The panel tasked with reviewing the Renewable Energy Target (RET) has requested an extension to complete its final report, according to the Australian Financial Review. The report, which was originally slated to be released by the end of July, will contain the panel’s recommendations about how the RET should be implemented. Pending its outcome, a renewable energy project pipeline worth approximately $15-18 billion hangs in the balance.
Since its makeup was announced, the impartiality of the panel’s members has been openly questioned by many in the renewable energy industry and renewable energy proponents (e.g. here here here). In particular, there are concerns that the views of RET review panel head Dick Warburton, chairman of Westfield Retail Trust and an anthropogenic climate change skeptic, will taint the panel’s report.
Mr Warburton has maintained that the panel’s composition is not only even-handed but also experienced. “Of course, it’s impartial. I have made it very clear fright from the beginning we would have an open book on this and listen to all arguments and submissions,” he told the Australian Financial Review last week.
His comments came in response to accusations made by Shadow Minister for Climate Change Mark Butler MP, who went so far as to say that the selection of the panel was ‘overtly political‘. Mr Warburton was dismissive of the claims, however, saying: “We’ve got a very clear, impartial view. I don’t know why he made those comments.”
Mr Butler, member for Port Adelaide, has previously spoken on the importance of the RET for the future growth of the Australian renewable energy industry. In a recent press release, he lashed out at the Coalition for creating an atmosphere of uncertainty around the scheme–uncertainty which is having a real impact on investment.
“This ignorant disregard for a growing global industry – of which Australia should definitely be a frontrunner – needs to end now. Tony Abbott cannot keep ignoring the need for Australia to move towards a clean energy future.”
Before the election, Australia was in the top four most attractive places to invest in renewable energy projects. Since Tony Abbott’s attack on the industry began after the election, Australia has fallen to ninth on the list.
“Investment in the industry is being routinely undermined by the Prime Minister’s negative and untrue rhetoric around renewable energy. It’s risking more than 20,000 jobs and $18 billion worth of investment,” Mr Butler said.
“Investors in the energy sector want clarity, certainty and consistency in public policy. The Government and Palmer United Party created chaos in the Senate over the carbon price, this shouldn’t be repeated with the RET, further uncertainty would be disastrous for the sector.”
Although the current composition of the Senate means that many of the more extreme imaginable outcomes–such as the scrapping of the RET in its entirety–are unlikely to come about through legislation, some aspects of the RET will remain vulnerable through ministerial decree. And while it is uncertainty about the future of the RET that is now plagues the developers and investors of large-scale renewables projects, it is smaller projects that could be more significantly impacted by unilateral Coalition action.
How small-scale solar system prices could be impacted
For small-scale renewables projects (under 100kW in capacity), the incentives currently available under the small-scale portion of the RET (the SRET) could be reduced at the stroke of a pen. Presently, such systems are eligible to create small-scale technology certificates (STCs) based on a ‘deeming period’ of 15 years. STCs are tradable assets (a type of renewable energy currency) which can be applied to the up-front cost of a solar system.
If the deeming period were reduced to 10 or 5 years, fewer STCs would be created with the installation of each new system. The up-front benefit would also fall in accordance with this, thus effectively raising the cost of solar PV systems for ordinary homes and businesses across the country. In a similar vein, if the government opts to reduce the STC Solar Credit ‘multiplier’ from its current rate of 1x (formerly 2x) to, for example, 0.5x, solar system installation prices are likely to rise.
STCs, when applied to the cost of installation, typically knock anywhere from 65¢-75¢ per watt of the cost of installing a solar system, depending on the location and the going market price for STCs. This means that a 5kW (5000W) solar system, for example, would typically benefit from around (65¢ x 5000 =) $3,250 worth of STCs. Assuming STC prices remain stable through such changes (something that is by no means guaranteed), a reduction of the deeming period to 10 years would cut this benefit down to around $2,160, while a reduction of the multiplier to 0.5x would reduce their value to $1,625.
Based on the average price of a 5kW solar system ($1.70/W), if either of these changes were implemented, solar system prices would likely increase 20-25%. If the scheme were eliminated altogether, prices are likely to see increases of nearly 40%.
© 2014 Solar Choice Pty Ltd