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Monday, 17 August 2009
Page: 8048

Mr COMBET (Minister for Defence Personnel, Materiel and Science and Minister Assisting the Minister for Climate Change) (8:22 PM) —in reply—Firstly, I thank all members of this House for their contributions and their efforts in contributing to the debate on the Renewable Energy (Electricity) Amendment Bill 2009 and the Renewable Energy (Electricity) (Charge) Amendment Bill 2009. The Rudd Labor government is pursuing through this legislation a number of important changes as part of its efforts to combat the challenge of climate change. Principal amongst them is the establishment of a renewable energy target, such that 20 per cent of Australia’s electricity supply should be provided by renewable energy generation sources by the year 2020. That represents a fourfold increase in the renewable energy target and is expected to unlock, in partnership with the Carbon Pollution Reduction Scheme, up to $19 billion worth of investment in renewable energy.

The renewable energy scheme target which the government is establishing in the current legislative arrangements is based on a statutory target of 9,500 gigawatt hours to be achieved in 2010. The government is significantly expanding that target and establishing a target of 45,000 gigawatt hours from renewable energy sources by the year 2020. The expanded scheme will deliver on the government’s commitment that I outlined a moment ago, and that is to have 20 per cent of Australia’s electricity supply coming from renewable sources by 2020. As I said when I introduced the Renewable Energy (Electricity) Amendment Bill 2009 to the House some time ago, the bill will clarify the objectives of the renewable energy target scheme. It will increase annual targets for renewable energy generation from 2010 on a yearly basis, including the 45,000-gigawatt-hour target I mentioned a moment ago, which will be maintained from the year 2020 when it is achieved through to the year 2030.

The bill also implements a solar credits mechanism based on a renewable energy certificate multiplier for small-scale renewable energy including solar photovoltaic, wind and hydro systems. The bill also mandates a review of the operation of the legislation and the regulations underpinning the renewable energy target scheme in 2014. The bill also, importantly, provides for partial legislative exemptions from liability under the scheme in respect of some electricity-intensive activities. There is an amendment dealing with that issue that I will speak to in due course. The bill also provides for the transition of existing and proposed state renewable energy target schemes. On that front, the renewable energy target scheme has been designed in cooperation with the states and territories through the Council of Australian Governments and brings the mandatory renewable energy target and existing and proposed state schemes into a single national scheme. The legislation underpinning the current mandatory renewable energy target scheme comprises the Renewable Energy (Electricity) Act 2000, the Renewable Energy (Electricity) (Charge) Act 2000 and the Renewable Energy (Electricity) Regulations 2001.

Under the principal act, wholesale purchasers of electricity are required to meet a share of the renewable energy target in proportion to their share of national wholesale electricity markets. The act provides for the creation of renewable energy certificates by generators of renewable energy. One renewable energy certificate represents one megawatt hour of electricity from eligible renewable energy sources. Installations of solar hot-water heaters and small generation units are able to generate renewable energy certificates under deeming arrangements prescribed in the regulations. Once registered, the RECs, as they are called, are able to be generally traded and sold to liable parties, who may surrender them to the renewable energy regulator to demonstrate their compliance under the scheme and avoid paying what is called the shortfall charge.

The Renewable Energy (Electricity) (Charge) Act 2000 sets the level of the shortfall charge for noncompliance. In relation to the charge act there is, of course, a related bill, to which I will also speak in summing up the debate, and that is the Renewable Energy (Electricity) (Charge) Amendment Bill 2009. That amendment bill increases the level of the shortfall charge under the renewable energy target scheme from $40 per megawatt hour to $65 per megawatt hour. The shortfall charge in effect encourages compliance with the renewable energy target scheme, as liable entities who do not meet their obligations to purchase renewable energy certificates will need to pay this charge. Increasing the shortfall charge to this level will act as an incentive for investment in renewable energy in order to meet the government’s significantly increased renewable energy targets. That presents something of the context concerning these bills and the work that is done by them.

I would like to briefly address a number of the specific comments and propositions that have been raised, in particular by those in the opposition, during the course of the debate. I will turn first to the renewable energy target and the interim arrangements that the government has announced in relation to the operation of the target and its relationship with the Carbon Pollution Reduction Scheme. Yesterday the Minister for Climate Change and Water announced interim arrangements that will provide interim assistance under the renewable energy target until such time as the Carbon Pollution Reduction Scheme passes the Senate. This is about providing certainty to the renewables sector in the face of the opposition’s failure to do what the government regards as the responsible thing, and that is to pass both the CPRS and the RET legislation. The RET interim arrangements represent a less than perfect way, in our construction of it, of tackling climate change and delivering assistance to industry. But it is a very necessary course of action, given the coalition’s opposition to the CPRS legislation and their decision to vote against it in the Senate.

The government decided—by way of providing some context to this issue—and the Council of Australian Governments agreed on 30 April this year to provide assistance under the RET to activities that are emissions intensive and trade exposed under the CPRS legislation. This was in recognition of the cumulative cost impact of the RET and the carbon price to be delivered by the Carbon Pollution Reduction Scheme. However, the COAG agreement was made in the context of the CPRS legislation coming into force. The cost impact of the RET alone is small for most industries. But, in the absence of legislation implementing the CPRS, the scope and basis for assistance under the RET has had to be reconsidered by the government. The government, therefore, is proposing an amendment, which I will speak to, to allow for RET assistance to be provided to highly electricity- and emissions-intensive trade-exposed activities in the period before the CPRS legislation is in force. The government remains committed to providing assistance to all emissions-intensive trade-exposed areas to help manage the cumulative costs of the CPRS and the RET once both pieces of legislation pass the Senate.

A number of comments have also been made in relation to the aluminium industry. Those opposite have raised concerns about the impact of the renewable energy target on the aluminium industry and have suggested that the sector should receive more assistance by our providing a 90 per cent exemption for both the existing and the new renewable energy target obligations. The government does not intend to provide exemptions from the existing mandatory renewable energy target scheme, which has after all been in place since 2001—and under which all aluminium entities, like other sectors, have been bearing their share of the MRET liability. As assistance under the new renewable energy target only applies to the expanded portion of the target, all industry will continue to make a contribution to supporting the deployment of renewable energy. Having said that, the government is mindful of the position put forward by the aluminium industry and which is represented, I guess, by the coalition amendment; however, the government is unmoved by that and we adhere to the position advanced in the bill.

Thirdly, there have been a number of contributions in relation to waste coalmine gas. There were some foreshadowed amendments that I think are now not necessarily prosecuted by the opposition in relation to this issue—and it is an important issue. The government is also introducing an amendment today which recognises that the cessation of the New South Wales Greenhouse Gas Reduction Scheme, known as GGAS, once the CPRS commences to operate may impose a significant cost under the new arrangements on existing electricity generators using waste coalmine gas. Recognition of these existing generators in the legislation as proposed by the government is intended as a transitional measure to underpin the continued viability of projects that have already been committed and which are operating under GGAS. Over time, the Carbon Pollution Reduction Scheme will provide an increasing incentive in favour of low-emissions generation such as waste coalmine gas. To target this transitional support appropriately, eligibility is restricted to existing waste coalmine gas projects. It is time limited to the year 2020 and it includes caps on the amount of eligible generation for each year.

The government’s amendment clearly differentiates between waste coalmine gas and renewable energy sources and includes higher targets to ensure that no renewable energy is displaced—that is, that the energy from waste coalmine gas generation is additional to the renewable energy target. This will ensure that the 20 per cent target of renewable energy in Australia’s electricity mix is maintained and does have integrity. The amendment will also help meet the need to smooth the transition from GGAS to the CPRS for the waste coalmine gas sector. It is something about which there has been much interaction between the government and the generators in that area.

Issues have also been raised by the opposition in relation to the food-processing industry. What I can say in relation to that is that the government does not intend to provide a 90 per cent exemption for food processing. There is currently no emissions-intensive trade-exposed category of food processing. Indeed, food processing is a diverse range of activities with, of course, significantly different levels of exposure to electricity prices. The impact of the renewable energy target on entities carrying out food-processing activities such as dairy processing is expected to be modest, and it would be inappropriate, therefore, in the government’s view, for the renewable energy target assistance arrangements to be provided to businesses in the food-processing sector when there are other activities markedly more exposed or more sensitive to movements in electricity prices. Food-processing businesses may qualify for transitional assistance. I can add as an aside, though, that under the Climate Change Action Fund to implement new low-emission technologies and upon passage of the CPRS, which the government keenly anticipates, I would encourage such businesses to investigate those opportunities.

The next issue that has been raised by those opposite during the course of debate of these matters relates to what could be described as banding of the renewable energy target. It has been suggested that the renewable energy target should be banded to ensure the deployment of less-mature renewable technologies. The renewable energy target scheme encourages, however, the deployment of renewable energy, without picking winners, within the target range—that is, the mandated portion of electricity supply to come from renewable energy sources. The government has this view—that banding is undesirable within the overall target—because the expanded renewable energy target is in fact very large. It increases the current mandatory renewable energy target scheme, as I said, by over four times, from 9,500 gigawatt hours to 45,000 gigawatt hours by the year 2020, and it is held at that level until the year 2030. Modelling indicates that, due to the large size of the target, the renewable energy target will pull through a range of technologies, including wind, biomass, solar and geothermal energy. Part of the argument that has been advanced is that, because wind power is perhaps a more mature technology than something such as geothermal, wind power would crowd out the opportunities for investment in geothermal energy. The government, of course, will closely watch the operation of the renewable energy target, but we are not of the view that the situation demands that we should adopt a proposition to provide for specific bands for particular types of technologies within the overall RET target.

Over time, the Carbon Pollution Reduction Scheme will be the primary driver of renewable energy and will provide significant support over the next two decades in addition to the RET. The RET is complemented too by significant direct support for the development, commercialisation and deployment of emerging renewable technologies. For example, the government’s $4.5 billion Clean Energy Initiative announced as part of the 2009-10 budget includes $1.6 billion to support research and development of solar technologies as well as $465 million to establish the Australian Centre for Renewable Energy. In combination with the support under the RET, these policies will promote a diverse portfolio of renewable energy technologies.

Finally, issues have been raised in the debate about heat pumps. Heat pump water heaters draw renewable thermal energy from the atmosphere and so decrease consumption of fossil-fuel sourced energy. They are an eligible energy source under the mandatory renewable energy target. At its meeting of 30 April, the Council of Australian Governments agreed to examine further by the end of this year some of the eligibility provisions of the renewable energy target for heat pumps and new small-scale technologies that are not currently eligible under the renewable energy target. The government considers this the best process to consider the eligibility of heat pumps and new small-scale technologies.

I will conclude by making some further brief comments. The renewable energy target scheme is part of the government’s economically responsible approach to tackling climate change and moving towards a low-pollution future. It will drive significant investment, accelerating the deployment of a broad range of renewable energy technologies like wind, solar and geothermal power. Through a single national scheme for the first time, the renewable energy target will transform the electricity sector over time and it will ensure that 20 per cent of our electricity supply comes from renewable sources by the year 2020. It is an extremely important institutional change.

There are several things that the government is prosecuting in an endeavour to act firmly in dealing with the challenge of climate change. The Carbon Pollution Reduction Scheme is critical. It is the key mechanism by which we will go about reducing greenhouse gas emissions, by ensuring that a carbon price is imported into the economy. It will shift investment and it will work in close cooperation with the second major institutional change, which is represented in the bills before the House—that is, the establishment of the renewable energy target. The third set of components that the government is prosecuting is energy efficiency measures. We are investing a significant amount of funding in a whole host of energy efficient measures—for example, almost $4 million in the installation of household insulation. These measures are extremely important for Australia as a nation, and I commend this component of the government’s steps to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation for the bill and proposed amendments announced.