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Wednesday, 9 November 2011
Page: 8730


Senator BOSWELL (Queensland) (17:15): by leave—When I was speaking before, I was talking about the disaster of rooftop photovoltaic cells, how the scheme had gone wrong and how the government had botched the whole program. Before I get into that, we need to go back a bit.

In the last Howard government budget $150 million was allocated over five years for cash subsidies for rooftop solar. It blew out by over half a billion in 18 months before Garrett finally pulled the pin. The $150 million allocation over five years under the coalition became $700 million of spending in 18 months under Labor. However, having belatedly pulled the pin on the subsidy they had a political problem. They had created a monster; they had created demand. They had to replace that subsidy but they did not want to pay for it.

What they came up with is one of the most tortured bits of algebra you could possibly imagine. They would provide a renewable energy certificate for every megawatt of power a rooftop system would generate over a life of 15 years and then multiply that by five. This was to get the subsidy somewhere near the $8,000 value of the cash subsidy they were replacing and they got a fair way towards that goal.

The price of RECs at the time was close to $50. That meant that householders would pick up over $7,000—not what they had been getting but still pretty generous and it was stimulatory. These RECs would then go on the open market where the big electricity suppliers and consumers—the so-called liable entities who had to meet the 2020 target of 20 per cent renewables through acquittal of RECs—would buy them. But so many were produced, as the gold rush for rebates continued to gather momentum, that the market was swamped. There were so many RECs being created—albeit 'phantom' RECs—that the price collapsed.

That points to one crucial aspect of the huge policy snafu in renewables. The only way the government was ever going to get wind farms going—and wind farms are or were the government's only hope of meeting its target—was with a very high REC price of $60 plus. Only a REC at that price would enable would-be wind farmers to raise the funds they needed to get their turbines up. Instead, the government, chasing the popular vote via rooftops, put in place a policy which totally undermined the REC price. Working that out was not rocket science. It was pretty much an inevitable outcome but, clearly, they could not see it coming.

Meanwhile, the states were not helping by instituting ridiculously high feed-in tariff arrangements for the power generated on rooftops, and, in some cases, direct subsidies. The New South Wales Labor government put in place a 60c per kilowatt hour gross feed-in tariff. They gave people 60c for every kilowatt hour of power their system produced, even if it was consumed in their own house. The ACT did the same. Victoria had a 60c feed-in, but only for power in excess of what was used in the house. These tariffs were more than four times the average price of mains power.

All states except Tasmania ultimately ended up with some sort of feed-in tariff, and this was despite the fact that since 1997 there had been discussion at COAG to try to get a uniform approach. Despite the fact that at the time every state except WA was a Labor state, they could not get that agreement. We had a free-for-all to see who could be the silliest in terms of subsidies, with taxpayers footing the bill through increased power prices. The effect of the combination of subsidies—state and federal—sent the whole thing into overdrive. Demand for systems went crazy, which collapsed the REC price even further and led to a decision to again fundamentally change the system.

The new idea, to operate from the beginning of this year but announced in mid-2010, was that the liable entities, the people responsible for meeting the 20 per cent target, would no longer be able to use the RECs created on rooftops to set against their target. From the beginning of this year they would only be able to use RECs from the likes of wind farms—large scale renewables projects—but they would also have to buy all the small stuff. They would not be able to use them to meet their targets, but they had to buy them.

Again, the totally predictable result was that, in the second half of 2010 especially, the liable entities bought up every cheap rooftop REC they could before the boom dropped. Most were able to bank enough RECs in that time to get them through to 2014 without going back onto the market. The result is that the government, by mismanaging the rooftop issue, has totally sabotaged its target. Wind farm projects have, for the most part, stalled. Rooftops may be a source of votes but they are also a source of only miniscule abatement.

The former Secretary to the Department of Climate Change and Energy Efficiency, Dr Martin Parkinson, once famously projected that if you spent the $200 billion or so that it would cost to put a solar panel array on every rooftop in Australia, you would save about 13 million tonnes of greenhouse gas—that is, the abatement would cost about $7,000 a tonne. And that is just the absolute bare bones of the renewables disaster, which is unfolding still and has more problems ahead. What it boils down to is the same sort of decision making we have become accustomed to from this government. It has all the classic hallmarks. It is as though, before this government embarks on any major policy initiative, it asks itself: how do we completely stuff this one up? They follow a pretty typical, standard issue, stuff-up route on renewables. First, blindly overspend—massively: they have achieved that. Flag big changes months ahead of making them to create maximum negative outcomes: achieved. Outsource the problem, and the cost: achieved. Use extremely bad, misleading modelling: achieved in spades. Be blind to all and any warnings, especially if they are from industry: diligently achieved. And then, of course, declare it a brilliant, blinding, top-to-bottom success that will save the Great Barrier Reef, the Murray-Darling, and, in due course and the fullness of time, humankind and the planet: achieved. Typical.

These are the people who are about to engage in the most complex policy implementation process in the history of the country. I confidently predict it will be like everything else they touch—a disaster. The problem is that, this time, it could be a disaster that fundamentally undermines the long-term future of this country.