Presentation to the C4C International Climate Conference on the New Senate Inquiry into Household Electrification

Andrew Bragg – Senator for NSW – 15 minute presentation

Firstly allow me to acknowledge the contribution of Cristina Talacko and the work of C4C. It has done the hard yards on climate policy when it has been harder than it should have been. Thank you Cris.

Ahead of the next poll, it is crucial that we maintain a leadership position on emissions reduction policy which adopts the latest and best ideas whilst maintaining the primacy of individual choice - a cornerstone of liberalism.

The Senate recently voted to establish an Inquiry to examine how Australia can turbocharge our electrification. The Household Electrification Inquiry is being run by the Senate Economics References Committee, which I chair, and will report at the end of 2024.

A policy to cut household emissions must be guided by three key principles:

1. Promoting consumer choice
2. Embracing new ideas
3. Fighting inflation

The Terms of Reference guiding the Inquiry are purposefully broad. No idea is off the table.

Some areas of focus that have arisen in the early stages are the economic barriers for renters to electrify, the effectiveness of existing Commonwealth and state policy, and the potential of home battery systems.

The benefit of running this Inquiry through the Senate Economics Committee is that it allows us to divorce household electrification from the culture wars that may stifle the decarbonisation agenda.

I really don’t want to see the kind of dangerous politicking that has taken place in the US find its way to Australia.

During debates in the US Congress, the following is standard fare: “If the maniacs in the White House come for my stove, they can pry it from my cold dead hands.”

Australia can do a lot better than that. If we lose electrification to a culture war, we may never get to net zero.

It is my hope that the Senate Inquiry will be an effective platform to bring policymakers and industry together to capitalise upon the economic and environmental advantages of household decarbonisation.

I believe the benefits of these changes are so tangible to households that no crazy culture war will be able to undermine progress on this front. For example, there may be no better way to fight inflation at the household level than through electrification.

These arguments won’t win themselves. They must be won through the development of policy and the profiling of the issues and the solutions.

That will be the work of this Senate Inquiry: it will develop a smorgasbord of policy options on electrification for households and business.

It will be a smorgasbord for all parties to choose from but I obviously hope that my party can be a major diner at this event.

Reducing Emissions Through Electrification

I have long believed in the importance of Australia reaching net zero. We have made some progress but we have a long way to go.

In Australia, our three biggest sources of emissions are electricity, transport and agriculture. With each of these sources roughly producing the same amount of emissions, there are various options that can be considered.

From these sources, the most practical reductions can be achieved through reducing electricity emissions.

But up until now, a large part of the net zero discussion has been on reducing electricity emissions.

This is proving to be a difficult task for governments to manage, but it is one I am confident we can achieve.

Perhaps a simpler task will be to reduce household emissions through incentivising electrification.

Residential electrification is the process of replacing existing fossil fuel devices, such as gas water heaters and petrol cars, with modern electric appliances.

Rapid technological advancements have given the term ‘going off the grid’ a new meaning. Electrification allows households to generate and store clean electricity, without relying on the grid.

There are different ways of measuring the size of household emissions.

One estimate has been prepared by the Department of Climate Change, Energy, the Environment and Water. Their latest emissions data reports that household emissions, including electricity use, household vehicles, and appliance costs, account for 42% of domestic emissions.

When the commercial sector, including small businesses, offices and workplaces, are included, this figure grows to 70%.

The Rewiring Australia study estimates that average household energy consumption would drop from 102 kWh to 37kWh if electrified – a reduction of almost two thirds.

So this agenda is not an option but a must.

Supporting consumer choice

Just a few weeks ago we saw the Andrews Labor Government move to ban gas connections for all new homes in Victoria.

This is not the right approach for Australia.

Australians believe in consumer choice – leaving it to consumers to make their own choices about matters that affect them.

That is why the gas ban was so poorly received by many – because the Victorian Government put the cart before the horse.

As Shadow Minister for Climate Change and Energy, Ted O’Brien MP, said at the time, this is “another ‘big government’ Labor mandate forcing people to do as they’re told – and leaving them to find the money to comply with these orders.”

Instead of taking the Andrews’ approach, we should be examining how tax concessions and other economic incentives could drive household electrification, and in doing so, drive down prices.

Listening to the community and embracing technology

I accept that energy policy is complex, and developing policies to turbocharge household electrification will not be easy. The Commonwealth has a pivotal role to play, but so do the states and local governments.

All levels of government should be listening to the community, who are broadly supportive of the decarbonisation agenda.

Through the Inquiry process, it has become apparent to me that Australians will embrace household electrification if we create the right policy settings.

Recently, I met with constituents on the NSW South Coast who are part of an electrification drive called Electrify 2515.

This community is seeing the advantages of electrification first hand. With decreasing power bills, and more efficient appliances, the Electrify 2515 community has fully embraced electrification.

But those living in Electrify 2515, accept that there are constraints which are holding back the full potential of electrification.

One of the main issues raised with me was the inability for renters to take advantage of electrification. The current rental codes in NSW lack any incentive for landlords to electrify their homes.

With more Australians renting than ever, we will be examining the current regulatory settings for renters, to see what can be done to encourage landlords to electrify their homes. Doing this not only benefits the current tenants, but also makes the property attractive for future tenants.

We could also explore the idea of energy ratings for households on the market.

Importantly, the community in Wollongong was focussed on driving local skills and training.

We need more cost effective local tuition for apprentice sparkies. Proper training will be essential to driving household electrification.

Much of the feedback I have received so far has been related to the cost-effectiveness of batteries for households and small businesses.

I spoke to a small business owner, Rob, who managed a 54% return on investment per annum in 2022 when he installed solar PVs on his small business. Using the PV to charge his electric car, this return on investment increased almost 70%.

However, he doesn’t have battery storage as part of his network. His solar PVs are connected to the grid. Batteries, he told me, are currently just not cost effective.

I also spoke to a local homeowner, Peter, who had installed solar PVs on his home. He told me that he was able to save 80% over the last seven quarters as a result.

Still, he also informed me that batteries were still not cost effective. The upfront cost is too high.

To find solutions to the cost barriers for home batteries, I asked the Parliamentary Budget Office (PBO) to do some modelling on a potential tax deduction for home batteries.

The PBO found that a deduction on the installation of new home batteries of up to 50% of the cost or $3,500 would result in an increase in home battery uptake by 10% through to 2033-34.

This would only come at cumulative cost to the budget of $375 million over the next 10 years.

Alternatively, a deduction of up to 75% of the cost or $5,250 would result in an increase in the take up of home batteries by 15%.

This would cost the budget $584 million over the medium term.

Using the tax system, we can incentivise a significant increase in the take up of home batteries over the next 10 years, by reducing the cost borne by Australian households at only a modest cost to the federal budget.

This is the kind of policy I believe Australians are calling out for.

It makes electrification an economically attractive and simple proposition for all households. It does so without robbing households of agency, or the market of options to maintain energy security in Australia.

I believe this is a rich vein for households but also for small businesses: the lifeblood of Australian liberalism.

I welcome your ideas and feedback as the Inquiry gets underway.

I am confident that the Coalition will come to the next election with a policy platform on energy that is good for our economy, good for household budgets, and good for the environment.