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House of Assembly - Fifty-Fifth Parliament, First Session (55-1)
2022-10-18 Daily Xml
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Statutes Amendment (National Energy Laws)(Regulatory Sandboxing) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 1 June 2022.)

Mr PATTERSON (Morphett) (11:56): This is another good opportunity to talk about energy matters in this parliament. I indicate that I will be the lead speaker for the opposition on the Statutes Amendment (National Energy Laws)(Regulatory Sandboxing) Bill 2022. The amendments in this bill have been worked on, similar to the previous bill, by the national and state energy ministers over a number of years, going back to 2018. During this time, and even before that, both the gas and the electricity markets have undergone a significant period of transformation, and that shows no signs of slowing.

In terms of the options that customers have, there are many now. Certainly, rooftop solar is a big option for households and for industry as well. In South Australia, we now have installed capacity of rooftop solar systems that at certain times, not all the time, is able to generate more than 100 per cent of South Australia's electricity demand, especially in the middle of the day. This is growing significantly: it is over a gigawatt, probably going towards 1.5 gigawatts now and growing between 100 and 150 megawatts per year. It is obviously a very good mechanism for households and industries to reduce their electricity bills.

Closely aligned to that, more recently there is battery storage, that is, being able to capture solar energy created on rooftops and then use it at more convenient times. As I said, most of the generation from rooftop solar is in the middle of the day and batteries allow that to be stored, especially when people are out of the home, and then used either at the start of the day or at the end of the day.

Certainly, the former Liberal government recognised that as a big opportunity for households. We had the Home Battery Scheme, which was very successful and saw approximately 200 megawatts of battery storage introduced into South Australia and represents that about 20 per cent of household batteries in the nation were here in South Australia. It is probably one of the highest per capita rates of batteries in the world.

That really is an important way going forward. As I said, 200 megawatts is significant if you put that at grid scale. That is a significant way to be able to store energy and put it out during those morning and afternoon peaks when the sun is going down and people are either starting their day or coming home. Closely aligned with that is automated home energy management and also virtual power plants.

With virtual power plants, individual households can be joined up, using software, to be able to combine these batteries into, effectively, grid scale batteries and to be able to, at times, put energy into the market, or soak it up when there is a significant solar panel. There is the potential for community batteries as well, where households, rather than having their own battery, could go into a big community battery. These are the sorts of technologies that potentially are on the horizon.

If we look at where things are going with electric vehicles, how do we cope with the introduction of electric vehicles and plug-in hybrids? They can be charged either at home or at public charging stations. Again, this opportunity was recognised by the former Liberal government. We had the Electric Vehicle Action Plan, a planned methodical way in which electric vehicles would continue to grow in South Australia and to make sure that was managed appropriately while also addressing some of the concerns and disincentives to purchasing EVs that motorists may have.

One of those, of course, is a charging network, not just to be able to charge a vehicle at home but to make sure that if you want to go on trips throughout the state, rather than just in the metropolitan area, cars can be charged, by having a methodically planned statewide charging network. The former Liberal government contributed significant funds, about $12.4 million, towards this task.

I think everyone has high respect for the RAA, for where they sit in terms of the motoring industry. They are charged with rolling this out, and we look forward to it coming online. That will certainly help accelerate the take-up of electric vehicles and reduce that range anxiety, because people will have the confidence that if they want to go for a drive in the country, if they want to drive throughout this great state, they do not have to worry about how they are going to charge their cars as they go through.

There are other aspects to this as well. Yes, you can charge your EV at home, but we were also looking at where you can charge these in car parks and retail spaces. Another aspect of that was $3.2 million EV charging trials for shops and car parks to be able to produce proof of concept. I noticed just very recently that the energy minister was at Wilson car park to unveil the first of these. That, again, is a successful trial coming to fruition. It is going to be able to inform what is going on and where we want to go in terms of EVs.

When I talked about charging these cars at home, one of the concerns, of course, is that humans, being creatures of habit, come home from work and all put their EVs on charge at the same time, and quite often that coincides with when the electricity generated from solar reduces. That can cause a big demand on the grid. It would be better to charge at other times, by having chargers that are smart chargers that are able to choose when is an appropriate time, taking into account the dynamics in the electricity market. That is going to not only help reduce overall demand on the network but significantly help reduce prices as well.

Quite often, the average price that people are paying is strongly dictated by these big peak demand times when prices surge. If we can reduce those times of demand, consequently it can also bring prices down.

The former Liberal government put in place a smart vehicle charging subsidy, and that has gone the same way as the Home Battery Scheme. This new government has cut that, and we will have to wait with interest to see what the effect of that will be and how the introduction of EVs will be taken into account. They are some of the challenges and opportunities from an electricity point of view.

In terms of the gas network, there are also opportunities for innovation. One of those that we have already seen is being able to blend green hydrogen into the existing gas distribution network. We have seen that in Mitchell Park. We have the Hydrogen Park in Tonsley: an electrolyser that creates hydrogen that is then blended into natural gas, up to about 5 per cent. That began operating in 2021 and supplies blended hydrogen and natural gas into about 700 homes in Mitchell Park.

It is interesting to see that those trials are also being carried out in other jurisdictions. The trial itself in Mitchell Park is also looking to be expanded. There are big opportunities there in terms of gas, in terms of trying to reduce its carbon footprint. The gas industry are looking at this very seriously as well, to make sure they are doing their part in terms of transitioning our energy systems in Australia to have less of a carbon emissions footprint.

These innovative technologies that I have outlined—and there are certainly others—are changing the energy landscape. Not only are they helping to reduce emissions across South Australia's electricity and gas networks but also, at the same time, they are providing quite significant benefits to consumers. They are offering network businesses an alternative and more efficient means to operate their networks.

These innovative business models, technologies and pricing arrangements will be the impetus to unlock further opportunities. Having said that, we are talking about changing the existing energy laws here as a result of some of these innovative practices, the reason being that the current electricity, gas and retail energy laws were first designed prior to many of these innovative technologies coming onto the scene. It is certainly essential that Australia's energy market continues to have a regulatory framework that can respond to these technological advancements and, importantly, that operates in the long-term interests of consumers as well.

One way to test technologies or new approaches is through what is known as 'proof of concept' trials to see what sort of benefit they are going to have to consumers. Under the current rules and regulations that energy market participants operate, it is quite difficult to determine if a new innovation can occur or, in fact, if the rules that are in place are going to create a barrier to trialling an innovative service to see what it can actually do, but the rules get in the way.

Other countries have also had this similar challenge—countries in Europe, the UK, Canada and also Singapore—and their approach has been to offer a framework, which is known as regulatory sandboxing, to encourage innovation in their energy markets. Regulatory sandboxing is a policy tool. It is designed to help regulatory frameworks adapt to rapid technological change and innovation.

These sandboxes provide a structured framework within which innovative technologies, approaches, business models, products and services can be trialled in a real-world environment without having to meet all the regulatory requirements and, at the same time, still protect consumers. Trials are aimed at being time limited, but they are there to provide useful information to support future regulatory reforms that will benefit consumers by delivering greater choice and cheaper actions. The Australian energy market is going through significant change. There are opportunities for innovation, and this is certainly front of mind for not only South Australia but all other states as well.

In October 2018, the former COAG Energy Council made a request to the Australian Energy Market Commission to investigate and report on how to best facilitate proof of concept trials. In November 2019, this resulted in the energy council receiving a report from the Australian Energy Market Commission that did in fact recommend the introduction of a regulatory sandbox toolkit.

Upon receiving this report, the COAG Energy Council agreed to amend the national energy laws and rules to introduce a regulatory sandbox toolkit, of course subject to consultation, and that consultation kicked off in 2020. Ultimately, at the time of the consultation, there was a draft bill, which is similar to what we see here before us today in terms of the regulatory sandboxing bill 2022.

Following this consultation, energy ministers ultimately agreed to introduce a regulatory sandbox toolkit. In terms of what this toolkit entails, it has some key tools that will be enabled by this amendment bill, which amends the national energy laws. It was agreed by the energy ministers in 2021, and ultimately the bill they agreed on was introduced by the former Liberal government into the South Australian parliament in August 2021. As has been said previously, South Australia is the lead legislator for these energy laws and that is why it appeared in the South Australian parliament. At the time, former energy minister Dan van Holst Pellekaan outlined that:

The introduction of a regulatory sandbox toolkit aims to make it easier for businesses to develop and test these innovative energy technologies and business models. This type of innovation in the energy sector can lead to better services and lower costs for consumers.

With parliament being prorogued and an election in between times, the bill was not able to be passed through both houses and so now, as lead legislator, it is very important for the national energy laws for this legislation to be implemented to allow for these innovative technologies. We see the bill now being reintroduced here. With all the work that has been done by the former government, certainly the opposition will be supporting this bill. As has been said previously, the convention for changes to these national energy laws is that the legislative amendments are supported by the opposition. In addition, I again indicate that we will be offering bipartisan support for this bill.

In terms of what the three sandbox tools are that have been created as part of this regulatory sandbox toolkit, the first is an innovation inquiry service. This is aimed at providing guidance and feedback and helping businesses get trials up and running quickly where they are feasible under the current laws and regulations.

Another tool is the new regulatory waiver power for the Australian Energy Regulator so they can temporarily exempt trials from existing rules where this is creating a barrier. Another tool is the new AEMC trial rule change process that can temporarily change existing rules or temporarily introduce a new rule of limited application to allow a trial to go ahead.

The first tool mentioned is the innovation inquiry service and it can be implemented without changes to the regulatory framework; however, the second two tools require changes to the National Electricity Law, the National Energy Retail Law and the National Gas Law, as well as more detailed provisions to be made under the associated National Electricity Rules, National Energy Retail Rules and National Gas Rules.

The innovation inquiry service will provide innovators with informal feedback and guidance on new technologies and business models that may be feasible within the current laws and rules, helping innovators enter the market or implement new approaches more quickly as a result. The innovation inquiry service will allow learnings and knowledge that will allow innovators to leverage off what has previously gone before them and find out how things worked, what the pitfalls were, and then bring their innovations to market a lot more quickly.

Additionally, insights from the inquiry service can identify unnecessary complex areas of regulation that can then be considered for reform into the future. In terms of getting a bit of perspective, other countries have also introduced these regulatory sandboxes and, based on overseas experience, the majority of inquiries can be resolved under the existing rules without requiring a trial waiver or a trial rule change in the first place.

In terms of the body that will be responsible for the innovation inquiry service, it will be the Australian Energy Regulator, and the implement will include determining when the service will be launched and what the resourcing requirements were. In anticipation of the bill passing—and it was introduced back in August last year and is now again before us—there has already been established a support for businesses who are looking to create innovative energy solutions. A website is available, energyinnovationtoolkit.gov.au, where businesses looking to innovate can look at potential use cases and at what is required, what is involved, and certainly get advice as well.

Once they have gone through that process, should these trial projects find that they are not able to be undertaken because of existing laws and rules, then either a trial waiver or a trial rule would be required. It is these two sandbox tools that the bill before us sets out to create by making amendments to the three energy laws I mentioned previously.

In terms of trial waivers, to achieve these the bill amends the functions and powers of the Australian Energy Regulator to make trial waivers for trial projects for a limited time of a maximum initial period of five years. The AER is considered the appropriate body for considering and providing such exemptions, given its role as the regulator of the national frameworks. The bill also requires the AER to assess a trial project against the innovative trial principles as defined in the bill in a newly inserted section 7B.

These principles are intended to ensure that only genuinely innovative trial projects that are capable of being trialled, scaled up and reported on are provided waivers. Other principles considered will be if the trial provides materially improved services and outcomes for consumers and adequate consumer protections are also maintained during the trial. Additionally, the trial project is not going to negatively impact on AEMO's operation of the national electricity system and national electricity markets and, if it is, how the trial is going to mitigate these impacts.

There is a list of innovative trial principles that each trial would be set up against, making sure that that forms the basis of any decision made by the AER. Further to that, when assessing a trial waiver the AER's role will need to weigh up any potential risks associated with providing a waiver with the potential benefits of the trial and ensure that risks are appropriately allocated between the trial waiver applicant and also the trial participants.

The bill requires that the AER not make a trial waiver for a trial project that is materially similar to a trial project for which a trial rule has already been made or is, in fact, the subject of a request for the making of a trial rule. That makes sure there is no double-up, and there is no need to waive rules when a trial waiver has been put in place as well.

The trial waiver tool provides an opportunity for innovators to experiment in a real-world context without the usual rules applying but, at the same time, the eligibility requirements for receiving a trial waiver ensure that customers, the market and the system remain protected. In addition to this, there are knowledge sharing requirements that allow regulators and policymakers as well as the wider industry to benefit from the trials. They do this by gaining a better understanding of how the regulatory framework may need to change in order to facilitate greater innovation and how consumer outcomes may be improved through new approaches.

The bill also confers on the AER a new function of monitoring and investigating trial projects carried out under a trial waiver. Principally, if a trial waiver can be put in place, the AER is in charge of it. On occasions, though, these innovative projects will require trial rule changes, and so the third tool, which relates to trial rules, is also in this bill, which gives the Australian Energy Market Commission the functions and the power to make trial rules for trial projects, again, for a limited time of five years.

This tool can be used if an eligible trial required new rules or the alteration of existing rules so it can proceed. The current rule-making process is considered too lengthy and, as a result, presents too high a barrier if you are looking at doing a limited trial rule. Therefore, the proposed trial rule change process will be conducted by the AEMC which is designed to be under 10 weeks and which will encompass the National Electricity Rules, the National Energy Retail Rules and the National Gas Rules. The idea is that this will introduce a more streamlined process for the assessment and making of trial rules.

However, should the trial project not meet the same innovative trial principles that are defined in the bill under the relevant section, whether a waiver or trial rules, then the project will be unlikely to be carried out. If the project is unlikely to be carried out or offers no reasonable prospect of leading to better services and outcomes for consumers, then the AEMC should not progress a request for a trial rule. Again, it is not a fait accompli that a request for a trial rule is going to be given and allowed to proceed: it does have to comply with these innovative trial principles.

Further, the bill also includes a provision that the AEMC is required to consult with the Australian Energy Market Operator when considering the making of a trial rule. While any trial rule is in force, the AER must monitor the associated trial project in accordance with the rules and in accordance with any applicable guideline made under the rules. Additionally, there is a provision for the AER and the AEMC to be able to revoke either a trial waiver in the AER's case or a trial rule in the AEMC's case should the need arise in terms of how the project is being carried out and its impact on consumers.

The bill does make provision for the South Australian minister to make an initial set of National Electricity Rules, National Energy Retail Rules and National Gas Rules that are associated with these amendments. As a result, when passed, the regulatory sandbox framework that this bill seeks to establish will provide a better equipped regulatory framework to respond to the rapid change occurring in the energy sector with the ultimate aim that consumers receive improved services and outcomes.

These are changes where the work relating to this regulatory sandboxing bill was undertaken through the previous term of the former Liberal government. As a government, we had a major focus on lowering energy costs for South Australians, and this bill is another example of that focus.

Mr FULBROOK (Playford) (12:23): I am pleased to support this bill as it will establish a framework with potential to do enormous good for the most vulnerable members of our community. Energy supply is an essential service that affects all South Australians. When learning about this legislation my first thought concerned the impact to vulnerable South Australians.

To date, many aspects of energy transition have delivered greater benefit to the consumers with the financial capacity to make significant up-front investments in new technologies, such as solar PV, home batteries or electric vehicles. There is enough evidence suggesting households privileged enough to be able to make these initial investments have quickly recouped their investments to enjoy ongoing benefits.

Those without the ability to make such investments are currently at risk of being left behind to bear the brunt of shared network and transmission costs. Considering the expansiveness of the South Australian transmission network, these costs are significant. The regulatory sandboxing changes will allow financiers, social welfare providers and other non-government organisations to explore options to address shortcomings of the existing energy market.

I am very impressed with the prospect of distributed energy resources having the potential to put the power back into the hands of consumers. You could call this the democratisation of our energy system. For too long, vulnerable consumers have been at the mercy of big business, whose prime aim is to make money for shareholders. Regulatory sandboxing will facilitate changes in the energy market, whereby communities can exercise greater power, either through their own combined investments or through collective buying power.

Social infrastructure also has a role to play in this future system. Community batteries have the potential to give leverage back to consumers while protecting vulnerable customers experiencing barriers from accessing new technologies. Renters are another demographic left exposed as we transition to new technologies. The incentive for landlords to invest in the modernisation of their properties just is not there. The number of people owning their homes outright is decreasing, mainly because pay rises have not kept up with the significant rises in housing costs.

As I said in my maiden speech, it took a generation to create this problem and, if we put our minds to it now, it will probably take this long to fix it. Because there are no short-term solutions to this trend, the problem of many consumers being left behind in the energy transition will get worse if we do not innovate. Sandboxing will allow innovations to be tested in the real world and encourage knowledge sharing amongst business, government agencies and non-government organisations. This knowledge sharing should lead to quicker, more frequent innovations and position market regulators to swiftly make regulatory changes when an innovation succeeds.

I hope to see a trial soon that encourages landlords to invest in technologies that benefit the renter while avoiding their having to ultimately front the cost through higher rents. Making these trials accessible to vulnerable groups so they can enjoy the potential benefit straightaway should be a priority. I think we can all agree that the National Electricity Market is a very complicated model. While understanding it is not out of reach for most South Australians, beyond a desire for cheaper and more reliable electricity, it is something that is not typically thought about or discussed. But disinterest is not a barrier: it is a choice.

However, for some vulnerable cohorts, it is not a choice. For one reason or another, whether it is not having literacy or numeracy skills or something else, it can be impossible to engage with the market due to the complexity of its design. As members of this house would know, there are protections under the energy laws and rules for vulnerable consumers that help prevent them from having to go without power, including when they have difficulty paying bills.

So, instinctively, when I see legislation that allows market participants to apply for trial projects with exemptions from having to comply with specific laws and rules, I do get concerned that vulnerable people from my electorate may be taken advantage of. On closer inspection, though, I was happy when I saw the detail about the assessment process for trial projects by the Australian Energy Regulator and the Australian Energy Market Commission. This includes safeguards seeking to protect consumers—most importantly, the vulnerable ones.

When considering applications, I understand the regulator will check that trial projects will not jeopardise essential protections, such as life-support customers or payment and hardship schemes. Also, paying special attention to identifying vulnerability risks, which could be inadvertently caused by the trial project, the regulator will assess whether the benefits outweigh the risks for vulnerable consumers.

It is commendable that the implementation strategy does not simply exclude vulnerable people from trials as a form of protection. Excluding vulnerable people is an approach that locks in the status quo for this cohort and excludes them from sharing in any benefits that a trial may have. Not allowing their real-world participation in trials of new products and services also dampens their voice when it comes to regulatory design and change. The implementation strategy for this legislation will instead cultivate trials as opportunities to benefit vulnerable consumers and to ensure that they have a voice.

It should be noted that the assessment of trial applications for projects benefiting consumers experiencing vulnerability is listed as a priority for the Australian Energy Regulator. I understand that during the drafting of this legislation and the implementation strategy back in 2020, the Australian Energy Regulator commissioned a report from the Consumer Policy Research Centre about exploring regulatory approaches to consumer vulnerability. It identified priorities for the regulator's approach for supporting vulnerable consumers, which included a revised approach to hardship payment difficulty. I noted:

Many regulators and legal frameworks have traditionally focused on debt and payment difficulty, however, some are looking more closely at the design of products and services to help create inclusive markets where people can secure what they need at a fair price, without being excluded or taken advantage of.

Sandboxing represents an opportunity for the electricity market to explore products and services that improve outcomes for vulnerable customers. This legislation provides a mechanism for innovators to improve outcomes for these consumers by promoting new products and services that are specifically targeted at addressing the unique needs of consumers experiencing vulnerability.

In addition to potential benefits during the trials, lived experiences from these will inform regulatory design and, most importantly, change. This will contribute to a future energy market that better meets the needs of vulnerable consumers. With this in mind, I commend the bill to the house.

Mr ODENWALDER (Elizabeth) (12:31): I am very pleased to rise and speak on the Statutes Amendment (National Energy Laws) (Regulatory Sandboxing) Bill. As other members have traversed in this place, the framework in which the National Electricity Market operates has been evolving ever since it started in 1998. This evolution has been fuelled by our very high expectations when it comes to the reliability of our energy network.

The old electricity grid consisted of a few large thermal generators burning fossil fuels, with transmission lines taking that energy to a distribution network through to businesses and households. That model, of course, is completely outdated now, it will never return, and now there are literally hundreds of thousands of small, medium and large generators scattered throughout the state, many of which now operate on solar and wind.

The National Electricity Market was always a complex system, and now it is even more so. The changes we have seen have created great opportunities for households and businesses to tap into the benefits, both directly by using their own power and by working in harmony with the needs of the other users of the grid. This has come at a time when there has been another major change in society with the Internet of Things becoming ubiquitous in our everyday life.

Some households will choose to be actively engaged in the energy market and use and sell their energy much like their trading stocks, or to withdraw demand at times when it can benefit them. Other households will not have the time or the inclination to be actively involved themselves, but they will see a benefit in a third-party provider offering this as a service. There will over time be many innovative designs that companies can explore that will deliver commercially advantageous outcomes for both the company and the household and also benefit the grid as a whole.

At the moment, though, existing rules lag behind this change. Comprehensive rule change takes a long time when we follow all the due processes of consultation and the consideration of submissions of such changes, but that process is very important to ensure the consumers are protected and to minimise unintended negative consequences. However, the regulatory framework cannot evolve fast enough, and we have seen this.

The overwhelming uptake of rooftop solar was a huge disruptor in this state. It was a fantastic effort by South Australians that helped us achieve our two-thirds renewable energy mix, which is something of which we should all be proud. However, incorporating this into the National Electricity Market was not without its challenges, and it continues to pose challenges. There is currently an issue of excess generation at times of peak solar production. The former Liberal government's response to that issue was to turn off people's rooftop solar, preventing people from benefiting from their own investments.

We on this side of the house, though, see this challenge as an opportunity. Our Hydrogen Jobs Plan will soak up this excess solar energy to produce cheap green hydrogen and create value for this energy, which is currently being wasted. Regulatory sandboxing will allow companies to explore a range of other options, limited only by their imagination and of course their ethics, which can deliver mutual benefits for households, companies and consumers alike.

The range of energy services is continuing to expand. We are now seeing highly advanced battery storage, home energy management systems, virtual power plants and electric vehicles growing in popularity.

With renewable gases becoming more prevalent—of course, I am particularly thinking of hydrogen, but there are others—the energy landscape is going to radically change again and again. The emergence of innovative technologies and business models is a fantastic opportunity for businesses, consumers and the environment, but they need to be intelligently incorporated into the National Electricity Market.

There are many moving parts in this market, and they need to mesh smoothly. Market operators need to work with generators, retailers, transmission companies, consumers and governments. There are a lot of fingers in this pie, and this has brought about a regulatory framework which at present lacks flexibility for conducting trials or proof of concepts. Our electricity, gas and energy retail law is now harder than ever to understand and navigate, particularly for people looking to do things that have never been done before.

Tightly managed systems, such as our energy system, can be restrictive and frustrating for our innovators to operate. There is a real benefit to be gained through this regulatory sandboxing bill for all states connected to the National Electricity Market. The current process for rule change is slow. It takes months and months to consider a change that a generator, transmission company or retailer applies for, not to mention the encumbering requirements on the applicant when requesting the rule change.

While these rule change requests may be made for a particular application, the rule change must apply to the whole system and not just the limited part that will experience its benefit. It is an all or nothing approach. It is an approach that discourages innovation, particularly where it is not 100 per cent sure it will play out. It is a lot of time and effort for someone or a company to invest into an idea when it is not a sure-fire thing to be successful.

Failure is not the enemy. Not every new idea will be successful. That is a matter of fact in all business. The enemy is discouraging people from trying in the first place. Of course, it needs to be a tightly managed market. Energy security is something that we simply cannot compromise. There are opportunities for consumers to be taken advantage of in our system if it is not designed to protect them, as the member for Playford has rightly pointed out.

That said, a tightly managed system can and must have room for innovation. That is what regulatory sandboxing allows. It allows innovators to carry out research and development with certainty that they will have pathways to test their innovative ideas in the real world. It allows innovators to try out their ideas without having to first follow through a time consuming, comprehensive rule change process. It allows the rest of the electricity market to be protected by ring-fencing these innovative trial projects. It allows the industry to be kept aware of innovations currently underway, and it also promotes transparent business-to-business knowledge sharing and learnings.

Sandboxing is a good idea, particularly in the environment we are in in South Australia. South Australia is full of people with good ideas. It is full of innovators, and we are known throughout the country as the innovation state. Our innovation districts, such as Tonsley and the Adelaide BioMed City, offer opportunities to support our innovators through helping them to develop capabilities, explore commercialisation pathways and establish partners with synergistic aspirations. These districts mean more of our innovators will be able to start up and we will have many more home-grown success stories.

We have smart people with the right attitude, an attitude that does not settle for complacency, and this sees us exploring new ideas all the time. We are moving towards a new world: a low-carbon world and, hopefully, a net zero world. Rooftop solar cells, as other members have pointed out, have taken over roof space in South Australia. Under a Labor government, we have seen our energy mix go from 1 per cent renewables to almost 70 per cent, and we still have a $20 billion pipeline of renewable energy projects in South Australia.

Electric vehicle technology, of course, is improving, and the number of these vehicles on our road is on the rise. Hydrogen stands to completely transform elements of our energy system, which is in addition to adding value through decarbonising heavy industry processes and boosting our economy through export opportunities.

These innovations will cause disruptions to the existing energy system, and we need to enable our innovators to come up with and test ways to address these disruptions. A framework for trial proponents to test their innovations will not only contribute to our energy security but also bring significant benefits to consumers. It was the Finkel review which noted that innovative technologies can help reduce the costs of providing electricity for consumers and also contribute to reducing emissions.

The passage of this legislation is timely. In June this year we saw a major market failure. The Australian Energy Market Operator had to step in and suspend the wholesale market because it had become impossible to continue operating it while ensuring a secure and reliable supply of electricity. Clearly, this is not good enough.

As other members have pointed out, having a regulatory sandbox is another tool in the toolkit for energy security, and more of such tools can only be a good thing—much like how 250 megawatts of sovereign generation would have been a useful tool for our energy security during this market failure, had the former Liberal government not privatised our generators during its one term in government.

It is also timely, because the Malinauskas Labor government is embarking on its ambitious Hydrogen Jobs Plan. Just like its Hornsdale battery, the Labor government is again setting out to encourage private investment by proving the application of new technologies at scale. With this will come the requirement for companies to develop business models that take advantage of the positive disruption caused by the formation of our hydrogen industry in the Upper Spencer Gulf.

Already, an example of potential trial project has been flagged in response to the Australian Energy Regulator's issue paper on this topic about the use of hydrogen to decarbonise gas networks. Innovative trial projects, of course, can relate to the supply or the demand for electricity, to customer retail services, or gas services. Such a trial would be made possible by legislation through either:

a new regulatory waiver power held by the Australian Energy Regulator, which exempts trial projects from complying with specified rules and laws and assess to address regulatory barriers; or

a new trial rule change power held by the Australian Energy Market Commission, which could be used to temporarily amend existing rules or to temporarily introduce a new rule of limited application.

These powers allow innovators to experiment in a real-world context while maintaining consumer, system and market protections.

On the face of it, exemptions from complying with specified rules and laws can be disconcerting, as the member for Playford again elaborated on, so I welcome the safeguards that prevent market participants from claiming their business as usual as a trial to circumvent National Energy Retail Law or National Gas Law. As part of the application process, the Australian Energy Regulator assesses whether the trial is genuinely innovative and considers whether the trial may negatively impact the National Electricity Market and ensures consumers are protected.

Sharing knowledge and insights gained from trials with the wider industry is also a key outcome of regulatory sandboxing. In return for a trial waiver, innovators may be required to share their learnings from the trials, particularly where it leads to benefits to consumers. This transparency—which, of course, does not extend to commercial sensitivities—is expected to reduce barriers to entry for new market participants. It will also encourage quicker innovation in the market because innovators will be able to leverage off others' learnings. Trial waivers and trial rule changes will also enable a more adaptive regulatory framework. Policy writers will be evolving the regulatory framework as new technologies emerge, rather than in response.

While not all trials will lead to permanent changes to the energy rules, some will, of course. I look forward to us passing this legislation, as it will allow the Australian Energy Regulator and Australian Energy Market Commission to open their doors to trial waiver applications and rule change applications, which I believe—and the government believes—will encourage technological and regulatory innovations that will lead to a more reliable electricity market and ultimately benefit consumers. I commend the bill.

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (12:43): We are in the business of disruption, and disruption is coming at us at a million miles an hour. The innovations that are before us are breathtaking in their scale, they are imaginative in their conception and they will change the way we live forever.

We are in a race to decarbonise. I have recently returned from Japan and Korea with the Premier, where you can see the real-life consequences of this race to decarbonise: entire countries that are completely reliant on the import of all their energy. Just picture that for a moment: all their coal, all their gas, everything they need to manufacture. They have no natural resources; they must bring them all in from abroad to make their economy work.

Here in Australia we are blessed—well, we were blessed, previously—with abundant natural resources. Those natural resources now are an impediment to the world's future. But we are also blessed with wind and sun and some of the best wind and solar resources anywhere in the world. They are the envy of the Western world; they are the envy of the renewable sector.

I do not know what innovations will come out of this regulatory reform, but I bet you they will be breathtaking. Listening to everyone who has given their remarks, including my own, with all due respect, they can just sound bureaucratic. But the truth is what we are doing here is accelerating the transition to a decarbonised future. Sandboxing, this regulatory framework that we are building up to allow new technologies to be tested in real-life experiences, is the way we will move forward.

To give you an example, the destabilisation of the grid from intermittent renewable resources not giving synchronous energy to the grid can cause a lot of destabilisation. We were not really sure what the impacts would be of the widescale introduction of solar panels and wind farms. Now we know, and now we are establishing a framework to allow new technologies to be tested on the home, on large-scale communities, on regional communities.

I went to Toyota, where I was able to see firsthand an electrolyser unit of a reasonable size, about the size of a home battery, that could power 80 to 90 homes in Australia today. It is fuel cell technology that has been miniaturised to the level that it could be placed in a home and it will look no bigger than a home battery. We will get to the point potentially one day when these innovations can be applied in real-world situations. We are testing them now.

As the shadow minister talked about, when the former Labor government, the Weatherill government, had its Renewable Technology Fund, we funded a scheme to build a 1.2-megawatt electrolyser to blend green hydrogen into the home distribution network. It was cutting-edge stuff. I just want to point this out to the house: when that decision was made in 2017, that would have been the largest electrolyser anywhere in the world. Today, six years later, it is still the largest electrolyser in the Southern Hemisphere. We have not moved. There has been a handbrake on this type of development. We need to get going.

This is not the fault of the shadow minister, and I am not trying to make a political point here, but the country has had a decade where we have not been keeping up with what the rest of the world are doing, yet we are the ones who are best placed in the world to deliver them. What we do not want to see is what happened with photovoltaic cells. We invented that technology. That was Australian IP. That was developed here. Now the only place in the world that manufactures solar panels is China. We have lost that technology forever. We do not want to see that happen again.

Liberal democracies need to work together to make sure that we can test our innovations, keep our IP in our countries, manufacture them here, be the tip of the spear, as it were, of the transition to a decarbonised future, to make sure that our citizens not only get the benefit of the transition in terms of saving the planet but get the jobs—good jobs, well-paying jobs, manufacturing jobs. Sandboxing, as remote as it seemed, is the way we can go about and test these technologies in a real-life way.

This is an exciting piece of legislation. This is exactly the type of Australian innovation that will help us lead the world. This is not a South Australian invention; this is an Australian invention. This is Australia at its best—bipartisan support, national recognition, national adherence to a piece of legislation that has been passed in this parliament. That is how you deal with decarbonisation: by getting on with it, working together, not trying to claim credit as a Labor initiative or a Liberal initiative but an Australian initiative. It is an initiative that I believe can help push that transformation that little bit further, nudge it just that little bit more. Who knows what we will come up with potentially?

I will throw some out there, since we are spitballing. We already have water delivered to almost every single home in South Australia—one in three homes has solar energy—and the miniaturisation of fuel cells and electrolysers is on its way. Imagine: could we see a time when every household has its own electrolyser and fuel cell? Could we? Could we see entire suburbs have centralised distribution through a larger fuel cell and electrolyser, developing an entire suburb, like a community battery?

Can we see batteries and fuel cells working together in some way that we cannot imagine today? There are fuel cells being developed today that are reversible: that is, they can make hydrogen and soak up supply at times of oversupply of solar energy, and then at times of high demand they could be reversed and they would provide power. That is just one example of technologies we are going to need to test, and sandboxing is one tool in the kit we now have that can help push this technology that little bit further.

It is exciting, and I want to thank the opposition for their support. I also want to pay tribute to the former minister who, along with his national colleagues, developed this piece of regulatory framework. This is a good piece of legislation. This is a good reform. This is a reform we would have supported had we not been successful at the last election, and I am certain that, had we not been successful, there would have been another minister here, in a Liberal government, moving exactly the same bill. That is how important this piece of legislation is.

With those few remarks, I thank those who have contributed to this debate in the parliament. I look forward to its speedy passage through the remaining stages and the hardworking members of the upper house.

Bill read a second time.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (12:52): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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