Frydenberg continues attack on state-based renewable targets

(Update: Frydenberg on Thursday morning said the events of the South Australia blackout showed that the state-based renewable energy targets of South Australia, Victoria and Queensland are “unrealistic.” This is despite admitting that renewable energy had nothing to do with the blackout. We will have more of that in a new story today).

Federal environment and energy minister Josh Frydenberg has continued his attack on state-based renewable energy targets, despite offering no new measures at the federal level.

Most Labor states and territories have announced, or already implemented, much longer dated and more ambitious renewable energy policies than the federal government, but are coming under attack from the Coalition, fossil fuel lobby groups and some think tanks for “going it alone”.

Frydenberg on Wednesday used a new report from the Grattan Institute, a leading critic of state-based targets, to renew its attack on the schemes, which it says will add costs and stop investment.

“Federal and state renewable energy targets being different does create a problem,” Frydenberg said on ABC Radio National. “It skews investment in an inefficient way. So, for example, Victoria has 40 per cent target by 2025, but it currently only has 12% of their electricity generation coming from renewables.”

He then used an example from the Grattan Institute report. “If they offer incentives to set up renewable projects in Victoria, that may attract investment here when the most efficient place may be a solar plant in Queensland. So in that case Grattan report is right because it may skew outcomes.”

Much of the mainstream media, including the ABC and Fairfax, as well as the Murdoch media, has seized upon the Grattan report as “evidence” that state-based targets will cause prices to rise and create chaos and inefficiencies in the energy market.

The renewable energy industry argues that without the state-based targets, there would be no investment at all. In recent years, the ACT’s 100 per cent renewable energy target, and its effective reverse auction programs, have caused more than 460MW of capacity to be built or start construction.

That represents nearly the totality of new build renewable energy projects in Australia in recent years, thanks to the policy uncertainty surrounding the federal target, which the Coalition first tried to scupper completely, and then cut by more than one third to just 33,000GWh by 2020.

The ACT target was critical in retaining interest in the Australian market from large international investors, which in turn has led to increased competition and lower costs.

The Victoria and Queensland are now following a similar path, aiming for the 40 per cent by 2025 target and 50 per cent by 2030 respectively. The new Northern Territory Labor government is also proposing a 50 per cent renewable energy target by 2030.

Those state governments argue that such targets are critical to ensure that the states attract sufficient investment in renewable energy projects in their state. This is particularly crucial for Victoria, which risks seeing much of its coal fired capacity closing over the coming decade.

In recent years, presumably because it retained a Labor government rather than a Colaition government, South Australia has managed to capture nearly half the investment in large scale renewables in Australia, helping it to lower its overall emissions and electricity costs.

Frydenberg says he wants to raise the issue again at the next COAG energy ministers meeting, but unless the federal government either raises or extends its own renewable energy target, there is little likelihood that any of the states will abandon their own state based initiatives.

Right now, those targets are the only post 2020 policies that are in place. Australia has no plans for any sort of carbon pricing, its renewable energy target effectively ends in 2020, it has no emissions standards for large coal generators and  its energy white paper completely ignores climate change.

As, it so happens, do the rules governing the running of the National Electricity Market.

Meanwhile, AGL Energy is reaping the rewards of its investment in recent years in large coal fired power stations and the rise in wholesale electricity prices, which are nearly eclipsing the impact of the carbon price scrapped by the Abbott government.

AGL, which has bought the large Loy Yang A brown coal generator in Victoria and the biggest coal fired generation fleet in NSW, rewarded its shareholders with an increased dividend on Wednesday, and said that despite the “unseasonal” warm weather in July and August, which reduced demand for heating, it expected to increase profits from the electricity market this year.

It also called for a uniform approach to climate and energy policies, repeated its call for new “capacity” payments to be made available for fossil fuel plants – decried by many as a new form of subsidy – and for “age-base’ limitations to be put on coal generators.

AGL also added an oil and gas executive, Peter Botten of Oil Search, to its board of directors.