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Wednesday, 27 May 2015
Page: 4704

Mr HUNT (FlindersMinister for the Environment) (09:12): I move:

That this bill be now read a second time.

The Renewable Energy (Electricity) Amendment Bill 2015 will implement changes to the Renewable Energy Target to better reflect market conditions and allow sustainable growth in both small- and large-scale renewable energy.

The bill will lead to more than 23½ per cent of Australia's electricity being sourced from renewable energy by 2020—not 20 per cent but 23½ per cent.

It also addresses problems which emerged more than three years ago with the Renewable Energy Target. Despite the presence of the 41,000 gigawatt-hour target, it was unlikely that it would be met.

First, there was a significant drop in electricity demand which occurred following the global financial crisis and it coincided with the closure of energy-intensive manufacturing plants. Together, they played havoc with wholesale electricity prices.

This was compounded by rising retail electricity costs associated with the carbon tax, network charges and feed-in tariffs resulting in households and industry changing their consumption patterns.

Second, the changes to the Renewable Energy Target introduced by the Rudd government and the subsequent creation of the phantom credit bank of what is currently 23 million certificates is still being felt today. This overhang continues to suppress demand for renewable energy certificates and stymie the signing of power purchase agreements.

These combined to make it increasingly difficult for renewable energy projects to attract finance.

Added to this, the increasing realisation that new subsidised capacity was being forced into an oversupplied electricity market made it likely that financial institutions would be approaching the new investments in the renewable energy space with significant caution and reluctance.

It is in this context that we have sought to place the Renewable Energy Target on a sustainable footing and to overcome the legacy of the problems created by the phantom credit scandal.

So this then brings me to the fact that the Renewable Energy (Electricity) Amendment Bill 2015 amends the Renewable Energy (Electricity) Act 2000 to:

adjust the large-scale renewable energy target (LRET) to 33,000 gigawatt hours in 2020. This will reflect a commitment to achieve approximately 23½ per cent of electricity from all renewable sources by 2020;

increase the partial exemptions for all emissions-intensive trade-exposed activities to full exemptions. This will be of particular importance to trade-exposed industries throughout the country, as recognised by the opposition and as in particular has been championed by many members such as the members for Bass, Braddon, Lyons, Wannon and Corangamite;

reinstate biomass from native forest wood waste as an eligible source of renewable energy; and

remove the requirement for Labor's legislated biennial reviews of the RET.

These changes will ensure that there is continued support for sustainable growth in the large scale renewable sector. And, the 33,000 target, I repeat, is higher in its ultimate effect than the originally conceived objective of 20 per cent, which was the purpose, the intended outcome and the stated objective of the original legislation.

There will be no changes to the Small-scale Renewable Energy Scheme. The scheme will continue in line with household and small business demand.

The removal of Labor's phantom credit scheme federally and the rationalization of feed-in-tariffs at the state level have reduced many of the distortions outlined in this week's Grattan Institute report. I am delighted that this bill is proceeding in a bipartisan fashion.

Key features of the revised Renewable Energy Target

The Large Scale Renewable Energy Target

This then leads me to the fact that the bill will adjust the large-scale renewable energy target, or LRET, to reflect the 23½ per cent target. We will therefore adjust the LRET from 41,000 gigawatt hours in 2020 to 33,000 gigawatt hours in 2020. It will adjust the profile of annual renewable generation targets from 2016 to 2030 so that the target reaches 33,000 gigawatts in 2020 and is maintained at 33,000 gigawatt hours per annum from 2021 to 2030. This target is separate to the 850 gigawatt hours that is to come from waste coalmine gas generation each year until 2020 under pre-existing transitional arrangements previously agreed between the parties.

As highlighted in our energy white paper released by the Minister for Industry, Australia has an over-supply of generation capacity and some of that is aged. From 2009-10 to 2013-14, electricity demand has fallen by approximately 1.7 per cent per year on average.

This is due to many factors: sadly, declining activity in the industrial sector; increasing energy efficiency, which is a positive for Australia; and strong growth in rooftop solar PV systems, which is also a benefit for Australia, which does, however, reduce demand for electricity sourced from the grid.

While the Government welcomes a diverse energy mix in Australia, it also recognises that circumstances have changed since the original target of 41,000 gigawatt hours was set in order to achieve what had been hoped would be a 20 per cent outcome.

This new target of 33,000 gigawatt hours directly addresses these issues and gives the industry an opportunity to grow. It represents a sound balance between the need to continue to diversify Australia's portfolio of electricity generation assets, the need to encourage investment in renewables while also responding to market conditions, the need to reduce emissions in the electricity sector in a cost-effective way, and the need to keep electricity prices down for consumers.

Most importantly, this new target of 33,000 gigawatt hours by 2020 is achievable. It will require in the order of six gigawatts of new renewable electricity generation capacity to be installed between now and 2020.

Even at the adjusted level of 33,000 gigawatt hours, the renewable sector will have to build as much new capacity, on the advice that I have, in the next five years as it has built in the previous fifteen. This will not be an easy task, but, on all the advice we have, it is achievable and therefore real construction will occur.

This new target will therefore be good for jobs in the renewable energy sector and, as I have said, lift the proportion of Australia's electricity generation to approximately 23½ per cent by 2020.

Assistance to emissions-intensive trade-exposed industries

When the RET scheme was expanded in 2010, partial exemptions were introduced for electricity used in emissions-intensive trade-exposed activities. These were hard-fought and negotiated by the coalition. The exemptions only apply to the additional RET costs that were incurred as a result of the expansion of the scheme.

The RET scheme regulations currently prescribe that electricity used in activities defined as highly emissions intensive and trade exposed is exempted at a 90 per cent rate, and electricity used in activities defined as moderately emissions intensive and trade exposed is exempted at a 60 per cent rate.

This bill will increase support for all emissions-intensive trade-exposed activities to full exemptions from all RET costs—that is, from the costs of the original target as well as the costs of the expanded target. A full exemption will protect jobs in these industries and ensure they remain competitive. This has been of particular concern, as I mentioned earlier, to the members for Bass, Braddon, Lyons, Wannon and Corangamite—each of whom has played an extremely important role in securing this agreement between the parties.

The reduction in the direct costs of the RET resulting from the lower large-scale renewable energy target will more than offset the impact on other electricity users of the increase in assistance for emissions-intensive trade-exposed activities.

Reinstating biomass from native forest wood waste as an eligible source of renewable energy

Native forest wood waste was in place as an eligible source of renewable energy under Labor's own legislation until November 2011.

The use of such native forest wood waste for the sole or primary purpose of generating renewable electricity has never been eligible to create certificates under the scheme. Eligibility was subject to several conditions, including that it must be harvested primarily for a purpose other than energy production. This is about the use of wood waste; it is not about cutting down biomass to burn.

Consistent with our election commitment, as was set out in our forestry policy on the first page and further within the policy, this bill reinstates native forest wood waste as an eligible source of renewable energy under the RET, basing eligibility on exactly the same conditions—precisely the same conditions—as were previously in place under the ALP when they were in government.

One of the objectives of the RET is to support additional renewable generation that is ecologically sustainable. We are reinstating, therefore, the provision allowing native forest wood waste as an eligible renewable energy source, because there is no evidence that its eligibility leads to unsustainable practices or has a negative impact on Australia's biodiversity. This was the experience of the 10 years during which this provision was in place.

We believe that the safeguards that were in place previously were, and are still, sufficient assurance that native forest wood waste is harvested and used in a sustainable way. The regulations were underpinned by ecologically sustainable forest management principles which provide a means for balancing the economic, social and environmental outcomes from publicly owned forests.

In all cases, the supply of such wood waste is subject to the Commonwealth and state or territory planning and environmental approval processes, either within, or separate to, the regional forest agreement frameworks.

Using wood waste for generation is more beneficial to the environment than burning the waste alone on the forest floor or simply allowing it to decompose and to produce methane—a greenhouse gas with very high global warming potential. Its inclusion as an eligible energy source is another contribution to the target.

We understand that regular reviews of policy settings create uncertainty for investors, business and consumers. That is why this bill removes the requirement for two-yearly reviews of the RET. Providing policy certainty is crucial to attracting investment, protecting jobs, and encouraging economic growth.

Protecting electricity consumers, particularly households, from any extra costs related to the RET, has been a priority from the start and the government understands that the 33,000 gigawatt-hour target remains a challenge for industry.

For these reasons, instead of the reviews, the Clean Energy Regulator will prepare an annual statement on the progress of the RET scheme towards meeting the new targets and the impact it is having on household electricity bills.

Again, this bill is about appropriately balancing different priorities; replacing the biennial reviews with regular status updates better meets the needs of industry and the needs of consumers, and any concerns within the parliament. It is about increased transparency at the same time as increased certainty.

Importantly, both the government and the opposition have agreed to work cooperatively on a bipartisan basis to resolve any issues which may arise with the operation of the Renewable Energy Target through to 2020. Against that background I do wish to thank many people, beginning with the opposition. We have negotiated in good faith with Mark Butler, Gary Gray and Chris Bowen. I particularly thank my opposite, the shadow minister for the environment, Mark Butler, and his staff for their work. These negotiations can be difficult but I believe both sides conducted an honourable process, and this was an example of the parliament operating as a parliament for an outcome which will be, ultimately, beneficial to Australia. So I acknowledge and appreciate the work of my colleagues on the opposite side of the chamber.

I want to thank my colleagues, in particular: Ian Macfarlane, whose knowledge of the electricity is peerless, not just within the parliament but arguably almost anywhere within Australia; the Prime Minister who, himself, proposed the compromise and suggested the notion of the Clear Energy Regulator providing the annual outdates—it was an important breakthrough and step forward and he engaged deeply in this process and was always seeking a balanced outcome; as I have mentioned, my colleagues Dan Tehan, Sarah Henderson, Eric Hutchinson, Andrew Nikolic and Brett Whiteley; and Angus Taylor, whose knowledge of the electricity sector and whose concerns for his electors were absolutely vital in helping us to achieve this outcome. He is a very informed individual and the parliament benefits from having another Rhodes Scholar enter this chamber.

From within the Department of the Environment, David Parker and Brad Archer played a critical role throughout the review process. I thank Lyndall Hoitink and John Jende—whose knowledge of the Renewable Energy Act and the implications are extraordinary. Mark Scott, Candice El-Asmar, Kieran McCormack and Peter Nicholas all played critical roles.

From the Clean Energy Regulator I thank Chloe Monroe, who performed an extraordinary role in executing the first Emissions Reduction Fund auction and also provided invaluable advice. She and her team are outstanding policy professionals. Although appointed by a previous government, we have proudly and happily continued her role. As far as I am concerned, she is invited to stay in the job for as long as she wishes to do it. She is really one of the great public servants in Australia. Similarly, she is supported by people such as Mark Williamson and Amar Rathore, both of whom have done a great job.

At the Office of Parliamentary Counsel I thank Iain McMillan and his staff. From others who have contributed significantly there is Jessi Foran from Ian Macfarlane's office. From within industry Miles George, as chair of the Clean Energy Council, and Kane Thornton, CEO of the Clean Energy Council, were indefatigable and fundamental in pressing the concerns and needs of their sector. This deal would not have been achieved without their work, and I honour and acknowledge it.

Similarly, Miles Prosser, from the Aluminium Council; Innes Willox, from the Australian Industry Group; and Kate Carnell and John Osborn, from the Australian Chamber of Commerce and Industry, all played critical roles in helping to bring us to this point.

Finally, I want to acknowledge two people from my office: my chief of staff, Wendy Black, whose counsel and guidance on every topic is really outstanding; and Patrick Gibbons, who is my senior adviser and whose knowledge of the electricity sector is surpassed only by that of Ian Macfarlane, who has spent hundreds and hundreds of hours helping to bridge the gaps between different parties. Again, this would not have been possible without him.

To all of those parties I say thank you. Let me conclude by saying this: this bill is consistent with the government's conviction that policy decisions must be based on sound economic principles and real-world experience. It also represents the government's commitment to maintain stable and predictable settings that encourage growth, encourage competitiveness, encourage efficiency and that produce better outcomes for electricity consumers.

The RET had to be reformed in response to changing circumstances. This bill achieves balanced reform. It will provide certainty to industry, encourage further investment in renewable energy and better reflect market conditions. It will also help Australia reach its emissions targets, and it will protect jobs and consumer interests.

As the energy white paper points out, Australia has world-class solar, wind and geothermal resources, and very good potential across a range of other renewable energy sources. In addition to the support for small- and large-scale renewables, which this bill provides, the government is providing over $1 billion towards the research, development and demonstration of renewable energy projects.

This bill recognises that renewable energy is an important part of Australia's future, while also recognising that its deployment must be supported in a responsible way with minimal disruption to our energy markets. I thank all of those involved in reaching this point. I am delighted that we have achieved a sensible balance which will allow the industry to grow to 23½ per cent of Australia's total energy production by 2020.

I commend the bill to the House.

Debate adjourned.