Happy RET ‘Destruction Day’: we need long-term target

Today, the clean energy industry tells us, is the first anniversary of the day the Abbott government began its review of the Renewable Energy Target.Ā They might well have called it ā€œDestruction Dayā€, because that is what it has done to the large-scale renewable energy industry in this country.

In reality, though, the destruction ofĀ the renewable energy industry began a full 12 months before the RET Review panel, led by a Tony Abbott appointed climate denier and pro-nuclear advocate, began its work. The standstill began when it became clear that Abbott would become the next prime minister, and no financier would risk investments under a regime led by, and peopled by, a group who question climate science and dismiss renewable energy.

The question is what to do about it now. CEC chief executive Kane Thornton wants the government to recommit to the current target.

ā€œWe have seen investment in large-scale renewable energy cut by almost 90 per cent. We have seen many of the sectorā€™s 21,000 employees already lose their jobs,ā€ he said in a statement to mark the “anniversary”.

ā€œThis uncertainty has damaged investments and spooked investors, with many of them losing confidence in Australia as a safe investment destination.ā€

Given that the RET has no impact on the budget, and the governmentā€™s own review of the policy showed that the best outcome for household power bills would be to leave the target as is, that is what should be done, Thornton said.

ā€œNow is the time for the government to end the impasse and send a strong, positive signal to the rest of the world ā€“ Australia is open for business in renewable energy.ā€

The CEC even has proposed increased exemptions for large energy users still on the table, even if it is clear from the recent fall in the Australian dollar and rising aluminium prices that the aluminium industry hardly needs it.

But there is fat chance of that happening. The government appears in no rush to resolve the impasse. Talks are said to have been put off until March, and Labor is waiting to hear when exactly the talks will resume.

Meanwhile, Abbottā€™s comments and actions in the past week ā€“ on children in detention, the human rights commission, terrorism, the dismissal of Ruddock ā€“ suggests he is being dragged further to the right, rather than to back towards the centre, in the wake of the call for a ā€œspillā€ of his position last week

That poses problems for the clean energy industry. The wind industry is in a desperate situation, and pleading for a resolution. Some industry players are in such a critical situation ā€“ with declining revenue and continued uncertainty ā€“ and they are on the verge of cutting their losses.

The possible collapse of a major wind farm developer might be fun for the conservative commentariat, but it will not look good for the government ā€“ even if it has barely blinked at the loss of jobs and investment in an economy that is treading water.

The solar industry is not in such dire straits. The small-scale, rooftop market is chugging along nicely. The large-scale sector would probably not come into its own for another few years, but it would like certainty on the large-scale target to encourage large corporates to install bigger systems, and for the build out of some larger projects.

It is for these reasons that it is now suggested a healthy compromise might be to revisit one of the scenarios entertained by the Warburton Review ā€“ a 30 per cent target by 2030. The suggestion is that this might now seem the most politically acceptable target, and the most commercially realistic.

According to the Warburton modeling, such a target would deliver around 52,000GWh of renewable energy by 2030, with a trajectory that would require just short of 30,000GWh by 2020.

ret scenarios

It has a couple of advantages. For the Coalition, the 2020 targets get them close to the ā€œrealā€ 20 per cent target that they have been pushing for in the last six months, and so deliver to their main constituency, which appears to be the coal generators (the only people that benefit, according to the Warburton report, by reducing the RET).

Wind farm generators would benefit because it should underpin the RECs market, giving certainty for future Snowtown64investments and clarity for current ones.

The solar industry will benefit because it will provide longer-term incentives ā€“ introducing a 2030 target would require certificates out to 2040. This will be critical in pricing the contracts that would be needed to get large-scale solar farms built without added government incentives, which are required now. It would also provide time, and an incentive, for geothermal and wave energy to prove their credentials.

It will also avoid a repeat of the boom-bust cycles that blighted the rooftop solar industry. As some industry players note, itā€™s all very well having a 41,000GWh target (which they insist can be met), but it seems pointless if it results in a huge amount of building between now and 2020, and then nothing. Government policy making must be smarter.

Of course, many will say ā€“ quite rightly ā€“ that a 30/30 target would be woefully inadequate. After all,Ā South Australiaā€™s Labor government is aiming for 50 per cent by 2025 (it should really be aiming much higher, given it is already above 40 per cent), the new Queensland Labor government is pushing for 50 per cent by 2030 , the ACT Labor government is pushing for 90 per cent by 2020, Tasmania is virtually already at 100 per cent. The NSW (Conservative) government claims it wants to be the ā€œCalifornia of Australiaā€ but hasnā€™t exactly explained how it would get there.

This is where federal Labor could get smart. It should take note of the recent developments in the UK, the US and elsewhere and either propose laws that ban ā€œunabated coal,ā€ or strict emissions targets that amounted to the same thing. Australia even had such a law, albeit not quite as biting (it was friendly to black coal but not brown coal) but it dumped it after the introduction of the carbon price.

That would set the scene for renewables to steadily take over from fossil fuel generation. As RenewEconomy pointed out on Monday, a new study from ANU found that even allowing for natural attrition _ i.e. closing coal generators when they arrive at their use-by date, or the end of their technical life ā€“ the need for renewable energy would be 140,000GWh by 2040, effectively a 45 per cent target, depending on prevailing demand.

That would require significant build out. And, as most studies show, wind and solar will be the cheapest of any new-build generation ā€“ be it coal, gas or nuclear.

Storage will prove to be cheaper than endless upgrades of the poles and wires that criss-cross the nation, which will allow more renewables to be accommodated on the grid ā€“ although it should be pointed out that South Australia is already at 40 per cent without the need for storage.

That might be a sensible outcome, but it is not clear whether our politicians can rise to the occasion. If, as we suspect, the Abbott government is being pulled further to the right, the most optimal outcome of current talks ā€“ a 38,000GHw target with extended RECs expiry ā€“ would be unthinkable. So might a 30/30 target with strict rules on coal emissions.

And Labor might just be tempted to let the Abbott government stew in its own juices, although it might be better served trying to capture the middle ground that Malcolm Turnbull will certainly occupy should he make it to the PMā€™s office before the next election.

Comments

5 responses to “Happy RET ‘Destruction Day’: we need long-term target”

  1. barrie harrop Avatar
    barrie harrop

    Abbott is in rapid self destruct mode its only a matter of time,say 3 months–6 months before his party will have had enough of his Captains calls (nearly 40% wanted given the sack last week-numbers building by the day),then i expect the RET will be sorted out in 5mins.

    1. Rob G Avatar
      Rob G

      After watching Q&A with MT, you can see Australians getting impatient wanting to get him in and Abbott out. He’s making a whole lot more sense and really is the only get out of jail card the LNP have. Agree Abbott is history and MT will get the RET back in order.

  2. johnnewton Avatar
    johnnewton

    I wonder Barrie. He’s being, as Giles writes, dragged further to the right. And the right hate renewables. Will the new leader (MT?) sort the RET in 5 minutes? He or she will have formidable opposition from the right rump

  3. Chris Fraser Avatar
    Chris Fraser

    We could call it the Renewable Energy Target Abbott Removal, Destruction or Exemption Day – (Retarded for short).

  4. Alan Baird Avatar
    Alan Baird

    It’d be fascinating to watch Bill Shorten in the event of a Turnbull Coalition Govt. How does he differentiate himself from a less-extreme-right-that’s-about-as-far-as-I’ll-go PM? Always keep in mind that a Shorten Labor Govt would always be a pretty leaden performance, as exciting as watching paint flake (slightly longer than mere drying). I suspect that if Turnbull was able to turn the Libs away from their extremist tendencies
    (a huge ask) Shorten would be twisting in existential agony brought about by no room in the space occupied by the “slightly left of hard right”. Diddums! We’re spoilt for choice! On the Right (not necessarily correct) that is.
    On the matter of the RET, fascinating to see the aluminium industry investment in the extremely productive area of (COALition) lobbying has borne fruit. Apparently we must absolve the aluminium industry from their electricity bills. Totally. Some Lib nonentity sez so. In fact we should probly PAY them to use our electricity! We already do? Oh, that’s all right. Anything less and they’ll leave! Don’t tremble dears. It’s only the RET sorting the sheep from the goats. But it’s evil, remember!

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