103-day election campaign to put more pressure on renewables target | RenewEconomy

103-day election campaign to put more pressure on renewables target

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BNEF says time running out to meet large-scale renewable energy target. Despite promise of stable policy and high certificate prices, investment remains at a standstill, and new reports suggest Coalition wants to merge CEFC and ARENA.

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The Federal Coalition’s move to put the country in election campaign mode for 15 weeks before its threatened double-dissolution federal poll is likely to put more pressure on the large-scale renewable energy target, which remains stalled since before the Coalition’s election three years ago.

It is now likely that the Coalition will go to the polls on July 2 with virtually nothing to show for its supposed “support” for renewable energy policy, apart from an extended investment drought and just a handful of wind turbines.

wind farm windlab

This may keep the large and influential anti-wind, conservative faction of the party happy, particularly as the government announces more research funding into the “health impacts of wind farms”. But it poses problems for the Turnbull government, as it seeks to distinguish itself from Abbott-era policies on renewables and climate change.

Despite a change in tone, the details of those policies remain untouched, and prime minister Malcolm Turnbull has repeated many times that the government’s current emissions reductions target is adequate – a view shared by few beyond the climate skeptic camp and vested interests.

It is hard to imagine him saying much different in the lead up to the poll, given the sensitivities within his own party.

The Guardian reports that the two institutions that the Abbott-led Coalition wanted to dismantle, the Australian Renewable Energy Agency and the Clean Energy Finance Corporation, may now be merged and use only borrowing, raising fears that ARENA will effectively be be emasculated.

That’s because ARENA provides grant funding – that it does not expect to get back – to help first-of-a-kind projects. Only then can those projects get project finance from the CEFC. If grants are removed, ARENA effectively fails to exist and new technologies will be unsupported.

John Grimes, from the Australian Solar Council, said “this looks, feels and smells like a cost cutting measure. The Abbott/Turnbull governments have tried unsuccessfully to abolish ARENA and the CEFC. This looks like a backdoor way to gut Australia’s most important clean energy agencies.”

The Clean Energy Council also expressed its concern. “ARENA has played a crucial role in providing capital grants to exciting near-commercial technologies such as large-scale solar, and this investment is helping to rapidly drive down capital costs,” CEO Kane Thornton said.

“While we recognise there are opportunities for more coordination and a closer working relationship between ARENA and the CEFC, it is important that the government continues future support through funding for projects, innovative finance and the high-level research and capability that has been established in these institutions.”

It is only funding from ARENA and CEFC that has allowed any wind or solar projects – apart from those commissioned by the ACT Labor government – to be built over the last 3 years.

On the RET, insiders and analysts say there is no real reason why investment in large-scale wind and solar should halt in an election campaign – apart from the obvious fact that it already has – given that there is bipartisan support for the current RET, and the “worst that can happen” is the re-election of a Turnbull government.

That might be true in normal circumstances were it not for the fact that the fossil fuel industry is hopeful, and the financing industry hopeful, that policy can be changed.

The renewable energy industry’s efforts, to date, to try to break that drought have been fruitless and, despite the huge shortfall looming, an extended election campaign may not be the right time for notoriously conservative financiers to loosen their purse-strings.

The renewable energy industry is well aware of what needs to be done to tweak the RET legislation to make it work – mostly extending the compliance timelines – but won’t campaign on that in the lead-up to the election.

On Monday, before Turnbull announced he would recall parliament and use highly contentious industrial relations laws to trigger a double dissolution on July 2 if it were rejected by the Senate, Bloomberg New Energy Finance said Australia was running out of time to meet its renewable energy target.

It said that even with a “stable policy” – now reduced to 33,000GWh from 41,000GWh – and record certificate prices, which have surged to more than $80/MWh, recently announced programmes and intended projects “may just be enough” to produce the required supply.

“There are many challenges and the market may be cutting it too close,” BNEF said in an excerpt from its quarterly report emailed to RenewEconomy.

“A minimum of 3.1GW of capacity needs to be commissioned by 2018 to avoid a shortfall, which requires 1.8GW of new investment,” it says. “A series of recently announced programmes and projects largely sponsored by government and retailers could deliver this amount, but the timing is tight and will leave the market with little liquidity.”

BNEF notes that even with certificates known as LGCs (Large-scale Generation Certificates) at record highs of more than $80/MWh, no new investments have been confirmed.
“Credit constrained and risk-averse electricity retailers appear to be re-engaging with the market, but long-term Power Purchase Agreements remain elusive and merchant exposure continues to spook investors.”
One of the main issues is the uncertainty about revenues post 2020, and the value of LGCs from 2020 to 2030, when the target flat-lines and then expires. The value could be affected by energy demand and coal retirements, which are “anyone’s guess”, and BNEF says this puts the viability of the target in doubt.
“Investors and off-takers essentially have to take a bet on new policies supporting their projects in future. This appears likely due to Australia’s high emissions, however climate change policy is unpredictable and remains highly politicised,” it says.
 The industry is aware of this and wants to make changes, but is reluctant to make an election issue out of it because of the fear of push-back from the conservatives.
Indeed, former prime minister Tony Abbott has already stepped into the public debate by declaring that Turnbull is running on exactly the same policy platform as the Abbott government.
That is hard to dispute, given that Turnbull has steadfastly insisted that the emissions reduction target formulated by Abbott is adequate, and refused to change course from the Direct Action policy he lambasted before reaching high office.
Labor, of course, has a much stronger 50 per cent target by 2030, but is yet to release details of how this would work. It would seem there is a big opportunity to make mileage out of the issue in coming months.
It can point to the fact that virtually nothing has been built since it was clear that Tony Abbott would be elected in 2013. The only wind and solar farms to be built or committed have been contracted by the ACT Labor government’s 90 per cent renewable target, and by projects supported by the institutions that the Coalition has tried to dismantle.
The Labor states in Queensland, Victoria and South Australia have announced tenders for what combine to be 300MW of wind and solar capacity, while ARENA and the CEFC hope to encourage another 200MW of large-scale solar projects.
There are signs of movement. AGL has created a new investment fund, which essentially serves to lower its own financial risk, and Origin Energy has sounded excited about solar, and this week contracted a design and engineering firm to progress a 200MW solar plant in Queensland.
The other big retailer, EnergyAustralia, is not so active, although it has commissioned a few extra turbines at its Waterloo wind farm to help meet its target.
As UBS noted in a recent report, the problem the industry faces is that despite legislation, there is no penalty on retailers or other obligated parties for not meeting their targets. They simply pass on the penalty price to consumers, whose money then goes into government coffers. There is no carrot to encourage investment, and no stick to penalise the lack of investment.
A handful of smaller energy retailers have already failed to meet their targets, but probably because they are loss making entities, so the current price of $80/MWh is more than the penalty price of $65/MWh. For those companies making profits and paying tax, the penalty price equates to $92.50/MWh.
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  1. SM 4 years ago

    The coalition is probably going to get re-elected in-spite of its current travails. So don’t expect any amendments to the LRET until after the promised review of climate policies starting in mid 2017. If the review is honest (ha ha) then expect some radical re-engineering of Direct Action & the LRET to get emissions trending down. If the review is political expect radical re-engineering of the LRET and creative accounting to cover up Direct Action’s failure and the climate can kicked down the road for the following government to deal with.

    • MaxG 4 years ago

      I am afraid this will be the case. 🙁
      As I said, Australians are stupid!

      • Suburbable 4 years ago

        Australians aren’t stupid. We’re just complacent.

        • MaxG 4 years ago

          What’s the difference? 🙂

      • Pfitzy 4 years ago

        We kicked the ALP our because they were awful for various reasons.
        The LNP are awful for various reasons.
        Neither of them are really palatable because the root of professional politics is deep after two generations.
        The major parties can’t be shifted without a serious attempt at chaos from the electorate, and that will lead to an intractable Parliament.

        Burn it down, start again.

    • neroden 4 years ago

      The polling is roughly 50-50 now. I think Bill Shorten has a chance to win. Fight for it!

      • solarguy 4 years ago

        Yes, I think Bill does have a chance now. He has to drive home the message further that climate change is real to the complacent and the weak heads alike. In addition it’s time to reveal to the public, Labors plan to achieve 50% by 2030 and vision beyond.
        If Labor can win the RE investment will flow. The one thing that they can blow it on, is allowing to much investment on R&D into new technologies as we already have the technology now to make a huge start and ultimately achieve 100% with what we currently have. We have 14yrs to make a real difference and set the path to 100% RE. That must be implemented NOW!
        It’s up to Australians to wake up to the Liberal Nazi Party’s right wing lunatics and their FF backers and throw them out of government.

  2. Suburbable 4 years ago

    Eneegy targets and renewables in general are shaping up to be the deciding factor for the upcoming election. It’s sad that the COALition (i love that name) even stand a chance of being elected given their history on energy, welfare and the evonomy.

    All Labor need to do is to present some figures on how they are hoing to achieve their goals and they will improve their chances of seizing victory. But their recemt history leaves me doubtful of their ability to do that. Even if they do, the Abbott circus proved that you don’t have to keep election promises, or even acknowledge that they existed.

    As usual, the Libs can’t win an election by themselves, so I think the pressure to provide a coherent, ambitious but achievable target for renewables needs to be put onto the National party.
    The odds on that getting results are minimal at best.

    From the above, you can probably see what a sorry state Australia in in. A much too complacent electorate has let things slide for too long.

  3. Andrew Woodroffe 4 years ago

    The line above saying there is no penalty on retailers is simply incorrect. Of course, there is – it is the non tax deductible penalty of $65/LGC(MWh) mentioned in the paragraph below. It is correct to say that the retailers are passing the penalty on to their customers as they do with the cost of buying LGCs. It is that the penalty is not, currently, enough.

    The uncertainty of the future demand and future policy along with an ever increasing amount of rooftop solar is got to be having an effect on decision making with the retailers.

    We seriously need to start phasing out the old coal plant.

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