Abbott’s taunt to renewables: you should be so lucky

The renewable energy industry is recognising that there is little hope for a reasonable outcome on the renewable energy target from a government led by Tony Abbott.

This conclusion, if it wasn’t evident before, was reinforced on Monday when government ministers told representatives from the renewable energy industry – which has been at a standstill for nearly two years – that they should consider themselves fortunate for facing just a 40 per cent cut in the renewable energy target.

Industry minister Ian Macfarlane told them “they were lucky” to have received an offer as generous as the one made – his take it or leave it final offer of 32,000GWH – an effective 40 per cent cut to the outstanding target.

According to some of those present, Macfarlane told the industry that he couldn’t guarantee that even the offer of 32,000GWh would be accepted by Cabinet, given the fierce resistance to the RET within Cabinet ranks.

The overwhelming sense of those in the room was that the agenda was still being driven by the Prime Minister’s office, the same one that appointed climate denier and pro-nuclear advocate Dick Warburton to head the RET review, and which has appointed other climate deniers to head inquiries into banking and the commission of audit, and to head its business advisory panel.

As we reported on Monday, the take-it-or-leave-it offer from Macfarlane and environment minister Greg Hunt has left the industry in a dilemma: accept a much reduced target that many say will cripple the industry, or endure more months of uncertainty – and no investment – in the hope that a better deal can be obtained down the track.

The question is, with whom? Cabinet is known to be hostile, given their individual hatred of wind farms, distrust of solar, and refusal to accept climate science. Macfarlane noted that the Coalition had started out with a 21,000GWh offer, effectively bringing renewables to an immediate halt; then 26,000GWh, then 28,000GWh, then 31,000GWh, and now 32,000GWh.

Macfarlane, who oversaw the scrapping of the previous scheme under the Howard government, appeared to contradict Hunt when the latter suggested there was still room for negotiation.

Hunt has been complaining to the industry that he is not being recognised for his efforts on the RET, often telling the clean energy industry that he is the “only friend they have got” in the federal Coalition.

And he may well be right, but that speaks more about the dire situation in Cabinet than it does of Hunt’s own advocacy.

Last week, RenewEconomy wrote a piece highlighting some of the biggest whoppers spoken by the Abbott government on the renewables target. And they added another on Monday.

Macfarlane told the meeting that planning restrictions would prevent enough wind farms being built, possibly ignoring the fact that the new Victorian government has wound back that state’s restrictive laws. As if on signal, the Northern Grampians shire council this week voted unanimously to approve the proposed 69 turbine, 200MW and $465 million Bulgana wind farm.

Hunt went further. He told Sky News that even building enough capacity to meet a 33,000GWh target would not be possible, and he claimed that the Climate Change Authority had said as much.


So what’s wrong with the 35,000 gigawatt hours? (the minimum proposed by Labor)


Well the problem with going to a figure which simply can’t be built out, which can’t be achieved with actual construction over the next five years, is that you end up hitting what’s called a penalty, if you don’t build it all there’s a penalty and that penalty takes the form of a carbon tax equivalent four times higher, at $93 a tonne…


And you believe that’s the case with 35,000 – that it cannot be achieved without…


Yes I do, I really do. And indeed the Climate Change Authority said that they thought the figure of 33,000 was the absolute maximum that could possibly be built by the industry by 2020.

Actually, the CCA said nothing of the sort.

The CCA, in its report last year, recognised there was debate about whether the 41,000GWh could be met because of the policy uncertainty (caused by the Coalition government’s review) – the industry says it can meet the target, the coal-fired generators and others with a vested interest in slowing down renewables says they can’t.

So to avoid any bottlenecks, the CCA suggested two alternative trajectories: a two-year delay that would have an effective 34,672GWh target by 2020, with 41,000GWh reach in 2022; and a three year delay which would have a 33,091GWh target by 2020, with 41,000GWh reached in 2023. (See graph below).

cca targetsThe CCA never suggested these targets could not be met. It certainly would not have suggested the two-year delay if, as Hunt suggested, it thought that 33,000GWh was the “absolute maximum that could be built.” What it did say was that a modified timeline could provide ‘breathing space’ to resume building the required capacity, following the disruptions of recent years, and would give some extra time for incumbent generators to adjust to further falls in projected electricity demand in 2020.

The CCA also said quite clearly there was no justification for the 41,000GWh target to be cut in any significant way, saying the policy was the primary policy instrument for electricity sector decarbonisation, and there were no more cost-effective and scalable measures are in prospect at this time. And that their overall impacts on consumers are “quite modest.”

The Abbott government’s own Warburton review found that the only major beneficiaries to a reduced RET would be coal-fired power stations, but the government – through Macfarlane and Hunt – has been arguing that it is costly, that the targets (41,000GWh and even the lower ones) cannot be met, and that would cause a penalty price to be paid.

Macfarlane and Hunt told the industry that there would be no further reviews, but intriguingly told the industry that it should “come back and talk to us” in 2018/19 if the target was agreed at 32,000GWh and it looked like it might be met easily.

The reaction of the utilities was interesting. According to those present, AGL suggested that a deal with the cross-bench – where the government has promised to take its negotiations if Labor will not accept the 32,000GWh offer – would cause higher financing costs and make building large-scale renewables more expensive. Origin Energy raised the prospect of penalty prices, as it has before, but said it was confident that retailers would meet their obligations.


16 responses to “Abbott’s taunt to renewables: you should be so lucky”

  1. Alexander Dudley Avatar
    Alexander Dudley

    No wonder they’re opposed to a Federal ICAC.

    1. wideEyedPupil Avatar

      But so is the ALP for obvious reasons…

      1. johnnewton Avatar

        Only the Greens (as in most sensible measures)

  2. barrie harrop Avatar
    barrie harrop

    Aust PM ,destroys renewable energy in Aust and now we shroud be thankful for small offerings ,wonder when his party will take away his leadership?

    1. Terry J Wall Avatar
      Terry J Wall

      When they stop using Fox News Facts for their research!

    2. Farmer Dave Avatar
      Farmer Dave

      Barrie, the problem is that if Abbott goes and most of the Cabinet remains, then we are unlikely to see any improvement. Giles understands that there is a large majority in Cabinet who are completely opposed to renewable energy. We need to address that underlying problem before we can expect any change in the Government’s attitude. As I expect that changing the minds of Cabinet ministers who are fixed in their ideology and are not interested in the facts will be difficult, this is not an optimistic outlook.

      I am interested in what is likely to happen if the current stalemate continues. Someone please correct me if I am wrong, but I thought that the 41,000 GWh target was still entrenched in legislation, and will remain so if the Government cannot convince enough cross-bench senators to vote with them to change that. Giles, I would appreciate a bit of an explainer on exactly how the system works, please. Is the obligation to hold/hand-in/cancel certificates on the generators or the retailers? How likely are they to finally blink? When are they likely to start to run out of options?

      1. Chris Fraser Avatar
        Chris Fraser

        It would be good to know more. The 41 TWh would be an annual figure that requires continuous creation and surrender of certificates. Doesn’t it make sense to invest in renewables rather than pay $93/MWh ? The racketeers probably just wanted to reduce the RET minimum obligation to ensure the market was flooded with RECs reducing their price … where they would be snapped up by them for a bargain improving their assets over liabilities. At least the debate about Australian renewable construction capacity is over.

  3. Keith Avatar

    This article makes clear that no matter what they offer, they will cheat on it anyway.

    So even accepting the 32,000 GWh “offer” is no guarantee that it will be honoured.

    In these circumstances, the best approach is to hold the line on 41,000 GWh. I can’t see that the LNP can maintain their absurd position for much longer, but clearly to see reason (and get in alignment with 90% of voters) they need to dump Tony Abbott…

    1. wideEyedPupil Avatar

      This will cost the Government big time at the next election. RE was a big winner for ALP in Victorian election with the ridiculous opposition to Wind by Bailleiu /Nathine deeply unpopular, especially in regions where commercial and community wind projects were stymied.

      It’s incredible how that Abbott has used the phrase that this government will not be blackmailed and yet that’s exactly how they negotiate with almost every sector they deal with, health industry, GPs, universities, refugees, RE and EE, ISPs — any industry that doesn’t donate to the IPA is on their hit list.

  4. johnnewton Avatar

    I wonder whether politicians have always lied so brazenly and we just haven’t noticed

    1. wideEyedPupil Avatar

      It think Hunt has new world record holder status for an Environment Minister.

  5. Albert Sjoberg. Avatar

    In Effect the government is creating a self fulfilling prophecy. The longer they drag their feet, the less likely it is that we will reach any target.
    These last 18 months have been the greatest argument for small government I have ever seen. Instead of letting us get on with the job, they have worked hard to hobble the sector.
    Unfortunately I still know a number of people that believe the government is doing a good job and will support it going forward. Cognitive dissonance much?

  6. John McKeon Avatar
    John McKeon

    Not only are the incumbent fossil fuelers in an arm wrestle with the (re)new kids on the block (that’s good), but also the fossil fuelers have ‘their own’ government to be umpire. It’s a protection racket, I tell you!

  7. Murray Nicholas Avatar
    Murray Nicholas

    If the actual target number is unrealistic given that it assumed a specific start date in the past and which has been knobbled already, what’s to stop us using the rate of production that target assumed and calculate the target number based on starting today? It won’t reach the target 41TWh number by 2020 of course (bad!) but it will set a trajectory everybody previously seemed to think was reasonable. Ideally, we would actually add a few percentage points on to that rate to seek to play catch up but without that there would be no need for Minister Hunt to fear the penalty kicking in because of the delayed start.

    1. Chris Fraser Avatar
      Chris Fraser

      Agreed with you Murray, however let’s not talk in terms of percentages … it confuses the Government.

  8. Rob G Avatar
    Rob G

    Two can play that game Tony. If media, banks and the wider public build uncertainty against fossil fuels ( and that is already happening – look at the CSG battle unfolding in northern NSW ) then those businesses will become paralysed by uncertainty. And in the end the only winner will be renewables. The final step will be the removal of this anti-renewables government. It’s beginning to feel very lonely in Canberra.

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