Don’t underestimate the determination of the Abbott government to throttle the large-scale renewable energy industry in Australia. We warned as much a day before the last election, but the prevailing view seemed to be that no Abbott government could be as destructive as suggested. How wrong they were.
For the past 12 months, the renewable energy industry has been bludgeoned into accepting a much smaller renewable energy target in the hope of gaining policy certainty. Having finally obtained agreement on the numbers surrounding a reduced target on Friday, that promised certainty was pulled at the very last minute.
Industry minister Ian Macfarlane threw in this piece of news almost as an afterthought at the announcement on Friday. But he well knows the impact. Even though the 41,000GWh target remains legislated, it is the uncertainty over its future that has caused investment to dry up in the past 18 months.
And as Macfarlane and environment minister Greg Hunt said in a media release on March 16: “We will also remove the requirement for regular two-yearly reviews of the RET to give the industry the certainty it needs to move ahead.” They said the same thing in another media statement on October 22.
Now they want to take that certainty away. It means that in 21 months of government, Macfarlane has announced four separate review of the renewable energy industry: the Warburton Review, the mandated review by the Climate Change Authority that it ignored, the Senate inquiry into wind farms, and now the 2016 review.
Not only is it an astonishing back-flip, but Macfarlane has announced the 2016 review even before he has presented legislation from the 2014 review.
One wonders, firstly, what the cost to taxpayers is. The answer is definitely a lot less than the cost to the coal industry if the 41,000GWh RET target remained in place. To add to his back-flips, Macfarlane wants the body the Abbott government has vowed to dismantle, the Climate Change Authority, to conduct the review.
Interestingly, the CCA has four board seats currently sitting vacant. Any nominees in the wings? Perhaps Maurice Newman, Andrew Bolt, or Bjorn Lomborg? Christopher Pyne is looking for another institution to park Lomborg’s Consensus Centre, perhaps he could morph it into the CCA.
At best, Macfarlane could be seen as a poor loser. He had made much of his refusal to go beyond the 32,000GWh, that he had already suggested was too much for many of his Cabinet supporters.
The result of this sabotage is that the renewables industry has rolled the dice on cutting targets in the hope of certainty – and lost, Both Pacific Hydro and Senvion told ABC Radio.
Another major investor said the large-scale renewables target would remain at a standstill. “We haven’t yet worked out how to tell head office (overseas). It is just too confusing.”
Miles George, the head of Infigen Energy, said maintaining legislated reviews is anti-business, a show of support for red tape, and does nothing but undermine investor confidence.
“The government’s own review panel and the CCA and have recommended against biennial reviews and Minister Macfarlane has said on many occasions that the recent review would be the last one before 2020. Given the government was unable to act on either the recommendations from its own panel review or the CCA review, one has to question the value of these reviews.”
But the Minister’s stance is not so much anti-business, as anti renewables. We’ve reported on many occasions Macfarlane’s form with the past renewable energy target, that he ended a decade ago when in the same role with the Howard government.
He does not hide his contempt for renewables, and neither do his Cabinet partners such as Joe Hockey, Barnaby Joyce and Tony Abbott. Three years ago Macfarlane told the industry he did not think much of wind and solar technologies. Wind energy rates a single mention in the energy white paper released last month.
Kobad Bhavnagri, the head of Bloomberg New Energy Finance in Australia, says that Australia has been “un-investable” for large-scale renewable energy in the last 18 months. The decision by Macfarlane suggests it could remain so.
“That also really sends an implicit signal to industry that, ‘Look, this ain’t over,’ by the Coalition,” Bhavnagri told ABC TV’s 7.30 report last Friday.
“The Coalition … is really giving us a signal perhaps that we’re prepared to tinker with this, to reduce it perhaps, to even wind it back further if the conditions are right to do so. So, I don’t think a unanimous signal of confidence in investment has really been sent yet on this policy.”
John Grimes, the head of the Austrailan Solar Council, says it is potentially devastating, and could also mean a review of the small-scale solar target, which the Coalition has promised to leave untouched this time around.
In an email to members on Monday, Grimes said:
“After three RET reviews in 3 years, they want another review in 7 months! That will devastate every solar business and every solar worker in Australia. Household solar, commercial solar and big solar completely uncertain once again.”
The Clean Energy Council, which has copped criticism from the solar industry in particular for compromising on the target in the hope of gaining certainty for the industry, dispatched chief executive Kane Thornton to Canberra on Monday to try to negotiate changes.
But it is not just the two-year reviews that will hurt the industry. The decision by Macfarlane to throw native wood burning into the RET cocktail will also add to uncertainty.
Not only does this create the potential for crowding out wind and solar, it also raises issues about the integrity of the RET given the debate about burning native forest. Retailers previously were not keen to use certificates created in this way to meet their liabilities under the RET, and this has probably not changed, given the opposition from NGOs.
But by continually changing the definition of what constitutes renewable energy under the RET, the government creates further uncertainty for other investors. Native forest wood waste was classified as renewable energy until 2011, then it wasn’t, now it may be again. It begs the question about what else might be slipped into the market in the next five years to suit the political fashion of the day.
A spokesman for the CEC said: “The CEC’s position is that we would only support native wood waste being eligible under the RET if there was an appropriately rigorous and broadly agreed-upon standard for ensuring the methods and locations of timber harvesting are environmentally sustainable. In our view these conditions don’t exist yet.”