Interview: CCA chairman Bernie Fraser

In an interview with RenewEconomy, Climate Change Authority chairman Bernie Fraser explains his decision to recommend a steady-as-she-goes target for renewable energy, and why he recommends moving commercial solar from the uncapped small scale market into the capped large scale market.

He also says why he fears why an Abbott government would be beaten down by the fossil fuel lobby’s attack on green energy, expresses his dismay over threats to dismantle the CCA and the short term nature of policy making, and why he chose to accept the offer of chairman of the new body.

This is a lightly edited transcript. You can find our report on the interview with Bernie Fraser here.

RE: Today you referred to the weight of scientific evidence on climate change and the increasingly apparent need for urgent action. Why are we not having a discussion in Australia about an even higher renewable energy target?

Bernie Fraser: I made reference to the science as part of a backdrop to the authority’s  conclusion. As I understand it and I am not a scientist, each successive study that is coming out seems to be firming up the probabilities of global warming and the urgency for action, and that was part of the backdrop for arguing for persisting with the existing RET target, notwithstanding the falling off of projected electricity demand.

The battle has been to persist with the 41,000GWh target., that is the main component of the RET of course, and the main swing component. And there was quite a lot of pressure to reduce that, and go with the equivalent 20 per cent of the adjusted electricity demand. We resisted that, and we’re sticking with the existing figure, which will possibly mean about 26 per cent of renewable energy on current projections – and that was quite a significant development.

RE: Have you been surprised by the vigor of the lobbying in this debate. Is that something that you experienced at the RBA, for instance?

Fraser: Yeah, I’m very new at this game, but I have been involved with the very extensive discussions with stakeholders, and round tables we had on basis of discussion paper and there was quite strong resistance from predictable quarters. I haven’t been surprised that (these positions) are continuing to be repeated now. I feel sure, well I expect, that the Opposition Coalition parties will be swayed by the lobbying to reduce the figure to an updated 20 per cent figure.

RE: Could you clarify that, you think that the Coalition parties could be persuaded to do that?

Fraser: I think that that lobbying that is being made to us, and the views being expressed by the fossil fuel generators and some other groups will be pretty powerfully directed towards the Coalition. And I think that there is a strong possibility that they will be swayed by that pressure.

RE: That does not give certainty that the renewable energy industry is looking for.

Fraser: We can only recommend the existing target arrangement would be better than adjusting it, for all sorts of reasons. That (adjusting the target) can be pretty devastating to investors, including those that have projects approved and so on. At the end of the day it will come down to who has the numbers in parliament I think.

RE: The generators and the utilities that called for the RET to be diluted presented a lot of numbers about the un-necessary cost of the scheme and the impact on their business models, and the electricity market. You have rejected those numbers. They have been this business for decades, How could they get it so wrong, or have they just been gilding the lily?

Fraser:  I don’t know what they are doing, Giles. We subjected our modeling – I’m not a modeller but I’m trying to come to a view on its reasonableness – to a lot of people in the industry, it got a lot exposure in the course of discussions, and effectively invited all stake holders if they saw any major differences with their own views, but no major difference were identified.

RE: Given that your report found that the impact of the small scale scheme would be very modest – possibly as low as $10 per household per year in 2020 – why bother making changes. The solar lobby believes they are not necessary and could impact commercial solar in particular.

Fraser: The small scale scheme has been pretty expensive, but a lot of those drivers – the solar multipliers and feed in tariffs – have been removed or wound down. That is a positive. The changes we have suggested are mainly with regard to improving the design and efficiency of the scheme. There are a couple of recommendations that would have some impact on costs. But these are pretty minor costs, if you look at the changes to the deeming arrangements.

The one possible measure that has excited a few in the solar industry is the proposal to reduce the threshold to the small scale scheme to 10kW from 100kW. We just happened to throw in as possible figure the figure of 10kw, but that will be decided by government. It is a possibility that Australia will become quite an attractive area for commercial solar PV, and these would be much bigger than 10kW. If they were to be encumbered under the small scale scheme which is uncapped …  it could have a cost impact if (commercial solar) takes off. And I think will work out a way to finance and put these things on warehouses and parking lots and schools and all sort s of things.  In that circumstance there could be a risk if it is still in the small scale scheme. If the limit is 10-15kW, these installations would still be attractive on economic grounds – this (decision) is just part of the cost containment.

RE: There were many questions in the press conference today about the cost of the RET, and even though it was modest, why consumers should be asked to pay. Has the messaging been poor about the impact of these schemes?

Fraser: I don’t think there is a wide appreciation that the impact is such a modest proportion. There has been a lot of propaganda about the impact of the carbon price and the renewable energy scheme. Electricity costs are going up dramatically, but the reasons are elsewhere.

RE:  Do you worry that our society is obsessed about the price of things, and not the value of good policy.

Fraser: There is something wrong with the communication of the message, and that is something we have to work on. In this environment that everyone is caught up in, people are being told that the rapid increase in bills is all to do

with the incompetence of government,  and the carbon price and renewables, but that is a fallacy that is not widely understood.

RE: Why did you accept this role as chairman of the CCA? Do you have particular views on climate change and renewables. Do you have clean energy systems on your own property?

Fraser: No, I don’t. The answer is quit simple. I was asked by (Climate Change Minister) Greg Combet. I  have enormous respect for Greg, having worked with him in industry funds and I have tremendous respect for his values. It was he who asked me, and if anyone else had asked me I would have been much more reluctant. He did ask me if I thought the science was a load of crap. I said no, I had great respect for the weight of scientific opinion on this matter.

RE: How do you see your role compared to that which you played as head of the RBA. On one hand you were juggling monetary policy, now you are juggling policy levers that could have an even greater impact.

Fraser: It’s all a matter of balance. The (roles are) different but similar in trying to achieve in a pragmatic way an acceptable balance that delivers desirable objectives at a reasonable cost. At the RBA it was a matter of making judgments  about interest rates being adjusted to prevent over-heating, or sliding into recession, and rising unemployment. This has similar sorts of issues about trying to achieve in a pragmatic way a reasonable balance between big macro economic considerations.

RE: Your next major work is a review of the government’s emissions reduction target. Has that begun

Fraser: We have done a lot of planning work, gathering information on the science and what is happening globally. We will have people coming to present to us on that, and we have got quite a detailed program of work as we move into the New Year. We have got until February, 2014 to lodge this report, but it’s going to be an intensive 12 months.

RE: That will be a contentious decision, because it will be critical for the structure and shape of Australia’s economy.

Fraser: It will be a pretty contentious and testing 12 months for the people involved.

RE: Are you concerned about the nature of the political debate around climate change and clean energy policies.

Fraser:  Not really. Obviously, one has to be aware of it. We are independent and I have always relished independence, and that’s great because y u can take the charter and have regard to the national interest and try to deliver the recommendations and proposals that are consistent with the national interest rather than towards one argument or another on political grounds. That would not appeal to me, and it wouldn’t appeal to other independently minded members of the committee.

RE: Was their much dissent on the conclusions of this report, because you have members from different parts of the business community.

Fraser: No, there wasn’t much dissent on this. There was some quite robust debate on a few issues. We talked them through and we got to the point where all members of the authority were comfortable about signing out on the whole of the report. That was my experience on the Reserve Bank, and I was on the RBA board for 12 years, and on only one occasion – towards the end of my term – did we ever have a vote to change interest rates. We got to a consensus by talking things through and making judgments relevant to the national interest. I hope we can pursue a similar course with the Climate Change Authority and so far we have been able to do that reasonably comfortably.

RE: Are you worried that a Coalition government would dissolve the Climate Change Authority, as they have indicated they will?

Fraser: I am worried. Not in a personal way, but I’m worried about the resource of knowledge and experience and independent wisdom in these kind of issues that Anthea (Harris, the CEO of the authority) has brought together in her team. If the authority were to be closed on an overnight whim, and a very valuable resource dispersed, that would be a tragedy. Climate change issues are not going to go away. They will become more complex and I would have thought that if a government were sensible it would realize that policy making is becoming more complex than ever, and really needs access to best policy advice. To risk disbanding and tossing that out the window would be a great loss, I think, to sensible policy making. It would mean ministers would have to rely on ministerial advisors who do not have the knowledge and are not in the business of providing independent advice. That is what I cannot understand, how a forward looking and rational Opposition can not see the folly of disbanding such a resource – not just in climate change but in other areas as well.

RE: Just getting back to the start of the interview, and your judgment that the Opposition could be swayed by vested interests on changing the RET. Is that based on any direct communication with the Opposition or just an observation of the politics.

Fraser: It is just an observation on the strength of the views of the fossil fuel industry – even since our report today. This suggests to me that the lobbying of those who want a “real” 20 per cent target will step up their lobbying now, and  it’s possible that the Opposition will support it. I just think that that is a likely development. I don’t have any first hand knowledge of their thoughts.