ensure we give Australia’s renewable energy sector every opportunity to compete viably over the long term. They include $0.1 billion for the Australian Solar Institute to support research; $1.5 billion for the Solar Flagships Program; $0.5 billion for the Australian Centre for Renewable Energy to promote development, commercialisation and deployment of renewable technologies; $0.5 billion for Renewables Australia to support technological research and bring it to market; and $0.5 billion for our National Solar Schools Program. All of these measures will assist in conjunction with the RET to assist the fast-tracking of renewable technologies and assist with the commercialisation of these sectors to eventually become competitive with traditional electricity generation. I would like to emphasise that commercialisation aspect, because in my many years of contact with new and emerging technologies it is not so much the research and development but the commercialisation at which companies get stuck. I think we need to concentrate very heavily on ensuring that transition from a prototype to a commercial operation.

The committee received evidence on a number of other factors affecting our renewable energy measures, and some concerned some of the problems that have arisen. Senator Milne was critical of some of the transitional measures to assist companies, and I am not so critical. I think that we do need to ensure that—and we are talking about the RET today, but this concerns, hopefully, the introduction of the CPRS—the transition goes as smoothly as possible and that the adjustment occurs after the introduction of those two measures.

One industry that has got quite a lot of attention is the aluminium industry. The committee received evidence that, even on a pessimistic assumption, all but the aluminium industry will face an increase in costs of under 0.5 per cent, with the majority under 0.1 per cent. This represents less than the impact of a typical day’s movement in the exchange rates. In regard to the aluminium industry, the committee found that the RET would not change most of the factors the industry gives for operating in Australia. These were the cited by the industry itself as Australia having the natural resources, the integrated supply chain and a skilled workforce. The final reason cited by the industry for operating in Australia was competitive energy supplies. Other major producers of aluminium are Canada, China and the US. They have already introduced renewable energy technologies in most of the areas where the aluminium industry is operating, and Senator Milne went through that. We do, however, need to take into account what the aluminium industry is saying, and the government has covered that in the bills we have before us.

Finally, in regard to claims about the increases in electricity prices due to the increased RET, the committee heard modelling from Treasury, McLennan Magasanik Associates and the Clean Energy Council. They concurred that electricity prices would rise by approximately three per cent in the period 2010-20. Interestingly, modelling undertaken by the Business Council of Australia and ROAM Consulting found RET would make wholesale electricity prices lower than they would be otherwise, although I very much doubt that companies such as those operating in the aluminium industry would make windfall gains out of that.

No government, having brought in renewable energy technologies or the CPRS, would then abandon any industry. This government has always acted responsibly in terms of the economy, and it would keep a keen eye on the operation of industries like the aluminium industry and other industries that receive interim assistance cited by the government, such as aluminium smelting, silicon production and newsprint manufacturing. I am sure that this responsible government would not allow those industries to go under, despite some hysterical claims to the contrary.

Senator Birmingham also mentioned the natural gas industry. Being from South Australia, like Senator Birmingham, I recognise the importance of the natural gas industry. I have also heard them lobbying about the importance of natural gas and it being a cleaner energy source than coal or some other sources currently being used. Natural gas has the ability to step into the breach in a transitional period and reduce our carbon emissions. Clearly it is not a renewable technology and does not fit into these bills, but I echo some of what Senator Birmingham talked about and urge that it be considered in that transitional phase. I say to Senator Birmingham: it is the CPRS-type structure that allows the funding and flexibility to enable not only the natural gas industry but also other industries to be funded and supported in transition. That is why, I believe, the government wants them considered together: because there is the ability to support these industries under the CPRS. In that context, to consider the RET separately does not make sense.

To conclude, I reaffirm that tackling the issue of reducing Australia’s carbon pollution is decidedly challenging. It is not an easy process, but it has to be started now. The government has consulted widely, building on over a decade of analysis, modelling and policy formulation to give a scheme that will deliver real environmental outcomes at the lowest cost to the economy and with the smoothest transition possible. It is frankly absurd to suggest that any government would not seek to deliver these principles when seeking to introduce such a massive economic reform. However, the RET legislation is profoundly important to ensure the sustainability and growth of hundreds of businesses, which will see the creation of more than 20,000 jobs and the investment of an estimated $28 billion over the next decade. Not only is this important as part of our tackling carbon pollution; it is also economically and technologically important for Australia to be ahead of the game—or at least in the leading edge of the game—in developing these technologies. Australians have great faith in the ability of our scientists, engineers and technologists to develop those technologies. The current government, through Minister Kim Carr, has put additional resources and funding towards ensuring that we are developing that research capability in our universities and technical institutions throughout Australia and that it is supported and encouraged through This is something that we can utilise in the development of renewable energy. It is vitally important that we pass this legislation. I commend the bills to the Senate.