Senator BOSWELL (Queensland) (00:05): by leave—The Commonwealth government has a bewildering array of policies to force emission reductions. Just look at the Labor policies such as the carbon tax, which is a market based mechanism, and on the other hand the renewable energy target that is a market intervention. The measures are so diverse, so all-encompassing and so overlapping in their effect that nobody is able to estimate their magnitude and how much they may reduce Australia's emissions. Indeed, under Treasury modelling Australia's emissions will actually increase from 578 to 621 million tonnes between now and 2020.
It goes without saying that nobody has ever placed these policy measures in a framework that sets an optimal emissions goal and costs. What we do know is that measures in place will have a trivial effect on the global levels of emissions and that the basis for them —that other countries will pursue the same policies—is no longer credible. We also are seeing the effects of these policies which we were previously assured would be almost undetectable in terms of the energy price and follow-on implications for our businesses and households.
The measures in place have already boosted Australia's energy costs from what were the lowest in the world. And all this is before the carbon tax comes into effect. Once the carbon tax comes into effect we, the nation with the lowest cost abundantly available energy in the world, will be among the highest cost energy consumers. These measures come in four varieties. First, there is the carbon tax; secondly, there is the government spending, some of which is financed by the tax revenue the carbon tax will raise; thirdly, we have the renewable energy target, which conveniently falls directly to the consumer so the government can pretend this is not another tax; and, fourthly, we have various standards forcing consumers to spend more than they would prefer on energy saving measures for their houses, offices and shops as well as in powerlines to connect the miserable high-cost windmills that the RET forces upon us.
Pride of place belongs to the carbon tax. Eventually envisaged to increase to over $100 a tonne, even its starting price of $23 a tonne means the basic cost of electricity is increased by 50 per cent. It is estimated to raise $8.6 billion next year and $10.6 billion in 2014-15. About half the funds are returned to taxpayers in ways that the government thinks will provide it with an electoral advantage; the rest goes to trying to repair the damage the tax does to industry and to reengineer industry structure in a way that the Labor-Green alliance approves of.
Then there are the direct budgetary disbursements. Some but by no means all of these are financed by the carbon tax. They include: the Clean Energy Future fund, $10.0 billion; the Australian Renewable Energy Agency, $3.2 billion; and pre-existing government measures to support other clean energy technologies. The CCS Flagships program is funding research, development and demonstration in CCS at $1.7 billion—though the Queensland and Victorian flagship projects are now looking pretty sick. There is the National Low Emissions Coal Initiative, the National CO2 Infrastructure Plan for carbon capture and storage and the Global CCS Institute. There is also support for clean energy technology development through Australian Research Council grants, cooperative research centres funding, the CSIRO and funding to be administered by other government agencies including the Clean Technology Investment Program and the Clean Energy Skills Program. On top of all of these there is the wasteful expenditure in the Department of Climate Change and Energy Efficiency, the Treasury and other departments.
What does all this add up to? Well, you will not find the summation on any government website. There used to be an aggregated value of expenditure totted up by the Department of Climate Change. In 2009-10 it came to $2,995 million, but there is now a void where that information was once recorded. Perhaps that is because the government does not know; the programs have all multiplied considerably. Perhaps the sheer number of firms seeking handouts, politicians seeking glory and public servants seeking new empires on the back of carbon emission reductions now mean that nobody can keep abreast of these programs.
Perhaps the government also no longer wants this consolidated information on the public record, as the folly of its destructive expenditure has begun to dawn on even its most profligate and ignorant ministers. Pride in the level of spending has become shame at its extravagance. But these are not all the costs that these shameful policies heap on the people of Australia. In addition, we have a heap of regulatory standards. These have been brought into greater light by the Victorian government recognising that the six-star regulatory requirement on new houses has brought an additional cost of over $5,000 per house.
Finally there is the RET, a tax that, like the regulatory burden of standards, has the advantage of not being seen as a direct charge. The Productivity Commission said that Australia's RET and similar measures cost $473 million to $694 million in 2009-10. At that time the RET was less than halfway to its 20 per cent target. The cost of this, if it were a stand-alone measure, would be $4 billion a year by 2020. The government knows that the rest of the world has suffered at the hands of the renewable myth. However, it continues to insist that renewables are the way to go.
The rest of the world is pulling back on renewables policy. Canada, New Zealand, America, China and even the renewables poster child, Spain, are saying no more to renewables. Spain's huge rollout of renewable energy made it a world leader in the sector and reduced its dependence on imported fuel, but the result is debt-laden utilities and consumers facing crippling rate hikes to pay for power stations that are hardly used. This was a major factor in a huge expenditure blow-out that continues to threaten the country's solvency.
Even the previous socialist government had started to reverse policies on renewables, and the centre-right government is moving even faster in dismantling the windmill and rooftop subsidies that have caused cost escalations which throttled the nation's industries. In Spain the consumer has been partly shielded from this by the price of electricity being kept artificially low since 2000. The burden has been shouldered by utilities, which have been operating at a loss on the basis of a government guarantee to eventually pay them back.
Wind power is a highly expensive operation to set up. Just to give an idea of how expensive it is, a megawatt hour of coal based electricity is around $35 to $40, whereas a wind hour is $113, maybe a little bit higher, and that is an hour of electricity that is far less reliable, being dependent on the vagaries of weather and therefore requiring additional back-up capacity. At the moment, there is a major problem with the market being swamped by small renewable energy certificates—that is, RECs—produced by solar power, so the big power companies will not need to buy the big RECs produced by wind farms until at least 2015. The only way the government is ever going to get wind farms going is through a very high REC price, around $60 or over. Only a REC at that price would enable would-be wind farmers to raise the funds they need.
Solar power in Australia has already suffered a similar fate to wind. Like wind, it is dependent on the consumer being forced to pay a premium for its output; but, in addition, it is so inefficient that it also needs a government subsidy. The federal government is learning the hard way that its ideals clash with reality. The Solar Flagships Program is a perfect example of that.
In the past few months we have seen the government's Solar Flagships Program come to a grinding halt as investors start to see the huge costs, and the lack of demand for solar means that solar is no longer a wise investment. On 7 February 2012, the government announced that it was delaying issuing grants to the winning projects, as neither had succeeded in obtaining financial backing by the 15 December 2011 deadline. However, since then, the grants have been reopened and a new $440 million plant that is to span western New South Wales—Nyngan and Broken Hill—has been announced.
Whilst this new project claims it will power 30,000 houses, the reality is that the figure will be much lower, as much of these plants rely on backup generation from coal fired plants to produce electricity when the elements are not working in their favour, as well as the fact that this power cannot be stored—not only that but, if we run comparisons of the costs on these plants with the costs of normal coal fired plants, we can see that financially this venture makes no sense. The federal government is funding the project in New South Wales to the tune of $130 million and the state government is kicking in $64 million. That means there is almost $200 million worth of subsidies being poured into a project that will not even generate power for 30,000 houses.
Furthermore, if we look at how much higher the price of electricity is when it comes from these plants, the results are astonishing. A normal plant's power costs $35 a kilowatt hour, whereas a flagship station's costs $200 a kilowatt hour. The New South Wales plant will generate 150 kilowatts, which means it will produce $52 million worth of electricity, running at full capacity. In comparison, for a coal fired station producing the same amount of electricity at $35 per kilowatt hour, the total sum would be $9.2 million worth of electricity. Effectively, the government is subsidising a solar plant that makes, in real terms, $9.2 million worth of electricity; but, because it is so expensive to make, it has to sell it at a cost of $52 million dollars to providers putting costs up further. The taxpayer is subsiding solar farms to the tune of $43 million to get $9 million worth of power. Nobody in this situation wins, yet the government perseveres, convinced its white elephant will bear fruit.
Many renewable energy schemes are now coming home to roost in terms of intolerable cost increases being forced on consumers. One example of renewables costing industry at the moment is the Waikerie pumping station in South Australia. It has an added cost of $18,727, or 5.3 per cent of its bill for renewables, and the carbon tax adds another $38,552, which is 11.3 per cent. When we combine these figures, we find its costs as of 2013 will have increased by 16.3 per cent, which adds up to $57,279—for farmers who are trying to grow products and battle imports.
The Independent Pricing and Regulatory Tribunal of New South Wales has estimated that changes to the Renewable Energy Target scheme will increase regulated electricity prices in New South Wales by six percentage points from 1 July 2011. We have done calculations—they have been checked thoroughly—on a retail business which shows the carbon tax in 2013 will be 14.56 per cent and the renewables will be 6.44, giving a total increase of 21 per cent added cost. Then in 2014 on the same business a breakdown of the renewables will cost 6.3 per cent and the carbon tax will be 15.6 per cent, which gives a total of 21.9 per cent increase on electricity bills. Furthermore, the feed-in tariff scheme introduced by the state government is driving a high uptake of inefficient, small-scale renewable generation—they are not otherwise commercially viable. The state governments are coming to their senses. A great start is being made in Queensland where the government has decided to reduce the rebate for new rooftop solar installations from 44 cents per kilowatt hour to just 8c per kilowatt hour.
Studies show that even though the amount of renewables has tripled in the last decade, it still counts for only 10 per cent of electricity used in Australia, at a colossal cost. The latest NSW IPART report puts the costs of the RET and the rooftop panels as increasing bills this year by six per cent. Imagine what would happen if the Greens got their way, their dreams were realised and we went to 20, 40 or 60 per cent renewable power. We would all be bankrupt.
I started off by saying how the measures in place and in prospect will elevate our energy costs to levels that rival the highest in the world. Not only is this a dreadful direct impost on the Australian household consumer but also the policies bringing this about will amount to a sabotaging of the Australian economy. The measures will compound one on the other to deal hammer blows to Australian industry's competitiveness and to Australian consumers. This madness must be dismantled in all its manifestations: the carbon tax, useless subsidies to technologies that will never achieve commerciality, standards that impose needless costs on consumer and producer alike and the costly rhetoric that is the renewable energy target.
In pursuit of the myths that green energy will allow us to maintain increased living standards but do so in some fabricated version of 21st century technology, the government has imposed great harm on this economy. We have the resources, skills and fortunate geography to enable us to achieve the world's highest living standards. Yet the crippling effect of the impost of energy, among other deleterious policies, has us limping along at a modest growth, increasing costs to householders, to homes and to families, and making our manufacturing and food processing industries completely uncompetitive and at putting us at the mercy of imports.