Senate debates

Thursday, 14 February 2008

Renewable Energy Legislation Amendment (Renewable Power Percentage) Bill 2008

Second Reading

10:27 am

Photo of Lyn AllisonLyn Allison (Victoria, Australian Democrats) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table the explanatory memorandum and have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The purpose of this bill is to amend the Renewable Energy (Electricity) Regulations 2001 and specifically to expand the interim targets from 2008.  The expanded targets are in line with the Government’s election policy.  However the administrative process and timeframe announced in December 2007 means that the targets will not be expanded until 2010, resulting in the renewable energy industry stalling and the capacity and continuity of the renewable energy industry are at risk.

Expanding the Mandatory Renewable Energy Target (MRET) from 2008 will create certainty and a stable investment environment for the ongoing development of renewable energy industry.

An Emissions Trading Scheme (ETS) alone will neither deliver the level of emissions cuts that Australia has committed to nor support renewable energy industry development.  It is essential that additional and complementary policies are progressed.  In order to deliver the least cost path to emission reduction from the energy sector, a combination of aggressive energy efficiency, a transition and higher contribution from renewable energy and strategic use of fossil fuels are required.  Therefore MRET is key and critical policy.

Since 2001, MRET has been the main driver of renewable energy investment in Australia, requiring electricity retailers and other large buyers of electricity to collectively source an additional 9,500 gigawatt hours (GWh) of electricity from renewable sources by 2010.

With the ALP winning the 2007 election the Renewable Energy industry has an expectation that there will be a significant expansion of MRET.  The ALP election policy stated that at least 20% of electricity is to be generated from renewable sources by 2020.  Based on current electricity demand projections this is equivalent to 60,000 GWh.  The assumption is that 5% of renewable energy was pre-existing to the MRET scheme and therefore to meet the 20% proportion an MRET target of 15% in 2020 or 45,000 GWh is required.

ALP’s election policy included a number of key qualifications.  These included bringing the Victorian and New South Wales state schemes into a single national scheme and only renewable energy will count towards the target with eligibility criteria to remain the same as MRET.

The Howard Government’s 2004 decision to cap MRET, in response to the Tambling Review, has stalled investment and growth of renewable energy generation in Australia.  As a consequence the MRET market is limited to those projects currently operating.

In the Council of Australian Governments’ Meeting on 20 December 2007 it was agreed that a plan for achieving the national expanded MRET would be developed by 2009.  With an interim report to be submitted to COAG by September 2008 together with final MRET design and proposals for a streamlined set of complementary policies across jurisdictions.  The implication of this statement is that an extended target would not be amended until 2009 and with a 2010 expanded target for which the electricity retailers must comply by 14 February 2011.

Without an expansion in the target there is an insufficient investment driver to maintain an ongoing and sustainable renewable energy industry.

A stop-start investment environment has the affect of stalling the renewable energy industry and the ongoing industry viability with flow on affects of regional development, employment and skills.

Recent International Energy Agency research shows that stable policies are necessary to ensure the investment certainty needed to support this industry development.

The renewable energy industry advises that new projects of around 800 to 900 MW per annum are required to support the development of a sustainable manufacturing industry in renewable energy.

The direct investment in Australian-based manufacturers and service companies will be more than $1 billion, with flow-on stimulus of more than $2 billion throughout the economy. More than 3,300 jobs will be created in the construction of these projects with flow-on jobs of 7,500 due to expenditure associated with these 3,300 jobs, providing a total employment stimulus of over 10,000 jobs. (BCSE, 2004).

A University of New South Wales study demonstrated there are more jobs per installed capacity unit by investment in renewable electricity projects than for conventional power plants – up to 6.6 times greater on average. In addition, over 80 per cent of these jobs and investment are in regional areas.

Since commencing operation in 2001, MRET has been so successful, that the renewable energy industry cost effectively met the 2010 target 4 years early.  The MRET scheme has been fully subscribed since 2006 and has overshot the original 2008 target by an estimated 7,000 GWh.

This Bill proposes the 2008 interim target be increased to 7,300 GWh which is equivalent to a 3.22% Renewable Energy Power Percentage.  Given the current surplus generation, only an additional 300 GWh would need to be generated in the 2008 calendar year.  This is well within the capacity of the renewable energy industry to deliver.

It is estimated that there are more than 1,500 MW, with a value of around $1.5 billion of renewable generation projects having received planning approval or at advanced development stage.  Without adopting the MRET targets outlined in this bill these projects will be delayed.

Failure to expand the target from 2008 would not only result in economic and employment loss, it will also result in increased greenhouse emissions.

Total electricity consumption in Australia is estimated to grow almost 35% from 2008 to 2020 under a business as usual scenario – that is assuming current policies and market conditions.  Demand is growing over 6,000 GWh per annum and will grow to over 300,000 GWh and require an additional 75,000 GWh electricity generation by 2020.

Without expanding MRET from 2008, increased energy demand will be met from fossil fuel generated electricity (coal or gas) and at the expense of renewable energy projects.

Without the 2008 expansion, greenhouse emissions from electricity generation sector will increase to over 60 million tonnes by 2010 and further entrenching and increasing Australia’s greenhouse position.  It will certainly mean that Australia will fail to meet our Kyoto target by 2012.

Following the proposed targets contained in this bill will deliver additional greenhouse emissions abatement of 30 million tonnes above business as usual by 2010.

Any economic analysis recognises the avoided greenhouse emissions have a significant economic value.  The Kyoto Protocol, which binds participating countries including Australia to emissions limits, has led to the creation of an international carbon market.  The European emissions trading market is valuing one tonne of carbon dioxide (the primary greenhouse gas) for delivery in 2008, between $30 to $50 per tonne.

Therefore by bringing the target forward to 2008 would avoid over 30 million tonnes of greenhouse emissions annually with a market value of over $1,200 million per annum (based on an average price of $40 per tonne).

Renewable energy technology costs are reducing as installed capacity increases globally.  Already Australian developed technologies are being built under licence in China to supply the demand created by the Chinese renewable energy target.  Global cost curves for wind show that installed costs drop 6 per cent with every doubling in capacity. Similarly, cost curves for solar photovoltaic modules show a drop of 5% with each doubling of capacity while global installations are growing at over 30% per annum.

Australia is well positioned to support an export market to New Zealand and South East Asia. In particular, opportunities in the Asia-Pacific regions are emerging as a result of the Clean Development Mechanism of the Kyoto Protocol.

Additional demand through the MRET scheme by expanding the MRET target from 2008 will result in a robust local market and will see cost reductions, economies of scale, expansion of local manufacturing and service provision.  Australia will be better positioned to build on export opportunities and participate in the global technology supply chain.

In order to maintain investment momentum for the renewable energy industry the bill proposes the interim targets are brought forward and expanded from 2008.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.

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