The federal government on Wednesday vowed to stick to a fixed target for the deployment of renewable energy by 2020, saying it would resist a push to dilute the target to reflect the possibility of falling energy demand, or to can the target altogether.
But the government also took aim at the federal Opposition, saying repealing the carbon price would have a huge impact on the deployment of green energy in Australia – a conclusion supported by leading consultants.
The defence of the RET has emerged as the critical policy issue for the clean energy industry, following moves by some quarters to have it repealed, or by the likes of Origin Energy to adjust it to reflect falling demand and make it a flexible 20 per cent of “actual” demand, rather than a fixed target. Some in the industry suggest this could cut the amount of renewable energy to be built over the next decade by nearly half – or a difference of between $10 billion of wind energy projects and solar farms, and $20 billion.
Climate Change Minister Greg Combet, in a speech on the first day of the Clean Energy Week conference in Sydney, labelled calls to drop the RET, or to weaken it, as “misguided.” He said that while the Climate Change Authority would review the effectiveness of the RET, the government intended to maintain the legislation, which stipulated that 41,000GWh of renewable electricity be produced by 2020.
He said the RET was an important part of the package that included the carbon price – and the creation of bodies such as the $10 billion Clean Energy Finance Corporation and the $3.2 billion Australian Renewable Energy Agency – and would not function effectively without it, increasing the costs of meeting the target and making it impossible to reach.
This meant that the while the Opposition has supported the 20 per cent RET target, its pledge to repeal the carbon price meant less clean energy would be deployed.
He dismissed Opposition leader Tony Abbott’s plan to replace the carbon price with soil carbon projects, emissions reduction subsidised by taxpayers, and a “green army” as a joke. He said it was inevitable that Australia would need to increase its emissions abatement targets, and transform its energy industry, at least after 2020. “If we do not take action and decarbonise the economy, we will be unable to compete against modern manufacturing industries powered by clean energy. Clean energy and low-pollution technologies will be the key to international competitive advantage.”
Does cutting the target reduce costs?
Seb Henbest, the Australia manager for Bloomberg New Energy Finance, said reducing the scope of the RET would be counter-productive. Based on current demand forecasts, it could mean that investment in renewable energy is halved from an anticipated $20 billion to less than $10 billion, but the cost to consumers – through the renewable energy certificates – would only be cut by around one fifth.
Henbest also said that repealing the carbon price would also be counter-productive, because it would make renewables too expensive. “Without carbon putting upward pressure on the wholesale price, there is a risk that the LRET will fail, because investment will not make sense.”
Not too big, not too small
Michael Fraser, the CEO of AGL Energy, and chairman of the Clean Energy Council, said he was disappointed that that some people wanted to “move the goal posts”. “What an incredibly bad idea,” he said. “It would be disastrous for investor confidence.”
He said investment in the clean energy industry in Australia was already suffering from the lack of certainty, particularly around the carbon price, and bank finance for energy projects in Australia was more costly than overseas because of this. He said Australia risks losing reputation as a stable destination. “Continuously changing rules creates soverign risk issues, and debt and equity markets don’t like soverign risk,” he said. Fraser said the current uncertainty around the RET review was also causing decisions to be put on hold, and this would likely continue until the findings of the Climate Change Authority were delivered at the end of the year.
However, he said while some were calling for the RET to be weakened, and the Greens were calling for it to be strengthened, he supported the status quo. He said that was the position of AGL Energy, the CEC and the Energy Supply Association of Australia.
The new CEO of the Climate Change Authority, Anthea Harris, gave little away about the process of the RET review. She said it would not look at state planning laws or connection issues, nor was there provision for additional terms of reference.
However, she underlined that the review would be undertaken in light of the intent of the legislation, which stipulated that any change must not be inconsistent with its need to reduce emissions and to encourage additional generation from renewable sources.
“The authority is aware that it is not starting with a blank sheet of paper and billions of dollars have already been committed.” One of the key hurdles would be to judge if any changes were worth making given the potential for disruption and flow-on effects it might cause.
The new CEO of the Clean Energy Council, David Green, said experience in the UK had shown that bipartisan support for clean energy policies, including a carbon price and a renewable energy target, were critical, but tinkering with the policies was dangerous. He cited constant changes one of the reasons why the UK is struggling to meet RET and targets in the transformation of the economy.
“Europe has got bipartisan support, and one of the real challenges for Australia is to get back to bipartisan support. It is absolutely crucial to get investment flows, because investors will not invest if they believe there will be shifts in policy.”
However, Green said the industry also needed to tell its story more effectively. “Believing we are right is not enough,” he said. “We have to show people that the journey is relevant to them in their everyday lives.” And he said that the industry had to show that renewables, and allowing consumers to produce their own energy, could “free them from the tyranny of rising power prices.”