Lyn Allison (Victoria, Australian Democrats) Share this | Link to this | Hansard source

I rise to speak on the Australian Energy Market Amendment (Gas Legislation) Bill 2006. The Democrats support this bill. I acknowledge and encourage the objectives of the bill to increase the access to and competition within the gas market. As a less greenhouse-intense fuel, gas is recognised as having an important role to play in reducing the greenhouse intensity of our economy.

I would like, however, to take this opportunity to discuss the broader energy market reform agenda and how the current business-as-usual approach is not serving us very well. The Australian energy market has been progressively deregulated since 1993. Deregulation broke down the government owned and vertically integrated energy supply industry and introduced competition and third-party access to infrastructure networks. This is all to be commended.

Australia’s energy demand is currently growing at three per cent a year, by 2010 greenhouse emissions from the stationary energy sector are projected to be 153 per cent above 1990 levels, and Australia’s energy consumption is projected to double by 2050. The consensus amongst energy policymakers in tackling the greenhouse challenge for energy is that we must drive energy efficiency to achieve aggressive reductions in energy consumption, we must use fossil fuels strategically and we must replace coal with low-emissions technologies such as renewable energy and increased small scale and high-efficiency generation close to where the energy is used—that is, distributed generation. The current energy market framework does not serve these outcomes.

We still have a 1990s style market and an energy market that provides incentives for ever-increasing energy demand. In these times of climate change and requirement for resource efficiency and energy security, all technologies will need to be pressed into service. We have to allow participation in the market to all these alternatives. I am not even talking about providing incentives, but simple removal of barriers to participation in the market. To quote the New Scientist:

According to projections by the International Energy Agency, 2005 was the first year nuclear power’s electricity output dropped behind that of small-scale plants producing low or no carbon dioxide emissions.

It goes on to say:

This burgeoning “micropower” movement is a significant step towards reducing carbon emissions. Much of the world’s small-scale generation involves combined heat and power “company-generation” projects, whose carbon dioxide emissions are 30 to 80 per cent less than that of large-scale gas-fired plants. The worldwide uptake of this technology is being accompanied by fast growth in the use of renewables such as solar and wind.

Far from creating an energy market to take advantage of this trend, the current regulatory environment in Australia has significant barriers to the promotion of innovation and participation of smaller distributed generation and renewable energy in the energy market and effectively prohibits energy efficiency.

Without participation from the demand side we have an incomplete energy market. This is an issue that was recognised in the Parer review report of 2002, Towards a truly national and efficient energy market. While a majority of the Parer review recommendations have been implemented and Ministerial Council on Energy working groups were established in 2003 to investigate energy efficiency, renewable energy and distributed generation, my concern—which should also be a concern for the government—is with the time frame of reporting. With respect to timing, recommendations from the MCE energy efficiency and renewable energy and distributed generation working groups either have not been delivered or have been delivered too late for the current round of energy market amendments, creating more barriers to lock out participation of energy efficiency, distributed generation and renewable energy.

Those barriers can be procedural or a consequence of the technology—such as self-dispatch solar or wind technology or outright regulatory barriers and cost barriers, such as inequitable charges being applied to late market entrants such as wind generators—or barriers can take the form of burden of costs not factored in at the time of deregulation, cost of connection and cost of participation in the market. For example, wind generation, which represents less than one per cent of Australia’s energy market, is being charged disproportionately compared to large power stations, which represent 85 per cent of total generation, through the application of network system control charges. An analogy is to charge a light aircraft for the cost of extending a runway, when the extended runway benefits large jets—in this case, the large power stations.

Peak energy demand, which may occur for only a couple of hours at a time, drives the need for additional infrastructure. There is a concept of ‘negawatt’ market, where large-scale load curtailability or energy conservation is bidden into the market, instead of additional generation. Currently there is no market for large-scale energy efficiency or load curtailability beyond the occasional informal arrangement between retailers and customers. Similarly, increased user participation and demand side response, where a consumer can respond to market signals of high demand price scenarios, is not being progressed in line with the current energy market reform agenda.

Additional concerns include inadequate retail competition and that the energy supply industry is showing trends of mergers resulting in corporations owning both retail and generation assets. That is a trend back to vertical integration and a trend towards locking out competition from new entrants and therefore innovators of low emission technologies and energy efficiency. This is not the direction we ought to be going in.

The Age today reported that in Spain wind power generation has risen to 27 per cent of the country’s total power requirement. That demonstrates that there are no commercial or technical reasons why Australia should not have similar levels of wind generation. But, as I have just pointed out, there are significant regulatory barriers.

Energy efficiency was discussed vigorously in the Senate yesterday, and we heard about the good work that the Public Service is doing in demonstrating energy efficiency to large industrial energy users. While there is an important role for education and awareness, regulation, where the benefits are clearly known, should be included now, while the process of energy market reform is actually happening.

Cost competitive solutions are emerging from renewable energy and are even more so when combined with energy efficiency. That shift must be accommodated in the regulatory and energy market reform. While the working groups on energy efficiency, renewable energy and distributed generation are happily progressing, no market adjustment is being made in the current round of energy market reforms. The benefits of energy efficiency and smaller distributed generation are well known. I suggest to the government that, as a matter of urgency, it should remove all of the regulatory barriers to participation by small generation and energy efficiency. Reform is tying Australia into high-energy growth and a high greenhouse emissions future rather than promoting competition between demand and supply options, promoting competition and innovation between energy services and energy commodities.

Brett Mason (Queensland, Liberal Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Link to this | Hansard source

I thank Senator Allison for her contribution. The Australian Energy Market Amendment (Gas Legislation) Bill 2006 will facilitate the development of a cooperative national approach to regulating access to gas pipeline infrastructure by applying the National Gas Law in the Commonwealth’s jurisdiction. This bill has the full support of all state and territory energy ministers, through the Ministerial Council on Energy. I would like to thank senators for their support of the bill and commend the bill to the Senate.

Question agreed to.

Bill read a second time.