RENEWABLE ENERGY AMENDMENT (FEED-IN-TARIFF FOR ELECTRICITY) BILL 2008 - Second Reading
Senator MILNE (Tasmania) (3:41 PM) -I move:
That this bill be now read a second time.
I seek leave to table the explanatory memorandum and to have the second reading speech incorporated in Hansard.
The speech read as follows-
RENEWABLE ENERGY AMENDMENT (FEED-IN-TARIFF FOR ELECTRICITY) BILL 2008
Australia has immense, untapped renewable energy resources of sun, wind, heat and water. We have some of the top researchers in the world. We have tremendous community support to make the switch from a coal-based economy to a new, zero-emissions, renewable energy economy. With the right policy settings and the right political will, we can make it happen. This Bill is a key first step to making a renewable Australia a reality by rewarding anybody who invests in renewable energy with fair pay for the clean energy they generate.
The purpose of the Renewable Energy Amendment (Feed-in-Tariff for Electricity) Bill 2008 is to amend the Renewable Energy (Electricity) Act 2000 to establish a national feed-in tariff (FiT) scheme. The objective of the FiT scheme is to provide reliable, long-term financial support for the commercialisation of a range of renewable energy technologies, both large and small. It is particularly intended to help those that are generally unsupported by the existing mandatory renewable energy target scheme or short term ad-hoc rebate policies such as the Solar Homes and Communities Program.
The bill is a revised version of my first feed-in Bill, with a number of changes resulting from lessons learnt during the Senate Environment, Communications and the Arts Committee inquiry into the earlier bill. I'll come to those changes shortly.
First I'd like to thank those who made submissions or attended hearings during the committee inquiry. It is quite clear, as rightly recognised in the Committee report, that there is overwhelming support for a gross national feed-in law in Australia.
This overwhelming support is not surprising given that the renewable energy boom we are now seeing in many nations around the world is unambiguously attributable to renewable energy feed-in laws. The principal reason for this success is investor certainty - a feed-in law provides the certainty homeowners, farmers, businesses or anyone else needs in order to borrow the up-front cost of a renewable energy system, because they know that the income generated by system will meet the loan repayments.
The Greens' strong support for feed-in laws does not mean that we don't also support the Mandatory Renewable Energy Target. Rather we believe they are compatible and complementary. The MRET should be retained because it provides a backstop, minimum level of renewable energy. The effect of MRET, however, is to support whatever renewable energy technology is currently the cheapest - in practice that mainly includes wind energy and solar hot water systems. By contrast, feed-in laws are tailored to support renewable energy that has a good prospect of becoming competitive in the future - these may include solar thermal, geothermal, solar PV, biomass, tidal, wave and so on. It is important to support a range of technologies for two reasons. First, it is not possible to be certain which technology will end up being most successful and second, because ultimately if we are to rely completely on renewable energy we will need at least a few technologies working together. When the sun isn't shining we will need to be producing energy from other sources, such as wind, stored solar thermal, geothermal, biomass, wave etc.
Since the committee inquiry there have been a number of noteworthy developments. For example in October 2008, the international accounting firm, Ernst & Young, released a report which concluded that Germany's system of feed-in tariffs delivers more renewable energy at lower cost to consumers than Britain's Renewable Obligation and its certificate trading system. This conclusion challenges the common misconception that feed-in tariffs cost consumers more than so-called "market-friendly" polices, such as tendering and certificate trading systems. Perhaps not surprisingly this was followed last week by the announcement that Britain's Labor government will now consider a proposal for feed-in tariffs for renewable energy systems up to 3MW. This represents something of an ideological breakthrough because the UK, like Australia, had been a strong supporter certificate trading systems (such as the MRET). In other words, what the Greens are proposing is exactly what the British Government is now proposing. If the Australian Greens can't persuade the Rudd Government maybe Gordon Brown can.
Despite the strong support for a feed-in law expressed in the inquiry, the position of both the Government and the Opposition is to simply refer consideration to COAG. This is a deliberate strategy to delay action because, as the Government knows perfectly well, many of the States have recently introduced FiT legislation - albeit very poorly designed schemes - and they will be reluctant to now alter these schemes. A COAG harmonisation will be at best a recipe for a lowest common denominator scheme. At worst it will mean no action at all with years of deadlocked negotiations.
All State and Territory schemes, with the exception of the ACT, have a number of fatal flaws, the worst of which is the so called ‘net metering'. Net metering schemes only pay the premium tariff on the net quantity of electricity exported to the grid after accounting for in-home consumption. This contrasts with gross metering schemes, under which owners receive the premium tariff for all electricity produced by their systems (whether consumed at home or exported). The very significant advantage of gross metering systems is that owners and lenders can reliably estimate the value of the renewable energy their system will produce. This is much more difficult with ‘net metering' systems - which explains why no scheme outside of Australia uses the net-metering approach. It also significantly increases the time needed for the investment to be paid back, reducing the incentive to invest. Net metering, frankly, is a deliberate attempt to set up a ‘Clayton's' scheme which looks like a feed-in tariff but does nothing.
A second major problem with most of the State schemes is that they support only solar photovoltaic energy. This is a major restriction. Most schemes around the world provide feed-in tariffs to a range of renewable energies to promote diversification and to maximise the chances of a real breakthrough in the commercialisation of one or more technologies. Again the ACT scheme is better than the other states because it offers feed-in tariffs for technologies other than just photovoltaics, namely wind and solar thermal.
A third major problem with most of the existing State schemes is that only small scale renewable energy generators are eligible to participate in the scheme. This too is a significant deviation from the successful European models. Why would we want to limit the potential of the scheme in this way? The Greens believe that both large and small scale renewable energy generators should be eligible to participate. Once again only the ACT has got this design aspect right.
The Government's attitude to renewable energy policies reflects a lack of appreciation of just how urgently, and just how rigorously, we need to reduce greenhouse gas emissions. Soon we will need to have a zero emissions electricity sector because achieving significant emission cuts in other sectors is more expensive. Evidence that the Government still doesn't understand the gravity of the climate change emergency is that it clings to the outdated emission reduction target of 60% by 2050. That's a long way behind the new targets of the UK and USA - 80% by 2050 - and even these nations are behind the science which clearly says that net zero emissions are required as soon as possible.
The federal government's primary argument against feed-in schemes seems to be that the cost of the scheme will negatively impact low income households. Whilst there will be an impact on households, the experience from abroad indicates the impact is very slight and manageable. The key is to compensate through energy efficiency offsets such as proposed by the Greens through the retrofit of the nation's housing stock. Even a cost impost of a couple of dollars per month on each household can raise enough revenue for a very effective scheme. Furthermore, it must be acknowledged that the MRET and the yet to be introduced emission trading scheme also inevitably impact on low income households. Compensation is necessary, but easily achievable through either the income tax and welfare systems, through the distribution of the revenue raised by the sale of permits in the emission trading scheme, or through investment in energy efficiency roll-outs to save householders money on their energy bills. The question isn't will there be a negative impact on low income households as this can be offset. The question is, are feed-in schemes an effective way to kick-start the vital renewable energy sector? The answer is clearly yes.
So to this Bill.
Like the first version, this Bill would go further than the approaches recently taken by Australian states by:
allowing the Minister to apply a feed-in tariff to any technology, not just solar photovoltaics;
ensuring that the feed-in tariff is applied to all renewable electricity generated, not just that component which is exported to the grid, which in the case of domestic photovoltaic systems may be negligible. The Victorian and South Australian feed-in tariff schemes are particularly weak in this regard; and
establishing a national register which will yield valuable information about the effectiveness of the various renewable energy technologies supported.
The main changes to the first Bill include:
Requiring that, in the case of small to medium sized renewable energy generators (i.e. those with an installed capacity of less than 1 MW), the process of reading electricity meters and the rebate of the FiT rates will be the responsibility of the electricity retailers.
Allowing owners of existing renewable energy generators (i.e. those installed before Royal Assent) to be eligible to receive FiT rate rebates and payments.
Requiring the FiT rate payments to be paid at least quarterly instead of annually and the FiT rate rebates to be rebated at the same time as an electricity bill is rendered to the owner.
Allowing the Minister to reduce to the FiT rate applied to any particular technology without waiting five years, but at a maximum rate of reduction of 5% per year.
Clarifying that extensions to existing registered renewable energy systems will not be treated as new systems for the purpose of eligibility for rebates and payments.
Removing ‘wood waste' as a renewable energy source due to the uncertainty about whether, in many instances, this source is genuinely renewable.
In summary the scheme is intended to operate as follows:
It is the responsibility of the Minister for Climate Change to set a FiT rate for any of renewable energy technology listed in section 17 of the Act, except ‘wood waste', each year.
In setting the FiT rates it is the objective of the Minister to support the economic viability of electricity generation from a range of prospective renewable energy technologies. To achieve this, the Minister may vary FiT rates according to the type and location of qualifying generators.
The owner of a qualifying generator will receive a constant FiT for 20 years, set at the time that they register with the scheme, on all of the electricity that they produce (not just the highly variable component which is exported to the grid). Only generators which forgo participation in the mandatory renewable energy target scheme can be a ‘qualifying generator'.
The Minister must review the FiT rate applying to each renewable energy generator type each year - with the adjusted rates applying only to new installations. In order to provide a degree of certainty to manufacturers and suppliers of renewable energy products, the Minister may increase FiT rates at the beginning of any financial year, but can only decrease rates at a maximum of 5% per year.
The Minister must set a FiT levy rate per MWh of electricity acquired from the electricity grid, to fund the Regulator's FiT payments to qualifying generators with an installed capacity equal to or greater than 1 MW. The FiT levy is to be imposed by a proposed Renewable Energy (Electricity) Feed-in-Tariff Levy Act 2008. The FiT levy rate must be sufficient to cover the estimated cost of payments made by the Regulator.
The FiT levy is payable by all electricity retailers and direct customers of electric energy from the grid, calculated by reference to their annual energy acquisition statements lodged under section 44. (Note that the annual energy acquisition statement is used to calculate the renewable energy shortfall charge of an electricity retailer or a direct customer).
In the case of renewable energy generators with an installed capacity of less than 1 MW, it is the responsibility of the electricity retailers to manage the process of reading electricity meters and the payment of the FiT rates. Payments from electricity retailers to qualifying generators will be in the form of a rebate on an electricity bill and must be rebated at the same time as an electricity bill is rendered to the owner. If the whole of an amount to be credited to the owner of a qualifying generator under in a particular billing period has not been set-off against the charges payable by the owner for the supply of electricity by the expiration of 12 months after the end of that billing period, the owner is entitled to the payment of the outstanding balance.
In the case of renewable energy generators with an installed capacity equal to or greater than 1 MW, a quarterly return by the owner of a qualifying generator must be lodged with the Regulator within 15 days of the end of the quarter. The Regulator must pay the FiT rate to the owner of a qualifying generator within 30 days of receiving from the owner a quarterly return in the prescribed form indicating the metered energy produced by the qualifying generator.
Feeding-in of electricity to grid
Subject to compliance by the owner of a qualifying generator with any relevant technical, safety or other requirements, electricity distributors must connect the qualifying generator to the grid and permit the owner to feed electricity into the grid.
The Regulator must establish a Register which records:
details of all qualifying generators, including the name and address of the owner of the generator, the date of registration of the generator and the type of generator (that is, the eligible renewable energy source used by the generator);
In the case of renewable energy generators with an installed capacity equal to or greater than 1 MW, the total amount of electricity produced by each qualifying generator each quarter;
the FiT rate to be paid to the owner of a registered qualifying generator and the period for which the FiT rate will be paid; and,
if there is any change to the installed capacity of a qualifying generator, the new installed capacity of the qualifying generator.
The Minister must ensure that an independent report on the operation of the FiT scheme is prepared and tabled each year. The report must include details of total renewable energy produced and total payments made under the FiT scheme, and the total receipts from the FiT levy.
The Minister must provide statements explaining how the FiT rates and FiT levy rates are calculated and must table those statements in both Houses of Parliament each year.
Australia could be on the cusp of a renewable energy revolution that will create tens of thousands of jobs and billions of dollars in new infrastructure investment, helping to build us out of the economic downturn by building a zero-emissions, climate friendly energy network. But if we are to see this come to pass, we need to drive the changes from the federal level. A strong, national, gross feed-in tariff for all technologies legislated by the Commonwealth is the best way to do this.
I commend the Bill to the Senate.
Senator MILNE -I seek leave to continue my remarks later.
Leave granted; debate adjourned.