5 things to know about new Senate and clean energy

Mike Willesee interview tipped Ricky Muir towards renewables

Ricky Muir had a bad start in politics. A very bad start. In his first major interview, with veteran TV journalist Mike Willesee, a brain freeze left him unable to explain a detail of the car industry that a revhead representative of the Motorists Party should have been across. He was mocked by the commentariat, particularly the conservative side struggling to cope with the reality that Tony Abbott cannot exert absolute power.

That interview – and the reaction – made Muir have a bit of a think about his next move. It was then that he decided to “make his mark” by embracing renewable energy, and vowing to oppose the repeal of the Australian Renewable Energy Agency, and any changes to the RET. He and the Palmer United Party now stand firm on both issues.

Apparently Muir has been impressed by the renewable projects in the areas surrounding his home in regional Victoria. He also sensed the strong public support for such projects, particularly at household level for rooftop solar, and for larger scale projects. There is real interest in new technologies, of the sort that ARENA will foster.

Muir has been advised that he can become a popular, and important, figure with his support for renewables. What next? Electric vehicles perhaps? Even revheads think the new Tesla is absolutely brilliant, apart from the lack of noise. Someone should take him for a test drive. And a bunch of other MPs too.

Will Abbott now go for a 30/30 renewable target

The decision by PUP and Muir to support the RET, along with the Climate Change Authority, the CEFC and ARENA – pretty much makes Tony Abbott’s RET Review panel redundant. What Abbott and his advisors intended to achieve from the RET Review was made pretty clear by his choice of climate skeptic and nuclear advocate Dick Warburton as chair of the panel, and the inclusion of fossil fuel lobbyist Brian Fisher, who observers say has been taking a leading role in discussions.

The support of PUP and Muir mean that Abbott’s preferred positions – the immediate repeal of the RET, or   closing it to new entrants – are no longer possible. The “compromise” deal, adjusting it to a “real” 20 per cent renewable target was also seen as the best possible outcome for the renewable industry given the make-up of the panel, but that too now seems beyond approval from the new Senators.

It does mean, though, that the other scenario Abbott’s office instructed the RET Review panel to consider – a 30 per cent target by 2030 – could come into contention. This would pacify some fossil fuel generators because it would result in a more gradual introduction of renewables over the next decade and a half. And the government could paint it as a “more ambitious” target, even though it will effectively slow down the pipeline, and reduce the total amount of renewables in the system by 2030 compared to most forecasts. But it could be something that the government could work with the new minorities.

Mind you, any form of renewable energy target will horrify the anti-green ideologues within and about the Coalition’s decision making core. RE understands that one of the most vocal anti-renewable voices in the policy arena, the Australian Chamber of Commerce and Industry, is about to release further details of its Deloitte report that painted some horrifying – and highly contentious – cost estimates on renewables. It may even attack the modelling of the government’s own consultant, ACIL Allen, which shot down the two big reasons the government and fossil fuel generators had to kill the RET – that it was a heavy cost to consumers and that it couldn’t be met. Expect to see this reported “exclusively” in the Murdoch media on Monday.

No new investment anytime soon

Despite the support of the RET, don’t expect any sudden rush of investment anytime soon. Power purchase agreements and financing will not be committed until the outcome is absolute clear, and that could take until the end of the year and more. The Abbott government could go slow with the RET review deliberations – not due until mid August – and then delay any decision until the energy white paper is completed at year end.

This uncertainty is the key. It has stopped any new investment in large scale renewables for the past 18 months, despite the fact that the Climate Change Authority recommended at the end of 2012 that the RET be unchanged and the Labor Party accepted that view. The mere prospect of a change of government and a review and dilution or removal of the target was enough to stop investment in its tracks.

So that problem remains. The commitment by PUP and Muir to “guarantee” no changes until 2016 – even if that held true – still does not provide the long-term certainty required. It needs more than a two-year profile on policy. Some projects may get away, particularly those with the help of ARENA or the CEFC, and some smaller scale ones, but probably with a higher cost of capital to reflect the risk of policy changes in the future.

That leaves households to continue to lead the way. Australian households have already invested $12 billion in rooftop solar in recent years – double the amount invested in large scale projects – and most forecasts expect households and businesses to invest another $30 billion out to 2030. In WA, the market operator reckons three quarters of houses and 90 per cent of businesses could have rooftop solar within a decade.

Future of ARENA still not certain

Despite the support of Muir and PUP, the immediate future of ARENA is still unclear. It seems more likely now that it will not be reabsorbed back into the energy department, but the scope of its funding is not resolved, neither is the make-up of the board.

At this stage, Muir and PUP appear willing to have through the $435 million in cuts announced by the Abbott government, along with smaller cuts and $370 million in deferrals announced but never legislated by the 2nd Rudd government. Those sums are included in the carbon repeal act that is going back to the lower house, and could be subject to more negotiation over the weekend.

The ARENA repeal act, which included stripping remaining non committed funds and absorbing it back into the department, may also be presented to the House next week, but it won’t get voted on in the Senate until September at the earliest when it goes to committee. In the meantime, ARENA remains free to continue its work, and will likely confirm some key projects in the next week.

The remnants of the current board held its last meeting this week, but Industry Minister Ian Macfarlane, whose department includes energy, has made no indication who, if any, new directors may be appointed.

The calibre of these appointments could highly influence how ARENA deploys its investments. For the moment, Macfarlane is playing it straight, as though Muir had not spoken: “No changes to announce.  The Government is considering transitional arrangements following the introduction of the legislation to incorporate the management of ARENA projects into the Department of Industry,” a spokesperson told RE via email.

ARENA is important because it – along with the CEFC – will accelerate the deployment of new technologies that will likely compete with wind on the cost curve in a few years – initially with solar PV, and in the medium term solar thermal, and perhaps even wave energy and geothermal. And it will critical in helping incorporate these technologies into the grid, through software and other “enablers”, and through innovative financing schemes.

Tony Windsor still in the game

Clive Palmer has not just been meeting with Al Gore in recent weeks, he has also been in heavy consultation with retired “country independent” Tony Windsor, one of the architects of the climate and clean energy policies that Abbott is seeking to tear down, and – like Palmer – a former conservative appalled at the lurch to the right by the current Coalition. Windsor, it is said, has been lunching with Palmer regularly to word him up on water issues, as well as climate and clean energy.

Palmer also has a strong team behind his about-to-be-released 300 page legislation for an emissions trading scheme, with many lawyers, ex-government advisors and department employees helping to put the finishing touches. The irony is that – like the CPRS and the clean energy future legislation before it, it will rely heavily on the template that was produced under the Howard government way back in 1999. Which just goes to show, there has never really been any disagreement about the most effective policy, just about the politics.