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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2007-11-13 Daily Xml
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ELECTRICITY (FEED-IN SCHEME—RESIDENTIAL SOLAR SYSTEMS) AMENDMENT BILL

Committee Stage

In committee.

Clause 1.

The Hon. M. PARNELL: Before I move my amendment, I have a few questions in relation to the clause. What is the likely impact of this legislation in terms of the take-up of new solar panels in South Australia? I am interested to know what business analysis—or, in fact, what analysis of any type—the government has undertaken that might give us some indication of how it sees this regime encouraging the take-up of new solar power.

The Hon. P. HOLLOWAY: Obviously, it is extremely hard to estimate what the take-up rate might be. You would have to have some indication of what the price elasticity of demand of solar panels might be, and that is not something that is easily measured. All the government's advisers can do is base it on current schemes. What I have been advised is that, every time there has been a change to the conditions and incentives have been increased, there has been increased take up.

Obviously, the greater knowledge and concern about climate change in the community are factors, but it is very difficult to estimate exactly what the economic impact might be. However, under the legislation, there is a threshold figure of 10 megawatts, after which there would obviously be a review because we are proceeding into fairly new waters, where there is limited information. The government has the capacity to adjust the scheme, depending on the take-up, but, at this stage, the government has set the parameters for this scheme based on the best guesses but, as I say, they are guesses.

The Hon. M. PARNELL: In my discussions with people in the solar industry—in particular with the people who sell photovoltaic panels to domestic customers—I have been told that the question they are most often asked relates to payback periods. Customers want to know, if they buy those panels and put them on their roof, how long it will be before they get their money back. I appreciate the answer the minister has just given that we do not have certain information and that the mid-term review will be an opportunity to see how the scheme has gone in terms of the take-up rate; however, has any work been done that might indicate what the payback period would be in a typical domestic installation of panels?

The Hon. P. HOLLOWAY: My advice suggests that, for a typical system without any incentives, the payback period would be greater than 20 years; however, the feed-in scheme would reduce that by at least one to two years.

The Hon. C.V. SCHAEFER: I assume that is dependent upon the price of power at the time. I also assume that those figures assume that the cost of electricity will remain as it is currently.

The Hon. P. HOLLOWAY: If you are making these estimates that was the premise; the work was done fairly recently, but obviously it would assume current electricity prices. Of course, there is also the capacity to conserve electricity and the impact of that; I suppose it depends on how energy efficient or inefficient the household is. Obviously, solar power will make savings vis-a-vis greenhouse gas-emitting electricity—whether it is coal, gas or whatever. I guess how much will depend on how efficiently the household uses electricity.

The Hon. M. PARNELL: In relation to the mid-term review, the minister has explained how that will be used to look at the take-up rates and at how the system is working. Can the minister also confirm that at the mid-term review the government will look at the basis on which the feed-in tariff operates? In other words, will the mid-term review look at the option of moving from a net exporting tariff to a gross production tariff?

The Hon. P. HOLLOWAY: My advice is that if you were to look at changing that particular aspect you would basically have to rewire the solar panel connections, because the way the solar panels are metered is related to the way they are measured for feed-in purposes. If one were to change the scheme one would basically have to rewire them, and I suggest that would be counterproductive. In other words, there would not be much benefit in reviewing that particular part of the scheme because you would have to reconfigure all the system. So, that really would go beyond what was considered in the review.

The Hon. M. PARNELL: Is it that, with the type of metering that is proposed, it will be impossible to tell what the gross production of energy from these solar panels is? Will the meters tell us only the difference between what you have consumed and what you have produced? It seems to me that we might be cutting ourselves out of a very valuable option for the future if we have meters that do not tell you the gross figure for energy that you have produced from your panels.

The Hon. P. HOLLOWAY: My advice is that the gross production of electricity by the solar panels would be recorded on the inverter. Obviously, the DC from the solar panels is converted to 240 volts by an inverter, and so at that stage you can record the gross production of electricity from the solar cells. However, as far as the feed-in part of it is concerned, you have the flow-in and flow-out and that is where the meter rules apply in relation to the flow-in and flow-out of electricity from the solar panels and to the mains (the grid) but, whereas you can measure the gross production, it is from a different part—it is from the inverter. It does not measure through the meters where it would be easily read for the purposes of determining the tariffs or rebates or whatever one is measuring from the meters.

The Hon. M. PARNELL: If no other members have any general questions I will move to my amendments. I move:

Page 2, line 3—Delete 'Residential'.

I point out to honourable members that, even though there are a large number of amendments, many are consequential, and I will speak to my amendment No. 1 as a test for amendments 1 through to 7 and 9 through to 16. The purpose of this amendment is to extend the range of customers who are entitled to benefit from this scheme, that is, they are entitled to this feed-in tariff. The minister, in his second reading conclusion, when I had flagged that I was interested in extending this scheme, not just to domestic customers but to small business customers, said—and I do not have the exact words—that this was not designed to be a profit-making scheme and, therefore, it was perhaps not appropriate for business entities to take advantage of it.

My point is that if we extend this scheme to small business then it may well be that there are particular circumstances in respect of a person in their domestic environment—perhaps they live in a unit or a block of flats or they live somewhere where they cannot take advantage of it, but they might own a small shop where they could take advantage of it because they physically have the space for the solar panels, The thrust of my amendment, for which amendment No. 1 is a test, is to extend the benefit of this scheme to small business customers as well.

Small businesses are defined in my amendment No. 4 as a business, 'where not more than 20 persons are employed', and, 'where the business does not form part of a larger business'. I note also, for the benefit of honourable members who might think that extending this scheme to small business somehow makes it a profit-making venture, if we go back to the answers the minister has given us, the likely shortening of the payback period for these panels is going from something around 20 years and we might be knocking one or two years off it.

Clearly, this scheme is targeted at people who want to do the right thing. It is not targeted at people who are seeking to make money as producers of electricity by supplying power back to the grid. It is a sweetener, if you like, that increases (albeit slightly) the incentive that is available for people to install solar panels on their roof. I think that extending the scheme to small business in no way transforms the nature of this scheme, which is really a scheme of encouragement rather than something that is profit-driven. I would urge honourable members to support the amendment.

The Hon. P. HOLLOWAY: The first amendment and, indeed, amendments 1 to 7 and 9 to 16, seek to redefine eligibility under the scheme to include small business customers with the definition for this category included under amendment No. 4, so this will be the test case for all of those amendments.

The government is opposed to these amendments. Expanding the scheme to small business, as defined in amendment No. 4, would be administratively complex and would result in additional cost to customers. Officials have contacted ETSA Utilities, who have confirmed that this is not a customer class specifically recognised by its existing tariff structures, the Electricity Act or its regulations and, therefore, the cost of managing the scheme for what is likely to be a small number of interested business people could be prohibitive. Expanding the scheme to small businesses will be administratively complex and will result in additional costs to consumers. Remember that this is a zero sum game and the higher the feed-in tariff obviously the more that other consumers will have to pay to cross-subsidise it.

Does the honourable member have a suggestion as to who would assess the numbers of people, the full-time equivalents, as it is defined in the honourable member's definition to clause 4? How would this be done? What happens if the numbers fall from 20 to 19 and so on? The government's view is that the cost of managing this scheme, for what is likely to be a small number of interested business people, would almost certainly outweigh the benefits. That is essentially why we will not be supporting this amendment.

The purpose of it, as the honourable member himself said, is to try to encourage customers to be more aware of it. I am sure that the owners of businesses can, in their private dwellings, support it in that way. If you have a business employing 20 people and each of those 20 people applies the scheme in their private home, I am sure it would make us all very happy.

The Hon. M. PARNELL: Given that the minister asked me a question, I will answer it. It is not that hard. Just as not every residential customer for electricity is going to take up this scheme, similarly, not every small business customer would take up the scheme. How would it work? It would be very simple. A business which has acquired some solar panels and put them on the roof would make application for the feed-in tariff to apply to it, just as a residential customer must make application to be brought within the scheme.

There is no extra paperwork involved—perhaps one extra document, just as a domestic consumer might need to sign a form stating that they are, in fact, a domestic premises and not a factory or something else. Similarly, a small business operator who wanted to take advantage of this scheme might have to just fill out a form stating `It is a small business. It has fewer than 20 full-time employees.' If the business grows so that it ceases to be eligible, I will let you know.'

I have to say that if a small business with maybe 21 or 22 employees—it might have grown during the year—is getting the benefit of having its 20-year payback shortened by one or two years, at the end of the day it is still overwhelmingly, through its own convictions and its own desire to do the right thing by the environment, helping us all. It seems to be very churlish not to give every encouragement to people who want to do the right thing. My response is that I cannot believe that this would be an administrative nightmare and we could leave it as part of the application process for people to claim their eligibility.

The Hon. P. HOLLOWAY: The problem is that basically you have to case manage each small business customer because you have to have somebody who can assess each of them, which will add to the administrative costs. It has been the government's intention to make this scheme simple with minimum administrative cost. With the residential area, those customers are well known and defined under the Electricity Act. ETSA Utilities knows who they are and it is not an issue, but in relation to small business customers there is no category that responds to the definition the honourable member would be inserting here, so you have to case manage them. It may not be all that complicated, but for the amount of savings involved it is a disproportionate amount of administration involved for the system. As we are trying to get the scheme up and running and trying to get acceptance of feed in, the government's argument is that, however good the intention, it makes the system unnecessarily messy administratively for the benefits it would deliver.

The Hon. C.V. SCHAEFER: The Liberal Party will support the suite of amendments. However, I have a couple of questions for Mr Parnell. First, we wondered why this has not been extended to schools. As I stated in my second reading, we see this as having little more effect than a grandstanding, flag waving, publicity seeking piece of legislation, which Mr Rann is very good at introducing. We see these amendments by and large as simply a small attempt to do what the bill says it will do, namely, give some rewards to those who choose to introduce these systems into their homes. We see no reason why they should not be extended to small businesses.

However, I wonder why this was not also extended to schools, given that Mr Rann has made several grandstanding efforts to convince us all that he will be the solar power king and install solar panels in all schools, yet he brings out a piece of legislation and it contains no mention of schools. I am wondering why that was not included. I also wonder why the definition of small business is based on the number of employees rather than on the consumption of power.

The Hon. P. HOLLOWAY: The comments are aimed at the government. In relation to schools, this government has a policy and has been supporting and paying for the installation of solar panels in schools. With the federal election the ALP has come out (I am not sure about the coalition) and supported solar panels in schools, so in a sense they are looked after.

The Hon. M. PARNELL: I thank the honourable member for her important questions. The schools are an excellent idea. I did not include schools because it was my understanding that various other schemes were available to provide incentives to schools to install panels, but I can see from the honourable member's question that at the heart of it is the fact that our schools are the future.

It is where our young people are spending vast amounts of their time, and it would be an important part of their education for them to see that the electricity they are generating is offsetting the electricity they are using. So, I can see that that would be an important lesson to tell. Ultimately, given that this is a government bill, I have tried to amend it in a fairly minimalist way, which is why I picked on small business for the reasons I gave before; namely, that it would encourage people who do not have the capacity in their homes to perhaps use their small business.

In relation to the number of employees as the test of what is a small business rather than the amount of electricity that they consume, my answer is that there is no standard definition of 'small business'. The one with 20 employees is used in other areas not related to energy consumption. Similarly, we do not have any distinction between single-person households in terms of residential customers with mum, dad, grandma and 13 children whose energy consumption would most likely vastly exceed that of a single person.

I think that in an ideal world I would like to have extended this bill more than I have. However, I am taking fairly modest steps given that, as the honourable member said, it is a fairly modest bill to start with. I was working on the assumption that making some minor changes and having them succeed was preferable to proposing wholesale changes that would be defeated.

The Hon. P. HOLLOWAY: Can I just make another point, too: I really am surprised that opposition members would support this amendment given that their federal colleagues do not support small business for the commonwealth rebate, which is, I think, $8,000. The commonwealth scheme is specifically for that. To support it here when there is not that scheme, and given that it is administratively messy, does not make a lot of sense.

The Hon. A. BRESSINGTON: I will be supporting the amendments of the Hon. Mark Parnell.

The Hon. SANDRA KANCK: I will be supporting the amendments. I do not think they are particularly onerous. There were many ways in which this bill could have been amended. I think I said in my second reading contribution that this bill is merely a start; and, in many ways, it is disappointing because of the various people and sources of energy that are cut out of it. I think this is a positive step forward.

The Hon. D.G.E. HOOD: Family First also supports the amendments.

The Hon. P. HOLLOWAY: I will not divide on it. Obviously we will have to look at this in the House of Assembly, but it would be disappointing if the scheme were to founder because of something that will have very little importance in terms of the impact it will have on encouraging the take-up of solar panels. This will create some administrative difficulties and, as I say, it would be a great pity if the scheme were to founder for that reason. As I have indicated, I will not waste the time of the committee by dividing, but obviously something will have to be addressed when this bill goes back to the House of Assembly.

Amendment carried; clause as amended passed.

Clauses 2 and 3 passed.

Clause 4.

The Hon. M. PARNELL: I move:

Page 3—

Before line 1—Insert:

qualifying customer means—

(a) a domestic customer; or

(b) a small business customer;

Line 2—Delete 'domestic customer; and substitute: qualifying customer

After line 9—Insert:

small business customer means a customer who acquires electricity primarily for the purposes of—

(a) a business—

(i) where not more than 20 persons are employed (and, for the purposes of this paragraph, the relevant number of persons will be determined by counting people who work full-time in the business, or full-time equivalents); and

(ii) where the business does not form part of a larger business; or

(b) a business that satisfies other criteria (if any) prescribed by the regulations for the purposes of this definition;

Line 18—Delete 'domestic customer' and substitute: qualifying customer

Line 23—Delete 'domestic customer' and substitute: qualifying customer

Line 24—Delete 'domestic customer' and substitute: qualifying customer

These amendments are consequential to the amendment we have just passed.

The Hon. P. HOLLOWAY: These amendments are consequential. We will not divide. Again, I point out that there are difficulties with this definition of 'small business' because it is not a customer class that is specifically recognised by existing tariff structures. For that reason, it unnecessarily complicates the scheme.

Amendments carried.

The Hon. M. PARNELL: I move:

Page 3, line 25—Delete '$0.44' and substitute: $1.00

This amendment goes to the tariff itself. It relates to the amount that a residential or small business customer is paid for the electricity that they generate over and above the electricity that they use. The amount in the government's bill is set at 44¢ per kilowatt hour, and my amendment increases that amount to $1. I have received some correspondence from various entities which have looked at both the government's bill and my amendment, and I will refer briefly to some of those. I refer to a letter dated 12 November, which I think went to all members, from Adrian Ferraretto of the Solar Shop Australia Pty Ltd, in which he states:

Solar Shop Australia therefore strongly urges the South Australian government to revise the proposed feed-in tariff upwards to $1 per kilowatt hour, and that it is paid on a gross export basis over a period of 20 years.

We will get to the length of time later, but the reason the Solar Shop has urged the government to support $1 per kilowatt hour is that that is roughly the amount that people in this business say is needed to genuinely promote the take-up of solar panels. I will not repeat what I said in my second reading contribution but, if we were using a gross production method, maybe a tariff of roughly twice the amount that you pay to buy your electricity would be appropriate. But, because we have the net export system, groups such as the Business Council of Sustainable Energy say that a tariff of five times the amount that you pay for your electricity is appropriate to encourage the take-up of panels and therefore encourage people to change the way they both use and produce electricity.

I note that other organisations such as EcoSouth Solar, which is the trading name of Ecoway Pty Ltd (and it is in the business of selling solar panels as well) agrees that the amount of 44 cents is insufficient, and it states:

EcoSouth fully supports the time frame extension—

which we will get to later—

and, whilst $1 per unit kilowatt hour for exported power would be fantastic, we believe 64 cents is more realistic.

That is at least 50 per cent more than the government is proposing. So, at the heart of my amendment is the purpose of this government bill. The government's bill is to drive change. The reason we need to drive change is to play our part towards reducing greenhouse pollution. Therefore, if the bill and in particular the tariff that is paid under the bill is insufficient to drive change, it will have been a complete failure. I accept that we will have this review and that, if it turns out that the bill is a failure and no-one takes up solar panels as a result of this incentive, we can revisit it, but the amendment I have put forward contains the amount recommended by the Business Council of Sustainable Energy and supported by many in the industry.

Since the tariff was first established, has the government had the opportunity to look at the correspondence from the various business interests, and would the government consider increasing the 44¢ that is currently in the bill?

The Hon. P. HOLLOWAY: No, we will not consider that, for the reasons that I will outline. I think we need to go back and understand what the purpose of this scheme is. It is a scheme to reward householders who have made the commitment to the environment by installing a solar electricity system. It is aimed at providing households with an opportunity to take control of their energy use and to reduce their greenhouse footprint.

I reiterate what I said before: the figure chosen of 44¢ per kilowatt hour has to balance the benefit to photovoltaic owners with the cost borne by other consumers. This is a zero sum game; the benefit that is given will be paid for by the mass of other consumers, and the more you subsidise those with the photovoltaic cells the more it will cost ordinary households, which in some cases are very low income households.

What the government has done here is try to strike a good balance. The figure of 44¢ already represents close to 10 times the weighted average wholesale price for electricity traded in the national electricity market. As I have stated here previously, at 44¢ per kilowatt hour, if the current 3 megawatts of photovoltaic systems grows to 10 megawatts by 2013, then the cost to be borne by other householders would rise from $1 million to $3 million per year. If on the other hand we supported the amendment and increased the benefit to $1 per kilowatt hour, then that cost could rise to at least $2 million to $8 million per year, and that has to be borne by other householders.

The industry obviously would like it, because it has an interest in that, and I am sure that many of the people who install these systems will have higher incomes and have a genuine commitment to the environment, but I suspect that in most cases they will be higher income constituents. There has to be a limit as to how much they are cross subsidised by the rest of the consumers.

The honourable member raised the German feed-in scheme in his second reading speech. I would point out that there are some substantive differences between South Australia and Germany. First, we are in the position of providing a support scheme that complements a capital subsidy that has bipartisan support at the commonwealth level. So, the feed-in scheme is not the only incentive, but there is a very significant capital subsidy; $8,000 is a significant capital subsidy provided at the commonwealth level.

The Germans do not have the equivalent of Australia's photovoltaic rebate program, and they rely on their feed-in payments. Secondly and more importantly, we get a lot more sunshine. That means that photovoltaic systems in South Australia produce a lot more electricity than those in Germany, so this may allow us to achieve acceptable levels of support with a lower premium being applied to the solar electricity generated than that applied in Germany.

The government would argue that 44¢ is an appropriate figure for the five years of this scheme. Therefore, we do not support the amendment. Again, I remind people that this is not an open-ended scheme: it is a balance between other customers, and in some cases they might be low income customers who do not have the capacity to invest in the capital to gain the benefit of these sorts of schemes. That is why we do have to strike a balance, and we believe that 44¢ is the appropriate one, but we do have the review halfway through the five-year scheme. If the take-up is not as high as we might like and is not reaching these objectives, we then have the capacity to change that.

The Hon. C.V. SCHAEFER: I have a question of the minister. Was at any stage a percentage of the current retail price per unit considered, as opposed to a flat 44¢ or a flat 80¢ or whatever it might be? Given that we are talking about a 20-year time frame, would it not be more just to have a percentage rate considered? I am sure that was considered; I would just like to know why the minister arrived at this decision.

The Hon. P. HOLLOWAY: My advice is that the parameters of this scheme are that it would be a five-year scheme and that the rate would be about twice the retail price of electricity. In the end, it is easier just to fix 44¢ rather than having to adjust it constantly by regulation or by some other means. Again, I think that would make the scheme unnecessarily complex for the small benefit you would get out of it. So, it is easier to stick to those principles: a five-year scheme at roughly twice the electricity tariff and, really, the 44¢ is a sort of a translation of that into the legislation.

The Hon. M. PARNELL: The minister's answer was that the cost of the scheme could amount to some $8 million per annum if the tariff was extended to $1 per kilowatt hour. Does the minister have the figures for what that might represent in terms of an annual increase in the power bills of other consumers? It seems to me that, if that $8 million was spread over all residential customers, we might be in the vicinity of $10 a year; if we spread it over all electricity users, that amount would come down significantly. So, my question is: is a few dollars a year too excessive a subsidy for a scheme that requires for its success a reasonable take-up rate of new panels rather than just rewarding those who have already put in panels?

The Hon. P. HOLLOWAY: There are about 650,000 retail electricity customers in the state. Obviously, that means that, if the cost of something like this was up to $1, it could be an additional cost of up to around the $10 to $11 mark per annum. But, remember, a lot of people are facing interest rate rises and other costs so, for ordinary householders, there has to be some limit. Obviously, we believe we need to have some incentive there. As I have said, this is a zero sum game. If you have a feed-in scheme for PV, other customers somewhere else have to pay for it. Again, just a few additional dollars per year is probably a reasonable price to pay for the benefits one would gain in terms of the greater awareness of this scheme and so on. However, when you start to get above $10 per year, because many of the customers would be fairly low-income earners facing mortgage interest rate rises, etc., it would start to become significant.

The Hon. C.V. SCHAEFER: The Liberal Party does not support this amendment, for the reasons outlined by the minister. We believe that it is necessary to have a balance between those who are using solar energy and other electricity customers. We could debate all day where that balance is to be struck, but there does need to be a balance and, loath as I am, I will have to trust that the government has the balance right on this occasion.

The Hon. M. PARNELL: I am disappointed that we are not going to increase the tariff today. I would like the minister to confirm again that a key part of the review will be to review the amount of the tariff. Whilst it might not directly relate to this section, I also ask the question whether that review might also consider extending the type of renewable energy generation that might be covered by the tariff. In other words, can the minister confirm whether small-scale wind farms or other forms of renewable energy might be part of the mid-term review as well?

The Hon. P. HOLLOWAY: The government has already given the commitment that it will look at those other forms of energy. The price is the key element, I suppose, to the success of the scheme. We have already canvassed the sort of targets we would like to have in our take-up to 10 megawatts by 2013 as sort of an aim. We are at just under three megawatts (2.95 megawatts) grid-connected solar power at the moment, and that goes up to 10 megawatts. Incidentally, that 2.95 megawatts is out of a national total of just 6.56 megawatts, so we have almost half of the national total, and I think that says something. It would be fairly easy to tell whether we are on track to achieving that but, obviously, the price is the key factor in terms of the take-up.

The Hon. D.G.E. HOOD: Family First opposes the amendment on this occasion. We believe that 44¢ is an appropriate figure. As the minister has said, it strikes the balance of not providing an over-subsidisation from one group to another. For that reason, we oppose the amendment on this occasion.

Amendment negatived.

The Hon. M. PARNELL: I move:

Page 3—

Lines 31 and 32—Delete 'domestic customer' and substitute 'qualifying customer'.

Lines 35 and 36—Delete 'domestic customer' and substitute 'qualifying customer'.

Line 37—Delete 'domestic customer' and substitute 'qualifying customer'.

Line 39—Delete 'domestic customer' and substitute 'qualifying customer'.

Line 41—Delete 'domestic customer' and substitute 'qualifying customer'.

Page 4—

Line 1—Delete 'domestic customer' and substitute 'qualifying customer'.

Line 4—Delete 'domestic customer' and substitute 'qualifying customer'.

Line 6—Delete 'domestic customer' and substitute 'qualifying customer'.

These amendments are consequential to amendment No. 1, which we have passed.

The Hon. P. HOLLOWAY: The amendments are consequential, so we will not be dividing on them.

Amendments carried.

The Hon. M. PARNELL: I move:

Page 4, after line 15—insert:

(5) The holder of a licence who is required to provide credits under subsection (1) should, to the extent that the holder passes on the cost of the credits to other customers, seek to spread that cost across all of the holder's customers, other than—

(a) persons who are in receipt of pensions under the Social Security Act 1991 of the commonwealth; or

(b) persons who are the holders of health care cards issued by the commonwealth; or

c) persons who are in receipt of other benefits, allowances or payments of a prescribed class.

This amendment follows on from the discussion we have just had about how the cost of this scheme is to be shared, and it proposes that we provide some protection for low-income people.

The amendment does two things. It spreads the cost of the scheme across all customers of the provider but excludes persons in receipt of a pension under the Social Security Act, persons who hold a health care card issued by the commonwealth, and persons who are in receipt of other benefits, allowances or payments of a prescribed class. So, even though the amount we are talking about, the additional impost onto customers, will be low (in the range of a few dollars per year), we need to ensure that we protect the most vulnerable people in our community, and my amendment seeks to exempt those customers from participation in the scheme. I do not have the figure for what proportion of the customer base those people form, but my best guess is that it would be quite low—not only in numbers but also that would probably be the part of the customer base that uses the least electricity, anyway. With those few words I urge members to support the amendment, which seeks to protect vulnerable consumers from additional cost increases.

The Hon. P. HOLLOWAY: While the objective of the amendment seems honourable enough, it does present some problems and the government will not support it. ETSA Utilities does not deal with concessions; that is the job of the retailers. In fact, it actually does not know which of its customers would meet the criteria that the Hon. Mark Parnell sets out in his amendment, so we would go from a simple, efficient mechanism to a much more complex one.

Requiring ETSA to gather this information would significantly increase the administrative complexity of the scheme and hence increase the cost of its operation. We are talking about a cross-subsidy of a few dollars a year, but if it starts to become too administratively complex then what you gain in benefits you would actually lose in additional administrative costs—and that might mean that significantly more has to be passed on to other customers to outweigh the cost of administration. With a feed-in scheme it is important to keep it as simple as possible. We have already had the amendment to add small business (a relatively small group of customers); however, if you are talking about pensioners, health care card holders and persons in receipt of other benefits, etc. then it will add significantly to the administrative complexity.

We should also be aware that pensioners and health care card holders are eligible for the government's energy concession, and (according to the most recent statistics published by ESCOSA for the 2005-06 financial year) this is received by over 200,000 electricity customers and is worth $120 per annum. It is one thing to know who is a card holder (I guess you get that information from the commonwealth) so that you can give those people the concession but, if you have a different tariff, that is a different matter entirely. For those few dollars a year it will add enormously to the administrative complexity and, therefore, the attraction of the scheme.

This government has dramatically increased the electricity concession. In fact, there has been a significant increase over the term of this government—I think it has gone from $75 to $120—and I suggest that that is the best way to address the situation of pensioners, rather than make this scheme unnecessarily complicated and run the risk either of making it less attractive because of additional costs or, alternatively, if it is too difficult to get the information then the system itself would not be able to proceed. I urge the committee not to support the amendment, even though the sentiment behind it is perhaps reasonable.

The Hon. M. PARNELL: My response to that is that I believe these difficulties can be overcome administratively and, at the end of the day, I think it goes to the heart of the scheme. It goes to the heart of our commitment; if we are serious about reducing greenhouse gas emissions we have to be serious about things such as this feed-in tariff—which I hope the government will increase when it is reviewed. It will come at a cost, but I think we need to bear in mind that we need to protect the most vulnerable people in our community.

I have taken advice that this scheme is workable—the same, I believe, as the small business amendment that we have passed is eminently workable. I do not think it is that difficult for the status of low-income electricity consumers to be ascertained and for mechanisms to be put in place to ensure that they are not penalised by the fact of other consumers having to pay more for the cost of the feed-in tariff. I believe it is workable, and I urge members to support it.

The Hon. C.V. SCHAEFER: The Liberal Party is supporting this amendment. I am unconvinced by the minister's argument that ETSA Utilities does not know who the beneficiaries would be. Given that there is already, as you have pointed out, a pensioner's discount, there must be a database somewhere which could be used in this case. We will be supporting this amendment but, again, I think it is a further reason for supporting 44¢ as opposed to $1.

The Hon. P. HOLLOWAY: It is one thing when you have a pensioner concession whereby, if someone is eligible, their electricity is measured in the ordinary way at the same rate as would be paid by other customers, but at the end of the day we have given them—and this government has increased it substantially—$120 per annum which is taken off their bill. That is a relatively easy thing to do, but what we are talking about here is that, if we were to exempt these people from the scheme, there has to be a different tariff for pensioners than there is for other customers. So, it means that each individual pensioner's bill has to be calculated at a different rate than that of other customers, and it is that part that really adds to the complexity; that just for the purpose of this scheme there would have to be a slightly different rate for pensioners relative to other customers.

Giving a rebate is a relatively easy thing to do, because they have those lists and they know who the pensioners are who are eligible for those rebates, and that could simply be taken off the bottom of the bill, but to actually have to put a different price for electricity is, we would suggest, significantly difficult. Again, if this amendment is carried, I would suggest it is one of the things that we will have to look at (the complexity of it) in the other house. I would ask other members of the chamber not to support this because it just simply, as I said, adds unnecessary complexity to a system that really needs to be simple to make it attractive and to make it work properly.

The Hon. A. BRESSINGTON: I rise to indicate that I will not be supporting this amendment. I appreciate the Hon. Mark Parnell's sentiments and completely concur with the fact that pensioners and low income people should not be faced with any further increases in charges, and so on. But I am also aware, as the minister said, that by burdening the administrative process it could unintentionally compromise any benefits that might flow to pensioners and low-income earners.

I believe that under this bill, while perhaps the tariff is not as high as is recommended and perhaps the benefits are not as great as they could be, in matters such as this perhaps we should not push the envelope too far with the government, which is actually aware of the systems that would be affected in trying to regulate tariffs for individual consumers. Given that none of us in this place have that experience or that knowledge of how those systems work, in this particular case—and you will not hear this from me often—perhaps we should accept that the government is doing the right thing and has calculated this particular costing and benefits to the best of its ability.

The Hon. D.G.E. HOOD: Family First is attracted to this amendment. We think that the sentiment is to protect the most vulnerable in our community, and I think the intention of the amendment is sound, but we are very concerned about the potential for administrative burden on the organisations. In a very difficult and close decision, we have decided not to support the amendment on this occasion. Pensioners are well catered for in other ways with respect to a rebate, for example, in this particular marketplace, and I would hate to see the administrative cost of this particular amendment becoming such that the scheme became more expensive for everyone involved, not just pensioners. So, for that reason, we will not be supporting the amendment.

The Hon. M. PARNELL: I thank honourable members for their thoughtful consideration of the amendment. I will not be dividing on it but I do urge the government again, as part of the mid-term review, to look at this matter and consider the base over which the cost of this scheme is spread, to make it as inclusive as possible of all electricity consumers, but as the tariff goes up, as I am sure it inevitably will, to make sure that the most vulnerable are protected.

Amendment negatived.

The Hon. M. PARNELL: I move:

Page 4, line 18—Delete '2013' and substitute: 2028.

This goes to the point of the length of time that this scheme is to operate. Under the government's bill it is a scheme that will go for five years, yet the communications that I have had from people involved in the solar industry and in energy policy is to say that the scheme needs to be longer to provide some level of certainty because the infrastructure that people are purchasing, the solar panels that they are going to put on their roof, certainly last longer than five years. People will want to have some certainty at the initial purchase that that they will be receiving a more generous tariff for the excess electricity they produce, and they would not want to be caught out in a situation where perhaps after five years the tariff dropped back down to the purchase price—back down to 20¢ or so.

It might seem to members that putting a date in the legislation (the year 2028) is too far out to be making decisions around now, but I point out that it would be virtually impossible for this scheme to remain in its current form for that length of time. It is inevitable that this scheme will change over time, but the signals that we send now are most important and I think we need to send signals to potential purchasers of photovoltaic systems that the government does support their decision to do their bit for climate change and that we do support them. Even though we are not going to reward them handsomely for it, we support their community-minded endeavours and we will write into legislation that this scheme will be in place for 20 years.

Having said that, I have no doubt that, when the scheme is reviewed in a couple of years (and perhaps after several reviews), it will bear little resemblance to the scheme that we are passing today. I have no doubt that it will have a broader base and I have no doubt that the tariff will be more generous. Really, whether it is five years or 20 years, I think it is symbolically important because of the message that it sends. I urge members to support this amendment to make the scheme go for 20 years rather than for five.

The Hon. P. HOLLOWAY: In terms of the duration of the scheme, I ask members to consider where the issues of climate change, greenhouse emissions, emissions trading and renewable energy are likely to be in five years. I think, to some extent, the Hon. Mark Parnell has really himself provided the argument against his own amendment, in terms of extending it. As I am sure all members would be aware, the South Australian government, along with other states and territories, has been contributing actively to the development of a national emissions trading scheme in Australia which it recognises is likely to be an efficient approach to reducing greenhouse emissions. It has recently become clear that Australia will have an emissions trading scheme in place by no later than 2012. Both parties at the federal level have committed to that now that the coalition has finally supported such a measure.

The government believes that additional complementary measures will continue to be required and will be considered as part of the mid-term review. However, given the rapidly emerging policy developments in this area the government prefers to monitor policy developments as they progress, rather than committing South Australia now to a feed-in mechanism for more than five years. There is a lot of change that will happen here and, as the Hon. Mark Parnell himself conceded, the scheme in five years will probably look nothing like it does now. The whole situation may change in that there may be other alternative or better forms of support, if required, for whatever form of renewable energy or greenhouse gas-free energy is preferred at the time.

We have committed to reviewing the scheme in 2½ years or when we approach 10 megawatts of installed capacity, whichever occurs first, and, when we do that, we will consider all of the relevant issues, including the response of consumers, and the signals being sent by the emissions trading scheme and any mandatory, renewable or clean energy targets that might be in place. That is, therefore, why we oppose the amendment. Things will be a lot different in 2½ years (and even more so in five years) without extending the scheme. There may well be other ways that we would wish to encourage clean energy in five years.

The Hon. SANDRA KANCK: I indicate support for the amendment. Unfortunately, I had to leave the chamber earlier when we were talking about a proposal by the Hon. Mark Parnell to increase the rate, which I would have supported. Having not been able to show my support for that I do want to indicate support for this amendment to extend the life of the scheme. We do need to have incentives and we need to send a message to consumers that it is worthwhile investing in this particular form of energy, particularly as we know the positive benefits it will bring in terms of alleviating greenhouse gas emissions. I think extending it is a very positive move.

The Hon. C.V. SCHAEFER: The Liberal Party supports the amendment.

The Hon. D.G.E. HOOD: Family First opposes the amendment. We believe that the time-frame involved is simply too long to have any degree of certainty. There is a review process scheduled for two years from now and we expect, as I think the Hon. Mark Parnell acknowledges, that, even if we were to enact a 20-year period, the likelihood of that period actually holding would be extremely slim, and so I see it as really unnecessary to do it in the first place. We will support the bill without the amendment.

The Hon. A. BRESSINGTON: I rise to indicate my support for this amendment. It is not going to create any more of the administrative burdens that I mentioned in regard to the last amendment. However, I do believe that it is necessary for the government to show its level of commitment for this initiative. I also believe that it is necessary for the government to be held accountable for any changes that are made and that those changes and proposals do need to come before the parliament so that changes cannot just be made at a whim in five years. I go back to a bill that is not related to this—the casino and TAB bill—which had to come before Parliament. It went through the democratic process of having a contract agreement changed and I believe that, if people are entering into the commitment of having solar panels fitted and whatever, it is a contract. They believe that they are entering into an agreement or a contract with the government and they need to have some level of surety as well.

The Hon. P. HOLLOWAY: In relation to the last contribution, that is why the government would have preferred the five years, so that people know what they are getting into; five years is a significant time.

The question is whether five years down the track this will be the best way to support photovoltaic energy and whether the economics will still be such. Hopefully there will be some breakthrough and they will become viable in their own right and possibly even cheaper than other forms. Even if not in five years, it may well be within 20 years. None of us can say with any certainty beyond five years what the best form of supporting clean energy will be, but if this amendment is carried (and it looks like the numbers are there for it to be carried) we will have a commitment for 20 years, even if after five years that is a silly way to go and other technology and developments mean that, instead of having a feed-in scheme, maybe geothermal energy, or whatever, is a better option.

The problem with this amendment is that it locks us in for 20 years in a field that is rapidly changing and where none of us really knows what will be the best form of support. If it was just five years—and there will be at least one election before then and close to the second election before that takes place—and if the government wished to extend it, it would always have the option after five years. But, if we are locking ourselves in for 20 years, we would have to repeal this bill if it no longer were the best way to go and if we wanted to support clean energy through some other better mechanism.

The commonwealth supports photovoltaic cells through its capital subsidy. If that was considered to be a better way to go in five years' time, depending on the results of this, that could be done, but if this legislation is now locked in for 20 years and people are buying it on the basis of getting 20 years of feed-in rather than five, it would be much harder to change it, even if it was no longer necessary to promote the take-up. It appears that that will be a problem for a government of the future rather than this government. However, it is bad practice to lock ourselves in in such a changing environment. I thank the Hon. Dennis Hood for his support of the government's position.

The Hon. M. PARNELL: I thank members for their thoughtful consideration and for what looks like majority support. I do not accept what the minister is saying. The clause I am amending is effectively the expiry date. A worst case scenario might be that, if a future government drops the ball on greenhouse and decides it is no longer an important part of its legislative agenda, this legislation could just expire. We could think of this as an insurance policy and, if the government or parliament does not come up with anything better as part of the review we are having in 2½ years, at least those people buying their panels today have the confidence to know that the worst case scenario is that they still have their 44¢.

That amount will be completely inadequate 20 years from now, but it puts pressure on the government to ensure that it comes back after the review and properly modifies the scheme. I would not have thought this was a die in the ditch issue. It is largely symbolic and the minister and I agree on that, but I do not see this as bad law: I see it as sending a very positive signal. It will give great assistance to those people in conservation groups and in the solar industry who are seeking to encourage the take-up of solar panels. It gives extra confidence that this is not a fly-by-night thing and that they have some security.

Amendment carried; clause as amended passed.

Title passed.

Bill reported with amendments.

Third Reading

Bill read a third time and passed.

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