The review of Australia’s Renewable Energy Target (RET) has recommended deep cuts to the scheme. If implemented by the government, the changes could mean closing off the scheme to new large-scale wind and solar farms, while also ending the current system of incentives for households to install solar panels and other domestic-scale technology.
Our detailed analysis of the review is here. Below, experts respond to the report:
Alan Pears, Sustainable Energy & Climate Researcher at RMIT University
In the covering letter to the report, the panel states:
Our report concludes that the costs of the scheme to the community outweigh its benefits and that significant change is required. The report presents recommendations for the Government’s consideration to achieve this.
This is inconsistent with numerous economic studies and, indeed, the panel’s own commissioned modelling. It ignores the importance of certainty for the stable development of the renewable energy industry. It will be interesting to see if future less short-sighted governments use this “moving of the goalposts” to justify review of policies and subsidies of the fossil fuel and energy-intensive industries.
Unfortunately, the outcome of the review seems to confirm that it has carried out the task set for it by a government that has repeatedly misused economic analysis to support ideologically or incumbent-protecting policies.
The reality is that our electricity future will be very different from our past. Many disruptive technologies and business models are emerging that are undermining the economics of our existing energy system. We also face accelerating climate change. So we really face a question of whether we continue to prop up the existing industry or actively support the emerging energy solutions of energy efficiency, storage, renewable energy and smart management of energy, even if it involves some short-term costs. Would you prefer to go back to landline phones instead of your mobile?
Unfortunately, renewable energy has become a political football, even though before the election the present government claimed to support the RET. The dominance of politics over evidence-based policy seriously undermines business confidence and increases societal costs in the future. We need to grasp the future instead of propping up the dinosaurs.
As I have previously pointed out, the average Australian household is now about A$300 per year better off due to improving appliance efficiency. If we look at the overall cost of climate response through sustainable energy measures, we will still be well ahead, even if the most pessimistic RET cost scenarios are realised.
Andrew Blakers, Director, Centre for Sustainable Energy Systems, Australian National University
The RET review is deeply flawed because it does not accept the fundamental purpose for the RET – to increase the supply of renewable electricity – which it is doing in a highly effective manner. The obvious consequence of the RET is that coal burning and carbon emissions will decrease and coal power stations will close. For example, in July nearly 50% of South Australia’s electricity came from wind and photovoltaic systems; mostly deployed as part of the RET. Importantly, the grid remains stable and carbon emissions are falling rapidly.
The RET encourages wind and solar to compete directly with coal and gas in the electricity market. This has driven down wholesale prices. Thus the overall price impact of the RET on consumers is negligible. Of course, coal power stations are heavily subsidised because they have a free licence to pollute following the removal of the carbon price.
Most of our existing fossil fuel power stations will retire over the next few decades. The RET target of 41,000 gigawatt hours by 2020 drives renewable energy investment at a sufficient annual rate to reach more than 90% renewable electricity if continued until 2040. Thus Australia has the wonderful prospect of moving to a clean electricity future at approximately zero net cost, as retiring coal and gas power stations are replaced by renewable energy.
Tony Wood, Energy Program Director, The Grattan Institute
The recommendation to deliver around 20% of electricity by 2020 from renewable energy represents a least bad balance between support for renewable energy and costs to consumers. Of the options, the arguments for real 20% would seem to be pretty strong. The biggest issue is how the government’s final decision avoids destroying existing and committed investments. The recommendation to cease further statutory reviews is sensible.
The panel’s main justification for recommending scaling back the RET seems to be that it will not contribute towards the government’s emissions reduction target in a cost-effective manner. The RET was never going to clear this highly questionable straw man hurdle.
The Panel should be applauded for implicitly challenging the government to focus its attention on climate change policies with greater emphasis on delivering lower-cost alternatives for meeting Australia’s emissions reduction target. This is, and always was, the main challenge – it would be a great, if unexpected, outcome of the RET review if the government took up this challenge.
Dylan McConnell, Reserach Fellow, Melbourne Energy Institute, University of Melbourne
Enacting the recommendations of the panel will decimate the renewable energy industry in Australia. The two main options offered represent a false choice, and will be equally devastating for renewable energy developers.
The softer option, having a target set as “share of growth”, may result in just as much additional renewable energy by 2020 as the “closed to new entrants” option. That is, none. Should demand decline (or remain flat) the target will be “held at the previous year’s level” – a fairly likely outcome given recent forecasts.
The panel aims to justify significant reform of the RET on the basis of its claim that “the interests of the broader community should take precedence”. Given that 71% of people want the RET to be at least 20% by 2020, or higher, (even when they are told, incorrectly, that the RET is a subsidy that drives up consumer energy bills), one has to ask exactly how the interests of the “broader community” are taking precedence in these options.