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

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.