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If renewables schemes are working, then why dump them?

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There is a pretty consistent theme emerging from the dozens and dozens of submissions to Tony Abbott’s review of the renewable energy target: it doesn’t actually cost anything. Removing the RET or severely diluting it would actually make electricity more expensive.

For the generators themselves, that would be a good thing. Which is why they want the RET removed or reduced. They have built quite enough coal and gas capacity, thank you very much, and force-feeding more wind farms and rooftop solar panels into the grid – even for a specific environmental outcome – will simply reduce their revenues, and make their profits disappear.

Two of the most significant contributions to the RET review panel have been from the NSW Coalition government – which is trying to sell a bunch of black coal generators, and encourage some new renewables – and the Australian Industry Group, which represents a powerful lobby of big, technology neutral businesses.

The points made by these two are quite consistent.

windfarmThe first is that the RET is designed to encourage renewable generation and investment, and reduce our dependence on dirty fossil fuels. And it’s doing a pretty good job of that so far. With the help of the carbon price, coal generation is down, gas generation is down, and the cost of renewable installations is falling. This helps in an orderly and cost-effective transition when ageing coal fired generator need to retire.

The second point is that it is not costing very much. Sure there is an addition to the consumer bills, around 3-4 per cent, but this is offset by the reduction in the wholesale price. Overall, the impact on electricity bills is positive. The AIG says dumping the RET, or diluting it, would lift costs for business.

(So don’t believe the garbage you read about mostly in the Murdoch press, which gives air time to right wing commentators who make ridiculous claims about the cost of renewables, more in their fear that the Greens could be right about anything rather than a recognition of the facts. Still, so perverse has the discussion become that some retailers such as EnergyAustralia argue that the cost of renewables would be $35 billion. Why? Half of this would be the cost of penalty prices paid by retailers such as EnergyAustralia for not building enough renewables to meet the current target. This cost will not be borne by the retailers, but  will be passed on to consumers. Just for a bit of context, the Australian Energy Markets Commission estimated this cost to be $3.5 billion).

The third point, which follows on from the first, is that renewables is a better option than soaring gas prices. And soaring gas prices is exactly what can be expected as the giant LNG trains come into production. The more gas-fired generation there is in the grid, the higher the cost of electricity. Allowing more renewables is an effective antidote.

So what is the fossil fuel industry response to this? Well, kill the RET anyway. The advisors that surround Abbott and appear to have their claws all over this RET review want to do it out of spite. That explains their dumping of election promises and their desire to kill the Australian Renewable Energy Agency – their war against renewables now even extends to those technologies that are “just around the corner” – solar thermal, geothermal, and wave energy, among others. Not to mention the next generation of solar technologies currently being developed in the country’s world leading research facilities.

Apart from the intervention of the AIG, the atmosphere has become so depressing for the renewable energy industry that even small mercies are embraced. This is what gives significance to the submission from the NSW government, which this week lined itself up with the arguments of the major anti-renewable utilities and called for the RET to be diluted to a “true” 20 per cent renewable energy target.

That would result in a significant deferral of renewable energy expansion, and a lot of the states own wind projects, and of the scale not seen anywhere in the world. After more than two years of intensive lobbying of 29 US states by conservative think tanks similar to Australia’s own Institute of Public Affairs, Ohio became the first to crack by agreeing to delay its renewable energy target for two years.

Yet the NSW position is embraced and applauded by the renewable energy industry. The reason for that is that they might have been expected to line up with other conservatives and call for it to be killed altogether, and at least they recognized the cost benefits of renewables, even if – on BNEF calculations – downsizing the RET to a true 20 per cent target would actually push prices up. But as one renewable advocate commented: “Anything that is not a direct kick in the balls is good news.”

Ouch.

So, how will this end up? Probably with a really lousy compromise, and worse than the renewables industry want to imagine. We went through a few of the scenarios before. The RET is likely to be retained in some form, but almost certainly will be diluted.  That’s why the price of certificates is now hovering around record lows of just above $25. Not enough incentive to get anything built, because wholesale electricity prices are also at record lows, and at the point where most coal generators cannot make a profit.

Look at the submission from the Australian Energy Markets Commission, the market rule-maker, for some guidance as to how this might work out: A bastardised scheme that would comprise “clean” gas generation – slowing down the renewables just as other are looking to accelerate – see Germany, Mexico, China and India – and adding another subsidy to fossil fuel generation. (Actually, in theory, a “clean energy” target could work, but only if the target was very ambitious, an unlikely outcome with this government).

All this is being done with the single intention of protecting the incumbents and fossil fuel generation. It really is that obvious and that blatant. The big retailers have done bugger all so far to facilitate renewables  in a meaningful way – the households have taken the biggest burden, encouraged initially by over generous tariffs and now the economic benefits, and have invested $11 billion in rooftop solar, while just $7 billion has been funneled into large scale projects. Now the retailers want to stop, or slow, even that small scale component, because it represents the greatest threat to their current model and short-term profits.

As the Abbott government has said, there is a simple philosophy of this new regime – to extract every molecule of gas and dig up every tonne of coal. And if that means dumping the carbon price, the renewable energy scheme, energy efficiency schemes, financing institutions such as the CEFC and ARENA, and throwing spanners in the works of international climate talks, then so be it.

Ultimately though, it will be the market and the consumers that decide. Ideology and the protection of vested interests can get you so far, and raise costs for everyone, but it can’t stand in the way of technology.

 

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  • Keith

    The budget has helped, because your average citizen now realises that the LNP doesn’t govern for them. Abbott got away with lies and scare tactics to win Govt (eg carbon tax demonisation …. but has he????), but there is a deep sense of public recognition that he is just propping up the fossil fuel industry, with no concern at all for future generations or even short term issues such as increases in electricity prices….. how will he cope with that one?

    El Nino will help focus the mind of your average citizen when it arrives (later this year?).

    • Max Boronovskis

      I don’t think there is that deep sense of public recognition (yet) about the propping up of the fossil fuel industry. The article rightly points out that so much of the media is still running the story about the added cost on our bill of mandated renewables and not the avoided cost of higher wholesale prices. The broader public I don’t think are fully in the picture on this, it is an information war in which we may have the higher ground but we don’t have the big guns.

  • Graeme Henchel

    All governments sow the seeds of their own destruction. Abbott will go the way of the dinosaurs even though he will screw our immediate future. Maybe he is the rightwing ideologue we need to make the general population realise what nutters these people are. The mendacious monk has jumped the shark with his blatant lies and unfair budget. We must maintain the rage.

    • Max Boronovskis

      I agree Graeme, I hope he does go the full term so that there will be no doubt in people’s minds, he will actually do a long term service to many of the causes he is now doing a disservice to in the short term. I want a bumper sticker that says “the mendacious monk has jumped the shark!” very funny thanks!

  • nakedChimp

    Some note from (http://www.cairnspost.com.au/news/cairns/rising-power-bills-add-to-household-budget-pain-in-cairns-and-far-north-queensland/story-fnjpusyw-1226936788168?from=public_rss) in regards to +10% to +15% higher power prices for Far North QLD:

    Will McDonald of Manunda
    “I still have the contract Newman and King sent me just before the last election stuck on my fridge. They must have a different idea of what lowering the cost of living is to me. It’s heartbreaking to have your ageing mother on the phone in tears telling you she will not use her air conditioner anymore and that she feels she would be better off dead because of the imposition she is on the government. I’ve already convinced her that she needs to keep her fortnightly doctors appointments to monitor her various age related conditions and that my wife and I will pay the $7 for her. I’ve always been a swinging voter but am ashamed that I ever voted for King and Entsch. I think I’ve learnt my lesson and will never be voting for the LNP again.”

  • Vic

    Although Abbott and his cronies would dearly love to “extract every last molecule of gas” from Bentley near Lismore, the people there will not let it happen. A critical mass of pushback from the public has been reached and now Metgasco along with the local, state and federal governments are in a state of paralysis over the issue.

    Activism works.

    It’s time to get active Australia. Get organised. There’s more to democracy than just voting at elections.