Renewables review kicks off with big battle over numbers

The Abbott government’s controversial review of Australia’s renewable energy target (RET) begins in earnest on Wednesday with a public meeting in Sydney that will wrestle with one of the key issues – how to define the numbers.

The meeting has been called as a workshop to discuss the proposed modelling assumptions for the RET review – on the Wednesday between the Easter break and the Anzac Day long weekend.

But the outcome could be crucial: it may be a seemingly obscure debate about numbers and definitions, but it could mean that the future of multi-billion dollar renewable energy industry in Australia could be decided even before the RET review is fully underway.

Short of scrapping the scheme entirely, the Abbott government is still likely to make significant changes to the RET, all the while insisting that the 20 per cent renewable energy target is maintained. It could do this just by redefining what the 20 per cent target is, and the issues paper released earlier this month suggests this could be on the cards.

There are two key numbers here – both around the definition of aggregate demand. Does the total number just reflect a narrow definition of the major grids, or should it include the rapidly growing off-grid market? And how should household consumption of rooftop solar electricity be treated?

If the government can make a large amount of household and off-grid demand simply disappear, it could mean the difference between building another 8,000MW to 10,000MW of renewable energy projects, both wind farms and solar farms, or less than half that to meet a new definition of the 20 per cent RET by 2020.

Critics of the RET – mostly fossil fuel incumbents, their state government owners and conservative ideologues – suggest Australia is likely to largely overshoot its minimum 20 per cent target by 2020, thanks to a combination of soaring rooftop solar installations and reduced demand. They say renewables could account for 30 per cent of total demand by 2020. Some of the more conservative commentators suggest the figure might be 40 per cent.

The clean energy industry, however, says these numbers are a gross exaggeration, and also the result of double counting. Rooftop solar accounts for a large part of the reduced demand from the grid, but it does not necessarily mean that households are using less electricity, they are just buying less from their retailers.

The industry argues that by subtracting the solar consumption  – which occurs behind the metre and is not readily visible by the market operator – from demand, and then adding back in the certificates they produce amounts to double counting – and distorts the figures.

Instead of heading towards 30, or even 40 per cent, the clean energy industry argues that the Australian market is headed towards 22 per cent renewables at the current rate – if the fast-growing off-grid generation is included, and not just a narrow figure produced by AEMO which focuses on the National Electricity Market and the SWIS in Western Australia and a couple of other key markets.

The RET review is mired in controversy because of the Abbott government’s decision to bypass the Climate Change Authority – which it wants to dismantle – and appoint its own panel, headed by climate sceptic and pro-nuclear advocate Dick Warburton. The assumption that the target could be repealed entirely, or severely curtailed, means that no large-scale renewable energy projects relying only on the RET have been committed since the start of 2013.

There is now widespread acceptance in the industry that the current RET target will at least be diluted, or deferred – the question is by how much and/or by how long.

The current target was broadly defined as “at least 20 per cent”, and was given a fixed number of 45,000GWh, later changed to 41,000GWh of large-scale developments and an uncapped amount of small-scale generation.

Since then, the Australian Energy Market Operator has dramatically lowered its demand forecasts, but this refers only to demand from the grid. Household consumption of rooftop solar is seen as demand reduction, even though those households might still consuming as much electricity, or even more.

“Distributed renewable energy technologies such as solar PV and SWH (solar hot water) are seen by the electricity system as a reduction in demand,” Green Energy Trading says in a submission. “To get a true picture of the contribution that renewables are making the apparent avoided electricity demand from small-scale solar needs to be added back to demand.

The industry also wants the RET review to take into account energy cost reductions caused by customers that have installed solar.

It notes that power exported to the grid is not properly valued because a large number of solar PV customers are not getting paid for exported power, yet this is clearly having an impact on reducing peak demand, reducing the impact of rising gas prices, and deferring network expenditure.