Renewables industry risks stalling without 2030 target

Donald Horne once penned the term “Australia the lucky country”, not as a positive term, but as an ironic indictment of Australia’s lack of innovation and enterprise in the 1960s. He argued that, as a nation, we were lucky to develop at a time when we weren’t being particularly clever.

Now, as the world begins the clean energy revolution, Donald Horne’s ironic use of Australia as the lucky country is invoked again, for similar reasons, but with a twist. In the case of access to abundant renewable energy resources, Australia truly is the lucky country – but are we being clever?

Australia has no shortage of renewable energy, we also have world class skills, infrastructure and know how. Not surprisingly polling shows that renewable energy also has strong public support.

So why aren’t we being the clever country, taking advantage of our abundant natural renewable resources to transform our energy sector and establish a globally competitive low cost, low carbon economy?

WWF-Australia commissioned Climate Risk to assess the feasibility of achieving a transition to 100 per cent renewable energy in Australia, and the impact that different policy settings – carbon price and Renewable Energy target (RET) – will have on the transition to 100 per cent renewable energy.

The report, Our Clean Energy Future: 100% Renewables Powering our Energy Future, argues that the transitioning to 100 per cent renewable energy is necessary, desirable and, as the Climate Risk analysis shows, technically achievable with the right policy settings.

For the electricity sector, without including expansion of land based transport, Australia could achieve 100 per cent renewable energy by 2037. If we are to achieve 100 per cent renewable energy in all energy sectors, then we must tackle transportation and electrify the transport system, this could be achieved by 2050 (see table 1). Both scenarios assume high energy efficiency.

Most importantly the report shows that under the current carbon price and no increase of the RET after 2020, most renewable energy industries will stall in 2020 and cease project development for between four and 32 years until cost convergence is achieved subject to carbon price (see Figure 1).

Figure 1: The duration of renewable energy industry collapse and stall for each of the carbon prices once the current RET finishes in 2020.

To prevent an industry collapse, not only do we need to maintain the current 2020 GWh target, but a post 2020 ‘safety’ RET will be required to meet the cost shortfall between renewable energy costs and energy prices.

A 2030 RET target of of between 137,000-169,000GWh (which is equivalent to a percentage target of 43- 53 per cent of business as usual) would avoid a stalling of the renewable energy industry post-2020, maximise the industry development in line with achieving 100 per cent renewable energy by 2050 and accommodate electrification of the transport sector.

To prevent the monopolising of a Renewable Energy Target by the lowest-cost renewable energy industry, the post-2020 RET should be “banded”. That is, each renewable energy resource should have a designated target appropriate to its scale of development. Additionally, a mechanism to phase out support for each industry once it achieves cost convergence with the energy and carbon market would prevent “free-riders”.

If our renewable industries are to survive, governments must ignore calls from the Australian Coal Association, Origin and Australian Industry Greenhouse network to scrap or reduce the RET, and instead give industry and investor certainty by increasing it out to 2030.

Arguments that a RET is too costly per tonne of emissions, ignore its role beyond pure emissions reductions, such as developing a secure, competitive and reliable energy market that can decarbonise faster if – and when – science and governments deem necessary. Banding the RET post 2020 maximises its effectiveness.

Kellie Caught is Climate Change National Manager WWF-Australia