Solar power and wind turbine

Renewable Energy Target state-of-play: What you need to know

by Solar Choice Staff on 27 October, 2014

in Solar and Renewable Energy Policy,Solar Choice News,Federal Government solar incentives,100kW,Renewable Energy Target

Sydney Morning Herald Environment Editor Peter Hannam has provided a lucid overview of where things stand with the Renewable Energy Target (RET). The piece is worth a read for anyone who has been following the saga over the scheme’s future as a reminder of the current situation and what is at stake.

Here is a quick summary of the major points:

Why do we have the target in the first place, and how does it work?

The primary purpose of the RET is to even the playing field between fossil fuel electricity generation and renewables. It does this by supporting the build-out of renewable energy generation plants through long-term incentives for renewable energy production. Under the RET, big polluters (mainly power generation plants and heavy industries) are required to purchase a set amount of renewable energy (accounted for in a type of currency called Renewable Energy Certificates, or RECs) in proportion to contribution to CO2 pollution. These incentives are paid for indirectly by all electricity consumers as big polluters pass on the cost of RECs to end-users.

The RET also encompasses a sub-scheme specifically for small-scale renewables (under 100kW) called the Small-scale Renewable Energy Scheme (SRES). The SRES provides what are in effect up-front subsidies for residential and small-scale commercial solar systems (mostly rooftop solar), and has been tremendously important in bringing solar power to the level of affordability which it is currently at.

Why is there a debate over the RET? 

Currently the RET aims for 20% of electricity from renewables by 2020, based on previous estimates of Australia’s future electricity demand which, due to a number of factors, have turned out to have overshot the mark–electricity demand has actually been in decline. If the target remains as-is, Australia will actually get about 25-27% of its electricity from renewables by 2020. The Coalition and incumbent utilities  whose profits are affected by the target and an oversupply of generation capacity), argue that the RET should be reduced to a ‘real’ 20% target in order to reflect the fall in demand.

Proponents of an unchanged RET say that making changes to the scheme mid-way through its operational life will have an extremely detrimental impact on investment certainty–if it can be changed once, why can’t it be changed again? Even without any changes having been made to the scheme, investor confidence has already plummeted and most large-scale projects are effectively on hold until the fate of the scheme is made clear. As Mr Hannam points out, 34 wind farms are unlikely to go ahead if the target is reduced.

Why is this happening now?

A regularly-scheduled, statutory review of the target got underway soon after the Abbott government came into power riding a wave of anti-Carbon Tax sentiment (which it seems to have incorrectly conflated with anti-RET sentiment). The panel appointed to review the scheme, headed up by businessman Dick Warburton, was widely viewed as heavily biased against renewables and in its final report recommended either eliminating the scheme entirely or cutting it back dramatically.

Where are things at, and what’s likely to happen?

Public support for the RET runs high, and concentrated campaigns by the renewables industry and its supporters appear to have managed to shift the government’s position. Currently, there is little chance of any major legislative changes to the RET making it through the Senate, where Labor, the Greens, Palmer United and a few independents hold a safe majority that is unified on this particular issue. Negotiations over the future of the target began last week with the Coalition proposing a reversion to to a ‘real’ 20% target but no changes to the SRES (small-scale solar is popular even among Coalition supporters). The Opposition parties have all promised not to budge on maintaining the target as-is.

It’s hard to tell how things will turn out, but it’s not unthinkable that some ‘compromise‘ will be found. The Labor party has signalled a willingness to push the target out a few years and possibly exempt the aluminium smelting sector from its RET obligations. In the meantime, the renewable energy industry holds its breath and hopes for a favourable outcome.

© 2014 Solar Choice Pty Ltd

Previous post:

Next post: