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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-07-21 Daily Xml
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ELECTRICITY (RENEWABLE ENERGY) AMENDMENT BILL

Introduction and First Reading

The Hon. M. PARNELL (16:47): Obtained leave and introduced a bill for an act to amend the Electricity Act 1996. Read a first time.

Second Reading

The Hon. M. PARNELL (16:47): I move:

That this bill be now read a second time.

In 2008 this parliament helped to proudly usher in the nation's first solar feed-in bonus scheme for households. The Greens at that time proposed amendments which were accepted. We moved to extend the length of that scheme and we also moved to expand it to include small generators other than households, including churches and small businesses. At the time that solar feed-in bill passed we said that it was not generous enough but we were pleased to at least be the first state to introduce it. Now other states have well and truly overtaken us and South Australia is now playing catch-up.

Members would also be aware that the Greens have raised over the last two years the issue of electricity retailers ripping off households in connection with this solar feed-in scheme. As members might recall, the legislation was passed in 2008 and it came into operation on 1 July of that year. When the legislation came into operation, the act then required that the sum of 44¢ per kilowatt hour should be paid for any excess electricity (net electricity, if you like) generated by solar panels and fed into the grid.

Prior to the introduction of this scheme, the electricity companies were in fact paying the owners of solar panels effectively a sum of between 16¢ and 24¢ a kilowatt hour which represented what those consumers were in fact paying for the electricity that they purchased from the retailer but, since 1 July 2008, some retailers chose to replace what they were already paying with the 44¢ premium rather than, as was intended by the government and I think all of us here, that that payment would be in addition to them actually paying for the electricity.

The premium, you have to remember, is not paid for by the electricity retailer: it is actually paid by virtue of a small charge on all other electricity consumers and that amount as that is then passed on to the solar panel owner by the retailer. It certainly does not come out of the pocket of the retailers, so we describe this as 'the great solar rip-off'. What we have found is that companies like Origin, AGL and TRUenergy are in fact collecting windfall profits while they are expecting the rest of the community to pick up the tab for this important action on climate change. In fact, all companies are now paying just a few cents per kilowatt hour.

The Greens started a campaign to ensure that householders with photovoltaic cells were paid a fair price. We introduced into this parliament a private member's bill—the Electricity (Feed-in Rates) Amendment Bill 2008—and that bill was designed to close the loophole and to require the electricity companies to do the right thing and to pay a fair price for the electricity in addition to the legislated feed-in tariff. That bill was passed by the Legislative Council. We passed it here on 8 April 2009. It was opposed by the government and, when they got their hands on it in the lower house, they refused to pass it. So we have given the government the opportunity to fix up this problem of their own making and they have rejected it. The government's excuse at the time was that they were going to have a review. They were going to review the scheme and therefore they were not prepared to pass the Greens' bill. The trigger for the review was the reaching of a target that was set out in the legislation.

The review terms of reference were finally released in, I think, November 2009, some five months after we were told that the review would commence; in other words, the review was supposed to start in May 2009. In June 2009, the government voted down the Greens' bill to fix up the solar rip-off loophole and said at the time that it would have an alternative response by September 2009. It had no such thing, and in fact the review only began some two months later than that—in November 2009.

Of course, that meant that there was no chance of fixing up this problem before the March state election. I predicted last year that it would be at least the middle of this year before we saw any action to fix this problem. But, here we are in July 2010 and we are still no closer to knowing how the government intends to fix up this scheme and, in the meantime, Origin, AGL and, since August last year at least, TRUenergy continue to rip off householders, and this is incredibly frustrating.

Even worse is the fact that, when announcing the review, the government flagged that it was interested in slashing the maximum size of solar systems that qualified under the feed-in scheme from 30 kilowatts down to 10 kilowatts. This will have major impacts on those who choose to invest in larger solar systems, particularly farmers who see the need to diversify their operations and want to generate a new form of income by harnessing the energy from the sun.

At this point, I make note of the statement the Premier made today in another place and tabled in this place just before question time, namely, the Premier's tribute to Stephen Schneider, who very sadly passed away. In his tribute, the Premier referred to the considerable contribution that Stephen Schneider made to policy in the area of renewable energy in South Australia. The Premier said:

Professor Schneider made extensive recommendations to the state government during the course of his Thinkers' residency. These include measures to both reduce emissions and increase our capacity to deal with the inevitably changes that will occur.

The Premier then went on to outline which of those recommendations had been acted upon. I reflected, on hearing the Premier's words, on the other recommendations that Professor Schneider made that have not yet been acted upon. One that I found on page 53 of the Thinker in Residence report from 2006 was that, as part of the objective of building resilient communities, the professor said that we need to create renewable energy income for farmers.

The best way for farmers to do that—and farmers in the Riverland are looking at this already—is to invest in renewable energy and to use that as a way of generating more predictable income than the vagaries of fruit growing, for example, which is so dependent on an increasingly unreliable water system. So, Professor Schneider was right. What concerns me is that the government is thinking of dropping the capacity of solar farms that will qualify for the feed-in tariff under this bill.

Last year, I asked the Minister for Mineral Resources Development, representing the Premier, questions about this scheme, and when we will see the results of the scheme, because we know the report has been sitting on either the Premier's or some other minister's desk for nine months. I still have had no answer to my question. The frustration I find at not being able to access this is compounded by the fact that I went through the proper channels under the Freedom of Information Act and had the report denied as well.

So, the government has been sitting on this consultant's report. I remind members that the consultant was Mr Paul Miley of Consulting Partners, and his report, it says, will be considered by cabinet and further updates posted on the government's website as they become available. Well, there are no further updates.

The election campaign then was upon us before we knew, and January and February this year was again a golden opportunity for the government to announce that it would fix up the solar rip-off and bring South Australia into line with the increasing number of other jurisdictions that are now powering ahead of South Australia. Certainly, the solar industry was very concerned about the suggestion of reducing the capacity of solar installations that would qualify for the feed-in tariff.

Here we are now in July, and the Greens are prepared to move to the next stage. There is no point reintroducing the bill to fix up the rip-off that the government has been aware of for over a year, and it now has a report that it is sitting on, which hopefully tells it how to fix it up. We are moving on to the next stage, that is, to move South Australia from a net feed-in tariff scheme to a gross feed-in tariff scheme. In doing so, we would come part way—and that is all it is—to matching the New South Wales scheme that has been introduced recently.

The New South Wales scheme came into operation on 1 January this year. That scheme provides for a gross feed-in tariff of 60¢ per kilowatt hour for all the electricity that eligible solar voltaic systems or wind turbines generate. Two aspects of that scheme are important for us. First of all, it is a gross scheme rather than a net scheme, and secondly, it applies to other forms of renewable energy than photovoltaic. It applies to small wind generators as well.

The New South Wales government has no doubt learnt from some of the mistakes of their federal colleagues, and they have made it a requirement that the solar PV systems must be installed by people who are properly qualified and who hold grid connect design and install accreditation from the Clean Energy Council, because the last thing we want to see would be a repeat of the home insulation scheme, which saw unqualified people installing the wrong products in the wrong places. So, the New South Wales government appears to have its act together, making sure that qualified people will be doing the work.

The Consumers Association, through its Choice magazine, has recently produced a review of some of the different feed-in tariff arrangements that apply. It says:

There is little argument: New South Wales currently has the country's most generous electricity buyback rate for those investing in solar power.

The article goes on to say:

Origin Energy's solar power manager, Dominic Drenin, goes so far as to call it 'the best residential solar panel offer in the world'.

The article then qualifies that by saying:

…but there are doubts about how long the generous incentives will last, with the popularity of the scheme meaning it's likely to be reviewed by state government soon.

Then it goes on to describe the different schemes. There is a lesson to be learnt from that, which is that we do not want 'shooting star' types of schemes, where only a small number of people get in early before some cap is reached and then the scheme is axed. That provides no security for would-be householders or for the renewable energy industry that needs to plan ahead with investment time frames longer than worrying whether this scheme will last the next month or the next year.

So the Greens' bill that I have introduced today is very simple. We have not gone back to the retailer rip-off component in order for us to be able to have a clean debate on the merits of gross versus net feed-in tariffs and to test the will of the parliament on that question. As I have said, the ball is in the government's court to fix up the retailer rip-off.

The bill, as I have introduced it, does follow the example of New South Wales and allows small-scale wind and other renewable sources as well as solar energy. When I say it follows New South Wales, in fact it does no such thing. It follows bills that the Greens have introduced all over Australia, including at the federal level. What I meant was that it is consistent with the New South Wales approach, which in fact borrowed very much from the Greens' own bill.

The rate that is paid under the scheme is increased from 44¢ to 50¢, and as I have said it is going from a net scheme, and that is where householders are only paid for the excess power that they export to the grid, to a gross payment, where householders are paid for all the power that they export to the grid. That will significantly increase the return to households, and it will decrease the payback time for solar panels. In fact, the payback time will be significantly reduced, possibly by five years or more, under this scheme.

The case study for the effectiveness of gross schemes is not the New South Wales scheme, or just that scheme, which is only fairly new, but Germany, where they have had such a scheme for some time. That answers the question that many of us ask: why does Germany have thousands of times more solar installations than Australia, when it is a northern hemisphere country, much of which is covered in snow for part of the year? The answer is that they have a gross feed-in tariff, so installing solar panels is actually an economically smart thing to do in Germany.

What I want to make very clear is that, by introducing this bill with this new, more generous scheme for renewable energy, it does not mean that people on low incomes are going to have to pick up the tab for wealthier people who are more able to install these systems. My plea to the government is to not be lazy in its analysis of the scheme and to simply say that it will just add to everyone's electricity bill, because it does not have to. The bill itself does not identify the source of funding, as the current act does not. The Greens believe that, after thorough consultation with the social agencies, with people working on programs for low-income people, we have come up with three possible ways for the scheme to be funded that do not impose an unnecessary burden on low-income people.

The three methods that I want to briefly explore are as follows. Firstly, we could attach the extra costs associated with this scheme to only those electricity consumers who use above average amounts of electricity. Secondly, we could fund part of the scheme through general revenue. Thirdly, we could look at attaching additional costs to those who install large, energy-guzzling devices, in particular monster air-conditioning systems.

The calculations that we have done are that if this bill were accepted as it is, and if the government chose to use the current model of spreading the cost equally amongst all electricity consumers, it would result, I think, in an unfair imposition on low-income people of about $15 a year added to the electricity bill. I do not think we need to go down that path, and I do not want to see that as the outcome, because that would be a significant burden on low-income consumers. There are fairer ways and I will just go through them.

I mentioned firstly that we can look at attaching the cost to people who use above average amounts of electricity. What we could do is use an inclining tariff, so that we focus more on low users of electricity rather than low incomes in terms of attaching the additional cost to fund this scheme. We know that the vast majority of low-income people are also low energy users. There is a direct correlation between income levels and the amount of energy that is used. We also know that small consumers, particularly low-income people, under-contribute to the network problems. In other words, they are not part of the problem, and the problem is what we call the 'peakiness' of the grid. In other words, they tend not to be the people installing massive air conditioners that put a massive extra load on the electricity system at the time of greatest heat. It is that peakiness of the grid that requires us to install new peak generators.

These low-income people are not generally the ones contributing to that problem, but they do at present pay more than their fair share of the cost of fixing that problem. What we could have is an inclining block tariff where you have an initial low base, or what you might call a lifeline tariff, which is based on a reasonable or average level of consumption. You could then follow that with three or four fairly steep inclining tariffs, and the feed-in costs to support this scheme would only attach to the higher tariffs. That would spare the cost of this scheme being an extra burden for low-income families.

The second thing we could do is obtain some of the cost of this scheme from general revenue. That might be an unpopular thing to say, but members should bear in mind that there is no sensible reason why we treat electricity infrastructure different to other natural monopoly infrastructure. For example, when it comes to roads, water infrastructure or broadband networks, there is an expectation that the government will pay, if not all, part of the cost: that it will not all be levied on consumers. However, for some reason in the case of electricity, and in particular in the case of renewable energy, governments argue that the cost must be totally borne by consumers.

If members are interested in some of the ways the government could use general revenue to pay for an expanded feed-in scheme, you could, for example, consider the fact that the state government receives greater GST revenue when the price of electricity rises. It is that windfall GST that could be used by state government to contribute to the funding of the feed-in tariff.

Over time, through the progressive privatisation of the electricity supply market, there has been a shift from taxpayers to customers in terms of paying for infrastructure. So, infrastructure that was once funded through a progressive system (taxation) is now being funded via a flat or regressive system: in other words, through customers. I think we need to preserve some of that original progressive funding model. That is the second way that I think this scheme could be funded.

The third way is that we could add an extra cost at the time of installation of large power-using devices: in particular, large air conditioners. We need to remember that households that have solar voltaic electricity systems are already playing their part in reducing the peakiness of the South Australian electricity grid, and that is a direct benefit to all South Australian consumers because it reduces the capital costs of expanding infrastructure to cope with peak demand.

You only need to think of the time of day when these massive air conditioners are running full steam, and that is on those hot days when the sun is usually shining pretty brightly and people are hiding in their homes away from the sun. The air conditioners, especially these massive newer ones that are popular in some housing estates, are already being subsidised by the rest of the community. The Greens believe that we need a greater price signal not just at the point of operation through increased electricity use but also at the point of installation. In fact, a levy on these massive new air conditioners could be collected and then used to fund this new gross feed-in scheme.

In fact, some experts have gone so far as to suggest that households should be required to install a solar PV system at the same time that they put in a monster air conditioning system to compensate for the increase in peak demand that is caused by that air conditioner. My bill does not propose such a thing, but it does make the point that, if we offset the installation of these air conditioners with renewable energy, then the array of solar panels on someone's roof becomes an un-air conditioner and balances out what would otherwise be a spike in demand through the grid.

The other thing, which I mention in passing, that the government could do, if it is serious about protecting low-income energy users from the inevitable price rises in electricity that will come not from this bill but from a price on carbon when we eventually see it, is to lead by example and install solar hot water services on every Housing Trust rental property.

The government, I think, put out a statement some months ago saying originally that all government buildings were going to have solar panels on them. Then, when pushed, they said, 'Well, not that vast bulk of public buildings that actually comprises the Housing Trust estate.' So, in fact, there will be very little action in terms of renewable energy on government buildings as a result of that announcement, but Housing Trust properties is the way to start. That means that the benefits of solar energy and solar hot water will be not just for the rich but for everyone.

In conclusion, the Greens believe that it is now time for South Australia, having been the innovator, to move to the next stage, and that is to shift to a gross scheme. The scheme is not economically reckless; in fact, it is conservative. The New South Wales Labor government scheme I referred to before is a scheme operating at 60¢ per kilowatt hour. In my bill I have suggested 50¢, and we need to remember that the current net scheme is 44¢. The reason that I have not gone as far as New South Wales is that, as I said, there is a danger in getting into a boom-bust cycle where you have a mad rush of householders desperate to take advantage of a scheme that they know will probably not last and the government realising that the scheme is too popular and then abandoning it. That is no way to plan for long-term investment in renewable energy.

The other point to note is that the New South Wales scheme is only for seven years, whereas the South Australian scheme was for 20 years, so we do need the security that comes from a longer term scheme. In my bill we have a lower rate, but we have ensured a longer time for the market to adapt and to avoid this boom-bust cycle which has bedevilled the solar industry over the last few years.

By way of stop press, because I know members here are keen to keep abreast of the latest developments, there was an announcement today (in fact, I only received it at the end of question time) at 3.42pm, and it is published in the Carbon + Environment Daily newsletter. It says that the Victorian government has announced that it will establish between five and 10 large solar plants in regional areas in a bid to source 5 per cent of its electricity from large-scale solar power plants by the year 2020.

That is the announcement of premier John Brumby. He said that the 5 per cent target was 'Australia's most ambitious solar commitment' and would be backed by the country's first feed-in tariff for large-scale solar. So, even though I am desperately trying to bring this government and South Australia up to the pace in terms of a feed-in bill, we see that the Victorians now are proposing to introduce such a scheme, not just for the small or relatively small solar and wind installations that my bill covers but also for large-scale solar.

It will be no surprise to members that as a result of that announcement today a range of people have come out congratulating premier John Brumby, including the Clean Energy Council, the Australian Conservation Foundation and, I will also say, Greens Senator, Christine Milne, who pointed out that a properly designed feed-in tariff is recognised as the reason Spain, Germany and some states in the United States have seen tremendous booms in renewable energy—and that, of course, creates jobs and investments, cleans the air and reduces emissions. Senator Milne points out that one-off, ad hoc grants do not do anything to develop the industry.

So, congratulations go to the Victorian Premier. He is still a fair way behind the Greens' clean energy bill introduced some time ago, but at least some premiers are starting to understand what can be done at a state level to support renewable energy and to support solar and wind, in particular—although, as members will note when they go through the detail of my bill, I have not confined it to just those two forms of renewable energy, but there is the option for the government to add other forms of renewable energy that would be covered by the bill.

With those remarks, I encourage all members to get behind this bill, as this chamber did last time I brought a feed-in bill to this parliament. If, in the meantime, the Premier wants to use the winter break to release the report that he has been sitting on for nine months and introduce a more generous feed-in scheme than the one I have tabled in this parliament today, I will be the first person to congratulate him. However, I am not holding my breath.

Debate adjourned on motion of Hon. J.M. Gazzola.

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