Government intentions to dilute the RET becoming clearer

The government’s intention to dilute the strength of the country’s Renewable Energy Target (RET) has become clearer, with Prime Minister Abbott accusing the scheme of ‘causing pretty significant price pressures’ for electricity consumers. Meanwhile, energy industry incumbents are waiting on the sidelines for the approaching RET review, holding ‘secret meetings to reshape the market for alternative power’ according to an article in the Australian.

The main bone of contention that the industry appears to have with RET in its current form is the target itself, which sets a mandate for 20% of Australia’s electricity to come from renewable sources by the year 2020. (Currently, about 10% of the country’s energy comes from from renewables.) In recent years, however, electricity demand has failed to rise to forecast levels, actually falling in absolute terms in most of the country. This, reform proponents argue, should lead to a recalibration of the target, which under the present framework is 45,000 gigawatt-hours (GWh)–actually in excess of 20% and more along the lines of 25%. 41,000GWh of the target is mandated to come from large-scale projects such as hydroelectric power plants, wind farms, and utility-scale solar farms, with the remaining 4,000GWh dedicated specifically to rooftop solar.

One might say that achieving a goal in excess of the target shows that the program has been a huge success–as indeed many have. There is certainly some relationship between the fall in electricity demand that has been observed across the country and the recent rise in rooftop solar panels–the ‘behind the meter’ technology’s power generation effectively in a blind spot for the electricity consumption figures because having solar panels installed generally means purchasing less power from the electrical grid. Currently, over 3 gigawatts (GW) of solar capacity is installed on well over 1 million homes across the country.

Instead, incumbents would prefer that the 45,000GWh number be pushed back to 2025, and the 2020 target be altered to be some other intermediate step. To make up for the changes, the scheme would be extended out to 2040 instead of its current end date of 2030. Doing this would ensure that renewable energy projects that are developed counting on revenue from the RET would continue to be ‘bankable’ for a longer period of time. It would also, proponents argue, mitigate the price impacts that the RET is supposedly having–claimed to be around 14% for residential and medium-sized commercial electricity users and up to 30% for larger electricity consumers, including heavy industry.

Mr Abbot said that Australia ‘out to be an affordable energy superpower’, and that renewable energy support schemes have gotten in the way of the country’s manifest destiny. The clean energy support scheme that the Prime Minister has been most outspokenly against is the carbon tax legislation introduced under the previous government. The carbon tax was a significant part of the retail electricity price increases in recent years, but the RET has been widely seen as a cost-effective mechanism for supporting renewables.

Nevertheless, the biggest driver behind electricity price increases has been network infrastructure–the ‘poles and wires’ owned and maintained by network companies across the country. Many argue that the amount of this investment could be reduced significantly with smarter systems, and that the network companies, which are frequently government-owned and bureaucratic, do what they can to maintain their budgets and revenues.

Hidden also from view in the phrase ‘affordable energy’ are the environmental and health issues associated with the country’s most common electricity fuel source: coal. Renewable energy advocates argue that these costs significantly impact other sectors, including the health sector. Investment in renewable energy is also critical, as Clean Energy Council chief executive David Green notes, to insulate the country’s electricity users agains longer-term spikes in gas prices. “We remained convinced that the RET policy is working effectively and, consistent with the numerous reviews undertaken over the past decade, that building more renewable energy is critical to driving consumer choice as well as avoiding much higher electricity prices as the cost of gas continues to increase,” he said. Meanwhile, RenewEconomy’s Giles Parkinson tears apart the argument that renewables are the major driver of electricity price increases, noting that rising wholesale gas prices are the single largest factor in the recent increase in regulated tariffs in Queensland.

As we have noted previously, the RET review is due to take place in the new year, and significant changes are anticipated.

© 2013 Solar Choice Pty Ltd

James Martin II