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House of Assembly - Fifty-First Parliament, Third Session (51-3)
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ELECTRICITY (FEED-IN RATES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 4 June 2009. Page 3059.)

Mr WILLIAMS (MacKillop) (10:41): When I started to talk about this matter, several weeks ago, I mentioned the electricity feed-in amendment that we passed through this parliament some considerable time ago and the fact that the legislation was more about giving the Premier an excuse to go out and promote himself as being clean and green and claiming that his government is doing something positive, rather than getting a proper feed-in scheme to encourage people to spend substantial amounts of money to put in photovoltaic generators, particularly in their homes and small businesses.

Since that original legislation we have seen several other moves. We have seen the commonwealth government substantially reduce access to the $8,000 subsidy that it was giving. They put a cap, so that those households with a combined income of over $100,000 per year were excluded from accessing that subsidy, and we also, more recently, have seen the commonwealth pull the plug on that $8,000 and basically say: 'We've run out of money and we're going to walk away.' The renewables sector is aghast at what the commonwealth is doing and at its lack of action.

This bill, which has already been through the other place, seeks to redress a serious flaw that occurred in our legislation. The reality is that, before the government bill was passed by the parliament, electricity retailers were buying the amount of electricity that was, in a net sense, fed into the grid from people who had a photovoltaic cell generating electricity, and they were paying on a one-to-one basis. They were paying about the going rate of what the retailers were charging householders for their electricity; it was in the order of 20¢ per kilowatt hour.

When the legislation was enacted to ensure that a net feed-in rate of 44¢ was paid back to producers of such electricity, a number of electricity retailers stopped paying for the electricity that was fed into the grid from photovoltaic cells: they just stopped paying it. The 44¢ that is being paid as a net feed-in tariff is not paid by electricity retailers. In fact, it is paid by all electricity consumers, and it is collected by ETSA Utilities, which runs the distribution network. It is collected as part of their charge, and it is what is known as a flow-through event. ETSA Utilities can then go to the Essential Services Commissioner and seek to have an appropriate increase in their fees to make up for the charge and so that they can collect it through an increase in their tariff.

That is where the 44¢ is coming from. The retailers are not providing the 44¢ but they are getting the electricity that is generated by photovoltaic cells and then on-selling it, so they are getting a proportion of free power and on-selling it to other consumers—maybe next door or just down the street from where it has been generated, meaning that there is very little cost in actually transporting and distributing it through the network.

It is estimated that at the moment the amount of electricity that is being generated in South Australia, if you multiply that by the going rate (which is around 16¢, I am told), equates to about $350,000 per year. So the electricity retailers are making a windfall gain of about $350,000 a year because of the flaw in the legislation the government put through parliament 12 months ago. This bill seeks to redress that. This bill seeks to establish a fee (and ESCOSA maybe would be involved in establishing that fee) by which the electricity retailers would be obliged to buy that electricity before they on-sell it, and it would be on top of the feed-in tariff already paid, the 44¢.

It is estimated that under such a system those who install photovoltaic cells would get an actual payback equivalent to about 60¢ per kilowatt hour—substantially more than the 44¢ they are getting now—and, obviously, that will reduce the payback period for the capital cost of installing such a photovoltaic generator quite substantially, thereby increasing the incentive for people to install them. That has become even more important with the commonwealth government winding back its subsidies substantially—and, I add, the state government has been winding back its energy-related subsidies quite substantially over the last 12 to 18 months as well, whether it be for electricity, hot water or other energy uses.

So, the bill is quite simple. It establishes, on top of the 44¢ premium already in law (it does not alter that at all), an obligation on the retailers to actually pay for the electricity that is generated and put back into the grid and that they on-sell. It has no impact on the taxpayer; it has no impact on the government budget. Its only impact would be to take away the windfall estimated $350,000 that the electricity retailers are now pocketing and give that back to the people who actually generate the electricity, those who install photovoltaic cells.

Surprisingly, our neighbours across the border in Victoria have recently introduced a not dissimilar measure, and it is the expectation that if you install a photovoltaic generating system in Victoria you would get a return of about 60¢ per kilowatt hour. The ACT has recently passed legislation so that your expected return would be about 50¢ a kilowatt hour. I understand other states are looking at doing the same, if they have not already passed legislation, and it is going to be of that order.

One very interesting thing is that one particular retailer, and I am told it is TRUenergy, is, indeed, paying for the electricity that is fed into the scheme and that it is on-selling. One retailer out of all the retailers that operate in this state is already doing the right thing. What this legislation sets out to do is to oblige all the retailers to do the right thing. The bill has already been through the other place. All it needs is the agreement of the government here and it will become law, and those who install photovoltaic systems will get paid for the electricity they generate, plus the incentive, which we already all agreed they should be paid, and they will be more inclined to install such systems.

All we need is the agreeance of the government. The government has had a long time to consider this matter because it was some months ago that it went through the other place. The government is well aware of it. All we need is the agreeance of the government and this can be enacted into the law forthwith, and all the energy retailers operating in South Australia will, from that time onwards, be obliged to do what they should be doing, anyway; they will be obliged to do what one retailer, TRUenergy, is already doing. I repeat: this will have no impost on the taxpayer, on the budget or on the consolidated account. It will merely make electricity retailers pay for all the electricity they on-sell. I commend the bill to the house.

Mr PICCOLO (Light) (10:51): I note that the bill was introduced into the Legislative Council by the Hon. Mark Parnell. I also note his concerns about some retailers electing to stop paying for electricity they receive from PV customers that is over and above the legislated amount of 44¢ per kilowatt hour as required by law. I fully agree that PV customers should receive fair value for the energy they export to the grid. More importantly, though, the question arises: what is a fair value and how should retailers pay for this energy? Despite what the member for MacKillop says, someone does pay for this. Other consumers will ultimately pay for it if it is not properly done, and that is one of the reasons I will be opposing this amendment.

Ultimately, if we are not here to protect the consumer then who are we protecting? The government accepts that the power remitted by owners of solar panels back to the grid has a value to electricity retailers, and that is not in dispute. These retailers need to recognise that value and pay for it, just as they expect their customers to pay for their power. That said, though, there are two fundamental weaknesses with the proposed amendment: first, the value of the power appears to be grossly over-estimated. The Hon. Mark Parnell has called this the 'base price' and valued it at 16¢ per kilowatt hours.

The advice available to the government is that it is worth of the order of 6¢ per kilowatt hours. This is because the proposed amendments are based on a price of delivered electricity, that is, they include in the price the energy, the network and the retail charges rather than the energy only charges, that is, the price of the actual energy generated by the PV owner.

Secondly, the amendment forces the wrong party to pay for the electricity, as I have briefly mentioned before. The honourable member requires the distributor to pay the additional base price, so that under this proposal consumers at large will ultimately pay for any payment increase and not the retailers, yet it is the retailer who is the recipient of the surplus power and receives the benefits, and some retailers will continue not to pay under this amendment.

The solar feed-in scheme has been operational only since July 2008. The scheme has been much more popular than anticipated. I seek leave to have incorporated into Hansard a graph, which indicates the take-up rates into the grid and the success it has been even under the current model. As the graph shows, in the first 18 months since South Australia announced its intention to have a feed-in scheme, the number of grid-connected solar systems doubled from 1,500 to 3,000 systems in SA. In the next 12 months that number doubled again.

The SPEAKER: Order! I missed the member for Light seeking leave.

Leave granted.

The SPEAKER: It is purely statistical?

Mr PICCOLO: It is. It is very hard to read it into Hansard.

The SPEAKER: Normally they are statistical tables with numbers rather than a graph.

Mr PICCOLO: But the graph has some numbers on it.

The SPEAKER: I am not sure whether it is easily incorporated. I will consult with Hansard. If they are able to do it we will do it. Normally tables with numbers are incorporated rather than graphical representations. I will consult with the member for Light. It may be that he is able to get it in a form which is a table with numbers on it and which is more easily incorporated into Hansard. Nevertheless, leave has been granted. We will take it as that for the moment.

Mr PICCOLO: In the first 18 months since South Australia announced its intention to have a feed-in scheme, the number of grid-connected solar systems doubled from 1,500 to 3,000. In the next 12 months that number doubled again. South Australia now has over 6,000 schemes—and the number is growing by the day.

By the time South Australia's scheme commenced in July 2008, Victoria and Queensland had announced feed-in schemes, using the same design principles that South Australia had developed. Queensland implemented its feed-in scheme in July and chose a net design and tariff rate that makes it virtually identical to the South Australian scheme.

The Victorian scheme, which is waiting to be passed by its parliament, has also been modelled on South Australia, legislating a net feed-in arrangement and a distributer obligation. The latest state to commit to the design is Western Australia. It, too, is committing to the net feed-in approach that has proved so successful in South Australia.

Feed-in schemes have provided an important support for the solar industry in Australia. When options for South Australia's feed-in scheme were originally developed in late 2006, the government's analysis indicated that solar owners were making an investment which had a pay-back period of 25 years or more. The analysis demonstrated that the feed-in scheme could reduce the pay-back period by up to 10 years, making it much easier for households to have a return on their investment.

The value of feed-in payments to solar owners cannot be underestimated. Feed-in payments have been shown to halve the pay-back time for a solar investment, even with the attractive offers that currently can be found in the solar installation market. I am told that some of the current offers appear to have a pay-back period of less than five years when feed-in is included.

Early criticisms of the net scheme claimed that feed-in payments did not provide adequate reward to solar owners. This is not correct, as can be seen by the take-up rate. I am advised the Department of the Premier and Cabinet carried out significant analysis that showed that the average system would receive feed-in payments for almost half the electricity produced. I am also told that no other Australian analysis of this magnitude exists as it was based on the actual export data from over 1,500 systems.

South Australia has long been a leader in this area and, despite strong growth in other states, over one-quarter of all systems installed across the nation are located here in South Australia. On a per capita basis, South Australia has 9.7 systems per 1,000 households—over double the installations of any other state. Again, it demonstrates the success of the South Australian scheme. The government is confident that the lead it has taken on this issue will keep South Australia at the forefront of supporting this form of clean energy technology, while paving the way for national harmonisation of feed-in schemes.

The Minister for Energy has said that the government would conduct a review of the feed-in scheme when the capacity of installed solar electricity reached 10 megawatts. The feed-in tariff has been so successful that the 10 megawatt criteria was reached in May this year. Against this background the government has directed the officials responsible for carrying out the review to include in the review scope consideration of the options to ensure customers receive fair value from retailers for energy exported to the network. It is incumbent upon the review process to get this issue right in order not to burden other consumers—as this amendment would.

It is anticipated that the government will be in a position to advise the parliament of the outcome of these deliberations in September this year. Managing the costs of the scheme and its impact on consumers is important to the government. The legislation was designed to reward small customers who invest in solar energy generation. As was highlighted in the debate on the bill, the rate of 44¢ per kilowatt hour for net generation payable by the distributor was chosen because we need to balance the benefit to the PV owners, with the costs borne by other consumers, as well as not adversely impacting retail competition.

As part of the review, the government will also be examining what is occurring in the retail electricity market and the behaviour of PV customers. Importantly, we also need to ensure that any obligation placed on retailers does not discourage them from offering contracts to small customers, including those with PV systems. There is now full retail competition between electricity retailers in South Australia. Full retail competition allows customers to choose a retailer that provides the best package of price and services to meet their needs, and all customers, whether or not they have solar panels, would be very well advised to shop around and find the best energy deal for their personal circumstances.

Nevertheless, while the government agrees that solar owners should receive a fair price from retailers for their electricity, at this point in time it is too early to agree to any new amendments to the feed-in scheme and they would be premature. Given that, the government will be opposing this bill but undertaking a review, and will report to parliament shortly.

Mr VENNING (Schubert) (11:01): I certainly want to comment on this bill and support the position of the shadow minister who has put our case. This bill relates to the rebate which South Australians who have solar energy schemes receive for feeding electricity back into the grid. On 14 February last year, legislation was passed which enabled the feed-in tariff scheme to come into effect on 1 July. However, unfortunately, it is not working as intended and the retailers are now profiting from the scheme by onselling electricity generated through the scheme back to consumers. We also know that, even since then, the federal government has changed its mind and brought this on, which I think is a serious breach of confidence, because most people considered that they had at least until 30 June to finalise their contracts to purchase their cells. I think some people have certainly been caught very short, and I cannot understand why the government did that.

This bill, though, seeks to remedy the situation of the tariffs by establishing a renewable energy price to be paid to domestic solar panel owners, consisting of the 44¢ rate registered last year and a one-to-one rate; that is, if the retailer is charging 20¢ per kilowatt hour for the electricity you receive from them, as part of your contract you will receive 20¢ per kilowatt hour back from the retailer when you sell your electricity back to them.

I think it is necessary to get the scheme right. I know from driving around the Barossa, particularly in the past 18 months to two years, you see solar panels on so many roofs. People are becoming far more energy conscious and want to participate, even at a greater cost. They want to be part of a new clean, green environment. They want to feel that they are doing their part towards keeping our environment safer and cleaner. I do declare an interest in the issue. Personally, I am aware of the cost of setting up a solar array, and even with the federal government rebate, it is cost prohibitive.

It also became obvious to me, when doing my own feasibility on fitting an array to my own home, that the power providers have the ability to adjust the tariff rate—or they did. I, like most consumers, presume I have negotiated a pretty good deal with my current electricity supplier, but if I install one of these arrays, they reserve the right to charge me at a higher level. That was a huge disincentive for me to continue and, of course, I did not continue with the process. Guess what—you do the maths—I have not proceeded, although I would have liked to and still would. This may go some way to removing the anomalies.

This is better than the wind farms—it really is. As I said, every time I go home another one of these great windmills is visible from my backdoor. I do not mind them during the day so much, but at night they are certainly in your eyes—

Ms Fox interjecting:

Mr VENNING: The wind turbines.

Ms Fox interjecting:

Mr VENNING: At night, with the flashing lights. They all flash on and off in unison. They are really off-putting. I reckon that one or two of the recent road accidents could have been caused from people looking at these things, because people look at them. I think the way to go is to have people have the cells on their roofs, and I think this legislation might somewhat offset what the federal government is doing. The federal government scrapped the big $7,000 rebate scheme but is going to bring it back on at a lower level. However, there will be no means test, so that means that everybody will be encouraged to hook them on. It is a very good motion, and I certainly support my shadow minister in what he is trying to do here. I look forward to his final remarks.

Mr PENGILLY (Finniss) (11:05): I also support this motion but I would like to add something to it. There is something missing from this whole debate that needs to be inserted and that is the capacity for private wind power generators to be able to feed into the system and get a feed-in tariff back. I say this because I have a Mr Mike Davidson down in my electorate, and some of you may have seen him with his wind turbine in the paper a few weeks ago. He has produced this wonderful machine, and in fact I am having another look at one next week. I would be quite happy to put one on my home, but the excess electricity cannot be sold and this is a problem. I think we need to adapt the legislation to cater for this provision of power generation by private wind generators.

It is all very well to have solar generators—a terrific idea. The ZEN company down in my electorate is at the forefront of solar power and energy efficient homes, and I know from talking with them that ZEN is also supporting putting in these modern wind generators. They, too, feel that people should be able to supply energy into the grid and claim some income back from it. I think that is an important thing that should be added. It is just a small thing; it is no different to any of us having solar panels and being able to feed it in. Why stop at solar? Why not include wind generators? These things are only five or six feet high, or a little higher depending on where you are, of course. Why not put them into the legislation so that people can also get the benefit from them?

Mr WILLIAMS (MacKillop) (11:07): First of all, can I say that I agree with the member for Finniss and I think that I raised that particular point when we originally debated this bill. The government at that stage did not want to go down that path and, hearing the comments from the member for Light putting the government's opposition to this matter, I can understand why it also opposes the idea of having a feed-in tariff applied to wind generators. It just reinforces my earlier argument that the whole feed-in tariff legislation that was introduced in South Australia was all about the Premier going out and getting a headline. It is not about supporting the renewable sector: it is about getting a headline. It was a minimalist approach.

Let me explain: the member for Light has just told the house that, if accepted by the government, this would have an impact by increasing the price for consumers. Wrong! It will have no impact on consumers, I tell the member for Light.

Mr Piccolo interjecting:

Mr WILLIAMS: 'Why?' he says. It is because the electricity retailers are currently making a windfall profit. They have not reduced their price to the general consuming public in South Australia because they are getting this electricity for free. They are still charging consumers exactly the same.

The difference is that some of the retailers—not TRUenergy but the other retailers—are making a windfall profit and they are putting the cash in their pockets. This matter would not take one more cent from electricity consumers. I have already stated that I believe that it will in fact take some $350,000 from some of the retailers—most of the retailers, but not TRUenergy who are already doing the right thing. They are paying the generators for the electricity that they onsell. But some retailers in South Australia are not paying for all of the electricity that they sell. They are getting it free; they are making a windfall profit.

If they are obliged to pay for that electricity, they will have no ability to increase their charges because it would not be a flow-through event. They will not be able to knock on the door of the Essential Services Commission and say, 'By the way, we need to increase our prices to make up for this additional cost,' because they have not been reducing their prices by dint of the fact that they are getting free electricity and onselling it.

If the government were concerned about that, the government could quite easily say, 'We do not think that the fair and reasonable price should be any more than 44¢'. Why doesn't the government come back and say, 'We will amend this matter and we will reduce the 44¢ which is paid by every consumer in South Australia' because it is a flow-through event under the definition and, therefore, enables the distributor to go to the Essential Services Commission and seek a price increase to collect that money. So, consumers are paying the 44¢.

If the government believed that that was a maximum fair and reasonable price, reduce the 44¢ and apply this piece of legislation so that the retailers are obliged to buy the electricity. That would retain the current feed-in rate at 44¢, which the government seems to argue is the appropriate rate. Nobody else in Australia accepts that; every other state thinks it should be higher.

It would be possible for the government to have that as the standard rate to make sure that the windfall profits are not gained by the electricity retailers. If any savings are to be made, they should be passed back to the retailers across the board. That is what the legislation aims to do, but the government does not have its eye on this ball, other than the headline which it received when the legislation was originally passed and put into practice on 1 July last year. That is the only interest the government has in this matter.

I commend the bill to the house and I hope that, between when I sit down and we vote on this, the government changes its mind.

The house divided on the second reading:

AYES (15)
Brock, G.G. Evans, I.F. Goldsworthy, M.R.
Griffiths, S.P. Gunn, G.M. Hanna, K.
McFetridge, D. Pederick, A.S. Penfold, E.M.
Pengilly, M. Pisoni, D.G. Redmond, I.M.
Such, R.B. Venning, I.H. Williams, M.R. (teller)
NOES (27)
Atkinson, M.J. Bedford, F.E. Bignell, L.W.
Breuer, L.R. Caica, P. Ciccarello, V.
Conlon, P.F. Foley, K.O. Fox, C.C.
Geraghty, R.K. Hill, J.D. Kenyon, T.R.
Key, S.W. Lomax-Smith, J.D. Maywald, K.A.
McEwen, R.J. O'Brien, M.F. Piccolo, T. (teller)
Portolesi, G. Rankine, J.M. Rann, M.D.
Rau, J.R. Simmons, L.A. Stevens, L.
Thompson, M.G. Weatherill, J.W. White, P.L.
PAIRS (4)
Hamilton-Smith, M.L.J. Wright, M.J.
Chapman, V.A. Koutsantonis, A.

Majority of 12 for the noes.

Second reading thus negatived.

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