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AEMC wants fossil fuels to access same subsidies as renewables

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The Australian Energy Markets Commission has recommended a major dilution of the renewable energy target, or changing it to an “emissions target” that would allow “clean” fossil fuel generation such as gas to also attract subsidies.

The AEMC, which sets the rules for the National Electricity Market, says the  RET is “unsustainable” – mostly because the target cannot be met due to the repeated delays in investment caused by policy uncertainty.

This assessment is supported by most incumbent utilities, including AGL Energy, although it is hotly contested by many in the renewable energy industry, who say that a clear policy signal now would allow the target to be met. But it is likely to become self-fulfilling the longer the uncertainty remains. No new projects have been committed for the last 18 months because of that uncertainty.

The AEMC, which has never been a great fan of renewables, describes the RET as a transfer of wealth paid to the renewable industry by the incumbent fossil fuel industry. If the target is not met, and the burden falls on the consumer to pay for renewable projects the energy retailers chose to not install, then the transfer of wealth goes from the consumer to the renewable industry.

The AEMC suggests the Abbott government has two choices – diluting the target to a floating “real” 20 per cent, as some retailers such as Origin Energy have been pushing for the last four years. This was once seen as highly controversial, but now appears as the very minimum the new government will do.

But the AEMC also suggests that the RET could be transitioned to an “emissions intensity based scheme” for the electricity sector.

The effect of this would be to allocate benefits – and subsidies – to fossil fuel generation such as gas, and coal, where emissions reductions are achieved.

“Such a scheme could be designed in a number of ways, including where generators below a defined emissions intensity level create certificates that generators above the level are liable to purchase,” the AEMC suggests.

“This type of approach would encourage all lower emissions technology options, not only renewable energy, and is therefore likely to meet any emissions reduction target at a lower cost.

“The expected cost of the policy would depend on the size of the emissions reduction target and type of low emissions technologies in the generation mix.”

Realistically, though, it depends on entirely how those targets, and the mechanism is framed. It could simply reinforce the power of the incumbents to protect their own assets – giving retailers an incentive to invest in their own coal generators rather than new capacity and new technologies.

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  • Keith

    I suspect there are going to be a lot of groups (now including AEMC) who, in the not too distant future, will look back at their RET submissions in dismay.

    Given the news about stranded assets and pulling back from fossil fuel and fossil fuel related industries (eg AMP Capital RIL fund now screening out companies with more than 20% coal or dirty oil related activities, Stanford Uni exiting from coal investments), plus solar & wind already becoming cheaper than coal, gas, nuclear and then massive investment by China & different path by India (minisolar) … and at last the US getting serious….. where is there space for a fossil fuel future other than in the minds of the leaders of fossil fuel companies and our LNP Govt?

    The chickens will come home to roost.

  • Zvyozdochka

    I see this as great news. I believe the fossil fuel financial model is collapsing pretty damn fast, and they know it.

  • juxx0r

    AEMC might as well just say “We’re too stupid to hit out RET target.”

    • Max Boronovskis

      Ha ha that’s funny, thank you!

  • Chris Fraser

    “The AEMC … describes the RET as a transfer of wealth paid to the renewable industry by the incumbent fossil fuel industry”.
    Considering the direct transfer of wealth from taxpayers to the fossil fuel energy industry, it’s possible some public offices serving the industry may need to brush up their understanding of where payments to cover the total cost of our energy come from.I’m happy for all of them to start from scratch.

  • Peter Campbell

    So, the AEMC is proposing an emissions trading scheme, just within electricity generators. If the LNP go for that, how many people will appreciate the irony?

  • Henry WA

    This is all about getting either the taxpayer or the consumer to pay for stranded fossil fuel assets or to keep them operating as long as they can get away with it, but disguising the process in the hope that the voters won’t notice.

  • Alan Baird

    Oh, you mean the fossil fuel lot aren’t subsidised enough? I thought they were cheap. I thought they received huge rebates that even the ALP wouldn’t touch, courtesy of Uncle Martin. But I must be mistaken.

  • Alan Baird

    On second thoughts, I think the fossil fuel mob should get the same subsidies. This would mean renewables would get a huge boost if they got a fraction of what the mining industry gets in fossil fuel rebates. The govt spends BILLIONS a year on them.

  • adam

    i couldnt find their submission on the ret review website maybe they’re keeping them confidential.

    However, the AEMC are responsible for ensuring economically efficient operation of the NEM.

    If the goal of the RET is abatement then a technology independent scheme will be better. E.g. if Loy Yang can abate through boost efficiency through boiler upgrades more cost effectively than building 200MW of wind, why not incentivise them do that?

    Whether or not this is socially/TBL the best policy overall is perhaps another question but thinking about the RET and abatement it is a sensible approach and surely not suprising coming from AEMC whose role it is to have these types of views.

    I hardly see this as meaning AEMC are part of the “fossil lobby”.