Carbon price gone: Next target is wind and solar

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Coal generators are celebrating the repeal of the carbon price, and large scale renewables are at a standstill. The next item on the COALition agenda is wind and solar, but consumer groups are fighting back.

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coal renewThe carbon price is finally dumped and Australia’s coal-fired generators can claim a major victory, and the prospect of increased profits. The immediate and medium term outlook for the renewable energy industry is a lot less rosy.

The move by Australia to become the first country to repeal a carbon price is expected to accelerate a switch back to coal-fired generation from gas – already triggered by the soaring gas price. Analysts say this will reverse many of the gains in electricity sector emission reductions obtained over the last two years.

Coal-fired generators, with pockets still bulging from more than $2 billion in handouts (including $1 billion in cash for “industry protection”), say the carbon repeal will boost earnings and make their assets more valuable in the long term.

Large scale renewable energy projects, meanwhile, remain at a standstill, whether they be a number of 3MW solar projects scattered through the eastern states, or 600MW wind energy giants proposed for South Australia.

AGL Energy underlined this point last week when it said the carbon price repeal will have a “materially positive impact” on the long term value of its Loy Yang A brown coal generator that it bought in 2012.

Deutsche Bank, in an analysis published last week, also noted that Macquarie Generation, which AGL is also proposing to buy, would also have its value lifted by the carbon price repeal. “The removal of the carbon tax is positive for earnings at MacGen,” it said.

Its not just the carbon price repeal that is good for the coal-fired generation business. As AGL also noted, the value of Loy Yang A, and presumably also the 4.6GW of coal-fired generation acquired through MacGen, will also be boosted by “any reduction in the renewable energy target.”

This promises to be the next big policy battleground between the incumbent fossil fuel generators and those that seek to replace them in what now appears to be an abandoned transition to clean energy sources.

The Abbott government has made attitude to renewables abundantly clear. It has moved to scrap both the Clean Energy Finance Corp and the Australian Renewable Energy Agency. Both are seen as critical to unlocking the huge reserves of renewable energy in Australia.

The Abbott government is also seeking to dismantle the Climate Change Authority, which angered the Coalition – and the fossil fuel industry – because of its support for the current renewable energy target in its review in 2012, and for its more recent push for more ambitious emission reduction targets.

Right now, the Abbott government’s most potent weapon is uncertainty.  The mere prospect of yet another review and the push by influential lobbyists to severely cut back or even halt the RET has had devastating consequences.

As we reported last month, no new large scale projects relying on the RET have been commissioned since late 2012, because of a lack of contracts signed by large retailers and the lack of finance.

Bloomberg New Energy Finance last week said just $40 million was invested in large scale renewables in Australia in the latest quarter – the lowest since 2001 – as investment boomed to more than $63 billion in the rest of the world.

Almost all the renewable energy investment in Australia in the last two years has come from households investing in rooftop solar –and households across the country are continuing to sign up at a rate of 15,000 a month, and are looking increasingly to battery storage in response to soaring electricity prices, unfavourable tariff arrangements, and their frustration with utilities.

In turn, the utilities are fighting back by calling for an immediate end to remaining support mechanisms, and have successfully called for the removal of any compulsory feed in tariff in some states, and even prevented any feedback into the grid from rooftop solar in Queensland.

But the debate is now taking an interesting turn, with consumer groups now pushing back against the three biggest retailers – Origin Energy, AGL Energy and EnergyAustralia – who are seen as the most antagonistic towards the RET.

(Actually, this is not quite true, as the most vocal opponents of the RET have been state-owned generators such as Stanwell Corp and CS Energy, and some smaller retailers – even those with a supposed “green” tinge” – have also called for the target to be reduced. See our story, Who is the greenest retailers in Australia).

However, the bigger retailers are an easier target than generators, because consumers have not just voice their disapproval, they have the power of choice and can change their service provider.

Get Up has launched a campaign against the “Big 3” – accusing them of doing “everything they can” to push Abbott into weakening the renewables target.

“The Big 3 power companies are using their might to wreck renewables. Only a large public outcry, especially from their customers and shareholders, will stop them,” the campaign says.

“The impact of the Big Three’s plans would be devastating for consumers, job creation and the cost of your energy bills, while they reap windfall profits as power prices soar.

“It’s selfish and short-sighted business with no care for their customers or the economy. With the Renewable Energy Target under review right now, we need to shift the game — and quickly.”

Meanwhile, the coal fired generators are laughing all the way to the bank. Under the Energy Security Act, the most polluting brown coal generators were given $1 billion cash between them in 2012, and then $1 billion worth of permits in 2013, with a cash-back facility at the Clean Energy Regulator.

If any generator still holds those permits, they can either hand them in when they finalise their 2013-14 liabilities, or exchange them for cash.  It was designed as one-off compensation, handed out over five years, supposedly to help the highest-carbon generators cope with the impact of the carbon price.

As one analyst put it:

“The rationale was that the compensation would keep the companies or assets solvent and allow them to refinance debt in an orderly way while keeping the lights on.  The compensation wasn’t designed to offset their annual carbon liabilities, though of course that’s how the companies used it.

“The really objectionable thing is that they got two-fifths of their lifetime compensation for the impact of the carbon price but were only subject to the carbon price for two years.  Their asset values will have bounced back with repeal of the carbon price, but they get to pocket the compensation anyway.”

The coal fired generators will also be pleased by the apparent focus of Environment Minister Greg Hunt on coal-fired generators under the handouts to be considered under the Direct Action plan. The irony is that this plan will now rely heavily on assistance from the Clean Energy Finance Corp that the government was so determined to destroy.

 

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22 Comments
  1. Alexander Dudley 5 years ago

    Tony Abbott and his puppeteers clearly hate this planet.

    • Tomagain 5 years ago

      and their grandchildren 🙁

    • SolarPowerBen 5 years ago

      But they LOOOOVE the grab on power (= might, influence). No wonder the ACCC is so busy in Australia!

  2. Richard Thompson 5 years ago

    This is of course the government who is “open for business”. We also have to remember that they told us that the adults were in charge. The Liberal party are generally known to be the party for business, their behaviour since their election has been akin to a bunch of bikies with baseball bats smashing up a china shop. As for creating jobs they can send in the work for the dole people to clean up the mess, big deal!

  3. Winston 5 years ago

    “no new large scale projects relying on the RET have been commissioned since late 2012” Um, what about Snowtown 2? Boco Rock? Nyngan? To say “not commissioned” is being just a tad equivocal. There’s plenty in the pipe, and LGCs aren’t really in short supply.

  4. John McKeon 5 years ago

    So … the ‘adults’ have reopened the country for business … the coal business … yes. They are stupid, visionless & blind, selfish pricks.

    • wideEyedPupil 5 years ago

      I’m devoting my professional life to taking them down for the next 12 months at least. F them.

  5. JohnRD 5 years ago

    The renewable industry isn’t the only one facing sovereign risk. Abbott has created the expectation that removal of the carbon tax will lead to massive falls in the price of domestic power. If that doesn’t happen there is going to be a witch hunt to find out why. The sort of witch hunt where more end more people become aware of the things being talked about in this article. The Greens, PUP and Labor will all be inclined to highlight subsidies to fosil power producers.
    The other problem is that market pressures will remain on coal fired power. Removal of the carbon tax will reduce the minimum price they can afford to accept.

    • wideEyedPupil 5 years ago

      No there isn’t going to be a witch hunt coming after Abbott and co on electricity prices. He’ll just say well it would have been even higher with the CT. People are thick on this issue, they don’t get “tax and return” and how most of them are better off under financially and climate wise with the Gillard-Greens CT. The witch hunts only occur from the right onto the left. The left just get on with advancing policy. Having said that the CT was not going to solve this country’s emissions problems.

      • Ronald Brakels 5 years ago

        They have a clear problem in that with rising natural gas prices electricity is set to rise in price and in general people are cluey enough to tell that an increase is not a decrease. Even if by shear random chance the continual increases in distribution charges that have gone on for years just for some strange reason stopped at this particular time in a convenient fashion, the Coalition still has a definite political problem in that electricity bills will continue to increase. Of course for a large faction reelection was something to be work out later, not something to give consideration to while doing whatever it took to get elected.

        • wideEyedPupil 5 years ago

          Most of the mouth-breathers who went ape about the Carbon Tax were largely programed to do so by the word “tax” and the fact the Abbott made a symbolic target of the CT to divide people along ideological lines.

          • Ronald Brakels 5 years ago

            Rising gas prices will drive a lot of people to electricity. And many into the arms of rooftop solar installers.

          • Miles Harding 5 years ago

            Gas for heating is lunacy at present prices. In WA the per kwh gas price seems to be pegged at about 1/2 that of electricity, making high COP (try getting the actual numbers out of suppliers) air-conditioners a clear winner, even before the pneumonia holes (gas vents) are removed. Best to give the meter back ASAP.

            Solar and battery would have to be the way to go, making the lousy export tariffs largely irrelevant. At present, the battery seems to be near neutral cost in this environment, probably slightly positive when time of use tariffs are considered.

            With some ideological input, (we have to stop business as usual and become sustainable or a horrible energy descent scenario fate awaits us) the decision is easy to make.

  6. Hugh Sharman 5 years ago

    But you insisted over a year ago that solar was already “cheaper than coal and gas” at https://reneweconomy.com.au/2013/renewables-now-cheaper-than-coal-and-gas-in-australia-62268? Was that with or without subsidy?

    • John Silvester 5 years ago

      Hugh thanks for the link.

      The answer to your question is in the first sentence of the article.

      “A new analysis from research firm Bloomberg New Energy Finance has concluded that electricity from unsubsidised renewable energy is already cheaper than electricity from new-build coal and gas-fired power stations in Australia.”

      Note that the quote refers to “new-build coal and gas-fired power stations”
      So what is your point?

      • JeffJL 5 years ago

        POW!

  7. taiyoo 5 years ago

    Maybe I missed something – generators passed on the full price of the carbon price to consumers but still got billions in compensation? What was the compensation for? The potential future loss of financing opportunities?

    • Miles Harding 5 years ago

      I don’t think you missed anything

  8. Rhona Eastment 5 years ago

    To my knowledge 1 large solar co., and 1 wave energy company have now pulled out of their intensions to invest in Australia, because of the repeal of the Carbon Price cum ETS.

    Watch also The Landscape Guardians, far right-wing activist group associated with the Institute of Public Affairs. Their sole purpose is to destroy any proposed or current wind farms. Nothing to do with protecting our precious landscapes. As.well, they have been awarded charity status by ATO, whilst the Australian Conservation Society, Wilderness Society, Friends of the Earth, etc., have now been denied the status of charity for tax deductions. This is shameful.

  9. Greg Wilkins 5 years ago

    So if the big 3 are evil, does anybody have a recommendation of a good 100% Greenpower provider in NSW that does support the RET?

    Is it possible to buy RET certificates directly from the generators, so retailers don’t get to take a cut in between?

    • Miles Harding 5 years ago

      I think it may be your own roof!

  10. Peter Richard Mckernan 5 years ago

    What if all of the Renewable energy organizations focus their attention and finance on the distribution area of one coal fired generator at a time. Produce and sell renewable energy at a price that undermines their break even price. this will eventually cause the closure of the coal mine. The re-deployment of the workers into a growing new industry will be seen as a natural consequence of “Market forces”

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