This government already funnels billions of dollars into renewable energy projects. As huge as that cost is, there is an even bigger silent one: the cost of complying with green regulation.
I was shocked that the Clean Energy Regulator, with a $75 million budget, has never made an estimate of just how much that cost is to business and Australians.
Transcript
Senator. So Senator Roberts, you have the call.
[Malcolm Roberts] Thank you, Chair. And thank you for attending tonight. First of all, what’s clean energy?
[David Parker] Senator, as the Clean Energy Regulator, we have a range of legislation that we’re entrusted to administer and the relevant bits of clean energy are defined in that legislation.
[Malcolm Roberts] So what are they?
[David Parker] Oh, there’s a range. Charlene, would you like to have a go at that?
[Charlene Thompson] Charlene Thompson, Executive General Manager, Scheme Operations Division. So Senator, as part of our administration of various legislative schemes, we are entrusted with looking after the two aspects of the renewable energy target. Which includes the large scale renewable energy target and the smaller scale target. And I believe the eligible technologies under that Act include solar, PV, wind power, I think there’s some bio methane in there as well. So, those things are essentially eligible activities or technologies that attract the incentive provided by the renewable energy target.
[David Parker] So there’s one other, which is heat pump hot water.
[Charlene Thompson] That’s right, yes.
[Malcolm Roberts] Sorry, what was that?
[David Parker] Heat pump hot water. So, it’s the new hot water systems. Rather than having, you know, electricity go through a resistive heater or a gas heater. You have a heat pump on like a reverse air conditioner, which puts heat into the water. They’re more efficient, use less electricity.
[Malcolm Roberts] So what’s defined as clean, is defined in the regulations, which you have to enforce?
[David Parker] Well, for our purposes, yes.
[Malcolm Roberts] Okay. The purpose of the agency is listed as being accelerating carbon abatement for Australia. I think that means carbon dioxide. Any such goal must be tempered by the costs this entails. The Regulator administers a range of programmes, including the Emissions Reduction Fund, the Renewable Energy Target, and the National Greenhouse and Energy Reporting Scheme. The Regulator has a budget of about $75 million. Is that about right?
[David Parker] That’s about right, yeah.
[Malcolm Roberts] So it’s generally recognised that the costs imposed on business by regulations is considerably in excess of the direct costs of the Regulator itself. So, more than your $75 million. Have you estimated the cost of compliance by businesses as required by the government’s regulation review guidelines?
[David Parker] Well, in terms of our existing regular regulation, no, we haven’t done a survey, but let me say, as a matter of culture, we take it as one of our duties to reduce the cost impact of the legislation that we administer. And I think it would be fair to say that we have a good record in that.
[Malcolm Roberts] How do you do that? And what kind of examples can you give me?
[David Parker] Yeah, Okay. So I can give you a range of examples. So, let me take one in the small scale renewable energy space.
[Malcolm Roberts] Small scale?
[David Parker] Small scale. So, this is solar panels on roofs, for example. When that scheme was originally conceived it involved people filling out lots of forms. The forms were shooting out all over the place and eventually winding up at the Regulator. Then we’d have people look at the forms, that would take some time, obviously filling in forms and moving information around the various parties in the industry would have a cost. As one of the innovations that was co-developed with industry, we now have a process called the Solar Panel Validation Arrangements. I won’t go into all of the details, because that will take some time, but broad broadly speaking, what it means is that the installer takes out their telephone. There’s an app on that telephone. They take a photo of the panels, where they’ve been installed. Before and after, so that you can see that it’s been done. That’s an Andy Ford measure. Takes a photograph of the relevant barcodes on the panel. So we know what panels are there. And then, you know, essentially you press submit information. So, it goes through the network, the web, to the various people involved, and it quickly ends up in our shop, for the purposes of validating the install and providing the Renewable Energy Certificates. That data essentially just goes directly into our systems and doesn’t require very much human intervention at all. And so that reduces the time taken to do this. And I could give you a range of other suggestions, like that.
[Malcolm Roberts] So a new scheme is coming in, the Corporate Emissions Reduction Transparency Report.
[David Parker] Yep.
[Malcolm Roberts] And it seeks to gather and codify information from all companies rather than the 2,500 presently covered in the National Greenhouse and Energy Reporting Scheme. The scheme was open to public comment until 19th of March, 2021 in a government media release of 19 February. At 28 days, seems a bit short. Was this part of the regulation impact statement procedure required by the government? And have you estimated the paper burden costs of the scheme?
[David Parker] Well, let me just correct some of the facts that you stated. It’s not a requirement to all companies. It’s a requirement for us to set up a framework, which we’ve done. It’s a voluntary arrangement.
[Malcolm Roberts] It’s an opt-in.
[David Parker] It’s an opt-in.
[Malcolm Roberts] Strictly speaking, it’s an opt-in.
[David Parker] Well, whether you call it strictly speaking or want to go to the issues about companies who’d want to opt in and why, it’s formally an opt in arrangement.
[Malcolm Roberts] So is this scheme proceeding?
[David Parker]A scheme is still in the process of development. You told quickly the story of the proposal being put out for consultation, we’ve got quite a substantial amount of feedback from industry about that. In essence, if you like, the scheme is about moving reporting from and this is itself, a simplification, moving reporting under the search process to the extent that companies opt in, moving that from gross emissions. Which is the arrangement under the so-called NGERS Reporting, National Greenhouse and Energy Reporting System over to a net story, if companies wish to opt in. And companies, as part of that, will be able to tell their story about how they’re proposing to reduce their net emissions position.
[Malcolm Roberts] So when you talk about emissions, you’re talking about carbon dioxide?
[David Parker] Yes.
[Malcolm Roberts] Okay.
[David Parker] Or equivalent.
[Malcolm Roberts] Sorry?
[David Parker] Or equivalent.
[Malcolm Roberts] Okay, methane. You’re not talking about nitrous oxide, sulphur dioxide, particulate or any of the real pollutants.
[David Parker] Well, nitrous oxide is a relevant gas that’s covered. So, anything that anything that’s covered, yep.
[Malcolm Roberts] So it covers real pollutants too? Now it is an opt in programme, as you said. Yet it’s likely, it seems, that green activist organisations will use it to target those companies that initially choose to opt out. To not opt in.
[David Parker] Well, look, I think that remains to be seen. I wouldn’t speculate on how we will use, who might opt in at this stage. I mean, it’s very early in the process. I mean, it’s quite clear that the way climate change issues are being thought about has moved quite clearly into the net space as opposed to the grey space. And so, what this report does is intended to align with that shift.
[Chair] Roberts again, I’d like to hand the court over to Senator Davidson. You can ask two more questions, if you’d like. Then we’ll pass it over.
[Malcolm Roberts] Can you offer information regarding the compliance costs for business?
[David Parker] Look, it’s difficult to say. It will depend on how a company chooses to opt in, on what basis. Whether that’s an equity basis or a basis that comes directly out of the NGERS arrangement. So it’s one of these things, which is quite difficult to say at this point in time.
[Malcolm Roberts] Well, last question, if the large scale renewable energy target has been achieved, and I’m told that we have achieved it, why is there a positive price to the renewable energy target subsidy target itself? When any such price is possible only if the regulatory measures are in place requiring retailers to incorporate this energy in their supplies. So if we’ve already achieved it, why are we driving more subsidies to achieve even more?
[David Parker] Well, the price of Large Scale Generation Certificate, so let’s just focus on that, for the purposes of discussing the question. So, the legislation sets a statutory target of 33,000 gigawatt hours. And a couple of things to observe. So there was a statutory target through time, but also a mechanism embedded in the legislation to permit, in technical terms, arbitration. Not arbitration, but arbitrage between the years, pardon me. And there is still some obligation that remains to be met, should a company wish to, right? They’ve taken so-called default arrangement out of that. They could redeem those payments for a certificate. So there’s some sort of old demand. And the other point is that that target is not the only demand that’s there in the market. So, it’s possible for people to voluntarily surrender certificates if they wish. And there are some schemes which also connect into the scheme, such as Green Power. Where, if people wish, they can sort of tick the box, I’m using term somewhat pejorative, but choose to purchase low emissions energy from the energy retailers. And I won’t go into all the details, but that also flows through into an LGC demand on top of the statutory target. So prices are hitting down. We expect them to hit down further, but in terms of where they go over time, as some of those things that I’ve explained with them work themselves out. Where the price heads over time, there there’s a range of views about that.
[Malcolm Roberts] Thank you.
