Friendly fire puts solar industry back in RET Review crosshairs

The clean energy industry is accustomed to the big power companies calling for the Renewable Energy Target to be abolished or slashed, but many of us have been stunned to hear some renewable energy companies calling recently for the target to be reduced.

Last year, Origin Energy called for the RET to be cut from 41,000 gigawatt hours to a 20% target.  The Australian Solar Council estimates this would be the equivalent of not building some 220 fifty megawatt solar PV plants or around 60 two hundred megawatt solar thermal power stations with four hours storage.

It may well be in the commercial interest of companies like Origin Energy – a fossil fuel company – to see the RET slashed, but that does not mean its in the national interest.  The RET has been extraordinarily successful, helping generate some 25,000 jobs and stimulating more than $20 billion in private investment in household and large-scale renewable energy since it was established.

You can understand a company like Origin wanting to hurt its clean energy competitors, but some may struggle to see why other companies would call for the RET to be reduced.  AGL is Australia’s largest investor in renewable energy, but it also has substantial investments in coal and gas-fired power stations and CSG plants, and it may also be in its commercial interests to see less competition for its ageing, polluting assets.

It may also be in the commercial interests of some pure play renewable energy companies to support an extended Renewable Energy Target but any push for a smaller target in the short-term would be a significant strategic error for any renewable energy company.

Some companies and commentators have argued Australia cannot meet its Large-scale Renewable Energy Target of 41,000 gigawatt hours of renewable energy generation in 2020.  It is too early to make that call.  It is undeniably difficult to get projects off the ground today.  Political uncertainty over carbon policy and the Renewable Energy Target, mixed with the difficulty of securing Power Purchasing Agreements and financing has led to an investment strike.  The oligopolistic nature of the power market has not helped.

Large-scale solar projects will be easier to finance and build over the next seven years, and that gives me great optimism that we can meet the target.  We have already seen the rapid development of projects in the ACT, and construction is due to begin soon on the First Solar/AGL Solar Flagships project.  Generally, it takes about 1-2 years to develop a large-scale PV project and 1 year to construct the plant.

There are no timing, resource or land constraints on achieving the entire remaining RET task by 2020.  The constraints are political and financial, and to a large extent stem from a lack of ambition and knowledge and the aforementioned oligopolistic energy market.

If you accept the view that Australia is unlikely to meet the LRET target, there are two options.  The first is to reduce or delay the target.  I am not aware of any country in the world that has reduced its renewable energy target and I’m certainly not aware of any renewable energy industry that has called for less investment in renewable energy.

The International Energy Agency, the World Bank, the International Monetary Fund and the Intergovernmental Panel on Climate Change have all called for more investment in renewable energy, not less.  A reduction in the RET would fly in the face of global trends and would make it even harder for the Australian Government to meet its 5% emissions reduction target.

The second option is to be more ambitious in the lead up to 2020.  There is only one answer for the Australian Solar Council and the solar industry.  We can, and must, be more ambitious.  We must increase and extend the Renewable Energy Target.

We can meet the target by creating the environment for more large-scale solar and renewable energy projects.  That means maintaining a price on carbon, using the Direct Action Plan to fund renewable projects and maintaining the Clean Energy Finance Corporation within this framework.

Previous research undertaken by AECOM for the Australian Solar Council and WWF indicated the Clean Energy Finance Corporation alone could deliver 3,000 megawatts of large-scale solar by 2020.

It is in Australia’s national interest for more wind energy projects to go ahead, diversifying Australia’s energy mix and reducing carbon pollution.   Governments need to encourage wind projects, not discourage them through unfair and discriminatory planning laws.  Wind energy companies should be leading the community charge to dismantle these discriminatory laws.

Australians do not want less renewable energy.  The 2013 Climate of the Nation report, published by The Climate Institute, indicated 40% of Australians believe the Renewable Energy Target should be higher.  Only 9% of Australians believe it should be lower.

Some might argue the renewable energy industry should accept a lower target for 2020 under a deal that would see a higher RET in 2030, with the scheme extended to 2040.  People should be careful what they wish for because under that scenario they would certainly get a lower renewables target.  Promises for 2030 and 2040 are politically meaningless, our leaders struggle to look 3 years out, forget 27 years in the future.

The Renewable Energy Target has been subject to perpetual review since it was established in 2001 and even more since it was increased four-fold in 2008.  The last thing the renewable energy industry needs is more reviews and more uncertainty.  Australian Governments have committed to delivering more than 20% of Australia’s electricity – 41,000 gigawatt hours of electricity – from renewable energy in 2020.  There are plenty of vested interests lined up hoping we fail.  Capitulation is not a strategy, rather it is a pretty useful outcome if you sit on the side of the incumbent polluters.

John Grimes is Chief Executive of the Australian Solar Council