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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2007-10-18 Daily Xml
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ELECTRICITY (FEED-IN SCHEME—RESIDENTIAL SOLAR SYSTEMS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 26 September 2007. Page 795.)

The Hon. C.V. SCHAEFER (12:08): This bill has been dealt with in another place and I will merely reiterate the views of my colleague in the House of Assembly, the shadow minister, Mr Mitch Williams. However, all members of the Liberal Party in the upper house and, I would imagine, all other members (other than the government) were circulated a letter from Mr Hurrell of Port Noarlunga South. I think it is worth commenting on that letter, in which he writes:

I have just signed up for a bank of solar panels, hoping to leave a smaller carbon footprint on our planet. Reality says, however, that this is costing us more than it should. By 'investing' in solar power, I am forgoing $1,120 a year (8 per cent interest on $14,000) in order to save $400 (half my power bill), a loss of over $700 a year. This sounds a rather poor investment. Now I've heard that 'this year' legislation will be brought in to make AGL and Origin pay 44c per kW/hr for any solar generated power ‘exported' to them, but so far no firm date for this to happen has been announced.

This is the part that I want noted:

I'm assured by a Government office that the bill is waiting for, Legislative Council assent. If this is so, what is the holdup? By now you should know whether you are for the proposal or not. If solar energy makes sense I would think it is your duty to agree to any measure that will accelerate the installation of more and more solar energy systems. Therefore, I look forward to hearing of the bill passing through the Legislative Council in the very near future.

That is the sort of misleading information that is being peddled by government officers at the moment in an effort to make the Legislative Council look recalcitrant, slow and lazy. This bill actually arrived here on 26 September; we then rose for two weeks and so this is the first opportunity the Legislative Council has had to deal with this piece of legislation. This man has been deliberately misled by a government office. I do not know who did it but I think whoever it was should either ring or write to Mr Hurrell and point out the error of their ways.

Having said that, I note that this bill does, indeed, allow for a 44¢ rebate to those who are connected to the grid through their own photovoltaic solar system. Mr Williams pointed out at some length in another place that the Liberal Party believes that this is nothing more than a political stunt; it will not do what it purports to do; it will not reduce greenhouse gases; and it will not materially change the consumption, generation or supply of power to South Australians. Mr Hurrell's letter suggests that AGL and Origin have been forced into this deal; however, in his second reading speech, the minister says the retailers will take the opportunity to participate in the scheme and said:

Two electricity retailers, AGL and Origin, are already offering their customers a net-metering arrangement.

It seems to me, in this case at least, that the energy retailers are quite agreeable to this arrangement. It is to be of five years' duration and will be reviewed in order to assess how effective the scheme has been and to accommodate the changing environment, as it may be in five years' time. In his second reading speech the minister also says that, regardless of the commencement date, the scheme will conclude on 30 June 2013. As I have said, the Liberal Party will not be opposing this bill. However, we remain sceptical as to how effective it is and, in fact, it may well be yet another publicity stunt. Having said that, it sounds good, looks good, so we will not be opposing it.

The Hon. SANDRA KANCK (12:13): The Democrats welcome this bill but we see it as being only a start. It has been a few years now since my party began campaigning for a decent rate of return for householders who feed sustainable energy into the electricity grid. When I am talking about sustainable energy, I am particularly talking about solar and wind. People who generate their own electricity from sustainable sources deserve this because they are actively installing either photovoltaic cells (which I will refer to as PV cells in the future) or small wind turbines. It is something that costs them, yet they are producing a benefit for our society and our environment. They are reducing their demand for electricity from the grid; electricity which, in the main, is powered by non-renewable fossil fuels with greenhouse gases as a by-product.

There are a number of benefits that come from this: first, if enough people were to do it we could subvert the need for a new fossil-fuelled power station; secondly, it reduces the draw-down on non-renewable fuels; and, thirdly, it reduces greenhouse gas emissions. I was, therefore, quite surprised to read the Hansard contributions of the shadow minister, Mitch Williams, who could not see a justification for those with household PV systems getting a rate twice that of mainstream domestic consumers. The bill proposes to pay 40¢ per kilowatt hour for electricity that is fed back into the grid, which is estimated to be approximately twice the amount charged for electricity for consumers over the five-year period that this act will be enforced. I refer to the latest newsletter of the Alternative Technology Association, appropriately titled The Sun, which states:

Whilst it is encouraging to see the first feed-in mechanism introduced in Australia, the proposal is disappointing to say the least and will not do a great deal to increase the adoption of renewable energy in that state. In contrast, a private member's bill proposed in the ACT looks set to introduce a far more progressive scheme. The proposal is for a feed-in tariff of 3.88 times the retail rate paid for 18 years on gross production—

and I stress that—gross production—and I will get to that in a minute—

for all renewable energy systems up to 10 kilowatts.

So, it is all renewable energy systems up to 10 kilowatts. This one excludes the smaller ones. The newsletter continues:

Victoria has passed legislation requiring all electricity retailers to publicly disclose fair and reasonable price, terms and conditions for the grid connection of all small-scale renewable energy systems and is proposing a mandated feed-in tariff to follow.

I think it is important that, as we are in a sense setting the tone for other states, what we have is solid. I am not convinced that it really is. Nevertheless, just for once, the environmentally conscious consumer might get a cross subsidy from those who use the electricity in a profligate manner. Although I will not be able to benefit from the scheme because mine is too small, I will not feel at all bad about cross subsidising other household consumers who have done the right thing by installing a domestic grid-connected system.

In relation to the issue of costs and who pays, the minister's explanation is lacking in information about who is paying for what. I would like some information from the minister either at the second reading summing up or I can question him some more at the committee stage about the cost of this scheme. It will be a retailer who pays the actual dollars to the consumer who has the domestic PV system installed, but who will pay for the metering costs? Does ETSA have any administration or management costs arising out of the system, and what costs are there for the retailers who participate in the scheme?

Again, because of the lack of information in the minister's explanation, I seek clarification about the application of this bill once it becomes law. Retailers will not be obliged to participate is the way I read it, which means that the domestic electricity producer might have to change their retailer. If my PV system was large enough and I wanted to participate in this, although I am with a retailer that offers the green energy rate, I would need to change. I would also like to know whether retailers who offer a feed-in tariff to domestic PV electricity producers are obliged to offer it at 44¢. Can they offer a higher or a lower rate?

Another limitation of this bill is that it provides only for PV systems, with wind power systems excluded. I was told at my briefing on the bill that this was because there was not yet a meter available for domestic wind energy production, but this is not the case. A new meter called Windy Boy—as opposed to Sunny Boy that is used for PV metering—has just been introduced into the Australian market. In light of this, I ask the minister whether he would consider amending the bill so that it could apply to wind systems at the domestic level. If the minister is not prepared to amend the bill to include wind power, does he anticipate that there will be a separate bill for domestic consumers feeding wind power into the grid?

I also note the comments made in the House of Assembly about payback periods. This is always something that has perplexed me. As members know, I drive a Toyota Prius, and I am occasionally asked what the payback period is. It is a very strange question. I went to the Toyota website to check the price range of the Toyota four-wheel drives and SUVs. They range in price from $63,000 to $94,000 compared to the price range of $38,000 to $47,000 for the Prius, yet I have never heard anyone ask the driver of a four-wheel-drive vehicle or an SUV what the payback period is for their car. Obviously, there never would be and, in fact, there is a huge cost to the environment.

When someone buys a plasma TV, which costs about five times the price of a standard TV set and uses about four times the amount of energy, no one asks them what the payback period is. In the days of public ownership of ETSA—paid for, of course, by the taxpayer—no one asked Tom Playford what the payback period would be. There is no real logic to asking this of people who are doing the right thing in outlaying their own money in the first instance so as to reduce fossil fuel and our ecological footprints.

I mentioned the issue of gross metering versus net metering. Looking at this issue of the sun, the ACT's proposal is for a feed-in tariff of 3.88 times the retail rate paid for for 18 years on gross production. The difference between having gross or net metering is that net metering only measures the electricity that is fed into the grid. There are many people who would argue that because people who have these systems are making the contribution I mentioned before—that is, not putting demand for having another power station built, not putting demand for fossil fuels and not putting those extra greenhouse gases in the air—they should be rewarded for all of the power that they create.

Unfortunately, that is not the case. I will not be able to benefit from my small PV system because it provides only for the lights in my house. What that system does is reduce the demand for electricity for my husband and me from fossil fuel greenhouse gas producing sources by 200 Kilowatt hours per annum, which equates to about 3 megajoules of fossil fuel energy that is no longer required. Because of those sorts of positive impacts that result from the use of ecologically-friendly sources such as PV, the Business Council for Sustainable Energy has advocated a rate of approximately five times the going domestic tariff. On that basis, factoring in the real benefits, the rate that ought to be offered in this bill would be five times 22¢.

It is a bill that could have gone a lot further. It is a cost-neutral activity for the government, so I do not think there is any justice for claiming this as part of any environmental credentials of the government. Meanwhile, it will continue to give millions of dollars of subsidies for car races, which spectacularly squander precious fossil fuels. This is a fair to middling start on this matter of giving a decent reward to people who are attempting to reduce their impact on the planet. I indicate Democrats support for the second reading.

The Hon. M. PARNELL (12:24): The Greens support this legislation because the need to address climate change is urgent. In fact, it is the major issue of our time. While the current federal election campaign will range over all the usual issues of education, health and transport, one would have to be not paying attention at all not to realise that climate change is there in the policies and statements of all the players. As I say, it is the major issue of our time. The main difficulty I have with this legislation is not its subject matter—which we support—but the fact that it is a very cautious step. In fact, it might be described as a baby step. It belies the urgency we face in dealing with climate change. As the Hon. Sandra Kanck said, this legislation could and should have gone much further.

The Greens are supporting the bill, but I have a number of questions which I will put on the record shortly; and, depending on the response to those questions, we may have amendments to improve this baby step to a toddler step. One of the myths that we need to explode is the myth that South Australia is a renewable energy leader. We often hear statistics quoted about the proportion of wind power that is physically present in South Australia compared with other states. We also need to realise that the proportion of homes in South Australia that have a solar hot water service is only 3.2 per cent. I recently received some email correspondence, which included some observations of visiting secondary students from Europe.

One of their observations was how surprised they were that we did not have solar on every roof. They could not understand how in a country like Australia, in particular a city like Adelaide with its climate, every house did not have a solar hot water service. If one looks at the proportion of total energy used in South Australia that is provided by solar power, one will find that it is 0.0006 per cent of our total energy. It is a minuscule amount of energy that we derive directly from solar power. Our overall use of energy and our demand for energy is increasing year after year.

Not that long ago we debated legislation in this place to deal with climate change. I was critical then—and remain critical—of this government's so-called mandatory renewable energy target in the climate change bill. I was critical because it is not mandatory. The bill contains no real or clear mechanism of how we will meet that target. I am also concerned that in this state we are not meeting our fair share of effort. We are not paying our way. In fact, we are sponging off other states, in particular New South Wales. We will see new renewable energy projects appearing in South Australia that have been driven by the New South Wales renewable energy target, yet political leaders will take credit in this state saying that it is due to South Australian policy. It will not be: it will be due to New South Wales policy.

One problem that we have in using all the market-based and other mechanisms available to us is that we have broken up the electricity system. The generation is now separate from the distribution and the wholesaling and the retailing, and it is very hard to drive positive change for climate change reasons when the system is broken up as it is. For example, there are issues with demand management and peak purchasing issues, where we have to expensively buy energy on those hot summer days when the prices are peaking. We have issues such as marketing for retailers in relation to green energy. We have problems with transmission and distribution infrastructure and our capacity to offset the creation of new infrastructure.

All these things are important and they are part of the policy mix for reducing our greenhouse gas emissions, yet because of the fragmented system it is difficult for us to do it. Members would have heard stories from the United States where energy companies, in fact, made more money by paying people to use less energy because it did offset the need for new infrastructure. However, the feed-in laws and the feed-in tariff in this bill is welcomed as an important policy tool, albeit a first step, and we know that this works well overseas. One advantage, of course, is that it supports the renewable energy industry. It supports the jobs in that industry: the jobs in the manufacture or importation and, certainly, the installation of solar panels. At the end of the day, it is being driven by a desire to reduce greenhouse gas emissions, and that is a good thing.

In the briefing that I had on this bill I was told that the setting of the initial price of 44¢ per kilowatt hour (which is roughly twice the retail price of electricity) was largely a political decision. My question of the government is: rather than it being a political or a pragmatic decision, why was it not based on science? Why was it not based on the need to meet clear greenhouse gas reduction targets, for example? I am a big fan of interfering in markets, and we already interfere with the market in electricity—for example, we have the postage stamp pricing, where you pay the same for your electricity whether you are at one end of the grid or another.

The Hon. S.G. Wade interjecting:

The Hon. M. PARNELL: As the Hon. Stephen Wade pointed out, we have similar policies in relation to water. So, it is not a free market but a manipulated market and, for the reason that we need to reduce our greenhouse gas emissions, we need to manipulate that market even further. In terms of some specific questions that I have in relation to the bill, first, I am interested in the scope of the scheme; the length of time that the scheme is to operate. The government's discussion paper, entitled 'South Australia's feed-in mechanism for residential small-scale solar photovoltaic installations', states the following (on page 5):

The long-term stability and security of the German feed-in program [which is 20 years] and a generous payment regime that ensures photovoltaic investment is profitable, all contribute to the success of the scheme.

This scheme that we are debating today is only a five-year scheme and the payment is not as generous as the German scheme. My question is: why not? If the government's discussion paper sings the praises of a more generous and longer scheme operating in Germany, why can we not have that scheme here in South Australia? It is a 20-year scheme in Germany and Canada, and the scheme is indefinite in its duration in Spain. I refer honourable members to a discussion paper entitled 'Tariff implications for the value of PV to residential customers'.

This paper was produced by the Centre for Energy and Environmental Markets at the University of New South Wales and BP Solar Australia. The abstract to that report states, 'The appropriate tariff for PV in Australia may need to start at around 85¢ per kilowatt hour and decrease over 15 years.' What we are looking at here is 44¢ per kilowatt hour. I was interested to hear the Hon. Sandra Kanck's contribution, when she talked about an appropriate tariff being in the vicinity of four times the market rate-even up to five times, I think she said. That is similar to what the University of New South Wales and BP Solar are saying that we need. The tariff implications paper goes on to state:

If the cost is spread across all residential and commercial users it would add less than 2 per cent to electricity bills yet could result in the Australian PV Industry Roadmap target of 350 megawatts installed capacity by the year 2010.

The questions that arise from that for the government are why the rate of 44¢ has been set as it has: why is it not higher? Also, why do we not extend the scheme to small commercial customers as well? You may, for example, have a situation where a person at their home does not have the facility to install PV, but perhaps at their shop they do have the facility, and they want to do it because it is the right thing to do. Why can we not include small business in this as well?

Another question I have—in fact, probably the most important question—is that, if this legislation is designed as a greenhouse gas reduction measure, what is the anticipated reduction in greenhouse gases that will flow from this bill? I asked this question of the officials who provided the briefing, and I would appreciate the minister's response in his second reading conclusion. I also want to know how much the government believes this legislation will drive the uptake of solar panels in South Australia. Surely the government must have some indication of the number of households likely to be influenced by the incentive of this feeder tariff, and we would like to know what government research indicates the take-up rate will be.

I would briefly like to challenge the idea of cost-shifting, which was given to us as one of the reasons not to increase the feed-in tariff—in particular, the price. I refer to the same government discussion paper to which I referred earlier, which states that in Germany the monthly extra cost per household due to feed-in tariffs of solar electricity was less than €0.30. It seems to me that there is no massive cost-shifting taking place when the extra monthly cost is such a small amount. The Australian government, in its 2004 Energy White Paper Securing Australia's Energy Future made the following statement:

As a form of distributed generation, solar energy can reduce the need for transmission and distribution infrastructure—something not fully attributed in the market. Peak output from solar energy often coincides with peaks in demand for electricity, generally hot days with high air-conditioner use. Wholesale prices for electricity in these periods can be 100 times the average.

In fact, you can go onto the web and look at the spot prices on hot days to see how high the price of electricity actually goes. The South Australian discussion paper argues:

It is likely that PV systems make some contribution to reducing the impacts on the electricity system but well short of their full capacity.

The Greens believe that the benefit of greater distributed household level PV generation on infrastructure, and the reduced necessity to buy wholesale electricity when the price is peaking, has not been fully reflected in the proposed tariff in this bill, and we ask the government to further investigate the tariff in light of those comments. So, the question is whether the government will provide us with more information on the impacts they think this legislation will have on other residential customers—in particular, the price of electricity—and to what extent the benefits of PV have been used to offset that cost. It is my suspicion that the government has been overly conservative in its estimations. The South Australian government discussion paper also says:

By contrast, householders could offset the cost of a feed-in mechanism by installing a single compact fluorescent light bulb, which would reduce household electricity costs by around $6 per annum.

If that is all that is needed—a single compact fluorescent light globe—to offset the cost of the feed-in mechanism, it begs the question: why not get households to put in two compact fluorescent light globes and then we can increase the tariff? Of course, it can carry that argument forward with three, four or five; in some cases, people have installed those energy-saving light globes right throughout their homes. It seems to me that if it is such a powerful tool to promote energy then surely it is something we should be embracing more and for which we should be giving greater incentive. I also ask the government to clarify the issue of renewable energy certificates and their relationship to this legislation, because the government's feed-in law discussion paper states:

Retailers may also be able to on-sell this electricity at a premium outside of the national GreenPower accreditation scheme. It should be noted that the feed-in mechanism is not intended to require PV owners to surrender their RECs [renewable energy certificates] to participate. The REC effectively separates the 'green' from the 'energy' and PV owners will remain free to assign their RECs in whatever way secures the maximum return for them. Presently, it is understood that RECs have greater value in the GreenPower™ program than in satisfying [mandatory renewable energy target] observations.

The importance of that is that we can get into the area of double counting. When you start double counting you start misleading the community. I think I have mentioned in this place before the case of the desalination plant in Western Australia which claimed it was being fuelled by renewable energy when in fact the renewable energy certificates for that generation facility were held elsewhere. So, I ask the government to clarify exactly how retailers can on-sell the energy outside the national GreenPower accreditation scheme.

It is also important to note that, once the RECs have been sold, householders can no longer claim that they run on green electricity, because they have sold the right to claim that green electricity to someone else. So, whilst you might have a solar hot water service or PV panels on your roof, if you have sold those renewable energy certificates you can no longer claim that that is yours, yet people would, because the physical infrastructure is on their roof. So, when we get into double counting we get into a situation where governments and individuals take credit that they are not properly entitled to. The problem with the PV system is the same with solar hot water as well. So, when we double count we find that we are lulled into believing that far more renewable energy is in place than it really is.

The final question for government is in relation to GST and to ask how that is accounted for. One good measure in this business is the mid-term review, and we support that. In fact, all legislation dealt with in this parliament, in other jurisdictions and at the federal level is very likely to become redundant very quickly. We are not looking at legislation that will last decades because, as the impact and awareness of climate change grow around the world, more drastic action will be needed and we will find that baby steps such as this legislation are not up to the task. The Greens will support this legislation, but we look forward to the answers from the minister and, depending on those answers, we may have amendments to this bill, but for now we are very pleased to be supporting the second reading.

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (12:44): I thank honourable members for their contributions to the debate. Several questions have been asked by the Hons Mark Parnell and Sandra Kanck in particular. I will continue my remarks later so that I can get answers to those questions. If we have the answers this afternoon perhaps we can complete the debate; otherwise, we will do it next week.

Debate adjourned.

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