Second Reading – Renewable Energy Target

Monday, 1 June 2015

Mr PITT (Hinkler) (18:34): I will not be supporting the Renewable Energy (Electricity) Amendment Bill 2015 that is currently before the Australian parliament. In my view, the renewable energy target—the RET, the deal the coalition has been forced into with Labor—will achieve only three things. It will increase the cost of electricity for those who can least afford it, Australian taxpayers will have spent billions of dollars subsidising private enterprise, and, come 2020, environmentalists will have little more to show for it than a warm and fuzzy feeling.

Let me explain. When I entered parliament in 2013 I was still a registered professional electrical engineer in the state of Queensland, and I promised to be a common-sense voice for the people of Hinkler and regional Australia. Over the past 18 months the issue raised most often with my office has been the spiralling cost of electricity—and for good reason. The median personal income in Hinkler is just $411 a week—just $411. A substantial number of pensioners call Hinkler home, and we have one of the highest unemployment rates in the country. Unfortunately, many of Hinkler’s major employers are making workforce decisions based on the cost of energy—local foundries, farmers and manufacturers all say their overheads are rising at an unsustainable rate. Any relief businesses and households might have felt with the repeal of Labor’s carbon tax quickly turned to dismay when Queensland electricity retailers substantially increased their tariffs. The end result was a net price increase of about five per cent. It is no coincidence that in 2013-14 the number of households in regional Queensland disconnected for debt or non-payment rose 87 per cent to 12,454. The Fraser Coast Chronicle last week reported that the local Meals on Wheels electricity bill jumped from $5,700 to $12,200 in just one year. The not-for-profit organisation says it has only two choices if it is to remain viable: to either increase the price of the meals or find $85,000 to buy solar panels.

What is the solution? I have heard politicians on both sides tell people to shop around for the best rate. That might be possible in the capital cities, but there is generally only one retailer in most regional communities. The lack of market competition will only worsen if the Queensland Labor government proceeds with its plan to merge state-owned corporations Ergon, Energex and Powerlink. The merger, combined with already high electricity prices, falling energy consumption and the renewable energy target, will result in substantial job losses in the energy sector. We heard a lot from the Electrical Trades Union during the January 2015 state election, but why aren’t they out there actively fighting for their members’ jobs right now?

In his second reading speech to this bill, the Minister for the Environment, Greg Hunt, said the renewable energy target introduced by the Rudd government resulted in:

… new subsidised capacity … being forced into an oversupplied electricity market …

I appreciate the government is trying to put the RET on a sustainable footing, but, in my view, this current legislation will still result in an increase in power prices, paid for by the people who can least afford it. Australians are using less electricity now than they were 10 years ago. The AEMO Electricity statement of opportunities report in August 2014 stated:

More than 7,500 MW would need to be removed from the market to affect supply-adequacy in 2014-15.

There is potentially between 7,650 MW and 8,950 MW of surplus capacity across the NEM in 2014-15.

Under any risk scenario, no additional capacity is required for at least 10 years. It also states that approximately 90 per cent of this excess is in New South Wales, Queensland and Victoria. Furthermore:

As operational consumption grows, the level of surplus capacity decreases. However, even with 10 years of consumption growth, by 2023-24 between 1,100 MW and 3,100 MW of capacity could still be withdrawn from each of New South Wales, Queensland, and Victoria without breaching the reliability standard.

The problem is that forecast consumption is expected to fall by 1.1 per cent per year at a minimum.

Current renewable technologies like wind and solar do not reliably generate power on a constant basis, and so the baseload coal or gas fired power stations still have to maintain capacity for peak use times when the sun is not shining and the wind is not blowing. Most of that peak occurs in the evening, after dark and, in many locations, when it is calm. Without some type of affordable storage system, there is no option but to maintain baseload power, and that will continue to force up the price of electricity. Put simply, if your running costs remain the same and you are selling less product, the next logical step is to increase the price of the product to be able to maintain your operations.

However, the Australian Energy Regulator, the AER, has advised of its plans to restrict Ergon Energy’s proposed revenue by 27 per cent over the next five years, well below the $8.24 billion that Ergon requested. The measure is expected to save Ergon customers between $16 and $44 in network charges on their bills each year. The savings would have been substantially higher if not for the exorbitant feed-in tariff offered to solar users by the former Queensland Labor government. In very simple terms, the AER makes its decisions based on how much the businesses need to spend delivering electricity prudently through the distribution network, putting an end to the so-called ‘gold-plating’ that occurred in the Beattie years. The AER says any costs above efficient levels are to be funded by the network owners and not the customers. On the one hand, federally we are trying to keep power prices down for consumers by reducing the operating expenses and revenue of electricity companies; but, on the other hand, our current environmental policies are inflating the price of electricity because, without baseload power, you have to start turning the lights off.

The public expects coal fired energy companies to maintain the same availability and readiness, but the renewable energy target encourages people to use more renewables in an already oversupplied market. To give you a simple example, I spoke with a pensioner in my electorate last week. He gets up in the middle of the night, each and every night, to turn off his refrigerator so he does not use as much electricity. He relies on his rooftop solar to power the fridge during the day, and he would rather risk food poisoning than run up an electricity bill that he cannot afford to pay.

I would support the move towards renewable energy if wind, solar and battery technology actually worked—meaning if it were capable of reliably supplying electricity during peak periods to replace traditional baseload power generators. Plus, the cost at this point in time is astronomical.

Under this bill, $15 billion will be spent over the next five years on infrastructure that will run concurrently with coal fired generators, supplying into a market that is excessively supplied. Broad estimates by the department indicate that renewable energy certificates from 2015 to 2030, at an average of $47 per certificate, will cost $24 billion. If the RECs are allowed to reach penalty at $93, the cost to users will be $43 billion. Can you imagine the response if we went to the Australian people and said they needed to contribute an additional $43 billion through their electricity pricing as a surcharge? To meet the target, Australia will need to build as many renewable generators in five years as we have built over the past 15—all of which will need to be replaced in the short to medium term, when the technology outdates and the equipment deteriorates. Putting aside the cost of building the infrastructure, renewable energy is extremely expensive to generate. Coal fired power costs about $36 per megawatt hour to produce, compared to $190 per megawatt hour for solar and up to $120 for wind. If renewable energy were a sound investment, governments would not need to subsidise private businesses with renewable energy certificates.

I find it absurd that we on the conservative side of politics have abandoned the stated belief in the free market to reach a deal with Labor. Labor’s recalcitrance will only hurt the very people they always purport to represent, and that is the poor. The Coalition’s Direct Action Plan costs around $14.50 per tonne of carbon abated at its first auction. That is compared to $25 under Labor’s carbon tax and a whopping $95 to $175 per tonne of carbon abated through the renewable energy target for the small systems scheme. Rather than subsidising jobs in private renewable energy businesses to the tune of almost $200,000 each over the period 2015 to 2030, we should be spending taxpayers’ funds on research to advance renewable technologies that have real promise—growing our fuel, finding cheap and effective storage sources and ensuring ongoing jobs in Australian manufacturing through competitive energy pricing. The enormous buckets of money thrown at renewable research by Labor was haphazard and predominantly unsuccessful in large-scale trials.

I have personally worked in hydro power stations that have been operational for more than 50 years and they will continue to work into the future. These plants provide a multiplying effect into the local economy, providing water storage, generating capacity and long-term infrastructure with real benefits. They are a true renewable, with their energy source replenished every time it rains. The greatest of these installations is, of course, the Snowy hydro scheme. Hydros can be used as peakers. They are flexible and can be run up quickly, and at night, when there is no wind or sun, they still work.

If you really want to do something about emissions, we need to be having a proper debate about zero-emission next-generation nuclear technology. If you want renewables, we should consider growing the fuel source. Spend money on research for natural fuel sources such as biomass, where every year 100 per cent of the fuel supply can be regrown, providing long-term jobs. There is a proposal floating around for loans for irrigators to install solar pumps. Unfortunately, they will only be able to irrigate when the sun is shining—and it is back to the bad old days of watering in the middle of the day, when evaporation is at its highest. All of those years of water-use efficiency and capital installation down the drain. Typically, irrigation only occurs during times of low rainfall and drought, when water is scarce, but it is either be killed by electricity bills or invest in capital.

The public perception is that we have not done enough with respect to renewable energy. In fact, there was a large amount of capacity before the target was even set. The price of installing rooftop PV solar has fallen substantially. In terms of installed capacity, that is, gigawatts, rather than generation, that is, gigawatt hours, coal is currently only providing around 50 per cent of the energy mix. To even come close to meeting the target set in this bill, around 1,500 to 2,000 wind turbines would need to be built. Wind turbines are intrusive, ineffectual and always best placed in your neighbour’s property, and out of view of your own. The remaining sites capable of having any chance of even 30 per cent utilisation for wind turbines are very limited, because you need a location where the wind blows consistently, of which there are not that many. And it should be close to where the energy is used.

Do I honestly think they can install the capacity needed to meet the reduced target? My answer is no. We will be back having this debate again in two or three years’ time, when it becomes apparent that even huge subsidies will not be enough to get sufficient facilities built. If you want to subsidise businesses, subsidise exporters that create long-term jobs. Do not subsidise businesses that devalue and destroy assets already predominantly owned by the taxpayer.

Every business owner in my electorate would like to have the upper hand against their competitors. They would love to receive a guaranteed price for the products they produce, regardless of need, subsidised by someone else. If—and I say if—Australia meets its 2020 renewable energy target, it will not be because we have created an economically self-sustaining, reliable source of renewable energy. People will be using less coal-fired electricity for one reason only: they simply cannot afford it.

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