Abbott’s divide and conquer rule crucifies renewables industry

First the Abbott government brought the renewable energy industry to a standstill. Then, this week, it brought it to its knees. Now, it has effectively told it to go and get stuffed.

The Abbott government – doing the bidding of the incumbent fossil fuel industry – has crucified the renewable energy industry in Australia by preying on its three major weaknesses: it’s lack of financial muscle; its disparate interests; and it’s craving for policy certainty.

In the past 18 months investment in large-scale renewables has come to a standstill in Australia, even as it accelerates in the rest of the world. In a move it thought would be a calculated risk – but was more an act of desperation – the Clean Energy Council this week tried to broker an agreement between the Coalition and Labor by proposing to split the difference on the renewable energy target between the two major parties.

It reasoned that something was better than nothing. So, on the same day that yet another poll revealed overwhelming public support for renewable energy, the peak body went to the government with a proposal that it knew was barely enough to sustain the industry, and would slash projected investment over the next five years by $5 billion, and jobs by around 3,000.

It was a risk, and it could turn out to be a spectacular failure. The Abbott government, which had started off on the premise that it wanted to kill the RET altogether, refused to budge from its position with industry minister Ian Macfarlane rejecting it out of hand.

Labor, which had fought for a higher target, and had set 35,000GWh on the basis of advice from the industry, appeared dumbfounded, having been told by the industry just a few days earlier that such a target would be intolerable. It promised to consult further.

“Labor has always placed high value on advice from the Clean Energy Council,” Labor environment spokesman Mark Butler said. “Labor would always give serious consideration to CEC positions in consultation with other key stakeholders. However, Labor understands that the government has reaffirmed its refusal to budge from a position of 32,000GWh which remains unacceptable to everyone.”

The CEC’s move this week reflects an industry in crisis. It cannot afford an extended investment drought, and it highlights the divisions within the industry that the Abbott government, and the fossil fuel industry, have so cynically and skillfully exploited.

A priori, the Coalition dislikes wind but may tolerate solar. The fossil fuel industry is fearful of both, because of what each will do to reduce its revenues. The irony is that the Coalition’s position – if it ever got to legislate a much reduced target – may open the door for more wind farms but slam the door on large-scale solar.

As Labor’s Mark Butler pointed out this week, getting unity among the varying technology groups is problematic; the large-scale solar sector, for instance, needs a much higher RET figure because its investments will come a “little later” than wind.

Earlier this week, Butler noted in comments to ABC radio, the industry had met with Macfarlane and agreed that a 32,000GWh would be a disaster and would be worse than no deal whatsoever.

So what has changed? It’s one thing for a politician to say that nothing is better than something, quite another for a peak body to take the same line.

It seems the wind industry – and some in the solar industry too – got cold feet, and rushed to secure any agreement they could before parliament packed up again for another six weeks. With the Budget session approaching, that would mean no agreement for months, if at all.

The large-scale solar sector – with a different timeline on their investment horizon – was appalled, particularly those technologies still coming down the cost curve. Andrew Want, the head of the Australian Solar Thermal Energy Association, was scathing.

“This is an extraordinary capitulation and betrayal by the CEC,” he wrote in the comments section of RenewEconomy in yesterday’s article. “It appears Government strategy to divide and conquer has been swallowed by the CEC, and CEC has decided the wind sector is where its bread is buttered.”

Want, whose company Vast Solar, is building a commercial pilot project for large-scale solar with storage, says relying on the CEFC and ARENA, as the CEC suggested the industry could do, was no solution. Large-scale solar needed a market, and it needed a target of 38,000GWh to give it room to compete, not a 32,000GWh target.

Others in the solar industry expressed equally strident views. “The CEC has made a decision that does not in any way represent the view of the masses in the renewables Industry,” wrote one in an email to RenewEconomy.

In the past few weeks, RenewEconomy understands that some big solar companies have been pushing for “banding” or reserving some of the capacity of the RET for solar technologies. The wind industry fought against such proposals.

The jockeying between wind and solar should not be a surprise, but it highlights one of the difficulties for a peak body such as the CEC, which in the past has struggled to marry the demands of technologies as diverse as wind, geothermal, wave energy, solar PV and solar thermal – both large-scale and domestic.

CEO Kane Thornton has spoken of the frustration – after years of negotiating rises and expansion in the target – of having to be in a position to negotiate such a savage cut. He points to the position of Pacific Hydro – which in the past month has had to cut 25 per cent of its staff – could cause contagion within the industry.

Infigen Energy, which last year flagged it was facing difficult choices if the market did not recover, and debt write-downs and a crisis in the industry, was the most vocal supporter of the move, saying it was the only way to resolve the impasse that has frozen investment for more than a year. CEO Miles George is also chairman of the CEC.

Infigen, on Thursday, followed this up by publishing an open letter to Abbott, pleading for an agreement. General Electric, the biggest energy supplier in the world, also called for a bipartisan agreement, but it wasn’t talking numbers.

It’s not the first time that CEC tactics to deal with the Coalition have been questioned. In 2013 it urged the then Labor government to back off on legislation to push the next review of the RET out to 2016 – apparently based on threats by Macfarlane. That decision gave the Abbott government the cue, and self anointed justification, to appoint the Warburton review.

Major players in the industry had also offered a compromise – way back in July 2013, to defer the 41,000GWh target, apparently in an attempt to appease the major retailers. The CEC was criticised for being too quick to accede to a request to exempt the aluminium industry.

However, the events of the past 18 months highlight just what a stranglehold the incumbent fossil fuel industry has over the energy sector, and many politicians. There are regular accusations of the extent of “regulatory capture” that results in favourable rulings from pricing regulators and rule makers, effectively building walls to protect incumbent business models.

As former Liberal leader John Hewson said on Thursday: :”The dirty 3 companies are the main reason the Abbott Government is squibbing on its clear election promise to keep the RET at 41,000GWH. All three are complete hypocrites. They claim to support renewable energy while walking the corridors of power, lobbying to undermine it.

“And, unlike renewable energy backed companies, they’ve been getting away with screwing households on their electricity bills by hitting customers with almost obscene profit margins as energy retailers too.”

The issue also threatens to re-open old wounds from the past. The CEC itself has been criticised for its attempts to negotiate from an “inside position”, and for effectively selling its most influential memberships to the big retailers. In effect, allowing the fossil fuel industry to influence its own boardroom.

For several years the CEC was chaired by Richard McIndoe, from EnergyAustralia, a man who once said a carbon price would cause the lights to go out and was no fan of renewables. He was succeeded by AGL boss Michael Fraser, who changed AGL’s green hue by investing billions in becoming the largest owner of coal generation in the country before stepping down as CEC chair.

The CEC’s former CEO, Matthew Warren, a controversial choice when nominated, now heads the Energy Supply Association of Australia – a lobby group for the incumbents – and is a fierce critic of the RET.

Now, the CEC is being accused of catering to its most influential members, which remain large wind energy producers.

Thornton disputes this, saying there are differences among wind energy producers and the solar sector. “This is a broad church,” he says.

“While views varied on the level of target reduction different businesses were willing to accept, a clear majority was prepared to accept a level of 33,500 gigawatt-hours.

“No one is pleased about this, but the damage being done to the sector is massive, and will continue if we can’t find a way to resolve this. We recognise the impact this would have on technological diversity and continue to promote ways to address this issue, including our call to retain the Australian Renewable Energy Agency and the Clean Energy Finance Corporation as part of our proposal to the major parties.”

It should not be forgotten, though, that the industry has been put into this position by the Abbott government which,  despite all the protestations of some of its ministers, never had any intention of doing anything but wind back the renewable energy industry – for the apparent benefit of the coal industry and the satisfaction of its right wing ideologues.

It has been able to do so simply through the creation of policy uncertainty. Environment minister Greg Hunt has harangued RenewEconomy for daring to suggest the Coalition promised not to change the target. Hunt says his pre-election comments were always carefully calibrated – as though obfuscation were a policy virtue. Politically, it may well be.

Australia – having become the first country to ditch a carbon price, is now hurtling in reverse on renewable energy, just as the International Energy Agency credits wind and solar for stalling the 40 year growth in emissions, and it says that wind and solar can carry the bulk of decarbonisation and the energy transformation.

Economic giants such as India and China appear to agree, and have both announced huge additions to their solar and wind energy targets, while analysts around the world hail the arrival of competitively-priced renewables. That, however, does not mean much in Australia, where large-scale renewables are fighting just to stay alive, and to try to dislodge fully depreciated coal-fired generators that have gone beyond their “natural” life.

The one place where solar can make its mark, on rooftops of homes and businesses and behind the metre, and so upturn the nature of an energy sector unchanged for a century, is threatened by regulatory inertia. The regulatory and political capture by the incumbent fossil fuel industry in Australia is almost complete.

The question for the industry that remains is: Where to now?