STATUTES AMENDMENT (AUSTRALIAN ENERGY MARKET OPERATOR) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 3 June 2009. Page 2529.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (16:59): I rise on behalf of the opposition to speak to the three bills that we have before us: the Statutes Amendment (Australian Energy Market Operator) Bill, the National Gas (South Australia) (National Gas Law—Australian Energy Market Operator) Amendment Bill, and the National Electricity (South Australia) (National Electricity Law—Australian Energy Market Operator) Amendment Bill.

They are all important, but No. 11 on the Notice Paper is the main bill, and the other two are almost consequential. I will speak to all of them as a package because I think it will make it a little easier and less time-consuming.

As members would be aware, we presently have a national electricity market. However, we are now bringing this into a national energy market, with the COAG agreement of 2007, which will establish a single industry funded national energy market operator (the Australian Energy Market Operator or AEMO) for both electricity and gas, and that is to be done through these three bills. I think members would understand that electricity is a relatively consistent product, which has been dealt with pretty well in a national sense, with the operation of NEMMCO and a whole range of other initiatives that have taken place over time.

The South Australian national electricity bill was introduced in this place in May 1996 by the then minister for infrastructure, the Hon. John Olsen. The introduction of measures involving the leasing of our electricity assets was somewhat contentious, but over the period of our term in government it is clear that the Liberal Party has had a longstanding interest in what is best for South Australians in relation to our energy supplies. In fact, back in those days, the Hon. John Olsen vigorously pursued the opportunity for South Australia to be the lead legislator in relation to any national law and, of course, we are again the lead legislator across the nation.

It is interesting to look at the transformation that has taken place over time. I can remember as a young boy on a farm in the South-East that we generated our own electricity with a 32 volt generator in the shed in the back garden. What a wonderful transformation it was when we had 240 volt electricity supplied to the property. Now we are seeing the evolution of energy supply to the point where we have a national market, where the eastern states and South Australia are all interconnected, and it works particularly well.

The government has for some time conveniently blamed any change in electricity and particularly energy prices on the fact that the former Liberal government privatised and leased our electricity assets. I am sure you are aware, Mr President, that, at the time that legislation was passing through this chamber, members were saying that, if certain members of the Labor Party did not cross the floor to support the Liberal Party, they would have burst in here and carried them across to the other side of the chamber. I was not here at that time, but I have heard those stories in the corridors of this place.

The Hon. P. Holloway interjecting:

The Hon. D.W. RIDGWAY: The honourable member says that I should not believe everything I hear, but I have heard it from so many sources, and I am sure there has to be a fair degree of fact in those stories. As I have said, the Liberal Party has been blamed a number of times for price increases, yet the net cost of energy and electricity in real terms has probably gone down somewhat over the past few years. What is of some concern to the opposition is that, once you go to a truly national body, as is proposed, the pricing mechanisms are taken out of the control of South Australians and the price we pay for energy, whether it be gas or electricity, will be at the whim of the eastern states.

I know that my colleague the Hon. Rob Lucas (who was intimately involved in the leasing of our electricity assets and, without a doubt, probably has the best mind in this parliament when it comes to knowing about energy regulation) will be making a contribution to this bill tomorrow, and he has a number of questions he wants to put on the record.

A national energy market is being proposed by these three bills, and I think that the government has committed $20 million to further renewable energy initiatives. I spent some time, together with the Hon. Mark Parnell and other members in this place, on the Environment, Resources and Development Committee, and we would often see wind power projects come up for review by that committee. In fact, we conducted an inquiry into wind power, and at that time there was some discussion about the fact that we had reached the capacity in the South Australian market for wind power, bearing in mind that, if you have too big a component of variable power, the grid becomes unstable.

So, for us to advance that industry, we must have access to a national market to enable us to facilitate that in a better way. I know that is not covered by this legislation, but it is interesting to note that regarding solar power for domestic users (something that the opposition is looking at closely, and we may even bring in an amendment bill) we have a feed-in tariff, which provides some incentive to householders and domestic users in that respect. With the amendments—

The Hon. M. Parnell interjecting:

The Hon. D.W. RIDGWAY: The Hon. Mark Parnell interjects that it needs to be fixed. I know that amendments I think the Hon. Mark Parnell moved in this place were to allow churches, community halls and other places, other than private dwellings, to participate in that scheme. We saw the Premier announce this wonderful initiative of wind turbines in the city. Sadly for the Premier, they never worked and perhaps would never have been connected to the grid. Again, it is an example of some of the spin that we have to endure under this government. However, there is some good new technology around.

I recall from my childhood that we had little Dunlite generators that would sit on something that was a bit like a windmill tower in the backyard, and it produced enough electricity to light a couple of lights; it did not produce a lot of electricity. There is new technology around now that may allow an opportunity for churches, school halls, scout halls and community halls and particularly domestic and rural householders to install a wind turbine. Something we need to look at is that, if they can produce electricity for a domestic situation under similar guidelines to those for solar power, we should look at some way to facilitate mechanisms so that the people concerned can receive financial recompense by way of a feed-in tariff in exactly the same way as for solar power.

It is also interesting to note that we are blessed in South Australia with the wonderful asset of hot rocks and geothermal technology, albeit in its infancy in our Outback, which is making good steps forward. When the Hon. Wayne Matthew was the minister for mineral resources or mining he acknowledged that we had a geothermal industry and needed to facilitate it in a legislative sense, and I congratulate him for that. We will see an opportunity over time to produce a significant amount of electricity, and it will be a national asset. This whole national market facilitates the development and investment by companies in that technology even more.

We do not ever talk about it—and it is not Liberal Party or government policy—but we have that wonderful uranium resource, and at some point we may find in Australia's future, when we have had the debate and if and when the community is prepared to accept it again, that we have tremendous amounts of energy in this nation. The national market framework being set up with this suite of bills will allow development and investment more easily than if we still operated as individual states.

The concerns of the opposition will be outlined by the Hon. Rob Lucas, who is the guru on energy regulation in our team. He will ask more technical questions tomorrow. The new AEMO will be responsible for two critical new functions, the most important being the national transmission planning responsibility. To meet the federal government's carbon policy objectives, electricity generation needs to change promptly from coal fired to low emission gas fired and renewable generation. These generation sources are often from remote locations, including South Australia's geothermal solar and wind resources. In the past, transmission planning largely has been carried out on a state by state basis.

The establishment of a national transmission planning body is imperative to coordinate the planning and investment of transmission assets across state boundaries in order to meet the carbon policy goals. That is absolutely right when it comes to a national approach, but the opposition is concerned that the capacity to set the price for energy in South Australia will be taken out of state hands. If we look at our federal parliament, we have a Senate where all states are equal so that state interests are not overrun by the big brothers in New South Wales, Victoria and Queensland. I understand that the Hon. Rob Lucas will have more detailed questions, but a question I ask the minister is: how will the framework affect our ability to control our price for energy in South Australia? That is a fundamental concern, and I note that the Hon. Mark Parnell will speak when I have finished, and I expect some of the concerns he will raise will be in line with the end result to consumers.

I also note that, while electricity is relatively easy to deal with, the gas market is different. My advice from some of the industry stakeholders in relation to gas is that we have three different types of supply arrangements. South Australia has a supply arrangement where you cannot starve the market; it always has to be in balance so that electricity generators have access to gas and mums and dads also have access on an equal basis. Victoria has four hours of supply in the system, and New South Wales has a different supply arrangement, so it is not nationally consistent. Electricity is all the same voltage and a product that is easy to control and manage because it is consistent.

Industry people are saying to me that they see this as a positive step forward and that it is logical for investment in infrastructure, pipelines and exploration of new gas fields that we have a national market and we are largely interconnected with a range of pipelines put in over time, and we know that coal seam, methane and other gas will come on to the market. The industry said that it is a case of 'suck it and see' from its viewpoint. It acknowledges that the framework was a sensible way forward; it seems logical. Industry stakeholders, whilst raising questions about some of the planning and pricing issues, by and large all say that it is the logical way forward.

When the minister responds, I ask him to put on the record, because we have these different regimes of supply in the different states, how over time it will conform to a national framework where no state and no gas consumers are left disadvantaged. I notice with the price setting for gas that the AEMO will be able to publish annually a gas statement of opportunities that will analyse gas supply and the demand and provide information to aid investors in gas production and pipeline infrastructure. NEMMCO currently publishes a similar statement for electricity.

I am interested to know, because we have different regimes in the states, how it will fit together and work so that gas and electricity consumers—the people who elect us, the mums and dads in the community—have legislation that is in their best interests, and in the end they get a quality, reliable source of energy at a consistent and affordable price. We are going through difficult times as an economy presently and we do not want to put an extra burden on our mums and dads in the community. As I said, the concerns the opposition mostly has relate to price setting and to future planning with the abolition of the ESIPC. With those few comments, I indicate that the opposition will be supporting all three bills, and I look forward to contributions from other members.

The Hon. M. PARNELL (17:15): I think that this is the third time that these tranches of national bills have come before us, and the Greens have been critical on each occasion. We have been critical of the process that has led to this legislation. We find it to be undemocratic and dominated by deals done at the executive level behind closed doors, with little room for the parliament to influence the outcome, and this set of three bills before us now fits into that category as well. We are told that deals that have been struck nationally cannot be interfered with at the state level. That does beg the question of the role of a state parliament in debating these laws given that we are under incredible pressure not to amend them in any way.

On previous occasions I have moved amendments to these national energy laws, all of which have failed. The lens through which I will be looking at this legislation is the question whether the arrangements that are being put in place position us for a carbon constrained energy future. I do not think these arrangements do position us as well as we need to be positioned. I note that South Australia is usually the lead legislator in relation to these laws but that other states have in fact already passed the bills that are before us.

In terms of the content of the legislation, in relation to energy planning functions, the role of the National Electricity Market Management Company (NEMMCO) is being replaced with the Australian Energy Market Operator, or AEMO (the acronym that is being used). It is also replacing our state Electricity Supply Industry Planning Council, or ESIPC, as its acronym goes. I can see no good reason why those planning bodies, in particular the state planning body, needs to be done away with as a consequence of this legislation. My understanding, and I thank it for the briefing it provided to my office, is that the government is keen to avoid the replication of duties.

I have a bill before parliament to reform the state ESIPC body. When this legislation passes that bill will have no future. However, the reasons I sought to amend the state Electricity Supply Industry Planning Council are the same reasons why I find this legislation to be inadequate, that is, that the planning bodies do not adequately take into account the important role of demand management, and they do not take into account the special interests and needs of small suppliers of energy, in particular, renewable energy.

In fact, concentrating the planning function in the hands of the existing big operators leads, I believe, to a direct conflict of interest. The large energy generators and retailers will have a huge say in the operation and the planning of this new energy market operator. These big corporations are already the ones that benefit most from the current make-up of the grid. They are big, heavy, centralised providers of conventional fossil fuel energy, and they will have 40 per cent of the say in this new company. If we give those existing operators—the big energy end of town—responsibility for planning the future of the electricity grid, I think there is not much doubt that they will favour the current centralised model rather than more diversified sources of energy or energy efficiency.

They are very likely to favour solutions that make the situation easier for them rather than what Australia really needs, particularly in a carbon constrained future. In fact, they would not be doing the right thing by their own shareholders if they did embrace a bold new future, because their obligation is to the existing coal, gas and other fossil fuel company shareholders. The voices that will miss out are the voices of consumers and the voices of the smaller operators. When this legislation went through the Victorian parliament recently the Hon. Greg Barber, the leader of the Greens in Victoria, posed the following question:

Is any of this getting us closer to the smart grid that we need in contrast with the big centralised grid that we have had forever? The centralised grid may have served our needs in the past, but it is certainly past its use-by date.

That is the question that I think we need to consider when we are looking at this legislation. Are we putting in place the best mechanism to help us get a smart grid? Clearly, the current grid is not that smart. We have a situation where if something goes wrong in Tasmania the lights go out in Prospect. That is not a smart grid. If we are looking at an energy future that is more decentralised, less dependent on a traditional fossil fuel base load, more accommodating of renewable energy (whether it is wind, solar, hot rocks or anything else), it will be a grid that is very different from the one that we have had up until now.

In conclusion, the Greens do not support this legislation, because it does not put in place the right rules to transform our energy markets in the way they need to be transformed if we are serious about addressing climate change and energy security. I will not be speaking separately to the other two bills. My comments on this first bill stand for the other two pieces of legislation before us.

Debate adjourned on motion of Hon. J.M. Gazzola.