Kelvin Thomson (Wills, Australian Labor Party) Share this | Hansard source

The Australian Energy Market Amendment (Minor Amendments) Bill 2008 before the committee is one element of the National Gas Law. The National Gas Law is a significant piece of cooperative economic reform that will bring the economic regulation of gas transmission and distribution pipelines under the national energy market governance arrangements. It also implements reforms contained in the Ministerial Council on Energy’s response to a 2004 Productivity Commission review of the gas access regime. The National Gas Law will reduce the regulatory burden on industry, improve service provider certainty and protect the long-term interests of consumers by introducing a new light-handed form of regulation that regulators may apply by empowering the Australian Energy Regulator, as the national regulator for gas access, to improve the consistency of regulatory decision making by allowing for merits review by the Australian Competition Tribunal of key regulatory decisions, by introducing strict requirements for timely regulatory decisions and by increasing information transparency. It will also maintain greenfields incentives for new pipelines, incentives which were established by the Ministerial Council on Energy in June 2006.

The Ministerial Council on Energy is seeking to achieve a truly national gas access regime by enacting the National Gas Law by 1 July this year. So that the National Gas Law can correctly commence at that time, it is necessary for this bill to be passed in the winter sitting. I note that at the last Ministerial Council on Energy meeting the Minister for Resources and Energy strongly emphasised the need for the reform program to proceed expeditiously. Since that meeting we can see that the government has made significant progress on energy market reform. The National Gas Law is before the South Australian parliament—I think passage is expected in coming days—and this will see gas pipelines brought under national regulatory arrangements, improving the climate for investment in the sector.

The government is also well into the process of establishing the Australian Energy Market Operator with responsibility for electricity and gas. This Labor government recognises that energy security is paramount to the continued wellbeing of all Australians. The government is putting in place arrangements that will guide the strategic decisions we need to make and prepare us for threats to our energy security. It is also clear that adequate, reliable and affordable provision of energy requires vigilance against threats. While appropriately focused investment will improve energy system resilience, we also need to manage the implications of accidental, environmental or intentional disruptions.

At the start of this week I had the opportunity, along with the minister and others, to receive a briefing from the Shell company concerning energy futures. The material that they put forward was very challenging. I will just point out to the House a couple of extracts from their publication Shell energy scenarios to 2050. In the foreword it states:

Never before has humanity faced such a challenging outlook for energy and the planet. This can be summed up in five words: “more energy, less carbon dioxide”.

And, in the introduction:

How can I prepare for, or even shape, the dramatic developments in the global energy system that will emerge in the coming years?

This question should be on the mind of every responsible leader in government, business and civil society. It should be a concern of every citizen.

Shell’s analysis is essentially that the world can no longer avoid three hard truths about energy supply and demand. The background, as they point out, is that the world population has more than doubled since 1950—it has more than doubled in my lifetime—and is set to increase by 40 per cent by 2050. The Shell publication continues:

History has shown that as people become richer they use more energy. Population and GDP will grow strongly in non-OECD countries and China and India are just starting their journey on the energy ladder.

The three hard truths are: firstly, a dramatic change, a step-change, in energy use. The Shell publication states:

Developing nations—

such as China and India—

are entering their most energy-intensive phase of economic growth as they industrialise, build infrastructure, and increase their use of transportation.

So we have demand going up. Secondly, supply will struggle to keep pace. Shell states:

By 2015, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth. While abundant coal exists in many parts of the world, transportation difficulties and environmental degradation ultimately pose limits to its growth. Meanwhile, alternative energy sources such as biofuels may become a more significant part of the energy mix—but there is no “silver bullet” that will completely resolve supply-demand tensions.

The third point they make—the third hard truth—is that environmental stresses are increasing. They say:

Even if it were possible for fossil fuels to maintain their current share of the energy mix and respond to increase demand, C02 emissions would then be on a pathway that could severely threaten human well-being. Even with the moderation of fossil fuel use and effective C02 management, the path forward is still highly challenging, remaining within desirable levels of C02 concentration in the atmosphere will become increasingly difficult.

The issue confronting us all, and Shell posed this for those of us who are policymakers, is how we meet such a monumental challenge. I want to encourage the government to put energy and endeavour into the issue of feed-in tariffs. We have been having a bit of a discussion this morning about the gas explosion in Western Australia and the security challenges that that encompasses. One of the things that I think is necessary for us in terms of our being able to secure energy supplies in the future is greater production by distributed energy as opposed to centralised energy arrangements, which are more vulnerable to attack or to breakdown.

One of the elements coming out of the Ministerial Council on Energy is the issue of smart meter rollout. The Ministerial Council on Energy has made available a cost-benefit analysis and regulatory impact statement for smart meter rollout. They are available for public comment. A communique from the Ministerial Council on Energy, which was held on 13 June—so, very recently—said:

Ministers are committed to development of a consistent national framework for smart meters in the National Electricity Market, supporting distributors to be responsible for the rollout of smart meters. Ministers noted there continue to be some uncertainties about the costs and benefits of smart meters in some jurisdictions and that different staged approaches are being taken to support the further development of smart meters. Smart meters are to be rolled out in Victoria and NSW, with over five million smart meters expected to be deployed before 2017. Queensland and some other states and territories will undertake extensive pilots and business cases prior to a further national review of deployment timelines in 2012.

So that is the background. This bill is about energy market security. I think the recent Western Australian explosion should be concentrating our minds on this issue.

In relation to my view that there needs to be greater consideration given to the idea of feed-in tariffs, let me point out to the House that present non-renewable power producers are being subsidised by society and the environment, which is paying the costs of global warming via drought and other extreme weather events. Feed-in tariffs can reflect the real cost of carbon. They can be based on either so-called avoided costs of non-renewable power producers or the electricity price charged to the end user, supplemented by a bonus or a premium in order to account for the social or environmental benefits of renewable energy.

The intention is to encourage individual homes, factories and building sites to become mini power plants, meeting their own power needs through the production of renewable energy which does not emit global warming emissions. The vision I have is of communities where energy production is distributed rather than centralised and is therefore genuinely sustainable indefinitely. Renewable energy targets are important. They encourage large investments in renewable energy by companies, but they do not encourage localised distributed energy systems in the way a feed-in tariff does.

A study of the summer, peaking electricity systems of California noted that power from PVs is produced disproportionately, at times when the value of electricity is high. Evaluation of solar PV electricity production that uses only the average wholesale cost of electricity will tend to undervalue the power, so the benefits to the owners of solar PV in reduced electricity bills do not reflect the true, time-varying value of the power that the panels produce. I think that a feed-in tariff will build community awareness. It will answer the question so many families ask: what can I do? It will drive the cost of solar PV down. Solar PV generates power when it is most needed. It evens out the power load, it reduces the extreme peaks of the hot summers, and PV output over summer peak load weeks has been shown to correspond well to system load at regional nodes in Victoria, South Australia and New South Wales.

Solar PV also avoids transmission losses and avoids the need for poles and wires infrastructure. There is, for example, information from the Electricity Supply Association that $24 billion of electricity network and generation infrastructure is required to meet Australia’s growing power needs over the next five years. Anything we can do to reduce the need for that infrastructure is clearly worth while. Infrastructure costs are being driven by the need to meet demand peaks. In that respect, I think a lot of the talk about the need for baseload electricity is misleading. We need to provide economically rational signals to customers, and sometimes this does not happen.

The Queensland government estimates that, for every air conditioner installed, the electricity industry has to spend an extra $13,000 on more poles and wires to manage the load. Clearly, we can do better than that. It is also something that generates jobs. Ten years ago Germany had a solar PV industry of a similar scale to Australia’s. Now Germany has an industry of 110,000 jobs, generating 15,000 megawatts of solar PV power. Australia has fallen behind. It is estimated that in 2005 the solar PV industry here was responsible for just 1,300 jobs. So there is plenty that we can do in this area to do better than we have been doing in the past.

There are design issues, of course. There is the question of price, the question of duration, the question of means of metering and the question of degression rate. I commend to the House some of the work that has been done by organisations like the Moreland Energy Foundation in my own electorate and by BP Solar in New South Wales. In the ACT we have a private member’s bill from Mick Gentleman, and indeed the states have been looking at various arrangements in relation to feed-in tariffs. I think one of the things needed and one of the things that the government recognises is that there is a need for a national system, rather than different states going in different directions. But if we are to provide energy security in future, if we are to meet challenges like the gas explosion which has occurred in Western Australia, if we are to seriously tackle greenhouse gas emissions and climate change, then things like feed-in tariffs and encouraging people to meet their own electricity through the production of distributed energy are very important. I commend the bill to the House.

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