Renewable Energy Target

The Hon. K.J. MAHER (14:57): My question is to the Minister for Sustainability, Environment and Conservation. Will the minister update the chamber on the potential impact of proposed federal government changes to the renewable energy target on the South Australian economy environment? Is the minister aware if any South Australian Liberals are standing up for our state, our regions and local jobs in this area?

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (14:57): What an excellent question from the Hon. Mr Maher, on point of course, as ever, with the political debate that is happening around this nation and very alive to what has just happened over in Canberra with Clive Palmer's group and the federal government. Several weeks ago I reported on the federal government's review of the renewable energy target and the uncertainty this review is creating in the renewable energy sector in South Australia. Since then a clearer picture has emerged about the likely impact of the proposed changes, and I believe that it is vital that we are all informed of this.

This is in light of recent speculation over whether the federal government's Direct Action Plan is about to get the votes it needs to become federal climate change policy. I saw some pictures last night of a desperate federal minister Greg Hunt trying madly to clutch Clive Palmer's hand as they walked down the corridor together. Clive eventually proffered it, but he did not seem to be particularly enthusiastic about it and they quickly dropped hands.

The Hon. J.M.A. Lensink: Is that really necessary?

The Hon. I.K. HUNTER: I want to see it as a reflection on the colour and life of politics in Canberra at the moment. The Hon. Michelle Lensink is not interested in that; well, I will move on.

The Hon. J.S.L. Dawkins: Your mob were lauding them earlier.

The Hon. J.M.A. Lensink: I just think you can behave like a statesman every now and again and surprise us.

The PRESIDENT: The Hon. Mr Dawkins, I think the entire question time you have interjected. As the Whip, you should know better and you do know better.

The Hon. K.J. Maher: Kick him out; he's been here long enough.

The PRESIDENT: The Hon. Mr Maher, I don't need you to interfere while I am talking. The honourable minister has the floor. Let him answer his question.

The Hon. I.K. HUNTER: Let me be clear, sir, and I will act as a statesman, as the Hon. Michelle Lensink often observes that I do. The federal Abbott government has no interest in taking real action on climate change. Instead, Prime Minister Abbott and his colleagues of climate change deniers are only interested in giving handouts and incentives to the big polluters. The Direct Action Plan—I think it has been described in an eminent Queensland newspaper as being the biggest political con ever perpetrated in Canberra—takes the unorthodox approach of rewarding big polluters for cutting emissions rather than the approach of setting targets and penalties for not reaching them. This approach is mirrored in the federal government's approach to the Renewable Energy Target scheme creating significant financial and legal implications for renewable energy investors.

In October of this year, the Clean Energy Council released a report titled 'Financing impacts of amendments to the Renewable Energy Target.' The analysis was conducted by law firm Baker & McKenzie, whom we have not heard of. It examines the risks that are likely to arise should the Abbott government's proposal to cut the RET be implemented, and it analyses what impact such a change would have on the financial and contractual arrangements for existing and future large-scale renewable energy targets.

This report raises a number of very serious issues about the financial implications of the government's plans to slash the RET. The Abbott Liberal government has said its preferred position on the RET is for a reduction from 41,000 gigawatt hours to about 26,000 gigawatt hours by 2020. That is about a 40 per cent reduction. The analysis in the report compiled by Baker & McKenzie for the Clean Energy Council shows that reducing the RET by this 40 per cent may lead to legal challenges, businesses defaulting on loans, and future projects being unviable.

The report also examines the issues and the complexity associated with designing and implementing any compensation scheme for existing renewable energy projects. It is important to note that, while the federal Liberal government insists that any changes to the RET would not affect existing schemes and investments, this report highlights some very serious dangers. For example, it has found that any substantial reduction of the RET will significantly alter the basis of the modelling used for current projects. Renewable energy certificate prices, for instance, would be substantially lower than the original modelled prices.

The reduction in the RET would also trigger a review of existing funding arrangements by lenders and the cost of capital for equity is likely to be higher, reflecting the higher costs. In addition, the vast majority of existing projects would be up for refinancing over the period of 2016-18, I am advised. Existing projects might not be able to meet the minimum financing requirements based on the revised set of risk assumptions and parameters. The report also highlights a very serious problem of potential compensation claim, stating that:

Slashing the Renewable Energy Target (RET) as proposed by the Federal Government would smash the value of projects that are already operating and potentially expose the government to massive compensation claims.

If this were the case, the overall effectiveness and efficiency of a reduced RET would be completely undermined, because any compensation and transitional assistance regime would need to be designed for the specific financial arrangements of each and every renewable energy project. In addition, the report finds there are likely to be legal challenges to any legislative change made to the RET which results in adverse financial impacts on renewable energy operators and developers.

A reduced RET would be bad for the environment, bad for Australia's reputation as a safe place to invest, and bad for South Australia. It would lead to massive asset devaluation, job losses and business closures. As well as this report, we have the real-life example of what is happening right now. I understand that, for the first time since the introduction of the RET, there has been no new investment in renewable energy in Australia. There is no fudging of the numbers here. There has been no new investment in this area.

Instead, reputable companies are stalling on prospective businesses. They are waiting to see what the federal government does with the RET. Companies like Pacific Hydro, Senvion, Neoen, and Infigen have already been granted development approval, but they are taking a wait-and-see approach too. This is not a good way to do business in this country. What would this mean for South Australia and its growing renewable energy sector? What would happen to the state's existing 15 wind farms that have provided ongoing employment to 842 people and a further 2,500 during various construction phases? What would happen to the $5.5 billion invested in the renewable energy sector that has flowed into our state, and the additional investment target of $10 billion in low carbon generation that we have set ourselves by 2025? It is all in jeopardy.

We have already seen energy developers, like Trustpower, say they will delay plans for future investment until there is clarity over the future of the RET. The Renewable Energy Target and the future viability of existing renewable energy projects is highly dependent on a strong bipartisan policy that will continue into the future. Business needs that security for their investment.

The South Australian Labor government will continue to fight against any change to the RET by the Abbott government because we refuse to be part of an arrangement that cuts jobs and closes businesses in this state, and I would like to know once and for all where the state Liberal Party stands on this matter. I have not heard a single thing from a state Liberal Party frontbencher on the radio or on the television. I have not seen a single piece of agitation with the federal Liberal government. Where are the articles in The Australian, where are the articles appearing in The Advertiser, where are they on the radio and television taking it up to the federal Liberal government?

The Hon. J.M.A. Lensink interjecting:

The PRESIDENT: Ms Lensink, there is only one person on their feet.

The Hon. I.K. HUNTER: As usual, the Liberal opposition in this state refuses to stand up for South Australia against the federal Liberal government. That is a disgrace. When South Australia needs a united policy to take to the federal government, they are nowhere to be seen, and I think that is shocking. They will turn their backs on South Australians, turn on their backs on South Australian jobs and turn their backs on the renewable energy sector.