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Abbott may close renewables scheme in January

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There are growing fears that Prime Minister Tony Abbott will bring Australia’s renewable energy target to a shuddering halt as early as January next year, but he will have to find a different reason to justify it.

Abbott, and many of his ministers, MPs and conservative commentators, have criticised the renewable energy target for pushing up costs to consumers. They, and many of the companies, statutory authorities and lobby groups seeking to stop the RET, have also said that the current 41,000GWh target will be impossible to meet by 2020.

But these two assumptions have been destroyed by modeling released by Abbott’s hand-picked energy consultants and modellers ACIL Allen.

Data released to an industry workshop held by the RET Review panel on Monday has shown what other research had already demonstrated, here, here, here, here, here, here, here, and here – that under all the scenarios where renewable energy is encouraged into the market, household electricity prices actually fall.

It also shows that the other major argument for changing the RET – that the target could not be reached (this was the main argument of the major retailers such as Origin Energy, AGL Energy, and even the Australian Energy Market Commission) – is also nonsense in the eyes of ACIL Allen.

This graph below illustrates the point about the costs to consumers.  It shows that after a short-term rise, the medium to long-term benefits of more renewable energy are palpable.  According to attendees, however, ACIL Allen sought to play down the impact of the “merit order” effect, where renewables force down the impact on wholesale prices, saying they were “unreliable”

acil allen consumer costs

ACIL Allen told the workshop that it was instructed by the PM’s office, which is controlling the RET Review outcome, to model four alternatives to the current fixed target of 41,000GWH (the reference case).

These include two scenarios where the renewable energy target is effectively brought to an immediate halt. One is total repeal, where even the renewable energy certificates already issued cease to have value, and one where existing and currently developed projects are “grandfathered”, but no new renewable energy generation is allowed.

(Renewable energy certificate prices are now down to a record low of just $22 – reflecting the dismay and pessimism in the renewable energy industry).

One of the other scenarios involves a “real 20 per cent” target by 2020 – modeled here to be 25,500GWH (in other words a reduction from the current target of two thirds of the amount of renewables to be built between now and 2020). This also includes the effective removal of the small-scale solar scheme.

The fourth scenario comprises a real 30 per cent by 2030 target, which would have the impact of delaying some investment, but resulting in 53,000GWh of renewables built out to 2030 – giving an extra decade to build just 12,500GWh above the current 41,000GWh target for 2020.

But while the two main arguments prosecuted by the government and the incumbents appear to have been demolished by the government’s own modeling, a new justification for strangling the renewable energy target has emerged.

This is that renewables are not so much a burden on households, but rather a “transfer of wealth from generators to households.”

Say what?

Get this, the building of renewable energy projects will be dubbed as a “resource cost” – ACIL Allen puts it at more than $12 billion – of investment that is “not needed” because so much gas and coal generators were built (with the aid of large subsidies and mostly in monopoly markets) on the (false) assumption of rising demand. ACIL Allen representatives even talked of having 70-year-old coal generators still operating.

Really, you couldn’t make this stuff up.

These estimates are justified by a series of assumptions that paints a kind view of the cost of fossil fuels, and ignores the benefits of renewables. In the modeling, there appears to be no account of network or environmental benefits of renewables, and no account of how they could offset 24 million tonnes of abatement from the government’s putative “Emissions Reduction Fund.”

It may be tempting to think that the 30/30 scenario could be adopted by the government, but this graph shows why it will be fiercely resisted by the incumbents – under this scenario (the blue line) the wholesale price is the lowest, and the so called “transfer of wealth” from the generator to the consumer is the greatest.

acil allen wholesale

The other problem is that there remains an ideological opposition to renewables within the conservative party – particularly wind energy – and a refusal to accept the fact that renewables actually work.

Polling suggests that solar remains enormously popular, a realisation that is dawning on MPs, even those in the Liberal and National Parties.

Despite this, the solar industry is also in grave fear about its future. Even under the “real 20 per cent” scenario” painted by ACIL Allen, the SRES scheme that supports new solar installations is gutted – with “deeming” – or upfront payments – reduced from 15 years to 10 years and the SRES component ending in 2020.

Solar industry people attending the meeting said the characterisation of solar was confusing and contradictory. On one hand it was described as “expensive abatement” in the order of $150/tonne, and on the other it was described as so cheap that it didn’t need subsidies.

The solar industry was confused as to how the modeling could show the abatement cost of solar to be three times that of wind. Solar is seen as more of a threat to the traditional utility model because of its ability to reduce demand – and revenue to generators – at the most profitable times of the day.

Of more concern, was the estimate from ACIL Allen that the solar industry would likely experience a 30 per cent slump if the solar support was removed, but that this would be “tolerable” because in the long term the market would rebound.

John Grimes, from the Australian Solar Council, said even with prejudiced assumptions – including only a modest rise in gas and coal prices – the modeling still disproved the government’s original assumptions.

Still, there now appeared to be a clear intent to remove the solar support mechanisms as a minimum. “Now about 15,000 solar workers don’t know whether they will have a job at Christmas,” he said.

 

 

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  • Andrew Thaler

    The uncertainty seems to be primarily used to create confusion and then when ‘an’ outcome is offered desperate people jump on it as a point of salvation.

    Logic is unfortunately normally not allowed to feature in these types of discussions!

  • adam

    I love this:
    “as demonstrated here,here,here,here,here,here,here,here,here,here”

    • Phil of Brisbane

      Hear! Hear! … and another great article – thanks Giles!

  • Zvyozdochka

    One of the charts shows that PV is unstoppable.

    https://twitter.com/kincuri/status/480927873864183808

  • Beat Odermatt

    Ok, I take land, clear all the trees, remove the topsoil and overburden down to 50 meters or more, clear more land to dump the overburden, then I clear more land to build a power station and then I build beautiful high voltage transmission lines and clear more land to build more transformers. I take water from a river to pump it to the power station where the burning coal boils the water to run generators and to make steam and ………….
    Or I take free wind or power from the sun.

    • michael

      I hear no natural resources whatsoever are required to build a concentrating thermal plant (3km radius clearing required, 1,000’s of mirrors, 200m high tower) or build say wind turbines (where do those materials, some exotic, come from?). Nice holistic argument.
      No transmission lines required to get power from the Hydro schemes/wind farms/utility solar to the houses?

      • Matthew Wright

        A lot less impact per MWh produced. There are lots of Life Cycle Assesments comparing these technologies. Generally the renewables are fully recyclable. So if you have silicon solar panels you can recover those recycle the glass, aluminium frames and silicon reducing energy and resource requirements of the next batch.

        You can’t recycle /undo / reuse the devastation of coal mining or unconventional gas recovery. Once you’ve done it once – you just have to keep on doing it stuffing more and more of the place up.

      • Beat Odermatt

        You mean the smoke stakes at power stations? I am not sure how high they are? If it comes to renewables then rootop solar provide a good way to reduce a lot of power in areas where it is needed and we have plenty of good opportunities to store any excess energy. Our problem is a total lack of vision by planners and engineers.

    • John P

      Speaks for itself!
      We have been living ‘off grid’ now for 22 years.
      Renewables have given us energy reliability, negligible carbon emissions and a big saving in costs.
      I suggest this latter is the problem for the Tories.
      No-one gets to send me an electricity bill.

  • Beat Odermatt

    I am sick and tired how selfish interest groups oppose renewable energy. I bet than none of these bastards ever working in a coal mine to see how much coal dust an ordinary worker breathes in every day and how many people suffer from cancer and other illnesses associated with coal mining! The hidden Billions in health costs are not shown in any costing of electricity. There is also nothing said about at least 50 Billion Dollars in future liabilities for mine rehabilitation, fire control and acid drainage control.

    • michael

      The ‘other sides’ modelling is always flawed, as they use different assumptions that are within a range of reasonable ones, but allow the outcome that’s desired.
      I think yesterday there was an article on solar companies not wanting RET removed because they want investment certainty, yet today, companies who want pre-RET investment timeframe certainty are derided.
      outside of environmental concerns which add subjective cost to legacy assets (and yes, these can’t be ignored in reality), the argument about not being in a supply shortage and hence new capacity not being needed is sound. that being said, there’s nothing to stop new entrants competing on the merits of their pricing proposition and displacing current capacity.

      • Matthew Wright

        The certainty has been there for non renewable companies for a long time. The Renewable Energy Target has been talked about since 1998 and every privatised fossil fuel plant has changed hands in that time. In all OECD countries there are targets for renewable energy. So any investor entering this space to take over risky fossil fuel plants that complains can not use the excuae that htey had blinkers on.

        Whereas renewable energy has been promotoed since the 1990s in a growing number of juristictions including all OECD countries. It’s pretty clear where you should have confidently been able to place your capital. What we’re seeing is the people who stuffed up buying political influence (Tony Abbott) to try and legislate themselves out of the shit. It’s ony a temporary solution and in the long run they’re going down faster than an outdated Saddam Hussein era scud missile.

      • John McKeon

        In addition to Matthew’s comment: in broad terms – the threat of a fossil fuel induced climate crisis has been with us for well over a quarter of a century. I have absolutely no sympathy for the fossil fool thugs.

      • Winston

        Michael, you’re right again – in a way. We do not need new capacity viewed purely from a perspective of MW available. But that’s not what modern day energy is about. It’s about doing what we’ve always done, stuffing electrons down the wire, but without the atmospheric damage. That’s a social choice, and it’s on of the government’s roles to support our society’s social structures. The cost is imposed to allow anyone – whether it be Infigen on one hand or GDF Suez on the other, to bring that transformative change to our energy networks.

  • Peter Davies

    I note the modelling did not include leaving the scheme as is. It also did not include the current push by utilities, expected to be successful because it will be non-transparent on the electricity bills, of as surcharge of 6c/kWh for customers who reduce their energy usage through renewable s for each onsite kW generated for “reduced demand costs” of having the poles and wires not meeting their forecast use. Couple this with the billing anomalies already existent (not rules but simply dodgy accounting practice) using unethical even if not illegal bullying tactics and it simply paints a picture of the contempt we as consumers are held in by the multi nationals now running the privatised system and our politicians who support them. This blog is worth a read:
    http://co2land.org/2014/06/23/selling-short-in-the-energy-market-symptom-or-disease/

  • Alan Baird

    But, but coal is cheap and so is the smoke. Or it should be by jove! Renewables enthusiasts are so presumptuous! Just because it’s clean shouldn’t make any difference. Can’t you see, coal needs all the help it can get. And why don’t those local miners of ours take up Gina’s eminently sensible suggestion and work for $2/hour,just to assist . Why, the African miners mentioned by Gina were so chuffed to hear her words of praise at their self-sacrifice they only rioted a bit with no more than a couple of dozen deaths. Tops.

  • hippygreenieleftie

    Anyone know who Michael is? A fossil fuel apologist so wilfully blind must be an industry troll or one of the winking wanker’s self-interested cronies.
    Another great article. Keep it up.

  • Lifeboatman

    Coal is Crap

  • Ian

    Science: develop a hypothesis then devise experiments to prove or disprove the hypothesis. If the hypothesis is incorrect make a new hypothesis to better fit the facts. Politics, a la Abbott: Decide on a policy, then devise a study to support that policy. If the study does not cast a positive light on your policy then scrap it and do another one. Sieg heil mein fuhrer, let us all click our coal-coloured boots and raise our arm and pay homage to the mighty energy utilities!