ELECTRICITY (FEED-IN SCHEME—RESIDENTIAL SOLAR SYSTEMS) AMENDMENT BILL

Final Stages

Consideration in committee of the House of Assembly’s message.

The Hon. P. HOLLOWAY: I move:

That the council do not insist on its amendments.

When this bill was before the council, the Hon. Mark Parnell moved several amendments, which have two basic themes. The first was to include small business in the feed-in electricity scheme and the second was to extend from five years to 20 years the operation of this scheme. As I argued at the time, there would be significant administrative difficulties if the scheme were to be extended to small business, as defined in the amendments of the Hon. Mark Parnell. I pointed out that, when it came to the support for photovoltaic cells that are provided by the commonwealth government, they are not provided to small business; they are provided to residential households only.

The purpose of the scheme is to encourage individuals to use photovoltaic cells, or solar cells, to generate electricity. I argue that, if we were to bring small business into it, that would increase the cross subsidy that would be required from ordinary residential users, who, in some cases, would be low income households. More importantly, the government particularly opposes the amendment in relation to extending this scheme from five years to 20 years. If one is going to have a scheme, why put that time frame on it?

The government has pointed out that it believes that, in the next five years, we will have a carbon emissions trading scheme: in other words, that the benefits or merits of this scheme may well be obsolete in five years. If we were to accept the amendments originally moved by this council, those people entering this scheme would have the legitimate expectation that they would receive this subsidy for the next 20 years, regardless of whether, following the review of the scheme in five years, it was concluded that there was a much better way of dealing with the promotion of alternative energy forms within this country. That is why the government cannot accept this amendment, even though, of course, five to 20 years hence it may well be a different government that has to put up with it.

The important thing is that we believe that five years is a reasonable time for this scheme to be trialled. Whether it should be continued after that date is something that should be assessed at the time on the information that is then available. If we were to accept this amendment for 20 years, we would effectively be locking in this scheme for 20 years. Those people who invest now would have every right to complain if it were to be removed at some stage in the future, because there was a better way in which to encourage alternative energy. That is why the government cannot accept this decision. It will be unfortunate if these amendments are insisted on, because that will mean that the country's first feed-in scheme will not occur because, as I said, the government cannot accept those amendments.

The Hon. M. PARNELL: I oppose the motion. I believe that we should insist on our amendments. I would like to address the issues that the minister has raised, which were raised in another place by the Hon. Patrick Conlon. I will also address the matters that he raised. I think we need to remind ourselves that South Australia is leading the way on this issue, and the other states are watching us to see what we do and whether we get this feed-in tariff right.

We will set the benchmark for the rest of the nation. So, this is not about the Greens or anyone else trying to stop the government getting the first feed-in tariff in this state and getting one that is good. We need to go back to the very first principles of this legislation. What is the legislation supposed to achieve? What it is trying to achieve is to increase the uptake of domestic solar panels—small-scale solar panels—that people can put on their roof for the sole purpose of reducing greenhouse gas emissions. That is what this bill is all about.

It will succeed if we manage to encourage more people to put solar panels on their roofs. It will fail if we do not encourage them, and that is what we must always bear in mind. Let us not make this some sort of a government versus opposition issue, or a Greens versus people issue: it is really the Legislative Council having done its job properly as a house of review and taken a reasonable piece of legislation but with flaws and fixed it up. We have made it achieve the purpose for which it was intended.

I now turn to some of the points which the minister has raised and which the Hon. Mr Conlon raised in another place. He said that they have consulted with industry. The Hon. Mr Conlon said:

Members should make no mistake, this was the subject of extensive consultation over a year with industry and lots of interested groups.

I challenge the government to release to us the responses that it got from industry which told it that this bill was what was wanted; that this bill was perfect, because the submissions that came to me from industry said, 'Five years is not long enough. We need 20 years to get investment certainty.' I think—

The Hon. P. Holloway: They would say that, wouldn't they. Would you expect them to say anything else?

The Hon. M. PARNELL: Obviously, the solar industry has an interest in selling solar panels, but this bill has an interest in getting solar panels on roofs. People will not get them in their Christmas stockings, minister: people will have to buy them. You must work with the solar industry. Sure, it wants to sell panels but it needs to be able to go to its customers and say, 'You have legislated support that will assist you in the decision to do the right thing by the environment and put these panels on your roof.'

Show me the submissions from all relevant industry members that say, 'Five years is what we need', because the submissions I have say that it is not good enough. The Hon. Mr Conlon in another place is saying that they would keep faith with industry by sticking with the five years when there is no-one to my knowledge from industry who wants a five-year scheme, and I think that is just ludicrous. You will earn more brownie points with industry if you extend the scheme to 20 years as proposed in the Legislative Council amendments. It does beg the question: what is the point of having consulted with industry if you are not going to listen to a word that it says to you?

I have shared with members in this place the submissions from the Business Council on Sustainable Energy, which said, 'We need for investment certainty to have a longer time period than five years.' That organisation will not feel that you have broken faith with it. It will be delighted if you say, 'We've listened to you in consultation and we're going to extend this scheme to 20 years.'

It was also suggested in another place that the Greens had not consulted with industry about it. That is absolutely wrong. I have spent an awful lot of time on the telephone and on emails with all manner of people from industry. I have been talking to the Clean Energy Council (that is the new name for the Business Council on Sustainable Energy). I have been talking with people from BP Solar (the largest manufacturer of solar panels in Australia), the Solar Shop, EcoSouth, the Alternative Energy Association and a range of other retailers and non-government conservation groups, and I was surprised at how consistent they were in their replies to me.

Far from the government's claim that it is keeping faith with industry, the impression that I got is that if the government was to go and support the Legislative Council amendment in relation to 20 years, that is absolutely what they want. It has also been said that the amendments that this Legislative Council endorsed will somehow destroy the bill—kill this bill and make it unworkable. I think that is rubbish.

We have improved the bill. If the government wants to make threats to say, 'If these amendments of the Legislative Council are insisted upon, we will pull the bill', then be it on the government's head. The member for Mitchell in another place said:

If the bill is withdrawn that will rest squarely on the minister's shoulders and on Mike Rann's shoulders.

I can tell members that, if the bill is withdrawn as a result of our insisting on these amendments, these industry groups with which the government claims to be wanting to keep faith will come down on the government like a tonne of bricks and they will know why this legislation failed. They will not be blaming the Liberals; they will not be blaming the Greens: they will blame the government for not accepting some sensible, relatively minor amendments that improve this legislation.

The government said that it had no option but to oppose. That rather begs the question: why did the government bother consulting with anyone if it was not open to hearing anything that people in industry or the Legislative Council had to say? I think this motion does treat this council with contempt. We debated these amendments at some length. Not everything I put forward was accepted—many things that I think would have further improved this bill were rejected—but the two issues that we agreed on in this place were to extend the scheme to 20 years and extend the availability of the incentives in this bill to small business customers.

The minister in another place also said that 20 years was not an appropriate period of review. I remind honourable members that the government has committed to reviewing this bill. It said it was the halfway mark in its five year scheme at 2½ years, but it is not in the legislation. The government can review the legislation whenever it wants, and it will need to review it sooner rather than later.

The one thing where I do agree with the minister is that, even if we set a 20 or five-year time limit, this area is a moveable feast. We will have carbon trading, and all manner of things will come in and the landscape will change, but what will not change is the decision making processes of the mums and dads, and they will be overwhelmingly be the people who take advantage. Maybe a couple of small business people might want to as well.

They will walk into the retail outlets where solar panels are sold and say, 'I'm here because I want to do my bit for the greenhouse effect. I know that if I put some solar panels on my roof I can generate some electricity, feed it back into the grid and that will be good for the greenhouse effect and it will also be good for peak demand—those hot summer days when the airconditioners are running.'

The reason people do that now is out of their commitment to the environment. What this bill does is give them a small incentive, in that it guarantees a higher tariff at 44¢ than they have to pay to buy their electricity in. As we said last time, it is likely to reduce the payback period from 20 years to maybe 18 or 19 years. It is a fairly small incentive that might get a few more people into those shops to take up the option of solar panels.

What the solar retailers say to me is that, even though people are not there to make money—they are there to do the right thing for the environment—they ask, What's the payback period? If I put these panels on my roof, what's the payback period?' The solar retailers tell me they need to be able to tell their customers that they will be paid more money for the electricity they sell and that there is legislation in place that will ensure that is the case for at least 20 years.

What we have to remember is that these solar panels last that long. In fact, BP Solar, which manufactures most of the solar panels in Australia, guarantees its panels for a period of 25 years, so people are making a long term investment. So, when people go into the shops they need to know that as a parliament we are behind them. We are saying, 'You're doing the right thing; you're not going to make money out of these panels. You're not going to make a profit; it's not going to be a business for you: we're just giving you a bit of extra incentive to help you do the right thing by the environment, and we will lock it in that we will help you for 20 years.'

Over time, the rates, the tariff and maybe the calculation method will change, but we need to say that, as of 2007, we are standing behind the customers and we will give them this extra support that they need. I do not accept that 20 years for the duration of this bill undermines the intent of it. What it does is add that extra. As the solar sellers said to me, this 20 years is the most important thing for them.

It is the one thing that will help them to encourage people who are already part way there. The fact that they have walked into one of those shops shows that they are already part committed and, to help close the deal and help them put those panels on their roof, they need to know that it is going to be a 20-year period.

I will refer briefly to the other issue of small business, which should be able to take advantage of this scheme. The government makes the point that small business does not have the benefit of the commonwealth government's capital rebates—in other words, it is only householders who are able to get that cash rebate on the installation of their panels. That is an important incentive for householders. Small business people do not get that incentive, so what can we offer them? Absolutely nothing except this extra feed-in tariff—the availability of this tariff to them.

That means that a small business person who wants to put panels on the roof of their shop or workshop or factory, or whatever it might be, will have to be even more committed to the environment than a householder. A householder gets an incentive from the commonwealth and they now get the benefit of this extra feed-in tariff as well. The small business has to be really committed because they have not yet got the commonwealth benefit; they only have the feed-in tariff—if we insist on our amendments.

It begs the question: if we, in South Australia, want to be the lead state, why on earth are we hiding behind the coat-tails of the commonwealth and saying, 'If the commonwealth doesn't see fit to give capital subsidies to small business then why should we, as a state, give a beneficial feed-in tariff to small business?' I cannot understand why, with this government's ability to show leadership, it is hiding behind the coat-tails of the federal government.

After having had that final instalment of the fourth report of the International Panel on Climate Change last weekend, we now know that it is even far more urgent than it was when we first debated the issue to make sure that we do everything we can to encourage people to do the right thing by the climate. As I said yesterday when I was talking about that IPCC report, the time for baby steps is over.

I think we can also be mature about this debate and can make sure that it is not a party political thing. The Greens' role in this is that we are, I would like to think, a critical friend of government; we support the legislation and want it to succeed, but the government does not have a monopoly on wisdom. The Greens prefer to go out and talk to people in the real world who are actually manufacturing and installing these panels to find out what incentives people need to make that decision to invest.

I urge all members of the Legislative Council to note that by insisting on these amendments we are making some relatively minor changes to what was already a good idea—that is, to give preferential tariff treatment to people who have taken that public interest step and put solar panels on their roof. I do not think we should be swayed by the arguments raised, most of which I have covered.

Another issue that people may have some nervousness about is the administrative burden; people are saying that extending it to small business will be too hard. It is not too hard. All it requires is a small business person to go and buy some panels and sign a form which says, 'I am a small business person, I have fewer than 20 employees, and I want to apply for the 44¢ tariff.' That is sent in to the electricity company and the small business person gets the beneficial tariff.

The government will say that its intention was to spread the cost of this scheme over the same people who can benefit from it, and because we do not have a separate category called 'small business consumer' for the purpose of billing, this system cannot work. I say that is rubbish: we can make this work. I suggested that it be spread over the cost of all electricity consumers, with some discounts and rebates for low-income people. It is not too hard for the government to come up with a scheme, through regulations, that makes sure that we spread the cost of this.

It is a small number of small business people who are likely to take up this offer; I would imagine it is in the tens rather than the hundreds or thousands. In fact, if you were minded to put up solar panels your first option would be to put them on your house because you can get the commonwealth capital subsidy.

As I said when I moved these amendments, it is only if a person cannot put it on their house because they live in a block of flats, or in circumstances where there are trees and they cannot do it, so let us give them the option to put it on their business if they are a small business proprietor. I think these amendments are incredibly sensible. I urge the government not to oppose the amendments or not to pull the bill. That would be an absolutely ridiculous outcome for what are sensible amendments that will, in fact, put South Australia in a leadership role in relation to the debate on climate change.

The Hon. C.V. SCHAEFER: The Liberal Party will continue to oppose the government's approach on this matter. We supported the Hon. Mark Parnell's position when it was debated previously and we will continue to do so.

It has been interesting to see the government's shift in attitude. When the Hon. Mark Parnell moved his amendments originally, there was enormous consternation about how one could possibly work out what was a small business and what was not a small business—it would be absolutely impossible—and yet, by the time these amendments reached the lower house, the Hon. Mr Conlon said that that was secondary to the concern about extending the scheme for 20 years.

It seems perfectly logical to me to extend a program to 20 years if necessary. My understanding is that the pay-back period for installing these panels is between 15 and 20 years. The same people who contacted Mr Parnell contacted me to say that they need this 20-year period. If they have a five-year period, what do they say to their customers when they come in: 'We can assure you of a 44 per cent rebate for five years.' The customer says, 'Hang on, I need 15 years.' They reply, 'Sorry, we don't know what the government is going to do after five years.'

When I spoke the first time I said that it was the view of the Liberal Party that this was nothing more than a publicity stunt by the Premier. This sounds like a long bow but, to me, it is very reminiscent of when the Premier announced, with great gusto, that he was going to fix our problem gambling situation by buying back a large number of machines. That would reduce the number of machines and all would be well. By the time he had finished with it, all he had done was place the machines in the hands of very large operators, and nothing much changed at all.

It seems to me that this is a similar announcement: 'We are going to be the first state in Australia to introduce a feed-back scheme.' What it really means is that it was going to offer it to such a small number of people and run it over such a small amount of time that it was actually going to make no difference at all, but the government would be able to wave a flag and say, 'We were the first in Australia to introduce this.' This is yet another pea and thimble trick. It will be churlish in the extreme (and prove my point) if the Hon. Mr Conlon does, in fact, withdraw the bill. We will continue to support the Hon. Mark Parnell's amendments.

The Hon. SANDRA KANCK: I indicate that the Democrats will also be sticking by the amendments. I do not regard the amendments that got up in this chamber to be in any way onerous or draconian. A number of amendments were moved that were unsuccessful. What we have are the remaining few that were successful. They are not going to bankrupt anyone. Again, in the light of climate change and this government's stated commitment to reducing the impacts of climate change, this is one way of doing it by encouraging people to invest in this technology. The longer that we can provide these tariffs the more likely people will be to invest in the technology. If we are serious about climate change, then members of this chamber should stick by these amendments.

The Hon. P. HOLLOWAY: I will briefly address some of the points that were raised. What the government proposed in the original bill is that, in terms of people who feed electricity back into the grid from their solar panels, whereas they pay 17¢ a kilowatt hour (or thereabouts) for electricity delivered to their door, other electricity consumers, who might be some of the poorest people in our community for all we know, will cross-subsidise them to the tune of 44¢ a kilowatt hour for the electricity that they put back into their grid.

The bigger the take-up you have, the greater the cross-subsidy that is necessary from other consumers. If one increases the period over which this operates from five years to 20 years, if it does have the effect of increasing take-up beyond what is anticipated, it means that ordinary customers, in some cases the poorest consumers in our community, will have to pay more to cross-subsidise the scheme.

The government has put this bill forward as a result of all the information available to it and, of course, we will review it in 2½ years to ensure that we get the right take-up. There are two ways in which you can increase the take-up: one is by increasing the rate that you pay—in our case, we propose 44¢ per kilowatt hour—and the other incentive is, of course, the time. The five-year period and the 44¢ is very carefully pitched at what we believe (it is a guess based on the information that we have in relation to the previous take-up of solar panels) will achieve the goal of 10 megawatt hours of solar generation from the current three.

If one is to increase the attractiveness, then certainly we might get to a different target, but the point is that other customers will have to cross-subsidise the users of this scheme. This has been carefully pitched. The 44¢ parameter and the five-year period put by the government are very carefully pitched to achieve the goals that we have set. If these are increased, the government, as I said, cannot support the scheme, because it may have significant consequences for other users, which I am sure the Greens and the Liberals will be the first to run away from in terms of taking responsibility for it. However, this government does take responsibility. We will have to take responsibility for the outcome of the scheme, and that is why we will insist on rejecting these amendments.

Finally, the Hon. Mark Parnell spoke about the industry. Of course, he was talking about the solar panel industry. It is scarcely surprising, of course, that it would want a longer scheme, because the industry will make more money out of it. It is a quite simple case of self-interest. Of course it would want the longest period possible. I am sure the industry would prefer 25, 50, or 100 years or, in fact, indefinitely. Of course they would do that. The period and rate that we took are pitched to achieve the government's objective of getting 10 megawatts of solar panel generation in five years.

Again, I remind the committee that we had undertaken to review that. In 2½ years the rates can be adjusted if necessary to encourage that particular take-up. A future government always has the capacity in five years' time to adjust the parameters of the scheme. As even the Hon. Mark Parnell has suggested, within five years the scheme is likely to have vastly different rates, etc., in any case.

So let's be honest to those people who are buying these panels. We are offering them a very attractive rate—44¢ per kilowatt hour for electricity fed back into the grid compared with the 17¢ they pay for taking it out of the grid, cross-subsidised by other electricity consumers, and they will get that for five years. That is the deal. Of course, they also get the advantage of the commonwealth's $8,000 capital grant. If it is necessary to increase that in the future, obviously so be it. There will be all sorts of changes with carbon trading schemes, and so on, that are likely to be introduced within the next five years which will totally change the parameters. For those reasons, the government believes the five-year operation of the scheme is eminently sensible.

The Hon. M. PARNELL: The minister refers to this scheme as being carefully pitched. It is not carefully pitched. The government has no idea how many people will be attracted to take up solar panels under this arrangement, but it does not want too many people to do it.

The Hon. P. Holloway interjecting:

The Hon. M. PARNELL: You talked about the bigger take-up rate as being a problem because you say it leads to a bigger cross subsidy, and you talked about poor people having to subsidise rich people putting on their solar panels. The government has no idea how many people this scheme will attract, but those of us who have spoken to people in the industry are saying that their customers are telling them that it is no incentive at all. They will not get any new people. We do not want to just benefit the people who have already made the commitment, the people who have already put the panels on their roof—they are a side benefit. It is great that they can get the tariff, but, unless this scheme encourages new people to go into a shop, buy solar panels and put them on their roof, it will fail. If no new panels go up, it is a failure. All we have done is give a bit more return to people who have already done the right thing.

In terms of the cross subsidy, it is simple to spread the cost of this scheme, even though we do not know what it will be—it is not likely to be high—across all electricity consumers, and you will find we are talking about a few cents or dollars a year. We are not talking of an extravagant cross subsidy between the rich and the poor. I put an offer on the table in other amendments to exempt pensioners and low income people. The government can still go back and fix up that situation.

Let us not kid ourselves that the government has drafted this comprehensive scheme, knowing exactly through market research how many people will take up panels and what the greenhouse effect will be. It is hit and miss. I do not want to miss; I want to hit. I have put these amendments and urge members to support them because people in the business of selling solar panels to consumers say that, without the sort of incentives we are offering here, the take up rate is unlikely to be increased.

The committee divided on the motion:

AYES (6)

NOES (13)

PAIRS (2)

Majority of 7 for the noes.

Motion thus negatived.