Thank you Miles to the Clean Energy Council, for having us here. It’s been a tumultuous few weeks, but looking at the media releases from the Clean Energy Week launch last year, it’s been a pretty tumultuous 12 months. I was looking back at the releases and Michael Fraser, who then was the Chair of the CEC and from AGL, expressed concern at the launch that there would be a review of the RET in 2014 which would undermine certainty of investment.
But beyond that concern, the clean energy sector 12 months ago had good reason to feel pretty chuffed. In the July edition of the Ernst and Young Renewable Energy Country Attractiveness Index, Australia was grouped along with the power houses of China, Germany and the US – as one of the four most attractive places to invest in renewable energy. And, as Miles said, at your launch of the Clean Energy Week last year, both of the major parties restated a bipartisan to the specific large scale generation target of 41,000 Gigawatt hours. That was the fourth election in a row where there had been bipartisan support for the RET, at a time when there had been three years of incredibly toxic politics around carbon. But there was still bipartisan support for the suite of renewable energy policies, with the exception of course of the Clean Energy Finance Corporation.
It was quite remarkable after three years of what was the most dogged politics certainly that I’ve seen in my life around carbon, that the renewable energy sector had been largely quarantined from that dog fight. I also want to stress that the degree to which the current debate has started to focus on this idea of a real 20% just fundamentally misrepresents the Labor policy that underpinned the 2009 target. The Labor policy was never to reach 20% by 2020, the Labor policy was to reach at least 20% by 2020. It was never a ceiling, it was always intended as a floor, a minimum.
And it was not new for us to settle upon a precise generation target, rather than some percentage of a moving target. As you know John Howard’s MRET settled on a precise generation target and when Grant Tambling, the former Tory politician from the Northern Territory, conducted the review of the MRET in 2003 for Howard, he dealt with this debate about whether there should be a precise generation target and he recommended to Howard – a recommendation accepted by the Howard Government – that it was important for investor certainty to stick with a precise figure. I think it is also important to remind the community, in a time of some debate about the way in which the aluminium sector should be treated in the Renewable Energy Target context, that when we increased the RET from 9000 odd gigawatt hours to 45,000 in 2009 we gave a 90% exemption to the aluminium sector – a sector that previously received precisely zero support, no exemption whatsoever from the Howard MRET; so we think we come from a position of goodwill to the aluminium sector.
So, this is where we were 12 months ago when you were last launching Clean Energy Week. On the eve of an election which I think most people, frankly, expected the Coalition to win, the Coalition expressed very precise, continuing, bipartisan support for the vast bulk of the suite of the renewable energy policies that had been in place for four terms of Parliament, and particularly for the large scale and small scale targets. And frankly, you have to ask, why wouldn’t they? Because by 2013, this had been unambiguously shown to be a clear policy success.
Over our period in Government from 2007 to 2013 wind power generation in Australia tripled. I say, parochially in a way that South Australians tend to do, that South Australia was an outstanding performer in this respect. We did extraordinarily well in wind power generation over that time. It was only a few weeks ago that we got to the point in South Australia – it was a particularly blowy week – but we got to the point where wind power generation almost entirely matched total demand in the South Australian electricity sector – that’s how successful wind power development had been in our state.
As I think has been mentioned a couple of times, this didn’t come without jobs. Jobs tripled over our period in government to around 25,000, many of them in the household PV solar sector, but a whole range of other jobs in the area of wind tower manufacturing, PV solar panel manufacturing – Tindo being an outstanding example of that in Adelaide. So a wonderful jobs benefit as well as all of the other things that accrue to the electricity sector.
In the household sector, when we came to government, as I’m sure you know, there were less than 7,500 households which had PV solar panels on them. By the time we left government, there were about 1.1 million households which had solar panels on them. The yearly additions had certainly slowed down from their peak in 2011, but still around 160 – 170,000 households a year were adding solar panels to their roofs by the time we left Government. As I think had been mentioned by Bob, we have become world leaders in a whole range of large scale renewable energy deployment. Last year alone we, as a country, were able to launch the largest wind farm in the Southern Hemisphere, Macarthur Wind Farm, an AGL wind farm in Victoria and also the largest solar farm, the Nyngan/Broken Hill project that Bob talked about. ARENA and CEFC have also supported cutting edge developments in wave and geothermal technology.
Importantly though, I say as spokesperson for climate change particularly, the RET also started to drive down Australia’s carbon pollution. For a country that has pretty much the highest per capita carbon pollution production in the world, this was a central part of Labor’s agenda. Now as many people in this room know, and many people beyond it know, we’ve had this unprecedented position since 2008 where electricity demand has started to come down. Although some people say that’s where the carbon pollution reduction comes from – the decline in demand – it’s very clear that the reduction in demand has only made a minority contribution to the reduction in carbon pollution. In 2012-13, the first year of the carbon price mechanism, for example, we saw a reduction in the national electricity market of about 7% in terms of the carbon pollution that it produced. About a third of that reduction came from a drop in demand because of household solar and, unfortunately, the closure of the Kurri Kurri aluminium smelter in New South Wales. Fully two thirds of the drop in carbon pollution in 2012-13 was because renewable energy increased its share of the NEM by about 25%, at the expense of brown and black coal – exactly what this policy area was intended to do. And this was not just a 12 month phenomenon. Over the five years from 2008 to 2013, Australia saw its electricity demand drop by about 7%, but saw its carbon pollution drop by about 16%. In South Australia – I hark back to the great state again – from 2008 – 2013 we fully reduced our carbon pollution footprint by 25%. Coal now accounts for only 15% of South Australia’s electricity generation, where it was about a third only five or six years ago. So quite extraordinary reductions we’ve already seen, largely on the back of the deployment of renewable energy technology.
Bob talked a bit about the carbon tax impost. Well, one of the benefits of having a relatively clean energy sector in South Australia is that the carbon tax impost on South Australian households was about half of the average across Australia. So in South Australia the increase to electricity bills was about 4.6%, according to ESCOSA the electricity regulator in that state. I think it’s important to talk about that in the wake of the carbon tax repeal last week. For an average household electricity bill of $2220, that is about $2 a week. I don’t sneeze at $2 a week, but I remind people that it’s $2 a week that was entirely covered by the Household Assistance Package for fixed income Australians on pensions and for low-and-middle-income Australians through increases to family payments and increases to the tax-free threshold. More than covered. The other point I wanted to make though is that Treasury advised us that if we moved to Labor’s proposed ETS, linked to the EU, we would also get about three quarters of that reduction. So the difference in the two policies being debated in the Senate last week – for South Australians – is about 50 cents a week, all covered by the Household Assistance Package, except for high income households. And Bob talks about the ACCC being enabled to go out and police the reductions that will flow from the repeal of the carbon tax. It’s very clear that the ACCC is only empowered to deal with the electricity and gas sector. So, the 50c a week plus the probably about 25 or 30 cents a week that we’re talking about in South Australia as the difference from the gas sector, between the repeal of the carbon tax and the ETS.
In spite of the success of the Renewable Energy Target and the associated financing bodies like ARENA and the CEFC, it is clear that there is quite an extraordinary campaign against this sector. It’s a campaign that features quite prominent media identities including a well-known talk back radio identity here in Sydney, but also a range of newspapers that frankly should know better. It includes a range of business organisations, not just organisations whose business model is threatened by clean energy, but also some of the overarching umbrella organisations who again should know better. And it includes very senior members of this Federal Government unfortunately.
Some of the attacks, quite frankly, are ridiculous. Joe Hockey’s attacks on the Alan Jones show that wind farms were utterly offensive I think is something that Joe would be kicking himself about. Joe is a sensible fellow and I’m pretty sure he’d regret those comments. I have four traditional power stations in my electorate of Port Adelaide and I can tell you they are all butt-ugly. I don’t know the electricity sector as well as you guys, but I haven’t yet found an aesthetically pleasing way to put together electricity.
But there are other far more serious attacks, I think, that have started. The first is the cost of living attack that we saw very well-rehearsed around carbon over the last three or four years, which I hopefully helped to debunk a bit just then. It’s an attack that never happened during that period of bipartisan support for Renewable Energy Target, but which the Prime Minister Tony Abbott started to rehearse again on Alan Jones earlier this year when he said that the renewable energy targets are, to use his words, ‘significantly driving up power prices right now’. This is a formula he has repeated since then, so obviously a formula that he and his office gave some thought to. Now, we know that that is just simply misleading. We know that there is a very clear, modest, gross impact of the renewable energy targets – the large scale and the small scale – and it’s probably around 4% of the average household bill, putting together the small and the large scale. But we also know, according to the AEMC, that the impost of the SRES is actually coming down. It’s going to come down over the next couple of years.
The problem with this debate though, is I think until pretty recently, is that all of that attention focusses on the gross impact and it completely ignores the fact that there is an offset impact particularly on wholesale power prices that means that over time – as the Clean Energy Council has shown through its ROAM Consulting report –to remove the RET is actually going to cost Australian households more. It’s not going to save them money, it’s going to cost Australian households more. And we know that this is particularly the case in the peakiest of periods. Rick Brazzale did a study of the South Australian and Victorian heatwaves and – I was there, it was bloody hot. Rick studied the spot prices during this heat wave in the middle of January. In Victoria, the peak demand got to a level it hadn’t been at in five years, back during the heatwave that caused the awful bushfires of 2009 and he compared the peak spot prices of five years ago, which was about $4600 per megawatt hour and this year when it had dropped to $509 – about a 90% reduction because of the relief to the grid delivered by solar and wind energy. Very clear evidence of the suppression effect that the deployment of renewable energy on roofs and on wind farms is having on wholesale power prices.
It’s not just the CEC’s report, it’s also the Bloomberg New Energy Finance report that was done a little while ago and very helpfully – perhaps not intentionally – by the RET Review’s own modelling, which was skilfully photographed and then uploaded onto various social media accounts by those of you who attended the briefing done by ACIL Allen.
The second and perhaps the most serious attack is this RET Review. The PM is fond of saying that the election of this Government means that Australia is open for business. I’m sure there are many in the more traditional areas of the energy sector who might say that’s right, but to be blunt, it’s not clear that this Government sees Australia as being open for clean energy business. This RET Review has devastated confidence in this sector as you know far better than me.
Each quarter, since the election of this Government, the Ernst and Young Index has seen Australia drop a couple of points each quarter. We went down to sixth in November, we went down to eighth in February and last month we went down to ninth from fourth – one of the powerhouse economies in this area – down to ninth. A Bloomberg New Energy Finance piece last week showed that there was only $40 million invested in large scale renewables in the first half of this year. Now, as you know, globally there’s about $60 billion invested in renewables every quarter, so about $120 billion in every half of a year, about two-thirds of which is large scale. So Australia is investing $40 million at a time when the rest of the world is investing about $80 billion, about 2000 times the investment that is happening here in Australia under what has, frankly, become nothing more or less than an investment freeze. We didn’t support this review.
We accepted the CCA’s recommendation that the review should be kicked out to 2016 and thereafter quadrennial not biennial. But even if you accept that a new government has a right to conduct a review like this within the confines of the election commitments that it made, we still disagree with the way in which this review is being conducted; the way in which the panel was put together, the personnel on the panel has, in a very serious way, undermined the confidence that the clean energy sector can have in what has been such an overtly political exercise.
There’s obviously been a lot of speculation, a lot of bated breath, about what the results of that review might be, but that speculation and the bated breath has been significantly complicated by the quite extraordinary press conference that Clive Palmer and Al Gore did together in the Great Hall of the Parliament. While we could debate until the cows come home the benefit of the ETS commitment that Clive Palmer made at that press conference, I have said very clearly that we’re pleased that Mr Palmer has chosen to support Labor’s renewable energy policies; polices that, as I’ve tried to outline, are very clear policy success stories. And it’s good to see that there’s been some return to confidence in the sector -if you use the price of the RECs as a barometer, the price of the RECs kicking back up to about $30 which is about where they were before the announcement of the Warburton review. The problem though is that Mr Palmer is only giving his commitment to 2016 and he’s giving it largely on the basis that Tony Abbott made election commitments which are not consistent with the direction in which this Government appears to be headed. So, it seems to be a stay of execution rather than a return to the policy certainty that would underpin the sort of long term investment decisions that your boards and your banks have to make.
What this means is that there’s a very clear decision for this Government to make. It’s not optimal for this sort of policy decision to be made by 50% plus one of the Senate. It just doesn’t give the policy investor certainty that this industry needs. There is now a real opportunity for Tony Abbott to seize what Clive Palmer has done, decide if he wants to cut minor parties out of this decision making process and return renewable energy to the bipartisan position that it’s held for four elections – two elections under the Howard Government and two elections under the Labor Government.
We certainly stand ready to do this. We’ve got plenty of political ground to fight this Government on, I can tell you. It’s pensions, it’s family payments, it’s health, it’s schools. We don’t need to fight them on renewable energy. My preference is they see the error of their ways, they see the clearest commitments that they made before the election, and they decide to come back to the table and restore the bipartisan consensus around the renewable energy target and some of the financing mechanisms that have been working so well. But, I tell you this, if they don’t, if they continue down the path that Tony Abbott appears to be headed down, then we will fight them, because we think this is the right policy mix for Australia. It’s a policy mix that’s not abstract or academic. It’s been in place for years and it has worked. It has worked admirably, in terms of jobs, household choice around energy as well as in terms of carbon pollution reduction which is so important to Australia’s future.
I wish you all the best for the remainder of Clean Energy Week.
These are some of my remarks made to the 2014 Clean Energy Week Conference in Sydney on Tuesday 22 July 2014.
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Mark Butler MP 