Politics of solar: Milne, Hunt and the CEFC

The politics around solar, and the renewable energy target, and enabling bodies such as the Clean Energy Finance Corporation continue to get murkier as the election approaches. Attendees at the Solar 2013 conference in Melbourne got a taste of it on Friday as various politicians swaggered into the conference. Investment certainty is craved, and promised. But it remains elusive.

Greens leader Christine Milne delivered the only new initiative, saying she wants to establish a new federal government agency – the Energy Savings Agency – that she says will lower electricity bills, save energy and reduce emissions.

She says the Energy Savings Agency will have three priorities – focusing on reducing demand in peak periods, striking a minimum and compulsory “fair price” for electricity generated by consumers and exported to the grid, and designing a national energy efficiency scheme, something that Labor has talked about but failed to deliver.

Milne proposes providing $400 million over 5 years in incentives to reduce demand, which she says could deliver $1 billion in energy savings. The national EE scheme would look to combine and expand the three state-based schemes currently in operation.

She said the agency will make Australia’s energy system fairer, cheaper and cleaner. “The Federal and State Governments have failed to prevent unnecessary spending on new electricity poles and wires,” Senator Milne said. “Make no mistake, several state governments want to maximise profit from their electricity assets. Selling less electricity is not in their interest which is why reform of the energy market is too slow and why intervention is vital.”

“We need an independent agency to provide information, analysis, advocacy and financial support to help remove the barriers to cheaper and cleaner energy options.”

Senator Milne said the proposal has been costed by the Parliamentary Budget Office and will cost $405 million to run each year.

The case of over-investment in the grid was one taken up by Oliver Yates, the CEO of the Clean Energy Finance Corporation, which has $10 billion in funds to invest – for a commercial return – in emerging renewable technologies, and which is likely to be a major catalyst of big solar and other significant renewable projects.

Yates said that the $40 billion spent on the grid in recent years had provided a “miserable” outcome for consumers. A study to be released soon by the CEFC will conclude that a minimal amount had been spent on demand management – despite numerous studies saying that these could have saved billions of dollar in investment, and thousands of dollars to individual households.

“Rather than writing off expenditure  … there is a real risk that these costs will get pushed onto retail and commercial customers that produce electricity,” Yates said. This would be bad for the solar industry.

The CEFC this week released its investment policies, which include as a rough guideline a minimum $20 million investment by the agency, and targeting projects of around $200 million.

But the CEFC is now the subject of a fierce political battle, with the Coalition repeating its vow to not just disband the CEFC, but also to dishonour contracts entered into by the CEFC, and to repatriate money not spent by the time the “caretaker” period ahead of the September poll begins on August 12.

Coalition climate spokesman Greg Hunt spoke to the audience about the need for investment certainty and removing sovereign risk, but the Coalition’s two biggest policy proposals – removal of the CEFC and having yet another review of the renewable energy target in 2014 – are creating just that.

Hunt said the CEFC could spend up to $10 billion in the five weeks from July 1 to August 12, a suggestion that was rubbished by Yates – although Yates did make clear that “several hundred million dollars” could be pledged during that time.

Hunt was asked three times to clarify his position on the RET, and whether that included support for the 41,000GWh target. To which he replied each time, “we are committed to the 20 per cent target, and have proposed no changes.”

But despite his desire to have “investment certainty”, he reiterated the Coalition’s preference to have a 2-yearly review rather than a four yearly review recommended by the Climate Change Authority – and endorsed although not yet legislated by the government. It is this very prospect of yet another review in a year’s time – and the fear of a more favourable response to the utilities’ demands to lower the fixed target in response to falling demand – which is currently stalling investment.

He also repeated his intention to disband the CCA, as well as the various clean technology programs which had been facilitating investment in rooftop solar and energy efficiency programs on commercial rooftops – a program that has been warmly embraced by the manufacturing sector.

The Coalition’s major commitment to the solar industry is its “one million roofs” program, which will provide rebates of around $1,000 to 100,000 low income households a year over a 10-year period – a total investment of around $1 billion. Hunt says this will underpin support for the solar industry.