Retirement savings at risk if RET is slashed: IGCC

The Investor Group on Climate Change (IGCC) has advised the panel tasked with reviewing Australia’s Renewable Energy Target (RET) that the superannuation funds of millions of Australians are at risk should the scheme be weakened.

Emphasising the importance of policy certainty for the future growth of Australia’s burgeoning renewable energy industry and the overall health of the economy, the IGCC called on RET review chief Dick Warburton and colleagues to maintain the large-scale (LRET) target as-is: at 41,000 gigawatt-hours (GWh) of renewable energy by 2020 instead of the ‘real’ 26,000GWh target which has been suggested by some energy industry players.

It also recommended that the scheme should be extended beyond 2020 in order to “best support an orderly capital deployment process in the market”.

A collaborative body comprised of Australian and New Zealand investors, the IGCC focuses on the impact that climate change has on the value of investments. According to the IGCC’s website:

The IGCC represents institutional investors, with total funds under management of approximately $1 trillion, and others in the investment community interested in the impact of climate change on investments. The IGCC aims to encourage government policies and investment practices that address the risks and opportunities of climate change, for the ultimate benefit of superannuants and unit holders.

The RET is the principal renewable energy support scheme in Australia, and the bipartisan support that brought the program into existence during the Howard era led many–including the IGCC–to believe that it would carry on intact, even through changes of government.

Since coming into power, however, the Coalition’s crusade against the carbon tax has extended to encompass a number of additional renewable energy support schemes–with efforts underway to shut down the Climate Change Authority and Clean Energy Finance Corporation (CEFC) through legislation. The RET is also seen as vulnerable.

“Our expectation was that the LRET had bi-partisan support at a level of 41,000 GWh by 2020 and investments requiring long-term investment horizons of over twenty years were undertaken on that basis,” the organisation said in its letter to the RET review panel.

Maintaining the LRET is particularly important for renewables industry in ensuring the returns on large-scale renewable energy projects with longer time frames. A reduction in the target could mean a drop in the value of Large-scale Generation Certificates (LGCs), which are traded as a type of renewable energy currency under the scheme. LGCs supplement income from the sale of renewable electricity into the grid or, in the case organisations which build RE power plants in order to offset their energy usage, reduced electricity costs.

“Some 5 million Australians are financially exposed to these assets via their Australian-based superannuation funds, which hold equity stakes in . . . [project developer] Pacific Hydro,” said Nathan Fabian, chief executive of the IGCC.

“Many IGCC members also have public equity exposures to Infigen energy and private equity exposures to companies that operate in renewable energy markets. Additional exposures are held via infrastructure asset ­managers,” Mr Fabian said.

The IGCC weighs in with these comments in just as Clive Palmer very publicly declared his support for the RET, thereby significantly diminishing its chances of being substantially altered by the Coalition government through Parliament.

While praising Mr Palmer in a separate recent media release for backing the RET, Climate Change Authority and the Clean Energy Finance Corporation, the IGCC also stated that it believed any Emissions Trading Scheme (ETS) that is introduced in Australia should be brought in independently of other nations.

Mr Palmer, whose Palmer United Party (PUP) will be a kingmaker in the new senate, has stated that any ETS he supports would begin with a ‘sleeper’ carbon price of $0/tonne of CO2 until Australia’s major trading partners have all introduced their own schemes.

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