Legislative Council: Tuesday, September 12, 2023


Statutes Amendment (National Energy Laws) (Emissions Reduction Objectives) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 31 August 2023.)

The Hon. H.M. GIROLAMO (16:02): From the top, I indicate that I am the lead speaker for the opposition. What we have before us today is another piece of legislation from the statute book from South Australia to the nation as part of the national energy laws, this time on the emissions reduction objectives. These laws have come from the Ministerial Council on Energy, which includes federal and state energy ministers.

These reforms arise out of one of the first actions of the National Energy Transformation Partnership, which was established in 2022. This bill seeks to make changes to three pieces of legislation: the national energy law, the National Energy Retail Law and the National Gas Law. These amendments will integrate emissions reduction and energy policy into the national energy laws and provide greater clarity to Australia's energy market bodies. Currently, objectives include components such as addressing energy price, quality, reliability, security and safety.

This bill comes into this place at a time which my colleague has himself described as one of 'skyrocketing' energy bills for South Australian households and businesses. As the shadow minister for energy and mining indicated in the other place, as per convention we will not be opposing this bill.

Each of our energy laws I mentioned earlier has the objective to promote efficient investment and efficient operation for the long-term interests of consumers. At present, these objectives are in respect of price, quality, safety, reliability and security of supply. These are decided on by the energy market bodies as part of an efficient and economic efficiency framework.

Today, we seek to include into each of those energy laws an explicit objective to consider greenhouse gas emissions when it relates to targets set by participating jurisdictions. This change comes at a time of rising costs of electricity in our part of the world.

In May this year, the Australian Energy Regulator released the finalised default market offer for South Australian electricity users who are on standing offers. That default market offer had an increase of nearly 24 per cent for average household power in South Australia. That translates to an increase of between $439 and $512 on South Australian households' energy bills.

This increase came into South Australian energy bills as of 1 July, in the middle of a cold winter and while many South Australians were trying to keep warm. Amid a cost-of-living crisis, this is another cruel blow. It all adds to the increased cost of living for everyday South Australians.

As we all know, it is not just South Australian households that are bearing the cost of rising energy, businesses are too, especially small businesses as they are unlikely to be able to negotiate on their energy bills. We are a state built on small business. When he was opposition leader, the Premier had no plan that he brought to the 2022 election to ensure that electricity supply was offered, and we are living through that lack of policy now.

In late last year's state budget, the Malinauskas government axed the Home Battery Scheme, the Grid Scale Storage Fund and Switch for Solar—all programs that were proven to help bring electricity prices down. Months on, they still have not been able to fully explain why, except, as we would like to think on this side, that maybe no other ideas have come out from the Labor Party caucus.

At the same time, this government is going to spend at least $593 million on an experimental idea on a new untested hydrogen power plant, which their own policy documents claim will only target electricity costs for businesses in Whyalla, and this will not be until the end of 2025, if it is actually achieved on time and on budget at all.

The help coming from the federal government is even slighter. In contrast, the federal government's election claim was to bring down electricity prices by $275 per year in the budget handed down last year. Instead, it showed that electricity bills were forecast to increase by 56 per cent over the next two years.

Those opposite have tried to deflect blame and not take responsibility at all by saying it is an east coast problem, but yet again we find South Australia has the highest of all price rises of all states connected to the National Electricity Market in that recent default market offer in dollar terms. We look forward to a time when the government has a plan to bring down the cost of energy for all and that time cannot come soon enough. Having said that, we certainly do not oppose the bill.

The Hon. T.T. NGO (16:07): I rise to speak on this amendment to our national energy law. Australia's energy system operates under legislation that gives authority to regulations and rules. The legislation includes a set of objectives that must be followed by the three market bodies:

the Australian Energy Market Commission, which sets the rules;

the Australian Energy Regulator, which enforces the rules and determines the revenue that can be earned by companies operating most of the electricity networks and gas pipelines; and

the Australian Energy Market Operator, which runs the day-to-day trading and advises governments, industry and the public on energy market developments.

The legislative frameworks that govern the national electricity, gas and related retail markets include three national energy objectives. The electricity, gas and energy retail rules each have their own separate objectives; however, all three have objectives that focus on promoting the long-term interests of consumers through efficient investment, operation and use of energy services.

This bill introduces a new emissions reduction objective to these existing objectives. The amendment is an important and essential reform that has unanimous support from jurisdictions around the nation and certainly marks the closing of the door on years and years of denial and delay from the federal Coalition parties. This reform is a measured and progressive change in response to the clear and continued demand from the public, as well as from industry, for Australia to commit to sensible action on climate change.

The emissions reduction will rank alongside, not higher or lower than, the other set of objectives. As we navigate a pathway to achieve positive outcomes in emissions reduction and capture opportunities for energy transition, we want to maintain community support rather than alienate the public.

Addressing the many factors that contribute to climate change depends on the implementation of sustainable practices and policies that balance economic interests with environmental goals as we work towards mitigating climate change. Opportunities will flourish as the world moves to decarbonise. Already, trade barriers are being established, such as Europe's Carbon Border Adjustment Mechanism. Australian producers and manufacturers will have a competitive advantage from cleaner energy.

This nation's Labor governments know that Australia will be hugely disadvantaged if we fail to transition to cleaner energy. The failure of former Coalition governments to provide the foundations of a comprehensive energy policy has been disastrous. Instead, our Coalition governments held an unfounded hope of coal power continuing indefinitely.

Although South Australia does not burn coal for electricity, we are connected to the supply and pricing of the National Electricity Market. Unfortunately, our vulnerability was made worse by the complacency of the former Marshall government which placed greater reliance on building a transmission connector to New South Wales. That energy supply is dominated by coal, which, as we know, is becoming less reliable and more expensive. We can call this the legacy of the climate change deniers, who oppose investment in renewable generation. By not acting soon enough, we became a nation left exposed to the price shocks of fossil fuels.

In determining price rises of more than 20 per cent in the default market offer for electricity this financial year, the Australian Energy Regulator said the main factors driving the increase include higher coal and gas prices compared with previous years, and reliability issues with ageing coal-fired generation assets which created higher expectations of higher future wholesale energy costs.

We need to put these dark days behind us, and this bill creates a framework for us to do just that. This reform will offer a clear signal to the wider industry market participants, investors and the public of this government's commitment to achieve a decarbonised, modern and reliable grid. It is a change welcomed by industry, and the consultation phase included extensive input and feedback from major industry players. I will share some of the comments made by these important industry players. Energy Consumers Australia, which is the national voice of residential and small business energy consumers, stated:

Consumers tell us that emissions reduction in the Australian energy system is important to them. In our December 2022 Consumer Sentiment Survey, 26% of households see a rapid transition to renewable energy sources as one of the most important challenges ahead, while 30% see replacing old coal and old gas plants with new, more efficient technology as a priority issue…

The Australian Academy of Technological Sciences and Engineering welcomes these proposed legislative changes and made the following comment:

By placing an emissions reduction objective within the current framework, it provides the potential to develop long-term planning and investment in renewable energy generation, storage, and transmission. This will ensure that energy is accessible and affordable for consumers in the future.

Australia's largest natural gas infrastructure APA Group stated, and I quote:

Industry faces many hurdles in its efforts to decarbonise. The regulatory regime that covers electricity and gas infrastructure should incentivise decarbonisation efforts through the most efficient means possible.

For this reason, we support legislative reform that allows the benefits of decarbonisation projects, including reduced carbon emissions, to be recognised. The introduction of an emissions objective in the national energy objectives should be a positive first step in allowing this to happen.

In preparation of this bill, the Australian Energy Regulator (AER) has contributed significantly and issued a draft guidance on how it will apply the new objective for the long-term benefit of consumers. The AER has stated that:

By including a value of emission reductions as an input into the cost benefit analysis framework, it allows the monitoring of all costs and benefits to identify and promote efficient investment that is consistent with the national electricity objectives, including the new emission reduction objective.

If emission reduction is a material source of costs or benefits associated with an investment, the calculation of emission reductions, associated with a proposed project or program should take account of the change in energy market emissions, with and without the investment.

The AER goes on to say that an emissions reduction objective will assist them in supporting network investments which enable consumers to get maximum value out of their own investments in assets such as rooftop solar or batteries.

It is time for progress to be made in this space. In short, for far too long out-of-touch climate change deniers became a handbrake on forward thinking about our energy system. Consequently, Australia has a rundown fleet of ageing thermal generators. The cost of doing nothing is the cost that consumers are now paying in higher electricity prices. This reform brings the change our country needs and I am proud that South Australia, once again, takes national leadership in the transition to a cleaner, affordable, reliable energy system.

The Hon. R.A. SIMMS (16:18): I rise on behalf of the Greens in support of this bill. I think it is important to reflect, in talking on this bill, on the impact of the climate crisis on our state and, indeed, our planet. This is a crisis that is already negatively impacting all aspects of modern life, contributing to the destruction of ecosystems, biodiversity and human societies through sea level rises, extreme weather events, changing weather patterns and posing a significant threat to food security, water, the economy, social cohesion and the wellbeing of humans and all other things on this planet, and these impacts will only get worse in the months and years ahead.

We often reflect on the huge disruption that we have seen in our society as a result of COVID, between 2020 and 2022 in particular, but that was really the curtain-raiser for the climate crisis. That really is the tip of the iceberg when one considers the huge disruption that will flow to our economies and to our societies if we do not address the climate crisis. We need to transform Australia into a greenhouse powerhouse, a greenhouse-gas-negative powerhouse, that creates new jobs and a cleaner planet.

Australia and South Australia's climate policy must be consistent with our commitment under the Paris Agreement to pursue efforts to limit the temperature increase to 1.5° Celsius above pre-industrial levels. Multiple independent analyses show that the Earth's average surface temperature has already warmed by about 1.1° Celsius since the start of the Industrial Revolution in 1850. That is a significant amount. A nationwide systemic response is required to drastically reduce emissions from all sectors, including the energy sector, draw down greenhouse gases and be greenhouse gas neutral or negative by 2035.

Australia has the capacity to ensure that all our energy needs can be provided by renewable sources. I know that the emissions reduction targets in South Australia, as set by the Malinauskas government, are 50 per cent by 2030, from 2005 levels, and net zero emissions by 2050. This is a start but it just is not enough. We know we need to cut our emissions by 75 per cent by 2030, based on 2005 levels, and reach net zero by 2035, and that is what the Greens have been pushing for in Canberra and, of course, here in this place.

I will say, though, it is a relief to me, and I am sure to many Australians who care about the future of our planet, that we are finally seeing some movement on the climate crisis after the years of the Morrison, Abbott and Turnbull governments—the failed governments in Canberra. It is appropriate, I think, for me to reference the Morrison government's climate record, and I want to refer in particular to a report from the Climate Council on a catastrophic failure, 'The Lost Years: Counting the costs of climate inaction in Australia'. This report from the Climate Council, issued in 2022, found that the federal Liberal-National government has overwhelmingly failed on climate action over its three terms of government.

The report contained a national poll of 1,299 Australians, conducted by the Climate Council, and it showed that, on average, Australians rated the Morrison government's performance on climate change and its response to worsening extreme weather events as three out of 10. I think that is actually generous, based on what they did—the complete failure of leadership we saw from that government. One in four (26 per cent) surveyed rated the Morrison government as zero for doing absolutely nothing at all. Among 18 to 25 year olds, the average score was 1.5. Of the 1,299 surveyed, no segment (by age, voting preference or location) rated the government as more than 4.8 out of 10. How pathetic.

That is because the Australian people figured out the Morrison government. They got them right, they dispatched them at the ballot box and they recognised that this was a party being dominated by fossil fuels and by fossil fools: people who were not watching the climate science, people who were completely out of touch with mainstream opinion and the need to address the climate crisis. So whilst it is disappointing that we are not going far enough in our response to this climate catastrophe, at least we are finally seeing some movement, and I certainly welcome that.

I do want to express some alarm, though, at the Labor Party's obsession with gas in South Australia. I am not surprised: some in the Labor Party do love their hot air—they do enjoy a bit of hot air. Their obsession with gas is disappointing, because what we need to do is end gas connections for new homes by 2025, as the Greens have been calling for.

They are talking a lot about green hydrogen, and I am interested in learning more about that, interested in learning more about their plans, but the reality is that we simply cannot have an approach to tackling the climate crisis in our state that is based on natural gas being propped up and propping up the natural gas industry. The Labor Party does need to do better. That said, I welcome this legislation as some movement in the right direction. The Greens will continue to push for 75 per cent reductions. That is what the people of our state want, that is what is necessary for getting this climate crisis under control.

The Hon. S.L. GAME (16:25): I will speak only briefly on this bill, but I will mention that it comes into this place at a time of skyrocketing energy bills for both South Australian households and businesses. The substantial increases in household electricity bills have been a crippling shock for families, and especially our most vulnerable. It has been a winter of discontent, with many South Australians having to choose between food and heating. Exorbitant energy bills are adding to a crisis compounded by interest rate rises, rental increases and cost-of-living pressures.

Of course, households are not the only ones feeling the pain, as small businesses struggle with increased costs and fewer customers. With the cost of business going up, there is only so much a small business can cut back to reduce its costs. South Australians need a Malinauskas Labor government that can ensure that electricity supply is affordable and reliable. Instead, we have a Premier and an energy minister with no plan, and now South Australian families and businesses are paying for it. Instead of focusing on emissions reduction objectives that do not ensure baseload power and continue to put upward pressure on energy prices, there should be a total focus on how to bring down household and business electricity bills.

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:26): I thank the Hon. Ms Girolamo, the Hon. Mr Ngo, the Hon. Mr Simms and the Hon. Ms Game for their contributions to the debate. As mentioned, introducing an emissions reduction component to the national energy objectives was one of the first actions agreed to by governments under the new National Energy Transformation Partnership, and that occurred on 12 August last year. This is an important bill, and I commend it to the chamber.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. R.A. SIMMS: I have a question for the minister. I do genuinely understand if she is not in a position to answer, as I recognise this is not her area. I want to get a sense of what is the process if a state wanted to increase its emissions reduction targets. How does that fit within the national agreement and what is the process around that?

The Hon. C.M. SCRIVEN: I thank the honourable member for his question. I am advised that in the event an individual state policy was to change the minister has the discretion to nominate a changed target and that would be submitted to the AEMC for the market bodies to consider.

The Hon. R.A. SIMMS: So there is nothing to prevent the target from being ramped up over time?

The Hon. C.M. SCRIVEN: I am advised that each jurisdiction—so one state could make a change, and then the Australian Energy Market Commission would then consider that change, but it certainly would not, for example, change the overall targets of other jurisdictions.

Clause passed.

Remaining clauses (2 to18) and title passed.

Bill reported without amendment.

Third Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:33): I move:

That this bill be now read a third time.

Bill read a third time and passed.