Scrapping RET would hurt industry, not save it: Ai Group

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Peak manufacturing body warns ‘crashing’ RET would costs users more than it would save. Proposes staged reduction of solar support.

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Australia’s peak manufacturing body, the Australian Industry Group, has called on the federal government to leave the Renewable Energy Target unchanged, warning that a major reduction to, or scrapping of, the 20 per cent by 2020 target would likely cost its members as much in higher electricity prices as it would save them in passed through renewables costs.

In a somewhat surprising submission to the Abbott government’s RET Review panel, Ai Group said that while the review provided an opportunity to make sensible, bipartisan improvements to RET, “neither deep cuts in the target nor abolishing it altogether would deliver overall benefits to energy users.”

Ai Group – who did not support the original expansion of the RET – said its key focus was now is on how any changes to the target status quo would impact industrial energy users, and noted that a course change would be preferable to “crashing” the current scheme.

“The RET has swings and roundabouts for energy users. The cost of building wind farms and solar panels is passed on to retail customers. But the extra energy generated adds to supply in the electricity market, depressing wholesale prices somewhat,” said Ai Group chief Innes Willox, on Tuesday.

“After consulting with our diverse membership and reviewing the evidence currently available, we have judged that reducing the RET is likely to cost energy users as much in higher wholesale prices as it saves them in direct RET charges.

The Ai Group also urged the RET Review Panel to consider whether the current target of 41,000 was practically deliverable.

“If there is a genuine risk of missing the target and incurring penalties, the target should be trimmed. But on the current evidence base, cutting the target below this point would not advance energy users’ interests,” the submission said.

“Unwinding the scheme in its entirety would also lead either to a major compensation or grandfathering arrangement, or to a serious financial impairment of existing good-faith investors and associated increase in sovereign risk. Any of these outcomes would have substantial costs.”

Ai Group did, however, suggest improvements could be made to the RET, including the further reduction of subsidies to rooftop solar in coming years. But it stressed any such changes should be “as predictable, automatic and timely as possible.”

“Emissions intensive and trade exposed industries have enormous difficulty in passing on costs and are often less able to benefit from wholesale price impacts of the RET. The assistance arrangements for these industries need to remain a core part of the RET,” Willox said.

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2 Comments
  1. Simon Holmes a Court 5 years ago

    interesting ask by ai group — but instead of taking a position on whether the target can be met, which is more likely to be wrong than right, perhaps we should think more about what a “pressure release valve” for the target would look like…

    perhaps the government could sell “phantom RECs” into the market (again) whenever the price goes north of $50, then exchange them for real RECs at $50 when the market catches up. if they did that, these scheme would be bounded in cost to no more than 1c/kWh, be cash positive for government, provide a level of certainty (for all) and still deliver the target as soon as industry can deliver for a reasonable cost to all ‘liable parties’ — without trying to second-guess the market.

  2. PuffyTheMagicDragon 5 years ago

    What was the AI Group’s attitude at the last election? Did they support Tony Abbott and the L/NP? If so, it is chickens coming home to roost and they should just suck it up. Make your bed and lie in it. Tony did all those Hi Vis Vest photo opps at various factories day after boring day, and every one treated him as the best friend they ever had. Well, now you know he is not, but it is too late now.

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