Tony Abbott walking a solar tightrope

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The Abbott government’s threat to change the renewable energy target means we may not get the technology for a cheaper and cleaner power source.

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In 2012 I attended the annual general meeting of the Clean Energy Council, a room full of heavy hitters, the heaviest strangely belonging to gas and coal generators.

The newly settled CEO David Green offered an optimistic, albeit challenging, view of his new post and went to great lengths to point out the need to have allies in the government and opposition, the most significant issue on the day was the then recent decision of Greg Combet to slash the STC multiplier, ultimately pulling two years out of the life of the program.

To this end Green referred to our guest speaker, Ian Macfarlane, at that time holding an opposition position as shadow minister for energy and resources. What we heard from Macfarlane took many of us by complete surprise. Essentially he told us that the early closure of the STC multiplier was contrived and delivered via a bi-partisan deal between he and his Labor opposites, Greg Combet, Martin Ferguson and Mark Dreyfus, the justification for this was to ensure that the RET retained its integrity.

We, who sat there rather surprised, listened on to learn that whilst it may have upset the solar incumbents, it was imperative for the future of the RET. It was a convincing argument. He then continued to go into detail about the RET and the threats made to alter the legislation on which it was based.

The issues were these. Firstly, those who oppose the RET were insisting that the RET legislation, currently dictating 41,000 GWh (gigawatt hours) of renewable generation by 2020, be changed to reflect an actual twenty percent figure at 2020. Macfarlane went on to say that the forecast electricity demand at 2020 was set to be much lower than even 1997 levels and 41,000 GWh would actually take the renewables contribution to more than 25%.

Wouldn’t that be great! The other interesting note was that it would only take one more aluminum smelter to shut down to shoot this figure to around 35 per cent!

It should be noted at the time that the market indicators showed a sharp decline in energy consumption going forward. Current forecast data shows the figure to be reasonably stable at 200-250,000GWh by 2020, a perfect fit for the RET as is.

Prime Minister Tony Abbott is insisting that in getting to this milestone, Australians will be pillaged when it comes to energy costs, but it is important to why he is taking this stance. The runaway success of renewables in Australia, helped along by six years of Labor has taken all of the incumbent generators by complete surprise, and they are calling foul.

Somehow they seem to have managed to convince Abbott that the economy depends on burning coal to produce electricity, because it’s cheap. The problem with this assertion is that it is no longer cheap. Thanks to falling component prices and the initial government assistance renewables can now compete with new build coal fired power.

It goes without saying that the RET is critical to investment in renewables. A project we have explored recently is a 60MW project for the Gold Coast flood plain. We have been able to demonstrate that a combination of solar and storage can enable us to achieve N-2, possibly N-1 reliability and because of storage, earn $80 per megawatt hour minimum.

This is because we can exclude Powerlink transmission inputs from our dispatch costs. Ex RET this achieves a  7% return on investment, with the RET it’s more viable at 11 per cent. Used as a peaking plant, the RET gets us into no brainer territory of around 15 per cent ROI.

To derail this type of investment when it is just gaining momentum just doesn’t make sense. The reality is that removing the RET will provide minimal and short term relief only, whilst paralyzing the development of a cost competitive energy solution for Australia, not to mention a clean solution.

All of the experts have a handle on this phenomena, why doesn’t the prime minister?

Greg Hunt and Ian Macfarlane, purely as result of their collective inertia from years in opposition, appear to have become the only voices making sense in the current government. All we can do is hope for our last remaining allies in government prevail over Abbott’s haphazard agenda, right now it’s totally messed up.

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9 Comments
  1. barrie harrop 6 years ago

    Consider the amount energy lost in the gold plated grid this week in Southern Australia -through heat–time for rethink towards “distributed energy” where the customers actually use the energy.

  2. RobS 6 years ago

    I am as big a solar advocate as you could find anywhere, love the stuff, hoever I have a confession, I am anti REC’s (at least for solar). In the last 2 years the Rebate for solar has been slashed from ~$2 per watt to ~$0.60 per watt as a result of cuts to the solar mulitplier now down to 1. The industry has not just survived this ~$1.40 cut in rebates it has continued to flourish because other factors like increased power prices and plummeting system costs have continued to keep solar more than competitive with grid power. This is why it seems non sensical to me that it wouldn’t equally flourish if the remaining 60 cent s of rebate weren’t cut over the next 12 months, preferably in a few steps to lessen the immediate impacts. The drop in system prices alone over the last 2 years has matched almost cent for cent the cut in the rebate meaning the out of pocket costs have remained essentially the same for 2 years despite a 70% cut of the rebate when paired with ongoing power price rises this means solar systems have improved their pay off periods despite these cuts. Does anyone actually think these system cost cuts will suddenly stop? or that Tony will actually be able to cut power prices as he has promised? I certainly don’t.

    The downside of the RECs for solar is that ~50% of the population is significantly less likely to consider solar whilst they think it is dependent on subsidies, similarly the entire right side of politics is highly unlikely to take it seriously whilst they think it is dependent on subsidies. I’m not suggesting that every LNP politician will become a solar junkie if the rebates were scrapped but it would abolish a majoir plank of their opposition.

    I believe subsidies like these should be reserved for fledgling industries and technologies to help them get over an initial investment hump to see what if anything they can contribute. That role has been fulfilled for solar and I think the industry needs to grow up and start acting like the major player they are and acknowledge that they will survive without subsidies and who knows maybe they will find they do much better. I believe the ongoing distribution of RET rebates to solar is holding solar back and putting the whole scheme at risk for a bunch of other industries who are actually reliant on it AT THIS STAGE.

    • Pedro 6 years ago

      Being in the solar industry, I agree with you that now is the time to get rid of STC’s in their current format. Solar PV install companies should not be allowed to offer an up front STC discount on an installed system. The affect has been to distort the price differential between components of differing quality, making quality product appear vastly more expensive in percentage terms. The upfront discount also has the effect of devaluing what is actually a really good long lived product that saves or makes you money.

      The 5 times STC multiplier was in my opinion a disgraceful piece of policy. It allowed end buyers to get a big discount if you were quick enough and big CO2 polluters to buy cheap phantom no GHG abatement STC’s.

      It has been great for consumers in that they get artificially cheap solar PV and led to crazy solar boom/bust cycles.

      I am also starting to see the low end product sold by the truckload in the FIT, 5x multiplier boom starting to fail. Those cheap 1.5kW inverters are falling over in the heat. And the cheap panels are starting to delaminate and discolour. As a consequence those companies that sold the supper cheap gear are going belly up.

      • RobS 6 years ago

        You’re welcome to that opinion however it’s not accurate to describe it as agreeing with me because whether you give the discount upfront or not my opinion is that the discount should go for solar PV altogether.

        • Pedro 6 years ago

          The $8/watt subsidy stimulated the Australian market and encouraged many more electricians to get training with the installation of PV systems. It also exponentially increased the amount of PV businesses in the market which was excellent for innovation and competition.

          The Solar Shop did quite well in a $4/watt market place. I would have to give credit to the way they promoted solar grid connect systems and really got the ball rolling especially among the early adopters.

          Soft costs definitely went down and volume pushed prices down as well.

          If there was no 5x STC multiplier, the grid market would have stalled for a year or so until the cost/watt for PV dropped. I still believe it was terrible piece of policy and a sensible FIT would have been far better.

          I would estimate that STC’s and upfront discounts add about $500 in administrative costs to each system. The STC system also makes a bunch STC traders a pile of money for essentially doing nothing other than shuffling paper at the right time. From my point of view it is just a huge waste time and resources.

          There is also another bordering on corrupt distortion happening in the PV market because of the STC price/system. It is now cheaper since the STC price is high to dismantle and bin a functioning PV system and replace with an entirely new system than to add 4-8 extra panels with an upgrade. The point is there is no enforcement of the 15 year deeming period, people are double dipping and the so called GHG abatement of STC’s is even more of a sham.

    • JeffJL 6 years ago

      RobS.

      If you want to stab someone in the back you first need to get behind them. “I am as big a solar advocate as you could find ….however…”

      RECs did need to be reduced for home solar PV as the companies were starting to make too big a profit (as demonstrated by some companies sponsoring football teams in the top competitions). This profit was not there at the beginning then due to economies of scale world wide (and China kicking in) their largest cost, that of the PV panels, plummeted. Without future corresponding drops in the cost of the panels cutting the rebate completely would only reduce the number (and competition) of players in the market and prices would rise. Somehow I don’t think that the 50% of the population that you think is unlikely to consider solar due to subsidies is going to consider them if the price rises just because they are subsidy free.

      As to subsidies. Here in WA the government has increased the payback period of home PV installation by dropping their feed in tariff and only paying 9c/kWH. Since they sell it to the houses next door for 23.5c/kWH
      I am giving them a 250% mark up, and the power company does not have to do a thing. Who is subsidising who.

      Base load solar is a fledgling industry and needs the extra support. Any support by government to industry needs to be regularly reviewed to confirm that the aims of the support are being met and that they are not too generous or too stingy. So to should the reasons for the support be reviewed. Just to call for them to be removed because you feel that it would remove opposition to solar based on your gut feel makes it your opinion. Without facts and research to back up this opinion makes the opinion worthless despite your good use of facts and figures to call for the removal of subsidies for solar. Perhaps you were just referring to household solar PV in which case your argument gains a lot of credibility but still falls short. Note:- a significant proportion of the LNP opposition to solar is due to the denial of Global Warming.

      • RobS 6 years ago

        You are making a lot of assumptions about my position. I never mentioned cutting feed in tariffs, I wholeheartedly oppose such a move, I actually think FiTs are a vastly superior way of subsidising solar because it rewards actual system output rather than simply capacity. The REC system gave the same rebate whether the system was placed upside down on a south facing roof or right way up on a north facing roof (yes i’m exaggerating) or positioned in the shade of a large tree, two systems of equal capacity but with vastly different real world outputs are rewarded equally by REC’s. FiT’s reward actual output, they make it so that a well positioned 3Kw system is better compensated than a badly positioned 5kw system as I think it should be. I would have far rather seen no REC multiplier but much larger feed in tariffs to reward the actual contribution of a system. I certainly believe it should be legislated that FiT’s may never be less than 50% of retail power tariffs.

        I feel the tiny residual REC credit should be removed because unsubsidised solar in Australia now produces power for about 12 c/kwh which is far below retail power, in other words solar does not need subsidies to be competitive any more and all it does is increase the profit for solar panel buyers, this is not the point of subsidies. The fact that I believe the existence of subsidies is a major plank in consumer and political backlash to solar is a secondary factor, not my primary reason.
        The denial of global warming is not a reason to oppose solar, whether or not AGW is real conservatives are all about cost effectiveness, most believe that if something was cost effective it would not require subsidies, not an unreasonable belief. I believe solar is cost effective now without subsidies and that is the primary reason I beleive they should be phased out over the next 12-24 months. Keep in mind as I pointed out we are talking about 60 cents per watt of remaining subsidy, cutting it would represent less than half the support cut that has occured in the last 2 years.

        • JeffJL 6 years ago

          Cheers RobS. I’ll make another assumption here. You are just talking about household solar PV.

          I take your argument regarding the use of RECs for subsidising domestic systems on the basis of system capacity and accept it fully.

          As to dropping the remaining rebate I remain to be convinced and would need to see figures on the wholesale costs of the units (then and now) to agree to removing it completely without other support being in place.

  3. RobS 6 years ago

    ” The other interesting note was that it would only take one more aluminum smelter to shut down to shoot this figure to around 35 per cent!”

    This is a rather odd statement, This just means an aluminium smelter opens somewhere else in the world with likely dirtier power than ours. I would much rather two moe aluminium smelters upen up and we still reach 25-35% renewables or more. Hoping for industry to close down is one of the biggest criticisms of environmentalists by the right, lets not give them more ammo.

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