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).
The 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.