CCA suggests LRET be deferred, allow new technologies longer term

Print Friendly, PDF & Email

Climate Change Authority recommends Australia defer 2020 RET by up to 3 years, but says it’s the government’s only credible abatement policy. It also suggests any longer-term target could morph from renewables-only to a low emissions target, including gas and nuclear.

share
Print Friendly, PDF & Email

The Climate Change Authority has recommended that Australia defer the 2020 renewable energy target by up to three years, but suggests that the scheme be expanded over the long term as it is the only credible abatement policy the Abbott government has.

Controversially, it also suggests that any longer term target could morph from a renewables-only target, to a low emissions target, one which could include gas-fired generation, and nuclear energy if it was made legal in Australia.

In a damming assessment of Abbott government climate policy, the CCA – which the Abbott government has tried to abolish – raised questions about the effectiveness of Direct Action’s Emissions Reduction Fund, and recommended no changes to the RET, apart from a delay of up to three years. It also suggests now changes to the small scale target, based around household and commercial solar.

The CCA completed its report because it has a statutory requirement to do so, although the Abbott government commissioned its own, now discredited review led by pro-nuclear climate science denier Dick Warburton.

The Warburton Review said the RET should be closed, or reduced to a “real” 20 per cent target – effectively cutting the target from 41,000GWh to less than 26,000GWh. The government is pursuing the latter recommendation, although it has yet to find agreement with Labor or Senate cross-benchers.

The CCA said that in the absence of effective alternatives, the RET was essential to help reduce emissions. The CCA has previously suggested that Australia should have a target of 19 per cent reduction in emissions by 2020, and it has doubts that Direct Action can meet the current target of 5 per cent.

It is also dismissive of the calls by industry, fossil fuel generators, and the federal government, of imposing a “real” 20 per cent target.

“The Authority does not see any magic in a ‘real’ 20 per cent figure, or in other figures of this kind,” it writes. “What really matters is that sustained emissions reductions be made in the electricity sector.

“And, in the absence of better alternatives, this means the RET—and LRET in particular—will have to continue to lead this transformation. The Authority is not, therefore, recommending any reduction in the level of the LRET.”

However, it suggests that the target could be delayed by up to 3 years because there is now doubt that the 41,00GWh target can be met in the 2020 timeframe. This is disputed by many project developers and the Clean Energy Council – and by those with solar projects in the pipeline – but the CCA recommends it as a way of avoiding a large penalty price.

The Abbott government is using the threat of a so-called “penalty price” as a means of trying to force Labor into accepting a compromise deal, but it won’t budge above its target of 26,000GWh, or around a “real” 20 per cent.

Labor, with the support of the CEC, has indicated it may come down to the “mid to high 30,000s”, but no further. The CCA says without bipartisan support, and a strong commitment by the government, bankers would be reluctant to finance new projects.

The CCA said it was clear that fossil fuel generators were feeling the pinch from reduced demand – cause by energy efficiency and solar PV – but this would not be solved by slashing the target.

Indeed, it suggests that the RET should be increased and extended targets, and even open to a wider set of technologies. “This reflects the Authority’s view that, particularly in the absence of credible alternative policies, RET-type arrangements might be required to support increased penetration of renewables in electricity for some time.”

“On balance, the Authority considers it is better to extend the 2020 target and increase confidence it can be met, than to retain the target and miss it.“

The CCA strongly rejected the overtures of the fossil fuel industry in its last review published at the end of 2012. It says that the echanged circumstances since its last review – mostly declining demand and a stalemate over policy – do not warrant a reduction in the target.

“In particular, there is no compelling justification for reducing the target to a level representing 20 per cent of an updated electricity demand forecast for 2020. There is no reason to think that 20 per cent is the ‘right’ amount of renewable energy.”

“Any significant reduction in the target would not decrease consumer prices and would not provide a satisfactory solution to the current oversupply problem. It would, however, defer investment in renewable generation, leading to higher electricity sector emissions, making it harder for Australia to achieve the deeper emissions reductions required beyond 2020.

It said the LRET was a relatively low cost abatement program – with prices of around $32 per tonne of CO2 abated. His compared to costs of $95/t/CO2 in the small scale scheme.

“In the Authority’s view, the RET is the only currently prospective policy instrument in the electricity supply sector that can be relied upon to deliver sizeable volumes of emissions reductions.“

It was scathing about the government’s assumed concerns about fossil fuel generators. It said impacts on fossil fuel companies were inevitable if any emissions were to be reduced. “While modelling indicates that maintaining the current target level reduces fossil fuel generators’ profits, it is likely that any effective mitigation policy will have this kind of effect.”

It noted that more than half the coal-fired generation capacity had been bought or refinanced since 2009 – when the carbon price was well flagged by the then Rudd government.

And it noted that thanks to the repeal of the carbon price by the Abbott government, coal fired generators had pocked a combined $2 billion for “compensation” and had not been obliged to repay any of this assistance.

The CCA says the target could be delayed two or three years, because between 2017 and 2020 the steep increases in the RET target from 25,181 GWh to 41,000 GWh could be difficult to meeet.

It proposes this as a possible solution, deferring the target to either 2022 or 2023, and extending the target by three years – so it closes in 2032 or 2033. This was essential for financing of such projects.

CCA LRET

But it’s most controversial suggestion is that an increased or extended RET target could be modified to become a “low emissions” target, as some in government have suggested.

“This could include waste coal-mine methane generation plants, plants burning industrial waste gases derived from fossil fuels, potentially coal or gas carbon capture and storage plant, and, if ever permitted by law, nuclear energy.”

It said certificates created for non-zero-emissions plant could be discounted relative to zero-emissions plant.

The Abbott government has been an enthusiastic supporter of nuclear, with Abbott, foreign minister Julie Bishop and industry minister Ian Macfarlane all expressing support for the technology, despite the huge costs incurred by proposed projects in the UK and elsewhere.

Print Friendly, PDF & Email

11 Comments
  1. James Townsend 5 years ago

    The deferment of the target to 2023 is a bad policy for the industry. It will just defer investment for another 3 years. Deferment of target gives the Government ~26GWh in 2020.

    In this article modelling was undertaken on TWh required year on year. https://reneweconomy.com.au/2014/how-coalition-proposes-to-kill-20-billion-renewables-industry-90473

    I pointed out in the discussion, that the build rate on new MWs that needs to happen between now and 2020 is a rate that retailers believe is possible, otherwise they would have contracted RECs already to meet a forecasted shortfall.
    My prediction is limited large scale renewables deployment, but I am happy to be contradicted.
    Merry Christmas 😉

  2. Martin Nicholson 5 years ago

    “But it’s most controversial suggestion is that an increased or extended RET target could be modified to become a “low emissions” target, as some in government have suggested.

    “This could include waste coal-mine methane generation plants, plants burning industrial waste gases derived from fossil fuels, potentially coal or gas carbon capture and storage plant, and, if ever permitted by law, nuclear energy.””

    I fail to see why you see this suggestion as “controversial”. It makes perfect sense to anyone seriously seeking to reduce emissions. We need to use every means possible not just solar and wind.

    • Steve Fuller 5 years ago

      The Abbott government is concerned about a ‘glut’ of electricity at the moment. Solar and wind are displacing coal and gas and the coal and gas generators are squealing. But isn’t that a good thing? Aren’t we trying to reduce emissions?

      Energy efficiency is contributing to reduced demand and so the coal and gas sector squeal louder. But isn’t that a good thing too? And Australia has only embraced energy efficiency half-heartedly. Abbott repealed the Energy Efficiency Opportunities Act a program that cost business a few million $s and saved them nearly a billion $s. Go figure.

      So with the RET mechanism that was working effectively to increase clean production and reduce prices, coincidental demand reduction due to de-industrialisation (bye bye cars) and lots more energy demand reduction possible through a thorough energy efficiency push why on earth do we need unaffordable nuclear or the discredited Carbon Capture and Storage.

      Sure, we should capture waste and escaping polluting gases and use them wisely but……………

      Isn’t the problem purely a political one created by Abbott’s response to vested interests? As can be expected when Abbott is involved, this is a phony problem and therefore these are phony solutions.

      We can thank Phony Tony for this load of baloney.

  3. JohnRD 5 years ago

    The CCA report is a warning to anyone who is considering investing on the basis of the LRET to be careful. It just adds to the Abbott initiated uncertainty.
    People who seriously supporting climate action should be supporting ways of driving climate action that do not depend on bipartisan support to provide investor confidence. They should also be looking at schemes that don’t depend on federal government support to work. Variations on the ACT renewable auction scheme spring to mind.

  4. Chris Fraser 5 years ago

    Maybe start ramping RET investment after 2016 (election year). Then seek bipartisan agreement to ensure the % RET amount is assessed periodically to always go up in accordance with what industry can sustain – and never go down.

  5. John P 5 years ago

    “Everything old is new again”.
    This proposal to open the RET to nuclear energy reminds me of Britain’s “Non Fossil Fuel Obligation” introduced by the Blair government over 25 years ago. It was supposed allow a shift away from fossil fuels to other sources but it seemed to be little more than an official boost for the existing nuclear industry.
    Australia is not the UK, so what is the CCA up to?

    • wideEyedPupil 5 years ago

      seeking political favour from Libs? they’re hardly liked by Libs so why bother?

      • Alan Baird 5 years ago

        Exactly. Why bother sucking up. It only increases derision amongst the Libs. Labor has a long history of this. It doesn’t work: eg. Rudd

  6. Alan Baird 5 years ago

    The CCA is simply responding to the new political reality that emerged with the Abbott Govt. This reality is called “uncertainty”. The only certainty is that top Libs don’t like alternative energy or energy efficiency. I wouldn’t be too sanguine about a Shorten led Labor Govt either. I detect a fairly BAU attitude in William. He doesn’t exude “can-do” and seems to be somewhat incurious about alternative energy. This simply adds to the uncertainty, even after the next election.

    • wideEyedPupil 5 years ago

      most new build generation in Australia is renewables like solarPV and wind, it’s not alternative it’s the mainstream 🙂

  7. Jonathan Prendergast 5 years ago

    This is a bit disappointing by CCA. There are so many shovel ready renewable projects waiting for PPAs, and a glut of RECs right now, the risk of missing the target must be low. If anything I would expect we might overshoot it.

    For reasons of investment certainty, particularly by investors in renewables, the first position must be to maintain the current target. I have no problem if CCA offer up a alternative of 3 year delay, just so we can get back to bipartisanship.

Comments are closed.

Get up to 3 quotes from pre-vetted solar (and battery) installers.