Wind and solar facing “valley of death” despite changing economics

(Greens MP Adam Bandt on Monday pushed a bill to extend the renewable energy target beyond 2020. It was voted down by the Coalition and by Labor, who vowed never to do a deal on climate and energy with the Greens again.  Bandt’s speech – reprinted in almost its entirety – highlights some real dangers about policy choices moving forward)

Australia is facing an energy crisis caused by the failure of Labor and the Coalition to face the reality of both climate change and the technological transformation that has changed the economics of the energy sector.

And they look set to once again create another three to five year valley of death for renewables, by reaching across the aisle to agree on a ‘Clean Energy Target’ that counts new coal-fired power stations as ‘clean’ and leaves proposed new renewable builds in limbo because the existing Renewable Energy Target will soon run out.

As a result, the energy crisis we face will grow worse as will the climate emergency we are experiencing.

How we got here

Tony Abbott set out to destroy politically the clean energy program of the Labor-Green power-sharing Parliament, including a price on pollution. Once in power, he acted on it and repealed as much legislation as he could get away with.

This set in train the beginning of an investment strike in the wholesale energy market at the same time as a lot of existing coal generation was starting to reach its retirement age.

The uncertainty created by an Abbott government, with its virulent anti- carbon tax campaign and its climate denialism, meant that even though renewable generation was falling in cost, investors held back decisions on the next wave of investment in new generation.

Then Labor joined with the Coalition government in cutting the Renewable Energy Target from 45,000 MWh to 33,000 MWh, intensifying the investment strike in the energy sector.

As pressure mounted, fossil fuel generators were able to game the market using peaks in demand to drive up prices and rake in the money.

Instead of creating the certainty that was needed for a new wave of renewable investment that would drive down prices, Prime Minister Malcolm Turnbull used an extreme weather event in South Australia to declare war on renewables.

Despite the near unanimous chorus from industry and experts calling for a new stable mechanism to drive investment in renewable generation, the Prime Minister has continued his war, refusing to stare down the coal industry stooges who spruik for government-funded coal power and fail to act even on the recommendations of his own Chief Scientist’s recommendation for a clean energy target.

And now Labor has ditched their policy of an emissions trading scheme for the electricity sector and last week has signaled they will support a revised Clean Energy Target that includes coal fired power generation.

A Labor/Liberal deal means a ‘valley of death’

Such a Clean Energy Target risks creating a “valley of death” for new renewable energy investment that is only just recovering from Labor and the Coalition’s attacks on the renewable energy target.

While the falling cost of renewables, which are now the cheapest new generation and soon will be cheaper than all existing fossil fuel generation as well, is accelerating investment, it is a precarious recovery and the recent investment we have seen falls well short of what is needed.

If Labor and Liberal agree on a ‘clean energy target’ that includes coal but don’t include any mechanism to start closing coal-fired generators, it may well create a short-term ‘valley of death’ for renewables.

Because the Finkel review recommends not extending the RET past 2020/2030 but simply starting instead with a new CET from 2020, any Labor/Liberal deal may put the brakes on some new renewables investment between now and 2020. I have spoken to renewables

Investors concerned that if they build something before 2020 in reliance on support from the RET, that support will run out in 2030. This will put them at a disadvantage compared with investors who build after 2020, who will have the advantage of the CET well past 2030.

In other words, building before 2020 only gives you 10 years of support, but building after 2020 gives you more. This may encourage renewables investors to hold off for a few years, when we should be encouraging the opposite.

And as much as Labor might like to think they can simply ‘turn up the dial’ on ambition if they win office, this goes against the Finkel report and the words of the Chief Scientist himself, who has made it repeatedly clear that the scheme should be given time to settle in and that there should be no short-term changes to the trajectory.

Further, the whole Finkel report and the idea of a CET is premised on COAG first agreeing to the emissions reduction trajectory, which informs the emissions intensity level of the target. Presumably, any change to ambition would thus have to go back to COAG, allowing a recalcitrant State to hold out against any future progressive Federal government.

As such, if a Labor/Liberal CET deal is struck, there will be at least 3 years during which a paltry target will be in place, new coal will be incentivized and new renewables placed at a further disadvantage.

With a Prime Minister now actively canvassing how to use existing Commonwealth funds to extend the life of coal-fired power stations and others calling for direct subsidy of new coal, and with coal potentially being subsidized by the ‘clean energy target’, it is not difficult to imagine a scenario where government support encourages the building of a new coal-fired power station during this 3-5 year ‘valley of death’.

In turn, once built, the pressure will be immense on future governments not to adjust the CET or withdraw support so as to devalue these plants.

A Labor/Liberal CET deal that includes coal is a recipe for hobbling renewables and subsidizing the new build of what would otherwise be stranded fossil fuel assets. It is a seriously bad move that has short-term failings, the potential to lock-in long-term fossil fuel assets and a lack of any real mechanism to ‘turn up the dial’ should a future government have more ambition.

Overarching all this, without any complementary mechanism to retire coal-fired power stations, there will be less incentive to build new renewables to take their place, especially if

Governments start flagging a willingness to pay to keep coal stations open longer, as the Prime Minister did last week.

And when we also have the Chair of the House Environment Committee calling to scrap the existing Renewable Energy Target and Tony Abbott and the Nationals wanting new coal fired power stations built with taxpayers’ money, the scenario I’ve outlined looks more and more like becoming a reality.

A different course

That is why the Labor should not be signing up to whatever is on the table for the sake of an artificial bipartisanship.

Labor’s ‘come hither’ approach to the Coalition is not delivering for the climate.

First Labor ditched the policy of a carbon price and adopted an EIS because it thought that’s where the Coalition would land. Now they’ve ditched the EIS in favor of a CET because they think the Coalition might agree to that.

And at each step, the Trumps in the government dictate what happens next and ‘bipartisanship’ ends up meaning nothing more than Labor offering to sign up to whatever wretched policy Tony Abbott is prepared to approve.

If Bill Shorten and Malcolm Turnbull sign on to a Clean Energy Target that has been authored by Tony Abbott and the Trumps on back bench, it will not create certainty for those that want to invest in renewables and it will prolong the death throes of dying coal generation intensifying the energy crisis.

Enough is enough. It’s time for a different approach.

It is time to ditch the fig leaf of a Clean Energy Target that was first created by Malcolm Turnbull in 2007 in a failed attempt to save John Howard from Kevin Rudd and has now been reheated to save Malcolm Turnbull from Bill Shorten.

The threat of climate change and Australians energy future is too important to be again held hostage to the political gymnastics of the Liberal leadership. We have been down that road before.

Let’s get real. It is not even clear this government has a legal or legitimate majority in the Parliament. This government may not last a week, they may not last a month, and they almost certainly will not last past the next election.

It is not clear that the government even wants to legislate a Clean Energy Target in this Parliament.

Labor should not be dragged into the morass of the Liberal Party room and their coal obsession.

Both the climate imperatives and the electoral politics suggest Labor should sit tight for a year rather than outsource their climate policy to Tony Abbott.

In less than 12 months, they could be in government and have an opportunity to put in place real policies to drive the investment we need in wind and solar.

That is why the Greens are proposing this bill, which will continue and expand the Renewable Energy Target. And it’s why we’re offering Labor a different course.

We hope Labor will come to its senses and realise an economy-wide carbon price is still the best way to go. And indeed, it is with more than a wry smile that I hear all those business groups and electricity generators who tore down our efforts from the 2010 Parliament now saying with a straight face that a carbon price is needed.

But if Labor persists in having an electricity-specific solution to climate change, then here’s a way forward. Let’s have both an expanded RET and a meaningful EIS. One policy to pull renewables in, another to push coal out, both approaches needed.

5: If Labor has the courage of its convictions and goes back to having a decent EIS, we’ll meet you halfway and complement it with a decent RET, as we have in this bill.

We need to act now

But of course, we shouldn’t have to wait until then.

If Labor was willing to uncurl out of their small climate-target election strategy and be back their rhetoric with action, they should support this bill.

If the Prime Minister had any guts he should put on the leather jacket and stare down the Trumps on his backbench and support this bill.

Certainly the members of the cross bench who know investment in renewables are what their electorates need are willing to and I want to thank them for doing so.

Recharging the Renewable Energy Target is the single most important action this Parliament can take to invigorate investment in energy and drive down electricity prices and drive down pollution.

Despite the uncertainty of the last few years the Renewable Energy Target has proved its worth and been the single most important driver of investment in new generation.

The Clean Energy Council estimates over the last two years the RET has

But they warn that this unprecedented level of new investment is not nearly enough to replace the ageing coal generation that is continuing to close over coming decades. And it will stall before 2020 unless future policy certainty is established.

The bill

delivered over 40 projects worth $8 billion under construction throughout rural and regional Australia, delivering over 4000 MW of new generation capacity and more than 4000 jobs.

This bill, the Renewable Energy (Electricity) Amendment (Continuing the Energy Transition) Bill 2017 amends Section 40 of the Renewable Energy (Electricity) Act 2000 replacing the static yearly target of 33,000 MWh of renewable electricity and sets out near yearly targets from 2020 to 2030 increasing by 2,165 MWh a year. The final target for 2030 is 55,500 MWh.

This bill alone – without the other existing policies and targets at a state level and the other policies that the Greens would seek to put in place – will ensure renewables grow to 30% of generation over the next decade. We believe that if all the additional policies outlined in the Greens’ Renew Australia plan were put in place Australia could get to 90% renewables by 2030.

This will ensure investors have another 12 years of certainty about the investment environment for renewables going forward.

Conclusion

Mr. Speaker, as the recent catastrophic floods in the Southern United States and in Bangladesh have shown climate change is making extreme weather worse.

The images of a drowned metropolis beamed on to our screens from Houston will be the permanent future of hundreds of cities and much of the world’s population unless we get global warming under control.

We have little time to act and we must take all the steps necessary to create a different future.

Fortunately, with courage we have the means at our disposal to transform our economy. Changes that will not only prevent catastrophe, but make our society a better place to live and work.

We can become a global energy super power exporting solar fuels and attracting industry that wants to be powered by clean energy.

We can change the way we move by electrifying all our transport.

And we can democratise our energy system with distributed energy in people’s homes and businesses linked by an intelligent grid managed in the public interest.

The key to this is more investment in solar and wind. This bill will help drive that investment.
I commend the bill to the House.