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Wednesday, 3 September 2014
Page: 6340

Senator BACK (Western Australia) (13:36): I wish to discuss the renewable energy target review and its report, now that it has actually been handed to the government by the independent panel, chaired by Mr Dick Warburton. I want to make some comments about the review itself. The first point I want to put to bed is around some allegations that have been bandied about in this place during the week to do with the apparent incompetence of the panellists to review the RET. I just want to point out that, in addition to Mr Warburton, the other panellists include the eminent Mr Brian Fisher AO, PSM, a previous executive director of the Australian Bureau of Agricultural and Resource Economics and Sciences. He is a renowned economist. Another panellist is Ms Shirley In't Veld. As a Western Australian, she was the managing director of Verve Energy in WA from 2007 to 2012. Verve was the energy instrumentality that used more renewable energy sources than any other in Western Australia, so I do not know how she could not be regarded as credible. The other panellist is Mr Matt Zema, managing director of the Australian Energy Market Operator. So I want to dispel the myth that this group was not competent to undertake the work.

For those who might be interested, I will review what the RET is all about. The RET is a government intervention designed to mandate the proportion of electricity generated from selected sources. It is designed to support a policy of at least 20 per cent of Australia's energy coming from renewable sources by 2020; as such, the policy taxes electricity users and, in some cases, non-renewable generators. How does it work? The renewable energy certificate market emerges from the energy targets. Renewable energy certificates, or RECs, are issued to power station generators classified as renewable under the act. They are a form of energy currency as electricity retailers must purchase the RECs to cover their liability. Costs are passed on to consumers through purchase of mandatory certificates by electricity retailers. That, of course, is where it becomes a tax on energy consumers.

The first point I make about the target is that the objectives of the act have not been met, principally because there has not been to any extent a reduction of greenhouse gases in the time the target has been in place. The second point is that whatever achievements the renewable energy sector has made have largely come from hydroelectricity. Hydroelectricity, as we all know, was around for a long time before the renewable energy target was formed. Having lived and worked in Tasmania and having even had to declare an interest because a company of which I was the managing director actually supplied lubricants and fuels to the hydroelectricity scheme in Tasmania, I place on record that it is a wonderful scheme.

Senator Singh interjecting

Senator BACK: I want to place on record that I, for one, want to make sure that—whatever outcome is eventually decided by government—the hydroelectricity scheme is enhanced, protected and encouraged independent of the RET system, because it preceded RETs by so many years, as Senator Singh herself indeed knows.

At the time it was suggested that to achieve a 20 per cent contribution of renewable energy by 2020 would require some 41 gigawatt hours to be generated by renewable sources. We know that two things have happened. First of all, there has been a drop in demand—

Senator Singh: Mr Acting Deputy President, I rise on a point of order. I offer a correction to Senator Back; it is 41,000 gigawatt hours, not 41 gigawatt hours.

The ACTING DEPUTY PRESIDENT ( Senator Seselja ): Order! Senator Singh, there is no point of order.

Senator BACK: Senator Singh's contribution is quite right, for which I thank her. It is 41,000 gigawatt hours. I will check the Hansard to see what I did say. Indeed, as a result of a reduction in demand, we now realise that to achieve that 20 per cent target the figure is probably closer to 23,000 gigawatt hours. I do appreciate Senator Singh's keen attention in listening to my contribution. That is the background of the RET.

The RET comes under two broad categories: the small-scale renewable energy target and large-scale renewable energy targets. The small renewable targets, which are probably 10 per cent or less, are mainly to do with photovoltaics and solar hot water systems. In relation to the small-scale RETs, the recommendation of the panel is that there is probably little if any need for further support at this time. This is because power charges have gone up—somewhat because of the carbon tax, which has now been repealed through the excellent work of Senator Cormann and others—and costs in the solar sector have come down considerably. Nevertheless, power charges have gone up while the costs of putting photovoltaics on roofs have come down. It is arguable that photovoltaics are now cost neutral. I was the chief executive of an organisation that introduced seven or eight different forms of solar energy many years ago on an island that I had the pleasure of being responsible for and I am a great supporter of solar energy. If indeed there needs to be some continued support for a limited period of time then I would not violently object to that. However, market forces have applied and the costs of photovoltaic installations have come down while electricity charges have come up, and I hope that we are now at the point of cost-neutrality. The panel has said that we are probably already at that point and that, if we are not there currently, we will probably be there reasonably soon.

I want to move to the issue of the large-scale renewable energy targets. I have spoken in this place before of how concerned I am with regard to the wind energy sector. This report and others support the fact that there is an enormous amount of misinformation out there in the wider community about the large-scale RETs, particularly those relating to the wind industry. The industry have employed very effective tricks to—I believe—mislead the public into believing that paying them billions of dollars in subsidies will lower power prices. Of course, it will not; there is no evidence to say that it will. The reason that the public is not outraged about this, as I said earlier, is that the public do not pay this money in taxes; rather, they pay it as part of their energy consumption. The modelling has shown that it is possible that some $37 billion over the next 15 years—or $2.5 billion per year—may be wasted on wind farms. Again, because the costs are concealed, they will not be picked up.

Comment was made that currently the RET is responsible for only around four per cent of household electricity bills. I have to say to you that other evidence refutes that. I will quote this document from AGL Energy and then seek the authorisation of the chamber to table it

I have passed the document to others in the chamber seeking authorisation. The interesting point in the document is that AGL estimate that, in their commitment to buy 1.3 terawatt hours per year through the various wind associated organisations, it will cost them some $32 per megawatt hour above the 2015 wholesale market. They say that as a headline figure that will cost them some $40 million a year more for electricity than would have been the case without the wind strategy in place. I seek leave to table the document.

Leave granted.

Senator BACK: We are seeing the possibility that the estimated cost of the REC scheme could add some $50 billion to power bills over the next 17 years, with some 600 million renewable energy certificates being issued at a unit cost of about $90. So, in other words, we are looking at having $50 billion added to consumers' power bills, transferred to wind-power companies. I think this is unacceptable.

I know that Senator Polley wishes to follow me and I am anxious to make sure that she is given adequate time to do so, but first I would like to comment on emissions reductions, because I think this is important. The arguments regarding the long-term effect of the RET on price are fundamentally flawed, simply because the energy generated by wind farms does not reduce greenhouse gas emissions in the electricity sector. I challenge the wind energy sector to produce the evidence relied upon to assert that wind power has reduced GHG emissions in the electricity sector. Wind power is delivered intermittently, on repeated occasions not at all, meaning of course that the entire installed capacity from wind power has to be matched with equal capacity of fossil fuel generation. I challenge that industry to produce evidence to this chamber to say that what I am indicating is not correct.

Once awareness of the existence of the RET, let alone the magnitude of its cost impact, becomes more widespread in the public arena, support for it will evaporate. Renewable energy is not free. It is high cost compared to alternative forms of generation. It is not commercially viable without large subsidies, which ultimately come out of the consumer's pocket.