The renewable energy industry rejoiced at the decision by the Palmer United Party to protect the renewable energy target – as well as the Clean Energy Finance Corp – but doubts do remain about the industry’s future.
Clive Palmer’s vow to resist any changes to the RET – at least before the next federal election in 2016, appears to have given the renewable energy industry a stay of execution. The question is if there is sufficient certainty to resume investment in an industry that has been at a standstill for 18 months.
The decision by Palmer to direct the vote of his three Senators to protect the RET means that the Abbott government will not have the numbers to make any changes to the target. And it will protect the CEFC and the Climate Change Authority. There was no word on Australian Renewable Energy Agency, which Palmer says he has not yet considered.
The reaction in the industry was swift. Trade in renewable energy certificates soared, from a low of $22 to a high of $32, before settling around $28. The reality is that this decision raises hopes, but does not yet lock in investment.
Clean Energy Council deputy CEO Kane Thornton described Palmer’s intervention as “a Titanic boost for the clean energy industry”. (Palmer is building a replica Titanic).
Thornton said it was a big week for renewable energy, considering that Abbott’s own analysts ACIL Allen earlier in the week concluded that the RET could be met and would lower power prices for consumers over the long term – and would deflect the impact of soaring gas prices.
The Australian Solar Council said the Abbott Government should now end its “sham” review of the RET, and “simply allow the existing Renewable Energy Target to do its job.”
CEO John Grimes said the RET had been “an incredible success”, helping five million Australians reduce their power bills by installing solar panels and solar hot water systems. “More than 14 per cent of Australia’s electricity now comes from solar and other renewable energy sources,” he noted.
But it is one thing to save the RET from government changes, it is another to cause investment to resume.
Even thought the CCA rejected the insistence of incumbent generators and lobby groups to reduce the RET and recommended in late 2012 that the RET should remain – a position that was endorsed by the then Labor government – no new invstment has been committed under the scheme since that date.
That’s because the threat of another review by the Coalition gave the retailers – who are supposed to write contracts to support the investment, kept their hands in their pockets on the assumption that the RET would be cut, and financiers were too scared to finance any “merchant” investments.
At least 8,000MW of wind and solar farms will need to be built over the next 5 and a half years to meet the current target of 41,000GWh.
That is possible, but investment needs to resume quickly, but it unlikely to do so – at least for the next six months.
That’s because there is still a large surplus of LGCs (certificates) in the market, and the retailers need to be willing to contract. That could be encouraged with some minor changes to encourage investment in the next two years, and by removing the scheduled biannual review. Perhaps Labor could seize the initiative and put through an amendment, as it had promised to do while in power.
While Palmer has indicated that any proposed change should be taken to the 2016 election, polling has consistently shown that the vast majority of Australians support the existing target or a higher one.
As Thornton told RenewEconomy: While Clive Palmer’s statement of support for the RET is a very encouraging sign, it’s unlikely investment will begin flowing again until the current review is complete and there is certainty that the policy will remain unchanged for the long term.”
The future of the CEFC appears more clear-cut, as it does for the Climate Change Authority.
The CEFC’s funding is protected through legislation, so it will continue to allocate the $10 billion in funds that it has available. It believes that over five years, it can leverage nearly $30 billion in private money, and deliver emissions abatement at a profit. That is going to be a lot of new investment in clean energy and energy efficiency.
The retention of the CCA is interesting. Under its legislation, it has a statutory required to conduct the review of the RET that Abbott chose to handball to a hand-picked committee of like-minded people that included climate skeptics and fossil fuel lobbyists.
It recommended in 2012 that the next review should not be held for at least four years, to give the industry certainty to invest. But will it conduct its own review after that led by Dick Warburton?
Palmer’s promise to not change the RET legislation only extends until 2016, but Infigen CEO Miles George thinks it is unimaginable that any political party will go to the next poll with a policy of reducing the RET. Not that the Coalition did this time, but their policy was never held up to scrutiny.
The one part of the renewables industry that is still exposed is the solar industry, given that the Government can still make tweaks to the solar support mechanism, as changes to the multiplier can be made by executive decision.
It has been clear that solar has been in the sights of the panels – and the incumbent generators – because of the dramatic changes it forces upon a centralized, incumbent business model.
And, of course, there is a question about ARENA. This agency is critical for the deployment of new and emerging technologies – such as off-grid solar installations at mining operations, demonstration projects for wave and geothermal, and also solar research, the developmemt of new financing mechanisms, and technologies that will integrate renewables and storage into the grid.