Wind and solar developers warn of market crash as Tasmania chases gains for old assets

The Australian wind and solar industry is in uproar after state-owned Hydro Tasmania this week pushed for changes that could deliver windfall profits for its decades-old hydro assets.

The new controversy centres over the design of Renewable Energy Guarantee of Origin certificates (REGOs), which will be used to certify that electricity is green sourced.

These certificates will be particularly important for newly emerging industries such as green hydrogen, ammonia and green iron and steel.

The REGO scheme is also seen as a replacement for the current LGC (large scale generation certificates) that will effectively expire when the renewable energy target officially comes to an end in 2030.

But this week Hydro Tasmania argued that REGOs should not just apply to “below-baseline” generation – meaning hydro plants built decades ago – but be available for trading when the scheme is due to commence in July next year.

The Tasmania and Snowy hydro assets were excluded from the RET – and deemed below baseline – because many of them were built more than half a century ago.

The federal government’s current proposal for the scheme allows a few companies – including energy-intensive industries – to surrender below baseline REGOs over the next six years.

But the wind and solar industry argues that opening the market further to below-baseline REGOs could “crash” the market for LGCs and deliver unnecessary windfall profits to the state.

The industry also fears it could deliver windfall profits to Hydro Tasmania – of between $50 million and $150 million a year – depending on the price that REGOs were sold.

The LGC market is currently being propped up by corporate interest, and certificate prices are currently around $40 a megawatt hour.

The industry fears that lower priced REGOs could be priced at around $10 to $20/MWh, and undermine the LGC market.

In its submission, the Clean Energy Investor Group (CEIG) said it is important to ensure that the introduction of below-baseline certificates does not interfere with investment signals in the Australian market.

Hydro Tasmania acting CEO Erin van Maanen argued against restrictions on REGOs for below baseline hydro assets and said that, given the Capacity Investment Scheme roll-out, would make little difference to the market by opening them up six years early.

Tasmanian state energy minister Nick Duigan has written that limiting the purposes for which below-baseline REGOs can be used will be at the expense of households, businesses and producers.

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