RET deal gives no renewables certainty over coming decades

The Conversation

Over the past 14 months the uncertainty over the future of the Renewable Energy Target (RET) has completely stalled Australia’s electricity industry (both renewables and fossil fuels), causing many companies to reconsider their future in this country.

A compromise target of 33,000 gigawatt hours (GWh) in 2020 agreed between Labor and the Coalition has finally ended the deadlock. Or has it?

The electricity industry needs certainty to invest in long-term generating capacity, but the target itself is only in force until 2020 (just four years and seven months away). At least the major parties have agreed to get rid of the intermediate biennial reviews which would have thrown certainty out the window.

But Labor has promised to increase the target after the next election, and who knows what a re-energised post-election Coalition government might do if they were to retain power.

So where does that leave the sector over the coming decades?

Falling demand increases renewable share

The ostensible reason for the current review was that for a notional goal of 20% renewables by 2020, the original target of 41,000 GWh would have been “too high” (23% to 26%) – given that grid-based electricity demand has fallen over the last seven years (see the chart below).

Pitt and Sherry Emissions Index, May 2015

This fall is the result of a combination of reasons: the changing structure of our economy away from manufacturing, fallout from the global financial crisis, increases in electricity prices arising from over-investment in networks to meet projected peak demand, improvements in energy efficiency, and the explosion of rooftop solar to replace grid-based electricity.

The decline is marked: 9% in the four years and seven months since September 2010 or around 2% a year. If this decline continues to 2020 – a similar time interval away – then it could significantly increase the percentage contribution of renewables.

Minister for the Environment Greg Hunt currently estimates that the 33,000 GWh target will provide 23.5% renewables by 2020. This is similar to projections by ACIL Allen in their report commissioned for the RET Review Committee which assumes that electricity generation will rise (not fall) each year by 1.6% on average.

Alternatively, if demand flatlines until 2020, then the contribution of renewables (currently around 16%) could exceed 25% based on the other ACIL Allen parameters.

Even more significantly, if demand continues to fall at the same rate as in recent years, then the number could surpass 28%.

By comparison, a 41,000 GWh RET would have yielded around 26% renewables under the growth scenario, around 29% with flatlined demand, or around 32% with declining demand.

Pushing out large solar

In any event, without a price on carbon, the lower renewable uptake created by the 33,000 GWh target will slow the much-needed decarbonisation of Australia’s economy. The electricity sector’s emissions have dramatically increased since the removal of the carbon tax (see the chart above), at a time when the international imperative to reduce emissions is increasing.

Further, because of the backlog of wind projects already stalled by the RET uncertainty, large-scale solar may be squeezed out even though it will be increasingly competitive towards 2020. While wind is currently the cheapest new-build renewable, the Australian Energy Technology Assessment shows it will be followed hard on its heels by solar in 2020 because of rapid cost reductions. But the potential to overtake wind on price may come too late if the 33,000 GWh is already built out by new and pipelined wind projects.

In addition, the predicted potential for the RET to eventually reduce electricity prices (due to increased competition with incumbent generators) will be less effective now that the RET is reduced and future low-price competitors are potentially squeezed out.

No room for wood-burning

One thing is for sure, there should be no room in the RET for the burning of so-called “native timber waste” left over from other logging operations. Even if leftover timber that would otherwise decay is used, this is not a zero-carbon source of electricity for two key reasons.

First, the timber decay process itself takes many decades and retains some of the carbon in the soil, whereas burning the waste timber releases it immediately into the atmosphere.

Second, there is an additional and ongoing carbon footprint from the collection, transport and further processing of the waste timber before burning.

This is the best-case scenario. The worst case is that burning timber waste is a stalking horse for logging trees that would otherwise have locked up carbon naturally or in timber products.

With the current RET deadlock over, our next focus should be on Australia’s emissions reduction trajectory post-2020. If Australia is to meet its international obligation to keep global warming below dangerous levels, we need to provide the electricity sector with the certainty needed to make this happen.

The Conversation

Ken Baldwin is Director, Energy Change Institute at Australian National University.

This article was originally published on The Conversation.
Read the original article.

Comments

7 responses to “RET deal gives no renewables certainty over coming decades”

  1. barrie harrop Avatar
    barrie harrop

    Seems fine there will be no new coal fired energy plants built in Aust,most of the existing are past their use by date,and are not viable to extend the life with compliant costs ,nor could they be financed in any event,time to move on to renewable energy.

    1. david H Avatar

      Yes. In the long term technology, economics and the market will decide what happens – not the politicians. .

  2. Ken Dyer Avatar
    Ken Dyer

    The RET is an absolute red herring. The quickest way to get rid of coal is to remove their subsidies or subsidise renewables the same as coal. Then sit back and see who wins the race.

    And before people start bleating about lost jobs, put all those out of work specialist miners to work building high speed railway links – we will need a few tunnels. Not to mention all those renewable energy jobs currently going begging because of the bloody RET.

    1. david H Avatar

      Ken, In addition we could phase in world best practice emission limits which would see old coal power stations closed as it has for example in the US.

  3. JohnRD Avatar
    JohnRD

    Abbott has convinced investors that the RET is exposed to sovereign risk no matter what agreement is reached. We should be aruing for something like the ACT renewable auction scheme.

    1. david H Avatar

      John, I agree. It also shows a serious flaw in the Australian political system (federal and state) where major legislation can be changed on a whim for political point scoring while ignoring the destructive outcomes. It seems that other countries have found logical ways around this type of nonsense.

  4. Paul Turnbull Avatar

    There is room for wood in good climate policies just not for electricity generation. Collecting and delivering wood for electricity needs a lot more certainty than 4 years to be a profitable investment. Given that wood can also be used for liquid fuel its use for electricity is unlikely and unwise. The carbon cost for collecting and delivering wood is minor- why don’t you say this? Removing mature older trees and replacing them with vigorous younger trees increases the amount of carbon pollution removed from the atmosphere. Why do you mention the decay when you don’t highlight the more significant growth of younger forests? How can you ignore the risk of forest fires turning all the store carbon into carbon pollution – with no benefit to society? Giles why don’t seek more balanced views on this political side show which has more to do with how sensible land use?

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