GE says Australia should consider raising renewables target

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GE says Australia should consider increasing renewables target to counter the “lock in” of coal, and a fall in wholesale prices – caused by renewables. Meanwhile, a push to expand community projects, farmers and foresters join anti-RET brigade, but not AIG, and what TRU said two years ago.

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Global industrial giant General Electric has urged Australia not to dilute its renewable energy target, and says it should instead consider increasing the post-2020 target to ensure that renewables lead the path to a low-carbon energy future.

In a strongly worded submission to the Climate Change Authority, the Connecticut-based GE rejects calls for the LRET to be modified from a fixed target to a “stop-start” floating target, saying it would kill investment in renewables in Australia and deliver very little in cost savings.

Indeed, it noted that in other jurisdictions where proportional targets like “20 per cent” look like being exceeded, the response of relevant authorities was usually to increase their headline targets. In California, for instance, it had been lifted to 33 per cent from 20 per cent.

GE said that in Australia’s case, the fixed 41,000GWh should be maintained, but the government should also consider lifting the target beyond 2020 – once the emissions trading scheme, the new Australian Renewable Energy Agency and the Clean Energy Finance Corporation had been well established.

“Options to increase the LRET beyond 2020 should be considered in a future,” by the CCA, it said. Australia risked “locking in” its coal generation – a consequence of rising gas prices, a relatively low carbon price, and the failure of the contracts for closure scheme. This meant that renewables would likely have to play a greater role than gas in lowering emissions, but could need further support because the rollout of renewables would cause wholesale prices to fall, and so reduce the attraction of investment in renewables without further incentives.

The call is significant, because GE is the oldest player in the energy supply industry, and is involved in the nuclear, gas, wind and solar sectors. And while many other companies have spoken about maintaining the LRET, no others – apart from environmental groups and NGOs – have suggested the target be increased.

GE was particularly savage on what it described as a “stop-start” floating target approach, noting that changes of demand were unpredictable and would make it impossible for the industry to meet any expected upswing. This uncertainty would be exacerbated by the proliferation of solar PV, which would be difficult to predict, and would have a potentially large impact on estimated demand.

It also said reducing the target to 27,000GWh – as was canvassed by ACIL Tasman in a report prepared for and endorsed by TRUenegy – would cut investment in renewables by half, but only reduce the cost of the scheme by 28 per cent at most (and not nearly 50 per cent as TRUenergy suggested; a paper released by AGL Energy, coincidentally, says costs to consumers could actually increase. AGL Energy supports the LRET).

“This would be a poor policy outcome and inconsistent with the object of the REE Act to encourage the additional generation of electricity from renewable sources,” GE states.

GE predicts that most of the LRET will be made mostly by  wind energy, with around 8,000MW of wind turbines to be built, and solar PV coming into the mix as the cost of utility-scale plants declines and because solar power can command higher time-of-day prices. It said solar thermal may also enter the market before the end of the decade.

But it noted that choices about wind farm developments were also being influenced by location and time-of-day generation, and not just wind speed. “This is healthy for the grid and the electricity market,” it said, and demonstrated the ability of the LRET to deliver “the cheapest and best projects in the market.”

GE said the reduction in wholesale prices caused by the extra wind capacity would be a “boon for consumers” and would significantly offset the cost of the RET. However, it would also make it difficult for investors to continue investing in low-carbon generation infrastructure, so “higher subsequent targets may well need to be considered in future.”

It said that the large rollout of wind generation should “not be a surprise or a concern” – it could be easily managed by the grid, given progress in digital grid management, demand management and gas ramping ability. And GE said Australia was fortunate to be able to invest strategically, while its dollar was high and wind energy costs were at historic lows.

GE’s intervention in the debate came after another global energy supplier, Alstom, also defended the RET, and Korean industrial giant Samsung said it was looking to repeat in Australia its planned $7 billion investment in renewables in Canada, but that this was at risk if the LRET was diluted. The Clean Energy Council has also dismissed claims that it will grossly inflate retail energy costs.

Pacific Hydro also argued that any changes to the LRET should be upwards, and said any moves to dilute would put at risk billions of dollars of investments, thousands of jobs, and the superannuation savings of Australian retirees. It said the review was already having a dampening effect on the market, saying it had “direct experience” of one large retailer’s deferred negotiation of a power purchase agreement for a project that is fully permitted and ready to go ahead, subject to an off-take agreement.

Meanwhile, among other submissions to the RET review…

Hepburn Wind, the operators of a community owned wind farm in Victoria, also said the LRET should continue rising after 2020, but urged the CCA to consider a community “multiplier” – possibly at a rate of 1.5x) to boost the growth of the community energy sector and engage more Australians in clean energy technologies.

Australian Forest Products Association – like the Australian Industry Greenhouse Network, of which it is a member – wants the fixed target removed to reflect lower demand. But it wants allowable sources to be expanded to include energy from forest products.

Australian Conservation Foundation says projects supported by Clean Energy Finance Corporation should be additional to the RET, and this could be done by expanding and broadening the RET to a 50 per cent target by 2030. It wants waste coal mine gas removed.

National Farmers Federation supports the termination of the RET, along with feed-in tariffs, support for low-emission technology demonstration plants, subsidies in energy efficiency, minimum energy performance standards and even requirements for reporting energy use.

The Australian Industry Group said it supported the LRET target as is. “It is not clear that removal of the scheme is practical at this point, nor that the benefits of possible removal would substantially outweigh the costs.” However, it wants changes to the small scale scheme.

What TRUenergy said last time

Finally, several readers have pointed out the inconsistencies of the position of energy utilities, who had unanimously argued for fixed targets in the past on the basis of investment certainty. One noted that TRUenergy’s position was particularly inconsistent with what it said in a submission to the RET review in 2009, and another over the same period.

The most notable quotes were:

“Robust environmental markets, capable of delivering on the policy objectives that sit behind them, require that two core policy-related conditions be satisfied:

1. accurate and reliable measurement of environmental parameters; and
2. a stable policy framework as the foundation for investment to occur ‘in-good-faith’. ”

and

“While it is clearly the role of government to adjust policy settings from time to time, the case for these adjustments can only be made if they are clearly and demonstrably in the public interest. That is, the public benefits of such adjustment are greater than the collateral damage caused by policy uncertainty and that it is not simply the case that the adjustment shields from short term fluctuations in market fundamentals.”

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2 Comments
  1. colin 7 years ago

    Unbelievable response from the NFF. Obviously the NFF wants to become one of the frackers as well as not supporting biofuels

  2. Martin Nicholson 7 years ago

    It’s hard not to believe that submissions to any enquiry are based largely on self interest. In GE’s case, the self interest is clear. They are a major producer of both wind turbines and gas turbines. An increased renewable energy target will generate business for both. As they say, they see wind being a large contributor and more wind demands more wind turbines and more flexible on-demand generation capability i.e. open cycle gas turbines. It’s a win-win for them.

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