Open letter to PM: Renewable investment freeze must be resolved | RenewEconomy

Open letter to PM: Renewable investment freeze must be resolved

An eighteen month freeze in large scale renewable energy investment has occurred around the country and it must be solved.



renewablesAn eighteen month freeze in large scale renewable energy investment has occurred around the country, with the result that around $1 billion per annum of investment in Australian goods and services that was underway in the period 2011-2013 has now completely stopped. The effect of this investment freeze is being felt most in rural and regional Australia.  Infigen Energy’s South Australian wind projects provide a case in point.

Infigen’s Lake Bonney wind farm has been the largest single investment in the South East region of South Australia for over a decade. Infigen Energy has spent about $700 million on the three stages of the project, with roughly half of that investment going into Australian goods and services. The project includes Australian manufactured towers fabricated by Keppel Prince at Portland, transformers from Wilson Transformers and cabling from Nexans Olex, as well as design work and civil, mechanical and electrical works at the site, and at the associated substation.

Infigen Energy employed about 200 people over the six years of construction to build the three stages of the project. In addition we currently employ 20 people directly at the site, as well as 25 local contractors and part-time workers. We also contribute approximately $750,000 per annum to the local economy through rental payments to the 24 local families who host our wind turbines on their properties.

These substantial benefits for the local economy have been driven by Australia’s Renewable Energy Target (RET) legislation. That legislation was introduced by the Howard government in 2000 and was the driver for Infigen to substantially develop the first stage of the project in the following two years and thereafter commence construction in 2003.

The RET has been a successful scheme and for good reason has enjoyed bipartisan support at the Federal level since its inception. Polling consistently finds that cutting the RET is deeply unpopular in the electorate, regardless of who you vote for.  The most recent Essential poll found that 61% of Coalition voters and 72% of Labor voters think the RET target is about right, or too low.  Only 11% of Coalition voters want the RET cut. The RET scheme and its 41,000GWh large scale target for 2020 was supported by both major parties in the lead up to the 2013 federal election.

But the RET and the large scale renewable energy industry have been under a dark cloud since the Federal Government instigated the Warburton review in February last year. While the review was completed in August last year, there has still been no definitive outcome, and a freeze in investment under the scheme continues to this day. Prospective projects such as Infigen Energy’s Woakwine wind farm to the north of our Lake Bonney project in South Australia have been put on the backburner. Woakwine offers similar benefits to the local economy as our Lake Bonney project, as do the more than 6,000 MW of renewable energy projects with planning approval spread across Australia.

Bloomberg recently reported that Australia-wide investment in the large scale element of the RET scheme has dropped from over $2 billion per annum in the years 2011 to 2013 to only $240 million in 2014. Roughly half of that pent-up investment – about $1 billion per annum, could be going into Australian goods and services, and of course jobs in regional areas, right now.

So why are we in this situation? The main finding of the Warburton review was that the RET scheme actually helps to reduce pressure on power bills in the medium to long term. This is because renewable energy helps keep wholesale power prices down, as the “fuel” is free. That benefit more than offsets the cost to electricity retailers of buying renewable energy certificates under the scheme. The net result in a properly functioning competitive market is that prices will be lower for electricity consumers. Not surprisingly then the Warburton report also noted that cutting the RET would actually increase power bills for consumers in the medium to long term.

Australia’s electricity retailing and generation industries are dominated by three big power companies whose power generation and retailing profits are under threat from renewable energy.  They have argued that the RET must be cut, or they will refuse to abide by the scheme until it “breaks”, to use their terminology.

We should not accept that investment in large scale renewable energy and the national interest objectives of the RET scheme be held to ransom by the interests of the power retailing oligopoly.

The RET impasse has gone on way too long now. A negotiated deal between the Government and Labor is well overdue.

Miles George is Managing Director of Infigen Energy.

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  1. Robert Johnston 6 years ago

    What a disgraceful piece of self interest from Infigen. News out of the meeting which Miles attended had each of the retailers saying they will absolutely meet their legal obligations regarding the RET. Regulatory uncertainty has no doubt played its part but what is sure is that uncertainty would resolve itself after the next Federal election in any event.
    The real reason retailers have not contracted is they have not had to.
    There has been a massive oversupply of LGC certificates in the market du to the past regulatory failure that had deeming and multipliers on rooftop systems that at the time were creating LGC’s rather than the different STC’s they now generate – at a time when state government Feed in Tariff’s were overly generous and a boom occurred. Net result, flooded market, low prices and retailers buying like crazy to meet their FUTURE obligations. That oversupply would have been dealt with by 2016 effectively and the retailers would have been back in the market meeting their legal obligations by contracting with windfarms and solar farms late in 2015 and through 2016 to meet their legal obligations, just as they reaffirmed recently when called together by MacFarlane and Hunt.
    Miles’ position relates more to his short term financial needs than his long term growth prospects that is clear. Infigen have made no secret that they need cash and fast and that their assets are forecast to have reduced revenue. A short term bump in LGC values associated with finalising a RET deal will provide that bump.
    Well done though on getting the CEC to act as your lap dog on this though.

    • Adam Lippiatt 6 years ago

      Perhaps someone could clarify whether they intend to meet their obligations by paying a shortfall penalty or acquitting recs. Reports on this website suggest the former, which tends to mean costs are passed on without the requisite increase in renewable energy being contracted (ie “lose/lose”).

      If that is the case then I don’t see this as the absolute meeting of legal obligations.

  2. Rob G 6 years ago

    Abbott has no intention of solving the RET, he likes it left in limbo. He doesn’t have the numbers to act out its total destruction, so he is sticking to the original plan to keep the uncertainty around it. Yesterday the Guardian had an interesting article about the 3 big power companies being to blame for the RET stalemate, but it offered a solution. It suggested that an on mass exodus from AGL, Energy Australia and Origin to renewable energy suppliers would force Abbott to do a backflip on the RET. Voters do have the ability to do this, they just need co-ordination. What I found most interesting was the ‘learning’ that was happening in the comments section. People were genuinely interested in switching to renewable energy and were excited by the same/cheaper costs but the big out take was that most of them didn’t know where to look for alternative energy or that it was even available.

    As a person who works in advertising I find this potential shift could happen if only the smaller players could make their presence known. Powershop did a great campaign recently, but it was too short and didn’t push the renewable angle enough. Customers are waiting for something that is already here. These energy suppliers need to get out in advertising space that is high impact – billboards, branded promo teams at the main train stations etc.

    Furthermore the fact that these conversations are happening in mainstream media (okay guardian and smh are more high brow than but its still mainstream) is good news for renewables. The wider population is becoming more educated. There are, as expected, the typical ‘haters’ that try and push nuclear and argue that renewables are not worthy – but they are being refuted by many more informed readers. And with those conversations happening people are getting a greater understanding of renewables and how they can benefit from them.

  3. Chris Fraser 6 years ago

    The war against renewables should have been thoroughly lost as shown by the economic benefits of investment alone indicated in this piece. However, the parasitic government is not arguing the case based on economic benefit – they dare not even touch the economics argument. Instead they rely on obfuscation, lies and dog-whistling. It’s all about ideology.

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