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RET Review panel calls for large-scale, solar schemes to close

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The RET Review panel appointed by Prime Minister Tony Abbott has effectively rubber stamped the lobbying of the fossil fuel industry and called for the closure of Australia’s renewable energy target to new entrants as one of two options it is recommending to the government.

It is also calling for the immediate closure, or rapid wind back, of the small-scale renewable energy scheme, which supports rooftop solar and solar hot water. It says this scheme should either close now, or by 2020 at the latest. It also says it should be restricted to installations of less than 10kW – effectively cutting out the commercial-scale solar market. (It was previously open to 100kW systems).

As for the large-scale scheme, the panel says the two options are effective closure to new entrants, or a form of modification to restrict it to a “real” 20 per cent of demand.

If the government accepts either of the recommendations, Australia would become the first country to either ditch a renewable energy target, or wind it back – in much the same way as it was the first to scrap a carbon price.

Abbott is said to be in favour of the most drastic action, which is effective closure to new entrants. He personally appointed the panel, rather than follow the statutory requirements to have the review done by the Climate Change Authority, which just 18 months ago rejected the same arguments that the new panel has now accepted.

Although any legislative changes will be resisted and probably stopped in the Senate, the uncertainty will be enough to kill investment in large scale renewables. Changes to the small scale target could be done without the need for parliamentary approval.

The RET Review panel report suggests that the LRET could be modified to increase in proportion with growth in electricity demand, by setting targets one year in advance that correspond to just 50 per cent share of new growth. Except that there is no forecast demand growth. It says this approach would result in renewables making up a 20 per cent share of forecast electricity demand in 2020.

The RET Review panel says that targets would not be mandated for future years, exposing renewable energy investors to the same market risk (that future levels of electricity demand are unknown) that other investors in the sector currently face.

The findings brought immediate condemnation from the renewable energy industry. Climate Councillor Tim Flannery accused the panel – headed by climate change science skeptic and pro-nuclear advocate Dick Warburton – of bias.

The industry has warned of potential bankruptcies and massive job losses if either of the two scenarios outlined by the RET Review panel was implemented. Bloomberg New Energy Finance warned this week that such moves could “kill” the renewable energy industry in Australia for up to a decade.

The RET Review panel said it “recognises that repeal may result in adverse financial implications for existing investors.” But it said it would prefer to ignore the term “sovereign risk” and describe it instead as “regulatory risk” that is always present.

It accepted all the arguments put forward by the fossil fuel lobby on the costs of abatement, and the cost of the policy, and downplayed findings by its hand-picked modeller that suggested the costs of the target to consumers were more than offset by the fall in wholesale electricity prices.

Yet, at the same time, it said scheme has led to lower wholesale electricity prices and that its impact on household bills over time is “relatively small”. Abbott has led his campaign against renewables on the supposed cost of the scheme.

Clean Energy Council Acting Chief Executive Kane Thornton said that the recommendations proposed by the review could bankrupt the industry and put thousands of workers out of a job, while terminating competition and innovation in the Australian energy sector.

“It is inconceivable that the review could objectively recommend slashing the RET when its own economic modelling showed this would lead to higher power bills in the long run, while at the same time smashing billions of dollars of investment,” Thornton said.

“The review panel has clearly misunderstood the devastating effect of many of its recommendations. It is particularly naive to suggest that slashing the target would not have a massive impact on businesses that have invested on the basis of a legislated policy scheduled to operate out to 2030, and with over a decade of bipartisan support to date.”

“The biased review panel unsurprisingly recommends phasing out or abolishing the small and large-scale targets which threaten the strangle hold of highly polluting coal and gas producers,” said Flannery.

“Well I can tell you who does like renewable energy – the 10 per cent of Australians who generate their energy from their solar panels and the 21,000 people who have good Australian jobs in renewable energy. They will all be gravely disappointed by this flawed process.”

“For a panel led by someone who has lack of understanding of the scientific basis of climate change the results are hardly surprising.”

Infigen Energy last week described any attempts at restricting the RET as “economic vandalism” designed to satisfy climate skeptics. It repeated the claims this week.

The Greens on Thursday described the report as “climate denier drivel”. “I’m glad this dangerous and ignorant report is finally public, so everyone can see it for the climate denier drivel it is. The outcome was determined long ago,” said Greens Leader Senator Christine Milne.

Here are the full list of recommendations:

1 The Renewable Energy Target (RET) should be amended in light of the changing circumstances in Australia’s main electricity markets and the availability of lower cost emission abatement alternatives.
2 The Large-scale Renewable Energy Target (LRET) should be amended in one of the following two ways:Option 1 – Closed to new entrants (‘grandfathering’)
In order to reduce the costoftheLRET and its impact on electricity markets, the Panel recommendsthattheLRET should be closed to new entrants.

  1. The LRET is closed to new renewable energy power stations (subject to limited exceptions described below). The Clean Energy Regulator (CER) should set targets annually based on estimated output from accredited power stations.
  2. In addition to those renewable energy power stations already accredited under the scheme, eligibility would be extended to:
    1. Renewable energy power stations already under construction.
    2. Renewable energy power stations to be constructed where project proponents can demonstrate that there is full financial and contractual commitment to the project (e.g., final investment decision, engineering and procurement contract) within one month of the announcement of this approach.
  3. The last year of the operation of the LRET is 2030.

or

Option 2 – Share of growth in electricity demand
In order to provide support for new renewable power stations, and contribute to Australia’s emissions reduction target while achieving less reduction than Option 1 in the cost of the LRET, the Panel recommends that the target be set to allocate a share of growth in electricity demand to renewables in the following manner:

  1. The target is set annually by the CER, increasing each year to 2020 by an amount equivalent to 50 per cent of projected growth in national electricity demand, ensuring that new renewable energy power stations are only supported under the RET where electricity demand is increasing.
  2. Where national electricity demand is projected to remain flat or fall, the target is held at the previous year’s level.
  3. From 2021 onwards, the target is fixed at the 2020 level until 2030, the last year of the operation of the LRET.

Based on current electricity demand forecasts, this approach would achieve a 20 per cent share of renewables in the electricity generation mix by 2020.

3 The Small-scale Renewable Energy Scheme (SRES) should be amended in one of the following two ways:Option 1 – Abolition
In order to address the costoftheSRES (and its effect on electricity markets), the Panel recommends that it be closed immediately in the following manner:

  1. The SRES should terminate upon announcement.
  2. Those who contracted before the announcement for the installation of a small-scale system should receive the certificates they would have done.

or

Option 2 – Bring forward the phase-out of the SRES
In order to reduce the cost of the SRES while providing some support for new small-scale renewable energy systems, the Panel recommends that the phase-out of the SRES be brought forward in the following manner, to take effect immediately:

  1. Bring forward the last year of operation of the SRES from 2030 to 2020.
  2. Reduce the period for which certificates may be created for rooftop solar PV systems from 15 years to 10 years, and in each year from 2016 onwards further reduce the period for which certificates may be created, as set out below:

Rooftop solar PV: period certificates may be created

Year installed Period
Prior to announcement 15 years
From announcement 10 years
2016 9 years
2017 8 years
2018 7 years
2019 6 years
2020 5 years
2021 onwards Scheme closed
  1. Reduce system size eligibility threshold for rooftop solar PV systems from no more than 100 kilowatts to no more than 10 kilowatts.
  2. Reduce the period for which certificates may be created for solar and heat pump water heaters by one year each year, commencing in 2016, as set out below:

Solar and heat pump water heaters: period certificates may be created

Year installed Period
Prior to 2016 10 years
2016 9 years
2017 8 years
2018 7 years
2019 6 years
2020 5 years
2021 onwards Scheme closed
4 The current partial exemption arrangements for emissions-intensive trade‑exposed businesses should be maintained.
5 The self-generation exemption should be amended to extend the one kilometre radius restriction and to permit self-generators to supply incidental amounts of electricity (below a set threshold) to third parties without attracting a RET liability. The Government should consult with affected parties to determine an appropriate distance limit and threshold for incidental off-takes.
6 The Government’s commitment to the reinstatement of native forest wood waste as a renewable energy source under the LRET should be implemented through the reintroduction of the relevant regulations in force prior to 2011.
7 The requirement for statutory reviews of the scheme should be removed from theRenewable Energy (Electricity) Act 2000.
8 Projects, or components of projects, receiving support under the RET should be excluded from participating in Emissions Reduction Fund auction processes.
9 Projects that receive support under the RET should not be eligible to receive further assistance from the Clean Energy Finance Corporation or the Australian Renewable Energy Agency.
10 To further reduce the costs of the RET the Government should consider the following proposals to improve the operation of the scheme:

  1. Bring forward the dates for setting the Small-scale Technology Percentage and the Renewable Power Percentage from 31 March in the compliance year to a date prior to the commencement of the compliance year (e.g., 1 December).
  2. Align the acquittal of LRET and SRES obligations so that both are acquitted six monthly and allow liable entities to carryover a shortfall of small-scale technology certificates (as is currently the case for large-scale generation certificates).
  3. Publish the RET liable entity with whom an EITE business will negotiate the provision of the Partial Exemption Certificate.
  4. Update guidelines for determining the renewable components in waste for electricity generation.
11 The Government should consult with affected parties on implementation of the Panel’s recommendations for the RET including:

  1. Measures for ensuring that large-scale generation certificates trade in a suitable price range that provides an appropriate level of support for accredited power stations.
  2. Methods for setting targets.
  3. Setting the distance limit and threshold for third party off-takes for the self-generation exemption.
12 The Panel’s recommendations for progressively reducing the deeming rate for solar PV installations and reducing the size eligibility threshold from 100 kilowatts to 10 kilowatts should take effect from the date of announcement. Transitional arrangements should be provided for parties that have entered into contracts on the basis of the current policy at the date of announcement.
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  • Andrew Thaler

    Sign those contracts… even if you haven’t decided on what you are installing yet.. up to 100kW of course :)

  • Marka

    “It suggests that the LRET could be modified to increase in proportion with growth in electricity demand”

    how does this work when demand is dropping?

    • Pedro

      That’s the point, it’s not supposed to work. There will be no large scale RE development.

      • Andrew Thaler

        The same way they will *increase* the chocolate ration Marka…

  • Chris Fraser

    It’s not hard to see that the growth of renewable is affected both in its share of the existing generation, and from there it’s share of any growth of energy demand in the future. Absolutely no risk of using good economics to model it either. So, renewable growth is only at the whim of the expensive fossil burners during the term if this Government ? Giles is right they have simply rubber stamped the fossil lobby.

  • Blair Donaldson

    The whole review was a farce from the word go given that Abbott hand picked a climate change denialist and scientific ignoramus in Dick Warburton. Hopefully the Senate will block all the recommendations. The other option is putting pressure on state governments to or enhance their own RET. Either way, renewables and those who support them have a battle on their hands while Abbott and his fellow clowns are in control.

  • Zvyozdochka

    I’m extremely confident that the Abbott deniers have TOTALLY miscalculated this one.

    • Blair Donaldson

      I sincerely hope you are correct and that this stunt by Abbott and Warburton blows up in their faces. I suspect we won’t get much assistance from the Murdoch media on this matter.

  • JustThink4Once

    These idiots may be able to stem renewable energy here, but they don’t control the rest of the planet. The price of coal is steadily dropping as demand shrinks, ultimately to the point where it’s too expensive to dig up. See http://cleantechnica.com/2014/08/26/chinas-coal-consumption-finally-decreased/ .
    All that will come of this is an electorate that remembers who held Australia’s future back, long after the Liberal party’s financial backers in the coal industry have left for greener pastures.

  • Greg Wilkins

    The report says that the solution to the oversupply of generation capacity is to stop more renewables. But the whole point of a renewable energy target is to REPLACE generation capacity by closing dirty coal generators. The fossil fuel lobby just refuses to accept that some generators have to close.

  • Phil Gorman

    This is bloody outrageous. The whole of Team Abbot should be arraigned for abuse of power for this alone. Is breach of protocol actionable? Surely the affected industries could sue for breach of contract.

  • Rob G

    Everyone knew this would be a hostile review and it doesn’t fail to deliver just that. But at what cost? Surely if you we’re going to sell it into the Senate you’d take a more softly, softly approach and make a better pitch for their vote. But not here, it’s a nasty one side piece of research that smells like the fossil fuelers, sounds like the fossil fuelers and looks like the fossil fuelers. If anything, this ought to wake-up even the most docile of senators out of their slumber. Choose your sides wisely senators, as your own political futures will depend on it. When the Abbott ship goes down, you will go down with it!

    • JonathanMaddox

      This is the panel recommendation only. Whatever ends up being proposed as legislation and/or enacted as departmental regulation will be a little watered down, so the government is seen to be playing nice.

  • Macabre

    There will be a Royal Commission on this in the future – and it will be a worthy investigation for once (unlike the current round of Royal Commissions).

  • AB

    As a technical point. Electricity consumption is not dropping as much as claimed. Metered consumption is dropping which is good thing.

    Un-metered consumption is unknown because, well its unmetered. Solar that is on Net FIT metering configuration falls into this category. Only the unused amounts of energy flow back into the grid and is then metered. So consumers are still consuming energy, just not metered. Obviously this is profits we are talking about.

    Installations that self consume their entire energy fall into this category. So does industry that changes to more appropriate fuel of an operation, solar thermal to pre heat a boiler for example. This is energy that traditionally was captured by a meter and capitalised by business.

    The point is you can’t manage what you can’t measure, but hey what’s the point anyway. Metrics and evidence play no part in this government on any decision.

    It’s the Catholic model, shut down, destroy and deny, then presto there is no debate then science and justice become an abstract concept.

  • Damien

    Can someone explain to me how Govt can just ignore a ‘statutory requirement’ that the CCA do the RET review? I don’t get it? Does not this ‘statutory requirement’ mean that they have to use the CCA for the review?

  • Jay Inott

    This is outrageous! The mis-guided, ill-informed nature of these proposals make a horrifying read for anyone aware of the consequences. Please do not be discouraged if this is you. In the end, the 20% target was never a satisfactory target for me- when considering the overall reductions in emissions required & the likely trajectory or poorer nations which dictate a FAR deeper response by us- and the RET does look overtly bureaucratic in trying to achieve this understated goal.

    While I wholeheartedly thank the great work of those involved in bringing the RET to fruition -any step forward is a benefit- something better was always needed! (if we truly take individual responsibility in achieving a global alteration in emissions to mitigate risks sufficiently).

    Surely solar is soon to surpass any need for enforcing it in the market through its own merits; Aren’t improvements in technology meaning that initiatives such as this will bring a strong incentive irrespective of this legislation?

    http://choice.sunpower.com.au/

    I welcome comments as a new comer to this topic..

    • Pedro

      Hi Jay

      You are right there is a fairly constant improvement to solar PV technology either with cost reductions in production and efficiency gains. The end result is solar is getting cheaper every year.

      The real problem with solar and RE in this country is the constant attacks at both state and federal level on it and power companies coming up with ever changing regulatory hurdles. Essentially barriers to market entry for clean energy systems or projects.

  • george crick

    when are the voters going realise that the abbott government to help their mates in the coal/gas industry that abbot govt only wants to helps their mates in the coal/gas industries as they contribute to their party’s election funding?