Leading utility AGL Energy has called for the scrapping of federal government support for rooftop solar PV, and has indicated the large scale renewable energy target (RET) should also be diluted or deferred because it would be impossible to meet the current 41,000GWh target in the current timeframe.
The calls by AGL – a leading member of the renewable energy industry’s peak body, the Clean Energy Council – earned an immediate rebuke from the Australian retail subsidiary of New Zealand giant Meridian Energy, which accused it of joining other utilities Origin Energy and EnergyAustralia “on the dark side”.
AGL Energy says the small scale component of the renewable energy target, currently under review by the Abbott government, should be scrapped altogether.
“Household solar PV now no longer requires subsidies to be an attractive proposition for households,” it says in its submission to the RET review panel, chaired by climate science skeptic and pro-nuclear advocate Dick Warburton.
The position adopted by AGL Energy – once considered the “greenest” of the major utilities with a portfolio heavily skewed towards wind energy and gas – means that there is a near unanimous push by incumbent generators, retailers and network operators for support for rooftop solar to be ceased.
Household solar is emerging as the biggest threat to the incumbent business models, reducing demand from the grid and at a time during the day that the industry has traditionally extracted most of its revenues.
The target for small scale energy is current uncapped, but AGL argues that production from rooftop solar – which now amounts to 3.2GW across 1.3 million households – has already exceeded its “original policy intent” of 4,000GWh. It also alleges that rooftop solar received subsidies equivalent to “75 years of generation” – a reference to the “solar multiplier” that was used when the cost of rooftop solar was higher.
In a surprisingly brief submission to the RET review panel, AGL does not specifically call for a reduction in the 41,000GWh target for large scale renewables – as all other utilities are doing – but says that it will be impossible to meet.
Ironically, it blames a combination of policy uncertainty – which most in the industry recognise has been caused by the current RET review – as one of the major reasons why the large scale target cannot be met.
Indeed, the local offshoot of AGL Energy’s partner in Australia’s largest wind farm, the Macarthur project in Victoria, accused AGL of crossing to the “dark side” with the other retailers Origin Energy and Energy Australia.
“It looks like AGL has abandoned its support for rational policy, and crossed to the Dark Side with Origin and Energy Australia, putting their interests ahead of consumers and the economy,” Ben Burge, the head of PowerShop, the Australian retail offshoot of Meridian Energy, told RenewEconomy in an emailed statement.
“I’m not sure why they bothered writing two pages when their views can be captured in one line: Please let AGL grab more money from consumers by increasing wholesale prices (by diluting the RET), giving more money to AGL’s thermal plant as capacity payments, and paying AGL and their mates to close their coal fired stations.”
PowerShop also rejected the claims by AGL that the LRET would be impossible to meet – a claim repeated by other retailers with large interests in the coal industry. PowerShop pointed to the low price of renewable energy certificates – now around $28 – compared to the penalty price if the target was not met – which is $93.
“If these opponents to the RET genuinely believed their own arguments, they would be purchasing LGCs now, until such time as they start to approach the tax adjusted equivalent of the penalty price,” PowerShop wrote in its submission to the RET.
“The truth behind this disconnect is that some of the RET opponents (who control the majority of purchasing obligations) have an expectation that they can succeed in influencing a change to the LRET to reduce their obligations and diminish the downward pressures on wholesale prices that threaten their ability to prop up returns on their core assets (thermal generation).”
AGL Energy also repeated its calls for payments to be made to help coal fired generation to be permanently removed from the market, rather than just mothballed. It has previously cited the need to help with costs of “remediation” in closing coal fired generators.
It also wants new market mechanisms such as “capacity” markets – which allow for extra payments to be made for baseload or “dispatchable generation. This is a subject of fierce debate in European markets.
Germany has so far resisted such calls, despite its major generators losing money due to the influx of renewable energy. The International Energy Agency is also doubtful that they can be effective, and the capacity market in Western Australia has also been criticized for encouraging new capacity – such as diesel-fired peaking plant – to be built on public subsidy but which are never used.
The debate over market design will be intense in Australia. Supporters argue that the falls in wholesale electricity prices caused by the influx of renewables is good, and offsets the direct cost of the renewable certificates. AGL and others argue that it undermines the economic case for investment in any new plant. (Actually they don’t want any new investment because of the existing over-supply).
“Investment has become intractable,” the AFL Energy submission says. “There is little point continuing with higher targets for the LRET in the future if the underlying economic fundamentals prevent investment in new renewable capacity.”
However, it also appears to be arguing that the RET should not be removed altogether, as some generators and industry groups have called for.
“It is critical that existing investments be appropriately recognised as having been made due to legal obligations to invest in new renewable energy projects or enter into Power Purchase Agreements (PPAs),” it writes.
AGL Energy is the largest single investor in renewable energy in Australia, and its outgoing managing director Michael Fraser used to the chairman of the Clean Energy Council.
However, series of major fossil fuel investments, including the purchase of the Loy Yang A brown coal generator in Victoria, and the proposed purchase of 4.6GW of black coal through the purchase (so far rejected) of Macquarie Generation in NSW, would mean that its revenues would be leveraged towards fossil fuels over renewables by a factor of around 12:1.
