Australia’s path to a low carbon future is littered with the flotsam and jetsam of constant government policy changes, interminable reviews and woeful cost benefit analyses.
Policy decisions are maddening. We would avoid having to make recent unpopular budgetary changes if we retained the carbon price and its $20 billion in revenues.
Presently, all of the environmental markets that my company, Greenbank Environmental, currently operates in – the carbon market, the energy efficiency market and the renewable energy market – are under review and will likely be subject to significant change. Indeed, last week the Victorian Government scrapped the Victorian Energy Efficiency Scheme.
This uncertainty is magnified by changes to renewable energy policies, despite commitments made in the lead up to the election. It is very challenging facing a market with so much government consultation in quick succession and unexpected policy changes.
For business, this is a destabilizing and significant barrier to new investment. The environmental market is certainly not open for business. Indeed, it is suffering from what we call Uncertainty.
The multi-billion dollar renewable energy industry has been particularly badly hit by Uncertainty. The current Review of the Renewable Energy Target (RET), coming just 16 months after the completion of the last RET Review, is the most damaging for our business and for the whole renewable energy industry.
Companies like Greenbank that operate under the Small-scale Renewable Energy Scheme (SRES), helping families reduce their power bills by installing solar PV, understand the importance of the RET.
The SRES plays a critical role in helping families invest in solar, providing an upfront discount of about $2,600 to the cost of an average 3.5 kilowatt PV system, effectively making it a credit card purchase. Without the SRES, the average installed cost of a PV system would increase by 37 per cent, increasing the payback for a residential PV customer from seven to ten years. The average length of time a person normally stays in a home is seven years.
For solar hot water, the upfront discount is perhaps even more important, reducing the price difference between solar and greenhouse intensive electric hot water at that critical moment when the hot water system goes on the blink and needs to be replaced.
As a means to reduce power bills, PV and solar hot water suffer from similar perverse barriers to energy efficiency. Even though it may make economic sense for a family to invest in energy efficiency measures, the upfront cost and the logistical difficulties provide barriers to that investment. The SRES helps reduce that upfront cost for solar making it a much easier decision for ordinary Australians.
The SRES, like large-scale renewables, provides downward pressure on wholesale electricity prices, due to increasing competition from renewable energy sources and reduced demand across the National Electricity Market. As a result wholesale prices are considerably lower than expected. The reduction in the wholesale price due to the RET is estimated to be $6.70 per megawatt hour.
The SRES has built a strong, competitive industry, with the residential solar industry alone employing around 15,000 Australians through some 4,000 small and medium sized businesses. These are mum and dad businesses, spread right around the country, but particularly strong in rural communities and in the outer suburbs of our big cities.
Perhaps most importantly, it has helped five million Australians reduce their power bills at a time when the incumbent electricity sector has facilitated a massive spike in electricity and gas bills through over investment in the poles and wires; incorrect demand forecasts; and rising international gas prices.
The RET allows mums and dads to take personal responsibility for their energy costs, something the Government should encourage.
The RET represents a bipartisan policy commitment out to 2030 and was a key Government policy prior to the 2013 election.
Despite meeting all of the key performance indicators, the solar industry is doing it tough at the moment, in part because of Uncertainty, and that makes the small-scale target and the RET even more important.
The solar market is contracting and the number of systems installed has contracted sharply. Without the SRES, the market is likely to plummet by around 40-50%. That would mean the closure of thousands of small businesses around the country and the loss of thousands of jobs straight away.
The 2012 RET Review got it right when it said: “The SRES should remain a separate scheme, and its broad structure remain largely unchanged. This would provide a degree of confidence and predictability for the small-scale installers, small businesses, households…participating in the scheme.”
The solar and renewable energy industry doesn’t ask for much, just a degree of confidence and predictability. The best way to achieve that is to maintain the existing Renewable Energy Target.