Origin Energy, Australia’s largest energy utility, has launched a new attack on the renewable energy target, arguing that it is exceeding its mandate and should be wound back – to a point where little or no large-scale wind or solar farms are constructed out to 2020.
In a presentation to a Macquarie Group conference this week. CEO Grant King argued that Australia’s renewable energy target was already at 16 per cent of national demand, and suggested that to reflect a “true” 20 per cent target, its scope should be drastically reduced.
King argues that under this scenario only 9Twh more of renewable energy – both large scale and small scale – should be constructed under the renewable energy target, if it continues to exist.
If it is assumed that there is no further rooftop solar (unlikely unless it is removed from the scheme) this still represents a two third cut in the amount of large scale wind and solar farms that could be built out to 2020. If the figure does include small scale solar, it would mean virtually no large scale renewable energy projects between now and 2020.
This would be welcomed by the incumbent generators such as Origin and EnergyAustralia, as well as the state-owned generators such as Queensland’s Stanwell that want the target dismantled completely. They appear to have the ear of the government, and the industry fears it has the ear of the hand-picked and mostly anti-renewable RET review panel.
The argument presented by the utilities – and the Coalition – is one around costs to customers. In the table on the right on the above graph, King argues that the RET is adding $147 a year to consumer bills.
However, the table has angered renewable industry, who point out that state based feed in tariffs and energy efficiency schemes have nothing to do with the RET. And Origin has used old data to inflate the cost of the small scale scheme.
The REC Agents Association said the number of certificates has more than halved and the expected cost this year is closer to $24 than $67. “Origin’s figures are exorbitant, even if we allow for higher target last year,” said spokesman Ric Brazzale. Studies from the Clean Energy Council, Schneider Electric and others say the fall in wholesale prices offsets the cost of the certificates.
The real reason that utilities such as Origin are arguing against the RET – both large scale and small scale – is the impact of their incumbent generation. As this graph used by Origin shows, the combined impact of energy efficiency schemes, rooftop solar, falling demand, and increased large scale renewables is forcing black coal and gas out of the market.
King argues that in the “normal course” it would be expected that generators could better balance supply and demand and “restore reasonable returns to generation.” Most generators are not making any money at the moment, including brown coal generators in Victoria, black coal generators in Queensland, and some gas generators.
King said it was likely that much gas demand would be withdrawn from the market because of the rising prices caused by the creation of the LNG export market. That generation would be taken up by black coal. Origin last year bought two large black coal generators in NSW.