Submission to Senate Standing Committee on Environment, Communications and the Arts, Inquiry into the Renewable Energy (Electricity) Amendment (Feed-In Tariff) Bill 2008

Abstract

“Feed-in” laws require electricity network operators (distributors) to pay independent generators of renewable electricity a premium price over a guaranteed time period for any electricity they feed into the grid. Although relatively novel in Australia, these laws are in fact the most prevalent model of renewable energy incentive laws worldwide. They have been enacted in more than 41 jurisdictions. They have driven a massive increase in investment in renewables in countries such as Germany and Spain. Germany’s feed-in law, introduced in 1990 has led to a massive boom in investment. There was a 3025% increase in its solar capacity from 64 million kWh in 2000 to 2 billion kWh in 2006. Without a federal feed-in law, Australia is likely to miss out on much of the possible share of rewards from growth industries such as solar photovoltaics - where global grid connected capacity grew by 52% just between 2006 and 2007. Feed in legislation is necessary if Australia is to produce a more diversified range of clean electricity, reducing our reliance on coal-fired electricity. It would also provide a stimulus for local investment and innovation in renewable technologies. As Sir Nicholas Stern noted “innovation in the power generation sector is the key to decarbonising the global economy.” A purely market-driven approach will ignore technologies that could ultimately deliver huge cost savings in the long term. By not funding alternatives, we will “lock in” high carbon electricity generating capital stock for decades. We must ensure that a strong, well-designed feed in law is enacted, one which takes account of international best practice. The following are the key characteristics of international best practice identified in a 2006 survey of 25 EU jurisdictions by the Fraunhofer Institute in Germany: · FIT’s need to be designed to provide continuity and encourage long term investment policy; · Technology-specific tariff levels should be applied; · Design should include a purchase obligation; · Tariff degression should be included to provide incentives for cost reductions; and · The option of payment of a premium on wholesale market prices rather than a fixed price should be included. Passage of a national feed in law that builds upon the features of the strongest Australian feedin law yet enacted, in the ACT, would assist the Federal Parliament in demonstrating leadership on global warming. When we look at the other jurisdictions which have enacted far weaker FIT laws, such as SA, Victoria and Queensland, it seems that some interests are concerned that renewable energy feed-in legislation might work too well. The FIT law should provide a guarantee of return to investors over a 20 year period, high enough tariffs to provide an attractive incentive (ie a relatively brief payback period on capital investment), and should apply across a broader range of technologies and contexts than just residential solar PV installations.