BNEF: RET changes to cause bankruptcies, kill industry for decade

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Leading analysts Bloomberg New Energy Finance predict that the market for large scale renewable energy in Australia will be effectively destroyed by any scaling back of the renewable energy target, leading to bankruptcies in the sector.

BNEF warns that the impact could be broad. “A whole host of Australian and foreign companies and lenders could be exposed to asset impairments, and almost all will suffer significant write-downs in the mark-to-market value of their investments,” it says in a new report.

The analysis was published ahead of the release of the findings of the RET Review panel, and on the assumption that the target will be closed to new entrants, or severely scaled back.

BNEF’s concludes that the market for large-scale generation certificates (LGCs) will be destroyed and have a “fundamental value of zero” – because they will no longer be a scarce commodity. (There is already a large surplus in the market).

The closure to new entrants is the favoured scenario of Prime Minister Tony Abbott and his inner circle of advisors, as well as Industry Minister Ian Macfarlane, who closed the Howard government’s MRET scheme to new entrants a decade ago – despite an independent report that advised expansion of the scheme.

Environment Minister Greg Hunt is said to favour a scaling back of the target to a “real” 20 per cent, but is likely to be over-ruled. Clean energy companies says the outcome of either scenario is more or less the same – the destruction of the industry in Australia – as both Infigen Energy and Pacific Hydro have made clear.

BNEF’s analysis says that with LGC’s effectively valued at zero, renewable energy operators will be relying only on wholesale electricity prices, effectively at record lows.

“Equity investors will be quickly wiped out and projects will likely default on debt payments. Bankruptcies of renewable developers could then be expected, and exposed renewable energy assets will probably be stranded,” it says in a report.

In particular, wind projects that run on a merchant basis, rather than a power purchase agreement, are most exposed.

BNEF notes that any changes are unlikely to be legislated, given the support of the current scheme from Labor, the Greens and the Palmer United Party (at least until 2016 for the latter).

“Nonetheless, under such a scenario, investment in large-scale renewable energy assets would cease in Australia until at least 2020 and likely until around 2025, when new electricity supply is projected to be needed.”

BNEF says the charts below show the top 20 equity investors and debt providers in renewable energy assets in Australia. Many of these companies could be exposed to losses if assets are stranded by a change in government policy, it says.

bnf equity

bnef debt  

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  • Andrew Thaler

    An interesting thing to enquire upon.. and I might be wrong on this.. I recall the electricity retailers being given exemption from (something, competition regs or similar) and that with this exemption they were able to ‘pass on’ the full cost of the LGC’s (they were obliged to purchase as part of the 20% RET) at the old projected ‘floor’ price of LGC’s: that being around $40 per certificate.
    So if this is the case, and LGC’s value collapse towards zero… retailers are banking a profit by passing on the cost of a ‘zero-dollar certificate’ at $40.
    Just another of the scams that should be stopped. Retailers should not be allowed to profit from the trade of LGC’s to the detriment of the RE industry who invested their money in creating the bloody things!

    • ASIO is so gonna Google your metadata if you keep talking like that

      • Andrew Thaler

        As long as they spell my name right when they serve the summons…

  • Keith

    I guess being “open for business” includes destroying the competition.

    • whatismore

      As well as the environment.

  • greenjenny

    When do we start crimes against humanity proceedings against this government?

  • Dene Charlesworth

    All we are doing is stopping the tax payer funded subsidies. If the industry is viable investment will follow. If not then it should go.

    • Richard

      You need a better understanding of economics. Without the RET investment will follow when the power price rises high enough to justify it. When the prices rise electricity users get fleeced and existing generators get fat. Scrapping the RET is a big value shift from consumers to fossil fuel generators.

      • Dene Charlesworth

        You should have stopped after the second fullstop. Made sense until then.

        • Michael D’Andrea

          Maybe you shouldn’t comment on things you don’t understand.

          • Dene Charlesworth

            I don’t

          • johnnewton

            Oh yes you do old boy. You are a fossil fool, like Abbott

          • Anders Jenson

            How much money have you spent on coa and/or oil?
            How many Watts of energy did you receive?

            How much money would you need to supply the same in Photovoltaic generated energy assuming panel lifetime of 20 years?

          • Anders Jenson

            basically fossil fuels is an IV drip which poisons and forces dependency, anyone without a vested interest in their use can see this, I choose renewable because I car about my health,the people, independence and the environment. What do you value above these things?

          • Anders Jenson

            oath, We need renewables, over your life time Dene the money you have spent on fossil fuels could have payed for an renewable energy power station supplying multiple thousands of people

    • Marto Streisand

      The RET creates jobs, drives investment, reduces electricity prices for consumers and reduces carbon emissions. Unless someone has a completely libertarian philosophy that trumps pragmatic outcomes, this has to be viewed as a good policy.

      • Dene Charlesworth

        For every job created by RET approx 3 jobs are lost in the non subsidised world. All economists apart from the green trained ones agree RET forces prices up. I assume by carbon emissions you mean carbon dioxide & what would be the point of reducing this?? Try not to spout some ‘climate change, global warming, polar bears, hurricanes, drought, flood, snow, no snow, global cooling, rising crime rate, crap.

    • Tony Pfitzner

      The RET is a subsidy that corrects the market for the true cost of climate change caused by carbon pollution. Climate change will cause huge costs in the future. The RET will not force prices up in the intermediate term. The feed stock for renewable energy production is FREE! Coal can’t compete with that.

      But of course Charlesworth you believe this is crap, and base your evidence on a reading of the chook entrails and voodoo economics using the same high quality analytic methods as Abbott and Pell.

      All economists apart from the green trained ones

      Where’d you grab this one from -the chook entrails?

      • Dene Charlesworth

        We in the civilised world prefer to use first names Tony.
        The financal times know a bit about economics.

        • Tony Pfitzner

          It is not civilised to deny science and leave the next generation with a dangerous mess, so spare me the holier than thou crap.

          And I can further extend that to say that the thinking you espouse is far more dangerous than the threat represented by the capabilities of any half-baked terrorist returning from the Middle East. Failure to address climate change has real consequences, not just some relatively minor potential ones.

          • Dene Charlesworth

            To deny the developing world cheap energy that we have all enjoyed is immoral & probably racist.
            I assume you forgo all fossil fuels to protect future generations. I’m sorry to get personal but I doubt you have the mental capacity to research any of these matters so until you come up with some logical arguments I’ll move on to more adult pursuits. Have a good day.

            These “half-baked” islamic terrorists are doing a pretty good job of mass murder at the moment but I don’t get the connection to this discussion?

          • Tony Pfitzner

            To deny the developing world cheap energy that we have all enjoyed is immoral & probably racist.

            To leave them dependent on fossil fuels for development would be immoral. e.g. In India they have little or no grid infrastructure, and it is much cheaper to install distributed solar and have an ongoing fuel cost of zero, and not have to pay every month for the gold plated grid and power costs, and die at 40 from emphysema. The Indian PM Modi knows this, which is why he is promoting a massive solar program, rather than coal fired power.

            As for terrorists, my point is that Abbott advocates spending 640 million to possibly mitigate a small potential threat and drum up a few votes, but not take effective action on a real and very substantial problem.

    • Farmer Dave

      No, Dene – there are no taxpayer funded subsidies in the RET scheme.

  • Rob G

    Seems Abbott has pissed off everyone except the fossil fuelers. The big banks won’t be happy, investors won’t be happy and then there’s the entire population. Forget the Carbon Tax, fasten your seat belts for the big price hikes yet to come. You see, it’s all about favours for his mates.

    • Robert Nicholls

      Got it in one. Any one in the press checked the latest round of donations to the Free Enterprise Foundation?

      • Rob G

        Was that Dick Warburton driving passed in a brand new Range Rover?

  • Russ

    What grounds does the Governor-General need to dismiss the Prime Minister?

    • Robert Nicholls

      Supply is blocked or the government is unable or does not have the confidence or support of the houses to conduct business.

  • Hey hey give T & J a break. They made promises to big business before the election and all their trying to is keep them. Its not their fault that you all misunderstood their “promises made promises kept” promises were directed towards the upper end of town and not the people who don’t drive cars very far.