Heading into an election year all parties will be under pressure to deliver big ticket items, keep the economy ticking over, create jobs, reduce greenhouse gas emissions, and achieve a budget surplus – no easy feat. So when an opportunity arises to tick these boxes, why wouldn’t you take it?
In June this year the parliament passed legislation to establish the Clean Energy Finance Corporation (CEFC) and provided it with $10 billion dollars raised from the carbon price. The main aim was to help overcome financial and other barriers to deployment of renewable energy, energy efficiency and low emission technologies.
Under current policy settings CEFC projects are eligible for renewable energy credits (RECs) under the Renewable Energy Target scheme (RET), but there is no intention at this stage to increase the 2020 or 2030 RET target to accommodate the new CEFC-generated renewable energy projects.
Although the CEFC will deliver a more diverse energy mix, WWF believes this is a wasted opportunity and not the most efficient use of government funds, especially in the current tight fiscal environment.
WWF along with the Australian Solar Council commissioned AECOM to model the intersection between the CEFC and the RET, including the consequences of making CEFC projects additional to the current 41,000 GW RET target.
The results in the report entitled Modelling of the Clean Energy Finance Corporation: Potential Impacts on Renewable Energy in Australia, clearly show there is an opportunity for the government to get more bang for their buck.
But first, the modelling by AECOM absolutely justifies the establishment of the CEFC. It finds the CEFC as currently proposed will help deliver a big solar energy boom in Australia and quadruple geothermal output by 2030.
Although Australia is a world leader in solar research and development and leads the world in residential solar, Australia does not have a single project amongst the 200 biggest solar projects in the world. The CEFC could deliver more than 11.2 gigawatts of big solar – large scale solar PV and solar thermal – by 2030, as opposed to only 1.8 GW without the CEFC.
By 2030 the CEFC could also drive down wholesale electricity prices from the projected $125 MWh down to $117 MWh and slightly reduce retail prices for consumers down from the projected 36 cents kWh to 35 cents kWh.
We can also expect to see the CEFC lead to greater job creation with a possible 6,000 more jobs by 2020 and 12,000 more jobs by 2030.
When we look at overall renewable output the findings are mixed. By 2020 there will be no change to renewable energy delivered, as the current 2020 Renewable Energy target effectively acts as a cap, and the new solar projects displace wind projects that would have happened without the CEFC.
However by 2030 the CEFC kicks in and with the help of the carbon price we would see renewable energy increase from 23% under the no CEFC scenario to 29% under the CEFC scenario (these percentages are only for large scale renewable generation and excludes small scale renewables).
So, all in all, this is great news for renewable energy generation and Australia’s plan to transition to a low-carbon economy.
Even better news is that if CEFC projects were made additional to the current 2020 RET cap, the transition to a clean energy economy can be accelerated at no additional cost to consumers!
According to the AECOM modelling, if the RET target was increased to accommodate new projects generated under the CEFC, by 2020 there could be 37% more large-scale renewables, 5,000 more jobs, and substantially less emissions (10 MtCo2-e).
The wind projects predicted to be displaced by solar projects supported by the CEFC would come back into the system helping to drive down wholesale prices from $90 MWh to $87 MWh, and offsetting any potential increase to retail prices.
By 2030 we could also expect 18.5% more large scale renewables, 2,000 more jobs, and even further reductions in emissions, than what would otherwise have occurred with just the CEFC, again at no additional cost to consumers.
So for the same $10 billion, the government could help create more renewables, jobs, and emission reductions, at potentially no additional cost to consumers, if they increased the RET target.
The modelling was conservative in many of its assumptions, for example it assumed all projects would be required to make a 3 % return per annum, and did not consider the contribution of the Small Scale Renewable Energy Scheme (SRES) and the contributions the funds under the Australian Renewable Energy Authority (ARENA) could contribute to generating more renewable energy projects.
In its draft recommendations on the Renewable Energy Target Review delivered last month, the Climate Change Authority argued it would be difficult to predict the impact of the CEFC on the RET and suggested deferring the case for adjusting the post-2020 RET target until its 2016 review.
The modelling undertaken by AECOM shows waiting until 2016 could be too late to realise the substantial benefits that could be gained prior to 2020 if the RET was increased or topped up to accommodate the projects predicted to occur under the CEFC.
We believe the government can get greater bang for their buck if they made CEFC projects additional to the current 2020 RET cap. This could be done either via “top ups” like waste mine gas currently is dealt with (so credits used by CEFC projects would be put back into the RET), or by extending and increasing the RET target to 2030.
Getting more out of a program with potentially no additional costs to consumers should be something that all politicians, businesses and the public support – it’s good policy.
Kellie Caught is National Manager, Climate Change, WWF-Australia