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The Hon Peter Garrett AM MP
Minister for the Environment, Heritage and the Arts

Keynote address: Clean Energy Council Energy Efficiency Seminar

Speech - Getting Ahead of the Curve: National Leadership on Energy Efficiency
11 June 2009

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I would like to begin by acknowledging the traditional owners of the land on which we meet, the Cadigal people, and pay my respects to their elders, past and present.

I am pleased to be here at the Clean Energy Council's ‘Energy Efficiency Seminar’, discussing an area of policy that is an absolute priority for the Australian Government, and to listen to your ideas and issues.

As you are aware, action on climate change is central to the Australian Government's agenda.

The first plank of the Government's approach to addressing dangerous climate change is the Carbon Pollution Reduction Scheme. This is a substantial and significant economic reform.

For the first time in the Australian economy, the real costs of using fossil fuels will be recognised, as will the clear benefits of renewable energy and energy efficiency. Through the CPRS, we are turning the idea of the triple bottom line from theory into reality.

Today I will focus on energy efficiency, the second plank in the Government's approach to tackling climate change.

This is a space in which the Government is vitally active, rolling out Australia's largest-ever energy efficiency program as part of the Nation Building-Economic Stimulus Plan, and working with the States and Territories to deliver a National Strategy on Energy Efficiency.

As I have observed many times, energy efficiency is the low hanging fruit of greenhouse gas abatement; the cost-effective way to take action now to deliver us the low carbon economy we need for our nation to prosper into the future.

There is abundant evidence showing the benefits of energy efficiency. I am sure most of you would have seen the McKinsey cost curve on carbon abatement, which shows us the huge scope of energy efficiency opportunities available to us through already-existing technologies.

McKinsey identify a range of ‘negative-cost’ energy efficiency measures - that is, things we can do now that actually save us money. Actions like investing in more efficient lighting, heating, ventilation, air conditioning and water heating in commercial and residential buildings actually return more in energy savings than they cost to put into place.

The Centre for International Economics has reported on these opportunities too. Its modelling, done for the Australian Sustainable Built Environment Council, found efficiency gains from the building sector alone, with current technology, could improve GDP by approximately $38 billion annually at 2050.

Other countries are also taking notice of the gains to be made by energy efficiency. US Secretary for Energy, Nobel Prize winner Steve Chu, is a powerful advocate, recently calling energy efficiency “the quickest and easiest way to reduce our carbon footprint.”

Like Australia, the US has backed up these words with actions, for example in the recent American Recovery and Reinvestment Act of 2009, which includes approximately $20 billion specifically for energy efficiency programs. There are strong parallels here with the Australian Government's home insulation program.

The actions we can take in Australia we share in common with other countries, and this gives energy efficiency an added impetus in terms of our economic productivity and competitiveness. These actions flow through every sector of our economy and every part of our society. In short, we all have a role in improving energy efficiency, and everyone will benefit in some way from the effort.

That's why the Government is investing $4 billion in the Energy Efficient Homes Package to deliver ceiling insulation and solar hot water to around 3 million Australian households.

We have already seen more than 35,000 households install insulation and 29,000 install solar hot water under this program - and that's since February of this year, before the full rollout of the insulation program on 1 July.

We're now encouraging insulation installers to register online to participate in the full program.

And when Energy Efficient Homes rolls out on 1 July, most households will not pay a cent up front provided their insulation costs less than $1,600 for owner-occupiers and $1,000 for private landlords and renters.

The Energy Efficient Homes Package is already providing an immediate boost for jobs, and long-term benefits for households that will be more comfortable, cheaper to heat and cool and lower in their environmental impact for decades to come.

The scope of this energy efficiency and renewable energy rollout is unprecedented in Australia and it marks a defining point in the ambition of Australian Government action in this area.

To illustrate this point, I'll refer to a program that may be familiar to many of you here, the Australian Government's Solar Homes and Communities Plan.

At the time of the last Coalition Budget, the program received an average of 30 applications per week.

By the time of the conclusion of applications under the program this week, the Government had received more than 80,000 rebate applications since we came to office.

Our commitment has increased from the original $150 million over five years to now over $700 million since coming to Government.

Put another way, in recent weeks, the Government has supported more solar installations each day than the total number of installations supported by the program annually just three years ago.

As announced last December, it was the Government's intention that new Solar Credits under the Renewable Energy Target would come into effect from 1 July 2009.

It was also the Government's stated intention that there would be a transition from rebates to Solar Credits, in the expectation that there would be a surge in applications once an absolute cut-off date for rebates was announced.

Since my announcement on Tuesday morning we have received the expected surge in applications - close to the Government's original five-year election commitment to solar rebates - in just a few days.

This is not surprising, because the rebate has reached new record levels over many months - months in which the Coalition claimed repeatedly that the solar industry had ‘collapsed’ - and applications peaked in the week of the recent Budget, reflecting the belief of some that the rebate would end at that time.

In considering the best time for the transition from rebates to Solar Credits, the Government balanced the need for industry certainty against the need for an approach that was financially responsible, taking into account the unprecedented amount of work in the pipeline - more than 12 month's work at current installation rates.

On this basis, the Government decided that either continuing the program, or providing an extended notice period for the conclusion of the rebate program, would increase applications to a level that was not financially responsible.

This was a difficult decision, but it was also the only right and responsible decision.

If the Opposition wishes to argue the rebate should have been continued for longer, they must nominate the cut they would have made in the Environment portfolio to fund this continuation or accept that their policy would lead to a larger budget deficit.

The Government decided to bring forward the start date for Solar Credits from the previously stated date of 1 July to ensure there was no ‘gap’ in support for the solar industry.

Solar Credits will provide long-term certainty for the solar industry to grow, and invest, beyond annual budget cycles.

This is a direct response to feedback we have received from the industry since we came to Government - an industry that has seen boom-bust cycles for too long.

Solar Credits will be available to all households, irrespective of income, and not just households but the local fish and chip shop, the local surf lifesaving club - all businesses and community groups - significantly expanding the market for solar panels.

Solar Credits will provide a subsidy for larger systems up to 1.5 kilowatts, helping reverse the trend away from smaller, 1 kilowatt systems.

And by supporting larger systems, Solar Credits will move the market away from so-called ‘free solar’, providing a genuine incentive for the industry to become more competitive.

Because with a relatively expensive technology like solar PV - a technology that I have long supported, and that has a critical role to play in Australia's future energy mix - the priority must be to help the industry grow and become more competitive over time.

As I said to the solar industry on 2 August last year, “the open-ended, non means-tested provision of $8,000 rebates for any technology is not only financially irresponsible, it's environmentally misguided.”

“It's no way to build a solar industry with a strong and sure footing, the industry this country needs, as we rise to meet the great challenge of climate change.”

And this is the critical point.

If our task is to embed sustainability into the mainstream of Australia's economy - to inscribe energy efficiency in the DNA of our suburbs, workplaces and communities - then we must support industries to be competitive and deploy technologies that are cost-effective.

This means transforming the playing field for renewable and energy efficient technologies - through a carbon price, through the expanded Renewable Energy Target and Solar Credits and through a national strategy for long-term, coordinated and ambitious action on energy efficiency.

Otherwise we simply return to the window-dressing and tokenism of the previous Coalition Government's climate change policies.

Short-run programs that distracted from the Coalition's repeated refusal to embrace emissions trading, their refusal to expand the Mandatory Renewable Energy Target despite their own review recommending it and their entirely ad-hoc approach to energy efficiency.

And we see this approach now from the Opposition, with their refusal to support the CPRS and their ritual scaremongering about the costs of climate change action with no mention of the opportunities in a low-carbon future.

We see it in Mr Turnbull's adoption of the Government's climate change targets with no plan to achieve them - and with Coalition partners in the National Party who appear opposed to emissions trading entirely.

Make no mistake, this is Howard Government tokenism and scepticism revisited; Mr Turnbull is trying to sell the Australian people a climate change policy without any commitment to deliver.

The Government's comprehensive approach to climate change is about getting fundamental settings and reforms in place for the long-term.

In the past 12 months we have tackled a key question about how we deliver energy efficiency policy; essentially, what is the role of energy efficiency in the context of the Carbon Pollution Reduction Scheme?

We’ve had to examine how energy efficiency measures will interact with a price on carbon under the CPRS.

We’ve focused on the role of energy efficiency investments in unlocking cost-effective greenhouse gas abatement that otherwise won’t be achieved.

The Government's approach is guided by the recognition that there are several well known barriers to maximsing cost-effective energy efficiency opportunities, especially in the early stages of an emissions trading scheme.

We are talking here about market failures like the split incentive between tenants and landlords, the unavailability of useful information to inform consumer decision making and high up-front capital costs.

The Government's approach - delivered through a combination of carefully-targeted regulation, incentives and consumer information - is aimed at addressing these market failures and unlocking quick, cost-effective energy gains.

A great step forward in this process is the advancement of the National Strategy on Energy Efficiency.

This is an ambitious long-term work plan to ensure energy efficiency policy is coordinated across the entire economy.

The Strategy will provide a springboard for continuous improvement in Australia's energy efficiency performance - and in doing so help contribute to our goal of reducing the energy intensity of our economy.

This is a policy area that has been seriously lacking in national leadership.

The National Strategy on Energy Efficiency, advanced through COAG on 30 April this year, will turn this around.

The Strategy will target all areas of activity where substantial energy efficiency opportunities exist, and in doing so will:

In the Federal Budget, the Australian Government backed up the National Strategy on Energy Efficiency with funding of almost $65 million over four years for specific key actions.

These key actions include a number of early-start measures designed to improve the energy efficiency of the commercial and residential building sectors:

Critically, we will also be reforming our current system for setting building energy efficiency standards, and rating and assessing performance. We want national consistency and a framework for continuous improvement to deliver progressively higher standards over the next decade.

We understand that when a new building is constructed, we effectively lock in its carbon footprint for several decades - so the better our standards today the lower our emissions in the future.

This is a point well understood by the property sector - as evidenced by the widespread adoption of Green Star ratings in building design and NABERS Energy ratings for existing buildings.

‘Green’ buildings are more attractive commercial propositions than lower energy rated properties.

The Energy Efficiency in Government Operations policy recognises this, requiring the use of Green Lease Schedules for new government leases or buildings. With 13 per cent of the commercial lease market being occupied by the Commonwealth, this is an important consideration for building owners.

Many private sector companies are now also adopting green leases, and the tireless advocacy of groups like the Green Building Council has seen an increase in the number of commercial office buildings being constructed to 4.5 and 5 star ratings.

This culture shift is well overdue - a culture where environmental and economic benefits are pursued as complimentary goals. I’m looking forward to seeing further evidence of this later today, when I open Accenture's new ‘green’ Sydney office building.

The guiding principle for energy efficiency policy is that it should promote actions which are inherently cost-effective.

However, as I have said, up-front capital-costs can sometimes present a barrier to even the most cost-effective investments, and that is why targeted incentives and innovative financing can play critical roles.

The Government's $90 million Green Building Fund is well and truly open for business, with my colleague, Senator Carr, recently announcing 89 projects totalling $29.5 million from the fund's first two rounds, projected to reduce greenhouse gas emissions by around 65,000 tonnes per year,

The recently announced $50 million Energy Efficiency Trust is an example of a groundbreaking program that will speed the take-up of energy efficiency upgrades by giving business access to start-up funding.

The Trust will help business cover the up-front capital cost of improvements, with the funds to be repaid at commercial rates as energy cost savings flow through to the business.

The program will bring together public seed funding, private sector skills, business culture and technical expertise to stimulate and deliver energy efficient activities in commercial buildings and other business operations.

Energy efficiency initiatives with the largest flow-on effect to encourage innovation will be given top priority by the Trust, so investment impacts are maximised.

If Australia is to become a global leader in energy efficiency, we have to embrace cutting-edge technologies and tackle infrastructure barriers to smarter energy supply.

Imagine a home in which our pool pumps and hot water systems only turn on when they are needed. In which our washing machine or dryers run quietly in the middle of the night because night time electricity is cheaper. In which smart technology enables our air conditioners to maximise our comfort and minimise our costs. In which our electricity meter tells us how much energy we’re using, when and at what price so we can change our behaviour and use electricity when it's cheapest.

Imagine an energy network that thinks for itself. In which problems in the grid can be identified and fixed remotely.

The home no longer just consumes energy; it will generate energy and supply it back to the grid, solar PV and electric vehicles supplementing peak loads, even in-home fuel-cells.

This scenario is not far-fetched or far off. The Australian Government is committed to working with industry to explore the potential of smart electricity grids to transform the way we use energy in our homes and businesses.

Through the recent Budget, the Government announced the investment of $100 million in partnership with the energy sector in a smart grid initiative.

The goal of the initiative is to create an integrated system of renewable energy, smart grid and smart meter technology and infrastructure in one Australian city, town or region.

It will bring together electricity power generation, transmission, and distribution providers as well as private partners and IT experts, and will inform the wider national deployment of smart grid technologies.

The interest we have already seen in this initiative is tremendous, confirming the Government's belief that smart grids are very much the next frontier in energy efficiency action - a frontier that we must explore quickly and strategically if Australia is to get ahead of the curve on energy efficiency.

It is sometimes said that the cheapest and cleanest power station is the one that's never built - and that sums up the opportunity energy efficiency presents.

Our aim is nothing short of a transformation in the way we think about energy, the way we use energy, and in the sustainability of Australia's economy.

Every Australian has the capacity to make a contribution to our transition to a low-carbon future, and action by every Australian is vital if we are to avoid the impacts of dangerous climate change.

The Rudd Government is meeting the challenge in providing the strong leadership necessary to help every Australian make that journey successfully.

Thank you.

[ENDS]

Commonwealth of Australia