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Renewables fear the worst as Tony Abbott targets clean energy

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Australia’s clean energy industry leaders have been invited to a special meeting next week to discuss the future of renewable energy policy in the country and to contemplate the unpalatable, as Coalition leader Tony Abbott began his campaign with an early lead and a call to the Clean Energy Finance Corporation to cease its operations immediately.

A meeting of the CEOs of Australia’s largest companies involved in the renewable energy industry is believed to have been called by AGL Energy managing director Michael Fraser, who doubles as chair of the Clean Energy Council. It will discuss strategies to protect the renewable energy target (RET). Or indeed to assess whether they have the political capital or influence to maintain the target as is under a Coalition government.

The crisis meeting comes as the Coalition takes an early lead in the first days of the election campaign, and with increasing uncertainty about the likely make-up of the Senate. The renewables industry fears that with a Coalition win, the lobbying from incumbent utilities and generators, including the Business Council of Australia, to have the RET diluted or removed will intensify, and there may be little political protection for the current target.

The renewable energy industry is probably the industry sector most directly affected by the outcome of this election. While Labor has vowed to push the next RET review out to 2016, the Coalition wants to have yet another review of the RET in 2014, and has expressed sympathy with pleas to dilute the fixed 41,000GWh target because of  falling demand.

The uncertainty that this has created has already brought most large-scale developments to a halt. There is a view in certain sections of the renewables industry that it could be prudent to cut some sort of early deal – concede a dilution of the RET by extending the 41,000GWh target out a few years – in exchange for “certainty”.

Other factors that could be brought into discussion are support for a buyout of fossil fuel generators, which are being hit by falling wholesale electricity prices caused by falling demand and the low short-run marginal cost of wind and solar plants. Or at least help with rehabilitation costs, as suggested by Fraser last week.

However, some renewables companies are bitterly opposed to any concessions, pointing to the findings of the Climate Change Authority in December, which found no benefit from reducing the target. Wind farm developers, in particular, fear that any further delays may mean that some projects never get built, because some project developers will walk away in frustration and/or because solar PV may become a cheaper option within a few years.

Others say it is madness to even consider a dilution of a renewables target given the mounting evidence on climate change science and the growing need for Australian to hasten its transition to a low carbon world, rather than slow it down.

Australia is not the only economy to register falling electricity demand, but it would be the first major economy in the world to consider watering down its renewables target, when most countries are looking to impose even more ambitious goals.

Even in America, an influential fossil fuel lobby group – the American Legislative Exchange Council – reportedly backed by oil tycoons the Koch brothers and Exxon Mobil – has failed in each of the 15 states where it has sought to dilute renewables energy targets by introducing templated bills sponsored by Republican Party legislators.

In California, which has a carbon price ($14/tonne), strict energy efficiency targets and other incentives, a bill is currently before the state legislature to increase the renewable energy target from 33 per cent by 2020 to 50 per cent. The ambition is supported because there is no coal industry in California to oppose it. Efforts to lift Europe’s renewables target have been blocked by coal-fired Poland, among others.

However, such is the power of the Australian fossil fuel generators, and their influence over Coalition policy, that there is a real fear over the future of renewables in this country. Even “independent” bodies, such as the NSW pricing regulator IPART, have taken the extraordinary step of recommending that the renewables target be removed altogether.

AGL Energy has been the one major utility to defend the RET, and the fixed target, arguing that there would be no cost savings from diluting it, and saying that other fossil fuel generators are simply trying to protect the value of their own assets.

However, it has also said that the RET target needs to be realistic and “achievable”, and repeated delays and uncertainty makes meeting that target progressively more difficult. The CEO meeting is a reflection of the scale of the forces that confront of the industry.

If the RET is diluted to a “percentage” target of actual demand, then half of the wind farm projects currently in the pipeline will not be developed, as our Graph of the Day shows. Even AGL’s Silverton wind project in western NSW, which it identifies as the “least cost” wind project in the country, has been put on hold until the uncertainty is resolved.

The Coalition brought renewables investment in Australia to a halt during the Howard government’s tenure, after refusing to accept the recommendations of an independent report that it should extend the MRET which it had introduced.

The Coalition has reportedly urged some of its most vocal anti-renewables candidates, such as Angus Taylor, to quieten down during the election campaign. But it has repeated its vows to dismantle the Climate Change Authority, which recommended that the RET be maintained, as well as the Climate Commission, which this week released a detailed report extolling the economic and environmental virtues of solar energy.

And it wants to dismantle the Clean Energy Finance Corporation, which has a $10 billion budget to help finance clean energy and emission abatement projects, and which has been providing finance to various emerging technologies, and to help manufacturers and the agriculture industry become more energy efficient.

Abbott wrote to the CEFC chairwoman Jillian Broadbent on Monday, calling for the Corporation to cease operations immediately. Abbott promises to act to close the CEFC – a move that would require the support of both houses of parliament – on the first day of office, if elected.

However, the CEFC is defying Abbott’s threats, arguing that because it functions as an act of parliament, it is legally bound to continue its operations until the parliament decides otherwise.

Labor and the Greens remain committed to the CEFC (the Greens want to treble its funding to $30 billion), and say they will protect it if they have the numbers in the Senate.

CEO Oliver Yates told RenewEconomy on Monday that the CEFC would respect the caretaker provisions and refrain from making significant new investments during the election campaign. However, he said the CEFC would “continue to act lawfully within our legislative authority.”

“We will continue to assess investments so we are ready after the caretaker periods – and we will honour the contracts that we have in place,” Yates said.

The CEFC has so far allocated around $500 million towards a series of investments in energy efficiency, power generation using landfill and coal mine gases, as well as two new solar projects, and financing two wind farms.

It has a budget of $2 billion a year over five years, and must deliver a return on investments consistent with the government bond rate. The Coalition argues that canning the CEFC wills save $400 million a year, but the CEFC says that only the portion of finance provided on concessional terms will appear as a budget item, and there has been little of that.

Meanwhile, Tony Abbott has continued his scare campaign against the “carbon tax”. He told the ABC Radio AM program on Monday that a “fixed tax or a floating tax” would rise to $38/tonne by 2020 and could rise to an “almost unbelievable” $350 a tonne in the years after that.

And, he said, if you want to get rid of the carbon tax, if you want to take the cost of living pressure of families and the threats to jobs away, you’ve got to vote for the Coalition.

The Guardian has an amusing story of how Abbott confused the costs of carbon at a meat packing company in Brisbane. He estimated the cost at $5 million, but after taking into account the move to a traded scheme, and government support for an upgrade that will reduce its emissions by more than half, its liability is in fact just $525,000.  

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  • tsport100

    A government run by the cronies for the cronies.

    • juxx0r

      Yep, time to vote them out.

  • Peter Campbell

    The “20% by 2020” Renewable Energy Target was intended only as short-hand for an actual fixed 41,000GWh by 2020, designed to give certainty for investment in large scale renewable energy. The coalition seems to be flirting with the idea of weaselling out of the fixed target because electricity demand has gone down not up. Many people improved their domestic energy efficiency and added solar technologies resulting in the reduced demand because it would make a difference for our environment, knowing the detail of the bipartisan policy ensured our efforts would be additional to the legislated target. For the coalition to dilute it would be a gross breach of faith, a slap in the face and free-loading on the voluntary efforts of many ordinary citizens. If they even sound like doing this they should be angrily condemned.

  • Ian Garradd

    Vandalism is one thing Abbott is good at and one hopes Australians are smart enough to keep him and his band of backward fossil fuel snorting idiots out of office.

    It would truly be embarrassing if Australia was to head backwards while the rest of the world is raising the standards for carbon emission reduction.

    Clean energy is also good for employment.

    • lad

      We see just how good clean energy is for employment when we look at Germany and Denmark over the last 20 years. i believe Abbott has been living in a cave for about the same amount of time.

  • JohnRD

    Both the government and opposition have the same emission reduction targets.
    Both should be asked what they are going to do in the next 3 years as part of their plan to make this happen.
    The RET on its own is not going to be anywhere near enough.

  • theodore

    I agree with Abbott, why should tax payers bankroll energy companies. They are making money and without the government funding there will be more motivation from companies to invest.
    Abbott could actually give encentives to private companies to invest in green energy development. They get a rebate like everyone else. The more they spend on infrastructure the more rebates they get.
    I don’t support giving my 45% taxes for free to a corporation. If they want it, then let them invest in the industry.
    I only get 3000$ back on a 10,000$ investment in solar panels.

  • Gab Winter

    Wow Australia is so backward? I never knew. 🙁