Into the Government’s Underwriting New Generator Investments (UNGI) program
I rise to speak on the Clean Energy Finance Corporation Amendment (Grid Reliability Fund) Bill 2020. The CEFC is a statutory body administering a fund dedicated to investing in clean energy, and it has been so vitally important to date in the small amount of reductions we have managed to achieve.
I can't commence today without being a little astounded by some of the allegations that are made in this chamber, and it does reinforce for me the need for a fact check body on allegations that get made, especially in terms of statistics. There are very clear facts about where our emissions are going, and they are not going sufficiently in the right direction.
The CEFC is very important in supporting the objectives and supporting our emissions reduction and our transition to clean energy—in particular the Renewable Energy Target, which sadly has not been updated or renewed. It has driven a huge amount of the investment we've seen in renewables in Australia. The CEFC has been helpful in catalysing and leveraging investment in commercialisation and deployment of renewable energy and the low-emissions and energy-efficiency technologies necessary for Australia to transition to a low-carbon economy. The CEFC has been incredibly successful in its mission. It has leveraged over $27.3 billion in private capital, financed over 18,000 small-scale projects and abated emissions by almost 260 megatonnes of carbon dioxide.
Project developers in Warringah have been supported by the CEFC. Manly's Solar Beach is a collective of renewable energy developers based in Manly, in Warringah. Solar Choice, Edify Energy and Wirsol were in a consortium that variously originated, financed and developed the 57-megawatt Whitsunday Solar Farm, north of Collinsville; the 57-megawatt Hamilton Solar Farm, also north of Collinsville; and the Gannawarra Solar Farm, in Victoria. All three received finance from the CEFC, totalling $77 million, and the CEFC committed to a debt facility to support the projects.
It is such an important body and must be maintained and not impacted by this legislation. I support the CEFC. It will continue to play an essential role in our transition to net zero by 2050, if we are going to achieve net zero—and we absolutely must achieve it; the alternative doesn't bear considering. We heard in Senate inquiries that the BOM, the Bureau of Meteorology, has us on track for over 3.4 degrees of warming in the world and up to 4.3 in Australia. That should be the element of concern to members of this place: what their legacy will be and what environment their children and grandchildren will live in. Most members of this place are of an age that means they won't have to bear the consequences. If we are going to reduce emissions, we need to make sure bodies like the CEFC have the full capacity to do so. So I support the injection of more funds into the CEFC.
However, there are very clear concerns about the provisions in this bill. This bill amends the CEFC Act to establish the Grid Reliability Fund. The fund will be administered by the CEFC to support investments in new energy generation, storage and transmission infrastructure, including eligible projects short-listed under the Underwriting New Generation Investments, or UNGI, program. I note that UNGI is currently under audit by the Auditor-General. This bill establishes the Grid Reliability Fund Special Account. It appropriates about $1 billion and allows for appropriations to be increased through regulation. The GRF will enable the CEFC to invest in additional energy generation, storage, transmission and distribution infrastructure and grid-stabilising technologies where it has had limited ability to do so in the past. So the government stresses that the GRF, the Grid Reliability Fund, is separate from the existing funding of the CEFC and that this new fund is needed because of the current CEFC funding; the corporation cannot invest in supporting infrastructure such as transmission or condensers. In general, there would be sense behind this, except that there is clearly an attempt to dilute the focus on clean energy and expand the mandate of the CEFC through this Grid Reliability Fund to support gas and fossil fuels. There are serious issues when it comes to expanding the mandate of the CEFC—transmission and synchronous condensers are one thing, but then there's clearly the extension of gas.
The GRF is purportedly to fund the Underwriting New Generation Investments, or the UNGI, program. Many will say, 'What exactly is that?' According to the government, the UNGI was established to support firm generation capacity and increase competition. We know six renewable pumped hydro projects, five gas projects and one coal upgrade project have been short listed under the UNGI. In December 2019, the government announced that key initial support terms had been agreed to underwrite two projects: APA Group's proposal for a 220-megawatt gas generator in Dandenong, Victoria; and Quinbrook's proposed 132-megawatt gas generator in Gatton, Queensland—noting I'm only hearing of gas projects.
The UNGI program has had problems from the beginning. It has no guidelines—it had none and still doesn't—and no criteria for assessment of support. The program's development and implementation followed no clear process and had a flawed selection process. Despite these issues, the government short-listed projects, made initial agreements, advanced detailed negotiations with proponents and entered into memorandums of understanding with the New South Wales government to support projects under the UNGI, all whilst there was no actual clear underlying legislation. In June, I wrote to the Auditor-General on these issues, and it was accepted for an audit in this year's work program. In the current structure of this bill, it is unclear how exactly the UNGI will be supported by the CEFC.
Under the CEFC Act the minister can set a broad investment mandate in the regulations but cannot tell the CEFC's board to invest in this suite of projects. It's important to emphasise that the CEFC board is independent of the minister. So how will the projects be funded? Will the minister provide the short list of projects to the board? This is not in line with the section of the CEFC Act which states that the responsible minister must not give a direction 'that has the purpose or has or is likely to have the effect of directly or indirectly requiring the board to or not to make a particular investment'. So there are really big questions here as to what exactly the government and the minister are seeking to do through this Grid Reliability Fund, in particular in relation to the UNGI program.
But there are greater problems with this bill. By changing the definition of low emissions, the government is unnecessarily changing the CEFC's original mandate to allow for investment in gas generation. Gas features heavily in the explanatory memorandum, and I've only had to sit in this place to listen to the members of the government all talk about the purpose being gas. Why? The Morrison government is pressing on with its fiction that more gas is needed, despite the urgent need for Australia and the world to transition away from fossil fuels. There is no reason for this. We do not need more gas or new gas. The Australian Energy Market Operator, the forecaster and planner of the grid, the actual expert in the field, was clear in this year's integrated system plan—and I hope all members in this place have read the integrated system plan—that only existing gas generation would be required this decade and that any new storage required would be met by batteries and hydrogen. It does beg the question: what is the evidence being relied upon to support this idea that vast amounts of new gas are required?
Even the Petroleum Economist publication has come out against an expansion in the use of gas, saying that new gas-fired generation is unlikely to be economically viable compared with alternative options such as battery storage and pumped hydro, further stating that: 'Increasing Australia's gas consumption may create future import dependence in the east of the country. Renewable power projects offer the clearest route to elevating the risk of greater exposure to international gas market volatility.' So new gas is also not consistent with Australia's commitment to limiting warming, and we should be very clear that gas is a fossil fuel and rebuff any assertions by this government that it has a place in this transition or is somehow playing a part in meeting our obligation to reduce emissions to ensure we arrest the global warming that is happening.
I am concerned that the government is choosing ad hoc interventions over a cohesive national climate and energy framework. The bill is just an extension of the government's fragmented approach to climate and energy policy. It was made clear in the inquiry into the climate change bills that the desire from all sectors—from the private sector, the Business Council, industry, manufacturers, health, planners, builders, architects, the unions—is a cohesive framework that spans all sectors of Australian society and addresses all the gaps we have in the system. Interventions like the one-gigawatt gas generator to replace Liddell, or the threat of it, or the six gas projects listed for funding under UNGI are not warranted and will do nothing but disrupt the market. There will be no shortfall of generation; the only shortfall could possibly be caused by this government's anti-market rhetoric.
If we set the rules through a national climate and energy policy, the market will drive any new generation required. Whilst this government is talking about a gas fired recovery, states like New South Wales have passed legislation enacting an energy transition framework to move from coal to renewables and pumped hydro. They are attracting millions in capital hungry for a jurisdiction with a sensible policy. The inquiry into the climate change bills has made it very clear: we risk losing billions in investment if we continue down this path.
Just a couple of weeks ago, a $2.4 billion, 1,200-megawatt battery was announced by CEP Energy for Kurri Kurri, in the Hunter Valley. This would be the world's largest—and conspicuously close to the proposed one-gigawatt gas fired generation Liddell replacement the government talks of. The proponent said the New South Wales clean energy road map that passed the state's parliament last year had given the market confidence—I repeat that: had given the market confidence—because it was legislated in the New South Wales government to invest in renewable generation supported by large battery storage, without subsidies. New South Wales is getting on with the transition with sensible policy frameworks. It is long past time that the Commonwealth government did so too.
Really, what this government should be doing is providing investment certainty with a national climate and energy policy rather than interfering with these ad hoc policy-on-the-run interventions. It needs to set the rules, and the market will drive any new generation required. I urge the government to remain consistent with their free-market principles and actually apply them.
One final point: Australia's heading for a carbon crunch, whether we like it or not. It's time to get serious. Seventy per cent of our two-way trade is now under net zero goals. The European Union and the UK are both putting emissions at the centre of their free trade agreement negotiations; even the United States is contemplating carbon border tariffs on recalcitrant nations. If we are to avoid the worst of these trade penalties, we need to get serious about reducing emissions—no more incrementalising and no more delays.
The government must sign up to net zero with no qualifiers or carve-outs. In that light, the government must commit to no further expansion in fossil fuel generation and make serious attempts to decarbonise not just the energy sector but transport, industry and agriculture. My support for this bill—well, I have many issues, as I've outlined, but there are amendments that I intend to make which will remove the prohibition in this bill against the CEFC making payments to ARENA. This will also make the Grid Reliability Fund consistent with the rest of the portfolio. Of course we need to ensure that any investment is made consistent with the overall goal of reaching net zero as fast as possible—the Prime Minister's own words—and I would say no later than 2050. If the government is serious about getting there as soon as possible, then the actions of the government agencies—including the CEFC—must be concentrated on that goal.
I'm all for increasing funding to the CEFC, provided these are not changes to facilitate investments in fossil fuels. If the government needs to seriously think about where it is heading with this policy, let's be very clear: we have to get to net zero as soon as possible. The consequences don't bear thinking about. We need to pull all available levers to reduce emissions, and that means we cannot be supporting the expansion of fossil fuels.
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