Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 3 June 2020.)

Mr TEAGUE (Heysen) (16:09): I rise and take great pleasure in taking the opportunity to make some brief remarks in support of the Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill 2020, advancing, as it does, the Marshall Liberal government's agenda to deliver on outcomes and not just on process.

We have heard already today, and I reflect on the earlier contribution of the member for Elizabeth on another matter, about the experience of a regime that gets caught up in process for process' sake, the bundling up of material that might ultimately hold together or make a difference or do something if it were implemented but not actually ever getting there. Contrast that with what we have seen since March 2018, the election of the Marshall Liberal government: an outcomes-driven government, a government that says, 'Alright, what we are about is delivery and, more particularly, underpromising and overdelivering.'

Talk about outcomes, not process. Where there is a practical improvement that can be made, then go ahead and do that. That has seen its expression in so much of what has been brought to this parliament in the short time since the Marshall Liberal government was elected, sweeping away 16 years of Labor government in this state, 16 lost years when the state was subjected to that kind of approach. Now we have a whole new way of going about it: practical improvement and outcomes rather than process. Again, it is writ large in the subject of this bill.

The bill, as it does, will amend the Electricity Act 1996 and the Gas Act 1997 to enable a very outcomes-driven practical improvement to the retailer energy productivity scheme. What those who follow this area have seen in the past as a Retailer Energy Efficiency Scheme will now be shifted to a productivity oriented scheme so that where retailers identify ways in which they can deliver their services so as to increase productivity, then this scheme will support them in doing so. So it is not purely efficiency, but productivity. It broadens the scope under which the scheme can be applied.

We know that the Retailer Energy Efficiency Scheme is the scheme that is operated to provide incentives for South Australian households and businesses to save energy by establishing energy efficiency targets and then delivering on those eligible energy efficiency activities. What the new scheme will do is provide for those retailers to move to a situation where they can improve on productivity as well, and then have eligibility under this new scheme.

The energy efficiency scheme has been around now for the better part of a decade. It was established under parallel regulations for electricity and gas back in 2012, so it was therefore timely that the Retail Energy Efficiency Scheme underwent a review. That review took place last year, in 2019. A key recommendation coming out of that review was that the scheme be expanded from next year to include additional measures, energy demand management and energy demand response activities.

The proposed new scheme that will come into action shortly as a result will continue to have a focus on efficiency but will be expanded to a more meat and potatoes approach to the whole system, if you like, with a view to improvements on productivity, activities that will reduce end-use energy consumption for both households and business, activities that will reduce both costs and consumption for households and business, and activities that will provide broader energy market benefits, which might include reduced wholesale electricity prices, network costs and overall improvements in energy system security.

I would just pause for a moment to consider the importance of improvements in energy system security. It was only a few short years ago, of course—it is easy to remember now that we have found ourselves in this new environment of confidence that has been brought on since March 2018. Remember, we have just been through two typically long, hot summers in South Australia, the last one punctuated tragically by some of the worst bushfires that the state has seen in a generation.

In the present context, we have also seen that we have managed to carry on through those two long, hot summers in South Australia without a significant or sustained blackout of our electricity networks in the state. That is down very much to the diligent and capable work of the Minister for Energy leading a very capable team in implementing measures to do all we can to ensure we have a reliable network. We are very quick to come back to the position that we were in some decades ago when people did not think about power and particularly energy security all that much, because they assumed that you would turn on the light at home and the light would actually come on with the switch.

It was not so long before that that we had come to a point (and I remember it well), through the course of 2017 in particular, where we had really reached a generationally low ebb. We had come to a point where businesses throughout my electorate of Heysen in the Hills had come to routinely regard it as just good business practice—it could be in a variety of circumstances—to invest several thousand dollars in diesel generator backup systems for the business in the expectation that the new par for the course in the dying days of the old Labor government was that you expected having to be ready for, perhaps, a week of blackout in the summer, and that if you had stock in the fridges that you needed to keep cool, you might need to power that yourself, and in any number of a range of other circumstances of all kinds of seriousness, let alone the interference in domestic circumstances when you do not have energy security and reliability.

Of course, that was all capped off by the entire statewide blackout that we suffered through on 28 September 2016, a day that will live in infamy in South Australia's history. Where this scheme is tremendously important in focusing as it does on not only efficiency but also productivity and in dealing with all those indicia of a healthy energy system, it is right that activities that are concerned with improvement of energy system security are very much to the fore. I certainly applaud the initiative to ensure that where an incentive scheme is in place then it is there to see real practical improvement on the ground with the result that there are real and improved outcomes.

Certainly, this is among that suite of measures that we have seen already in these early years of the Marshall Liberal government that are going about restoring confidence by doing these practical things to ensure that there is robust improvement. I do draw particular attention to those particular activities that bring an energy market benefit related to improved energy system security.

The introduction of this new productivity scheme requires amendment to be made to both the Electricity Act of 1996 and the Gas Act of 1997, as I adverted to at the outset, to provide for the broadening of the scope necessarily, and so there is this bill before the house that will provide for those necessary changes to those two acts, and that is the subject of part 2 and part 3 respectively of the bill.

It is well to note that the final design of the productivity scheme will be the subject of regulations to follow. As a result, parts 2 and 3 of the bill, which set out the amendments respectively to the Electricity Act and the Gas Act, go to the characterisation of those regulations and anticipate those regulations applying to the new REPS (retailer energy productivity scheme) in substitute for the REES (Retailer Energy Efficiency Scheme) that preceded it in both those acts.

As other members do, I look forward certainly to seeing the full scheme as it is expressed in the regulations in due course and, more particularly, to the outworking of the new scheme. This is an area in which we see leadership in South Australia and leadership by our minister and the very capable people in his department in charting a course that we might anticipate is likely to be followed by other states in an environment in which there is a great deal that occurs necessarily in a coordinated fashion.

We on this side of the house are of course committed to a strong and thoroughly cooperative national energy market, the efficiencies and the benefits that come with that to this state, which is the result of being able to efficiently export particularly our abundant renewable energy generation that is here in this state, and also to ensure that there is a very smooth interaction between South Australia and the rest of the country.

This is not one of those areas in which the legislation proceeds in lock step but one in which here in South Australia we can demonstrate leadership, encouraging the more efficient and more productive use of energy and, in so doing, lead the way to the better application of technology in this space as well.

I take the opportunity to thank the minister for bringing this bill to the house and recognise the tremendous turning around that has occurred in just this very short period of time in this state in this energy environment, from a situation in which electricity prices were high and getting higher, where energy supply was unreliable and becoming increasingly so, to a situation now in which energy prices are steadily coming down for households and business and in an ever more reliable environment. That is not just me saying so; it is what South Australians have seen over more than two years now. I applaud the minister for his work in this area and particularly in bringing this bill to the house. I commend the bill.

Mr PATTERSON (Morphett) (16:29): I also rise to speak on the Statutes Amendment (Electricity and Gas)(Energy Productivity) Bill 2020. On reading the bill, it is in itself a short bill and homes in on a very specific area of both the Electricity Act 1996 and the Gas Act 1997, but I think it is very important in terms of the benefits it will have. Specifically, the existing act refers to the Retailer Energy Efficiency Scheme, and by looking at changing just one word, which in itself seems a small change, it actually opens up a big span of opportunities for this state and for electricity and gas consumers who will benefit from it.

I will touch on the Retailer Energy Efficiency Scheme. It was set up by the South Australian government and has been running for a number of years now. The idea is to provide incentives for both South Australian households and businesses to save energy. To do this, the minister sets energy efficiency targets through regulations that are to be met by electricity and gas retailers. The retailers in turn then deliver these energy efficiency activities to householders and businesses, and these are set by thresholds in the regulations that the minister sets out.

Retailers must have a certain number of customers to participate, and the larger ones have to not only deliver these energy efficiency activities to households and businesses but also provide energy efficiency activities to priority group households. If you can increase the efficiency of electricity usage, that means the actual amount of electricity used by the appliances in a household or business is reduced, thereby providing a cost saving for the actual end consumer and also, if you think about it from a macro point of view, reducing the overall demand of the system. As the member for Heysen so eloquently stated, that has become more and more problematic, in not only South Australia but also Australia, as we transition from what was a centralised, coal-fired, predominantly base load system to having distributed energy resources throughout the country.

In terms of the current objectives, they are to reduce household and business energy use, with a focus on low-income households, that will in turn produce associated energy costs and greenhouse gas emission benefits as well—that is the aim. The regulations regarding the Retailer Energy Efficiency Scheme currently operate until the end of 2020 and are required to be reviewed by the end of 2019. Of course the energy minister has conducted the review, and it was done in a number of elements: in November 2018, an independent evaluation of the scheme and then, out of this evaluation, in April 2019 a Review into the Retailer Energy Efficiency Scheme Issues Paper was released, and 19 written submissions commented on that.

The first aim of the independent evaluation aim was to look at whether the scheme should continue and, if it did, where the opportunities were in the future for the scheme to deliver benefits to South Australian consumers. The independent evaluation found a number of factors about the scheme. It found that it has been effective in delivering its objectives and efficient by delivering a net economic benefit while meeting those objectives. So the energy efficiency measures that were put in actually not only reduced energy usage but also had a net economic benefit.

It was also equitable, by delivering benefits to householders and low-income householders across the state. In terms of the administration of this scheme, comparing it with those of other states, it was administratively simpler, which in turn kept costs down. Of the scheme's expenditure, I think about 4 per cent was on costs, so a lot of the benefits are going directly to consumers.

In terms of actual efficiencies, it found that this scheme supported 8.5 million gigajoules of energy savings for South Australian households and businesses and that it is on track to deliver over $1 billion in energy bills savings to South Australian households and businesses over the 2015-20 period, which includes $328 million in energy bill savings for households, of which $155 million in energy bills savings were for priority, low-income households. Additionally, it also provided $720 million in energy bill savings for businesses and reduced greenhouse gas emissions, on track, over the period, reducing emissions by over one million tonnes of CO₂ equivalents. The independent evaluation found that the scheme performs well compared with other Australian schemes in relation to the administrative costs.

Certainly, the evaluation showed there was a strong case for continuing the scheme. It then went on to look at not only what measures are available from an energy efficiency challenge point of view but also, at the broader level, what the electricity market looks like in South Australia, noting that it has changed significantly since the scheme was first introduced. The Australian Energy Market Operator provided a recent South Australian electricity report in November 2019.

That report noted that the changing energy landscape is continuing to have a profound impact in South Australia, with several records broken in the last 18 months and grid demand becoming increasingly variable. The report itemised, to a greater extent, that the distributor Energy Resources, which are predominantly the rooftop solar of households and businesses, represent about 10 per cent of total South Australian electricity generation. Approximately 34 per cent of South Australian dwellings now have rooftop photovoltaic systems installed which, throughout Australia, is equal highest with Queensland.

The growth in rooftop photovoltaics means that, especially around midday, and especially in summer months, rooftop solar is providing a lot of input into the grid. That means that the operational demand from the grid is now reducing, especially on sunny and low-demand days. If you look at how this plays out, on Sunday 10 November 2019 in South Australia we had quite a mild day. At 2 o'clock, it was sunny, with temperatures around in the mid-20s. That meant that people did not have to heat or cool their homes very much, but the solar output from the rooftop solar was very high, and this led to a minimum demand of around 450 megawatts. At that time, solar photovoltaic was providing 830 megawatts, which equates to roughly 64 per cent of the operational demand.

This is the effect the new intermittent energy landscape is having upon the system directly in South Australia. That produces challenges, and that minimum has been reducing over time. While that was the minimum, it has been happening more often these days when it is mild and more rooftop solar is providing energy into the system, so we are getting these drops in minimum demand during daylight hours. But, of course, when you get towards the sun going down, all that rooftop solar starts going out of the system, so the system has to ramp up very quickly as well, and to provide that it needs to be done through dispatchable sources, which at present, and looking at the map from that day, was mostly gas and a little bit from the interconnector as well.

These are the sorts of challenges that our system in South Australia is confronted with. We have low minimal operational demand happening more regularly and being forecast to continue, but also at the same time quite high peaks where the energy demands start to peak as we get into the late afternoon and people are coming home from work and putting on the air conditioner, etc. The system itself is having to comply with these demands.

I have a few other points in regard to what the market was like in South Australia. On 24 January 2019, there were a number of records set across South Australia, where operational demands soared to 3,114 megawatts. That is a level not seen since 2011. Again, at the same time as we experience a peaky nature of energy supply, we also see the peaks increasing. At the same time, even in winter, we are starting to get record highs of winter operational demands as well. On 24 June 2019, there were roughly 2,500 megawatts sent out.

These are the challenges, related to the intermittent side of the energy supply, that have to be coped with by the system. There are measures around that, and one of those is demand management, the ability to try to reduce those peaks. While energy efficiency certainly will have an impact in reducing those peaks, the energy efficiency measures that the current Retailer Energy Efficiency Scheme was looking to provide are more across the board. Not only do they happen at 6 o'clock, when the peak is occurring, but they happen across the day. They suppress demand overall, but we really need our system to be able to cope with the ups and downs of demand to be able to also have some demand response.

The review into this scheme recommended that that is an issue that can be addressed very well by expanding the scope of the scheme, which gets back the changes in the amendment bill I was talking about. We are amending section 63AB of the Electricity Act by removing 'efficiency' and substituting it with 'productivity'. Similarly, in subsequent amendments, instead of having a REES shortfall the bill amends that and substitutes it to specify an energy productivity shortfall. The idea is to go from concentrating on a scheme that looks at energy efficiency and expanding it to look at energy productivity, so not only is efficiency taken into account but also productivity.

I will continue in that vein, in terms of where things are going, also from an Australia-wide perspective, because I think it is important. With the National Electricity Market, what is becoming more apparent, and what the energy minister here in South Australia is trying to do, is to work with our system as part of the National Electricity Market. Rather than trying to go it alone, we are recognising that the National Electricity Market is relying more and more upon interconnection, having more interconnectors throughout the network, to provide reliability and redundancy.

I think it is quite apparent—even most recently back in February, when the interconnectors to Victoria went down and South Australia was islanded from the rest of the electricity market—how important an interconnector is. Had we had an interconnector to New South Wales operating, it would have meant that we were not as reliant. It is obvious that we were doing it on our own, and that is why it is very pleasing that, from the first days of this Marshall government coming into power, we worked extensively to get an interconnector to New South Wales.

It was very welcome news when the regulator signed off on the interconnector between South Australia and New South Wales earlier this year. That is certainly the first step, and of course it still has to be built, but those are the sorts of measures that are required in this changing landscape. They are at the high level and are certainly going to be required to provide reliability and security in our system.

To go further, if we talk about some of the other measures that are going to be required at a smaller level, then demand response and demand management are certainly going to be important going forward, not only at a larger level but also at the consumer level, whether that be businesses or households. These measures that are being put in place are certainly going to be very important going forward.

I will just touch on the review into the energy scheme and some of the aspects it was looking at. These include introducing productivity into the scheme, having a productivity target expressed in that scheme, and doing it in such a way that it will include residential properties and businesses. There are some big opportunities in terms of efficiency and productivity gains that can be made by larger businesses, so the scheme is looking to expand to those larger businesses via the regulations.

It is important to make sure that the concentration of retailers does not just focus on these businesses. The idea would be to also set some residential targets and encourage those retailers to provide these productivity and efficiency gains to consumers. It is also important to make sure that it is spread into the regions and not only through metropolitan Adelaide. There is potential for a target for regional retailers so that they are able to focus their efforts on the regions, which will be quite important.

Interestingly, New South Wales has conducted a similar review into their efficiency scheme. Out of that review, they are also looking at moving to a focus on demand response technologies. I think it is becoming more apparent that it is heading in the correct direction, not only in South Australia but in New South Wales. As the member for Heysen said, as a leader, South Australia is coping with high levels of intermittent energy sources and is then having to put in place steps to successfully accommodate that. It will be looked at with interest by the other jurisdictions and also, I think, acted upon by them as well.

In summary, while this bill is not long in detail, it will certainly have a really high impact on consumers, both business and residential, by reducing costs as we continue to decarbonise our energy sector. It will also reduce the overall system energy, keeping that under control. This will in turn improve the reliability and security of the energy system. It will reduce those peaks, which in turn will reduce those very high wholesale prices that are naturally passed on to businesses and households in South Australia.

It is a very good step forward. I commend the minister for bringing this to the house and look forward to its passage through parliament.

Debate adjourned on motion of Mr Basham.