The Clean Energy Council has capitulated in front of pressure from the Abbott government and proposed a “compromise” deal that would see a massive cut in the size of the large scale renewable energy target.
In a letter to the government, and to Labor, the CEC has proposed an agreement at 33,500GWh, down from the current target of 41,000GWh. It is half way between the government’s “take it or leave it” offer of 32,000GWh, and Labor’s bottom line of 35,000GWh, and represents a cut of around one third of the outstanding target.
The letter was sent by CEC chief executive Kane Thornton, most likely under pressure from major wind energy players who are keen to see any sort of deal achieved in the hope that it can unblock the deadlock that has seen investment in large scale renewables virtually dry up in the past 18 months.
However, it will likely anger and frustrate developers of large scale solar, who believe that the reduced target will now largely be met by shovel-ready wind energy projects.
Large scale solar developers – which some analysts had forecast would make up one half of the target had it remained at the original 41,000GWh – will now find themselves marginalised, although a number of smaller projects could get the go-ahead, depending on financing and the structure of the deals.
The CEC recognises that an abridged target would “impact diversity”, and so asks that the government desist in its attempts to close the Clean Energy Finance Corporation and the Australian Renewable Energy Agency, which are key to ushering in new technologies such as solar and storage.
Indeed, it is believed some solar developers proposed reserving – or banding” some part of the RET for large scale solar developments, but this was fiercely resisted by the wind energy industry.
If the government and Labor can agree on the new target – no certainty given the Abbott government’s trenchant position – the biggest winners will be the coal-fired utilities, which the Warburton review made clear would be the only beneficiary of cutting the RET.
Separate analysis says that could be to the tune of more than $5 billion in revenues for the coal industry they would otherwise have lost. Meanwhile, the coal sector – already with massive over-capacity – is hanging out for government payments to help in remediation costs and the permanent closure of some facilities.
The compromise deal caught some by surprise, given the rejection of the 32,000GWh offer by the Abbott government on Monday, but others said there were some hints that the CEC was looking to break the deadlock, and did not want to risk the potential impact of another six months of uncertainty.
The full letter follows:
“I write to propose a solution to the current impasse in relation to the Renewable Energy Target (RET). This proposal represents a major compromise for the clean energy sector, the Government and the Opposition. I believe it is in the national interest that both major parties support this proposal and finally resolve this issue.
The Government’s review of the Renewable Energy Target has now been underway for more than one year. The uncertainty this has created has resulted in an 88 per cent drop in investment in large-scale renewable energy, with a massive impact on both the investors and the 21,000 workers in the sector.
The consequences of this are significant for the clean energy sector, as well as the broader energy and business community. It is now critical that this issue is resolved and the bipartisanship that the policy has enjoyed for more than a decade is restored.
There have been a number of areas of substantial agreement for some time. These include:
- Providing full exemption for Emissions-Intensive Trade Exposed (EITE) industries
- Leaving the Small-scale renewable energy scheme unchanged
- Removal of the legislated requirement for a review of the policy every two years.The final key sticking point in resolving this matter has been the target for the Large Scale Renewable Energy Target (LRET). It is important to recognise that any reduction to the LRET target will have a negative effect on the entire sector.While the sector is not prepared to accept the Government’s previous proposal to cut the 2020 LRET target to 32,000 gigawatt hours (GWh) due to the impact it would have on the sector, we are prepared to accept a reduction of the target to 33,500 GWh.We accept that some level of compromise is necessary in any political negotiation, and this figure represents the mid-point between the original position of Government (often described as a ‘real 20 per cent’) and the Opposition (41,000 GWh as legislated). It is also a compromise between the Government’s current position of 32,000 GWh and the Oppositions mid to high thirty thousands. Note that these figures are exclusive of the 850 GWh from Waste Coal Mine Gas that has been added to annual targets.
This compromise must also recognise the following:
- A reduction of the target to this level will impact future technology diversity. The Australian Renewable Energy Agency (ARENA) and Clean Energy Finance Corporation (CEFC) have played an important role in supporting the development of a diverse set of renewable energy technologies for the future. The CEC requests that Government reverses its position with respect to these two institutions and commits to their enduring future, as well as to consider further approaches to deliver technology diversity.
- After being frozen for over 12 months, it is important to kick-start new investment as quickly as possible once the current review is complete. We would welcome consideration of initiatives to ensure investment flows quickly to protect jobs in this industry.
- It is important that annual targets are set in a way that balances the need to kick-start new investment and minimise damage to existing investments, yet support sustainable levels of deployment that encourage both least cost renewable energy and a diversity of technologies.
- Any retrospective exemption for EITE businesses in 2015 must be accounted for in an adjusted 2016 target to ensure the renewable energy sector is not further disadvantaged by this retrospective exemption.While recognising that this review has not considered the longer-term future of the renewable energy sector, it is critical that Australian energy policy continues to deliver on the important objective to transition to a cleaner energy sector and establishes the long-term policy drivers necessary to do this. We believe it is important that a clear process for doing this is established as quickly as possible.I trust that the above proposal is constructive in helping to finally resolve this matter and would welcome further discussion to this end. I have also sent this proposal to the Leader of the Opposition and will be urging the Federal Labor Party to also support this compromise proposal.”Kane Thornton
Update: Industry minister Ian Macfarlane has rejected the CEC offer, saying his government would not budge above 32,000GWh – saying that it translated into one of the highest renewable energy targets in the world. (Not true).
“We are not conisering anything over 32,000GWh,” he told ABC Radio. The solar industry has reacted to the CEC’s compromise with fury, describing it as a “betrayal”. See comments below. “What have they done?” asked another.
The Greens said the industry should have stood together and held firm. A lower target would lock in lower investment, fewer jobs, and a smaller cut to carbon pollution.
“If the government wants to fix uncertainty in the renewable energy industry, they can do it today. All it takes is for Mr Abbott to back off his cut to the RET, the way he’s backed down on Medicare and university fees,” said leader Christine Milne.
“The RET was working brilliantly, rolling out investment and jobs, especially in rural Australia, and along came Tony Abbott. He realised renewable energy is undermining the profits of the coal fired generators so he went out to smash it.
“He’s smashed the Renewable Energy Target and now he’s going to everyone from Labor to the crossbench to the industry, pressuring them to fix it.”