The head of Australia’s largest listed renewable energy group, Infigen Energy, has called for the large-scale renewable energy target (LRET) to be amended to ensure that to ensure that the investment freeze in the industry was resolved as quickly as possible.
As the fossil fuel industry prepares to ramp up its campaign to have the LRET diluted or even stopped, Miles George, the CEO of Infigen, said there was a strong argument for the target to be extended and lifted.
More importantly, George said interim targets should be adjusted to ensure that electricity retailers were given the incentive to write contracts for new wind (or solar) farms, and avoid the situation where all the construction will occur in just a few years.
A surplus of certificates – legacy of the poorly managed small-scale scheme (rooftop solar incentives) – has meant that the retailers have had little incentive to write power purchase agreements. In the meantime, some of them have been lobbying to have the target diluted.
George said that increasing the “stepping stone” targets in 2014, 2015, and 2016, and possibly reducing the targets in 2018 and 2019, would ensure that the industry was able to meet the 41,000GWh target by 2020.
He likened the move to the “backloading” proposal to get rid of surplus credits in the European emissions trading scheme.
“We have the situation where there is no reason for retailers to contract,” George told RenewEconomy in an interview this week.
“So the time is getting shorter and shorter every year, and the new build requirement gets tougher and tougher each year. It would be a more efficient outcome if the target profile were adjusted to achieve a more even build rate, rather than doing nothing for two years and then have a mad rush to build the remainder.”
George also argued that there was a strong case to extending and lifting the ambition of the target over the medium term.
“If you acknowledge that we need to do better than a 5 per cent reduction in emissions by 2020, and to have a significant change in electricity generation, then it would make sense to extend the scheme out to a longer date, and yes, have bigger targets for later dates. We don’t have a specific proposal in mind. But a higher target beyond 2020 – let’s say 30-30, would be a good idea.”
George said that if the Coalition won the election, he would hope that the promised review of the LRET would happen as quickly as possible to remove the
“I think that the Coalition understands the need for regulatory uncertainty,” George said. And he was also confident of the outcome.
“They committed to review of the LRET in response to lobbying from the fossil fuel generators. I think that as soon as that lobbying started, 6-9 months ago, a lot of the arguments raised by fossil fuel industry have been proven to be wrong.
“The Coalition in the meantime have committed to that review. That’s fine. Let’s review it with the facts rather than the fiction. There has been so much misrepresentation. The studies done by IPART, Escosa and others show that the LRET accounts for 1.5% of residential bill, and the wholesale price reduction associated with that far outweighs that small cost.
“If we were able to achieve that (a quick review), with the potential extension of the scheme, the removal of the 2 yer scheduled regulatory review and dealing with the current surplus of the scheme, that would be a great outcome.”
George said it was clear that wind generation was already having an impact on the market, crowding out fossil fuel generation. The expected doubling in gas prices would reduce the viability of gas-fired generation.
“With the right incentives, you will see a bigger proportion of renewables – new build gas will not make a lot of sense when paying a higher price.”
