Renewable Energy Target Review: Industry Responds

The long-awaited review of Australia’s Renewable Energy Target has been released, and, as expected, the Warburton Review has recommended scaling back and even closing large-scale renewable energy schemes to new entrants.

In short, the review suggests cuts to investment in renewable power stations, along with the scrapping of incentives for solar panels.

In its executive summary, the report recommends two alternative options: closing the scheme to new renewable power stations, while continuing to support existing projects until 2030, or ensuring new renewable power generation makes up just half of any future growth in electricity demand.

The review has left a cloud hanging over the country’s renewable energy industry with both large- and small-scale wind and solar generation likely to suffer if it is implemented. While industry from both sides of the fence has spoken out, the groundswell of public support and lobbying by the renewable energy industry – as well as the likelihood of a pro-RET Senate – means moves to implement the recommendations of the Warburton Review could be undermined.

A decision is expected by the end of September and the results will be analysed in the November/December issue of Energy Source and Distribution.

SRES no longer required to support the solar industry: John Bradley, ENA

The RET Review provides an opportunity for the Australian government to modernise an outdated framework for subsidising renewable technologies that no longer require support, according to the Energy Networks Association.

Chief executive officer John Bradley said the Small-Scale Renewable Energy Scheme (SRES) is now outdated.

“The SRES is a high-cost and illogical way of achieving greenhouse gas abatement. It subsidies solar and heat pump hot water technologies by up to
30 per cent, including where they achieve less abatement than unsubsidised gas hot water systems,” he said.

“The results are distorted hot water appliance markets, more expensive abatement and reduced gas network volumes, which push up prices.”

Modelling commissioned by the ENA has shown removing the SRES could reduce gas bills by about $50 per annum in 20 years.

“The SRES is also no longer required to support the solar panel industry. Australia’s penetration rates of small-scale solar panels are among the highest in the world, reaching 25 per cent in South Australia and 23 per cent in Queensland,” Mr Bradley said.

“The technology cost has halved in recent years, removing the public policy justification for subsidies from other electricity users. It is essential for good consumer outcomes that government-mandated subsidy schemes like the SRES reflect today’s needs and market circumstances.

“Early action should be taken to wind up the SRES or, at least, remove those displacement technologies such as hot water systems, which were never intended to be funded by the RET at all.”

The RET in its current form needs to change: Michael Fraser, AGL

Following the release of the report on August 29, AGL Energy Limited (AGL) chief executive officer Michael Fraser said whichever option the government chose, it needed to ensure investments made by companies in good faith are protected.

For more than a year, AGL has said closing old emissions-intensive power plants was a necessary part of any policy designed to encourage new renewable investment.

“The RET was designed and implemented when policy-makers assumed that electricity demand would increase, carbon pricing would be in place and old inefficient power stations would retire,” Mr Fraser said in a statement.

“None of these assumptions have proved to be right. So the RET in its current form needs to change, otherwise it will fail.

“AGL’s commitment to renewable energy has not changed – AGL is still the leading private investor in renewables, having invested more than $3 billion in renewable energy generation in Australia. We are one of the few companies actually building new renewables today – Australia’s largest solar PV plants at Nyngan and Broken Hill in western NSW.

“We also own and operate the largest wind farm in the southern hemisphere at Macarthur in south west Victoria.”

Low-emission natural gas users forgotten: Mike Carmody, Gas Energy Australia

The Australian government should accept the Renewable Energy Target report recommendation to scrap the Small-Scale Renewable Energy Scheme (SRES) and look to less expensive and more effective ways for households to reduce their greenhouse gas emissions, according to Gas Energy Australia’s chief executive officer Mike Carmody.

Mr Carmody said the government should accept the recommendation to scrap the SRES, to ensure CO2 equivalent emissions are reduced in the most cost-effective way for households and businesses.

“The scheme provides subsidies to households to buy solar and electric heat pump water heaters, but provides nothing for low emission natural gas or LPG water heaters, even though they provide lower cost greenhouse gas abatement than solar and electric, and produce less greenhouse gas emissions over their lifetime,” he said.

What’s on the table will devastate renewable energy developers: Dylan McConnell, Melbourne Energy Institute

Enacting the recommendations of the panel will decimate the renewable energy industry in Australia, according to the Melbourne Energy Institute research fellow Dylan McConnell.

“The two main options offered represent a false choice and will be equally devastating for renewable energy developers,” he told Renew Economy.

“The softer option, having a target set as ‘share of growth’, may result in just as much additional renewable energy by 2020 as the ‘closed to new entrants’ option – that is, none. Should demand decline, or remain flat, the target will be held at the previous year’s level – a fairly likely outcome given recent forecasts.

“The panel aims to justify significant reform of the RET on the basis of its claim the interests of the broader community should take precedence. “Given 71 per cent of people want the RET to be at least 20 per cent by 2020, or higher, even when they are told incorrectly the RET is a subsidy that drives up consumer energy bills, one has to ask exactly how the interests of the broader community are taking precedence in these options.”

Review panel grossly underestimated the impact of its recommendations: Kane Thornton, Clean Energy Council

The recommendations from the review of Australia’s Renewable Energy Target would decimate the industry, resulting in massive financial damage to more than $10 billion worth of investments already made and putting 21,000 jobs at risk, according to the Clean Energy Council.

The council’s acting chief executive Kane Thornton said the recommendations proposed by the review could bankrupt the industry and put thousands of workers out of a job, while terminating competition and innovation in the Australian energy sector.

“It is inconceivable that the review could objectively recommend slashing the RET when its own economic modelling showed this would lead to higher power bills in the long run, while at the same time smashing billions of dollars of investment,” Mr Thornton said.

“The review panel has clearly misunderstood the devastating effect of many of its recommendations.

“It is particularly naive to suggest that slashing the target would not have a massive impact on businesses that have invested on the basis of a legislated policy scheduled to operate out to 2030 and with more than a decade of bipartisan support to date.”

Stop propping up the dinosaurs: Alan Pears, RMIT University

The panel has ignored the importance of certainty for the stable development of the renewable energy industry, according to RMIT University sustainable energy and climate researcher Alan Pears.

“It will be interesting to see if short-sighted governments use this ‘moving of the goalposts’ to justify the review of policies and subsidies of the fossil fuel and energy-intensive industries,” he told RenewEconomy.

“Unfortunately, the outcome of the review seems to confirm it has carried out the task set for it by a government that has repeatedly misused economic analysis to support ideologically or incumbent-protecting policies.

“Renewable energy has become a political football, even though before the election the present government claimed to support the RET.

“The dominance of politics over evidence-based policy seriously undermines business confidence and increases societal costs in the future. We need to grasp the future instead of propping up the dinosaurs.”

Benefit to electricity consumers overlooked: Miles George, Infigen Energy

Infigen Energy welcomed the public release of the Renewable Energy Target Review Panel’s report to the government, noting it was disappointed the panel has recommended the government choose between two scenarios that would decimate the renewable energy industry in Australia for the foreseeable future and increase electricity bills for consumers.

“One of the primary purposes of the review was to consider the effect the scheme was having on the cost of electricity to consumers. The panel’s own modelling concluded the RET will result in a net benefit for consumers of 3-4 per cent per annum compared with the ‘closed to new entrant’ scenario recommended by the panel,” Infigen Energy said in statement.

“The panel has recommended the government adopt revised policies that result in the worst outcomes for electricity consumers. This flies in the face of the Coalition’s stated objective to take pressure off Australian households via lower electricity prices.”

Infigen’s managing director Miles George said claims the RET would drive up electricity prices have been shown to be incorrect.

“The primary beneficiaries of the panel’s recommendations are the large electricity retailers and coal fired generators, who already control 75 per cent of the market. A cut to the RET would effectively eliminate any competition for those already dominant fossil fuel focused companies,” the company said in a statement.

Stressing existing assets must be protected, Infigen Energy said the panel’s recommendation to consult further with industry should the government seek to implement any of the recommendations is critical.

“If the government is minded to adopt any of the panel’s recommendations then the arrangements that will be needed to protect the value of existing assets will be crucial and must be developed with the assistance of people with the requisite specialised knowledge,” the company said.

“Failing to devise and implement effective arrangements that work as intended would be very damaging for Australia’s reputation as a safe and reliable place to invest.”

The protectionist route will only support the status quo: Ray Wills, Future Smart Strategies

Managing director of advisory firm Future Smart Strategies, Professor Ray Wills, has fired a broadside at the Abbott Government saying it can’t stand in the way of progress when it comes to energy reform, “because it is a tidal wave that will happen regardless”.

“We should be engendering the change, supporting and growing it in a way that most benefits this country, but that’s not happening and ultimately it will cost us billions of dollars,” he said.

“The protectionist route will result in investment in infrastructure that supports the status quo instead of encouraging change for the better. ”

While solar will most likely become the dominant force, Professor Wills acknowledged there will still be a place for wind and wave power, as well as bioenergy. However, he said the key to realising this energy landscape is more effective storage and greater energy efficiency.

Professor Wills will remind industry renewable energy has had a long history of support in Australia when he speaks at All-Energy Australia in October.

“Five years ago, when the RET was expanded with bipartisan support, Australians overwhelmingly wanted more clean energy – and the latest opinion polls suggest Australians have only strengthened their views,” he said.

“The current polarisation of debate therefore puts the Abbott Government and its apparent desire to reduce or eliminate a RET for Australia up against the aspirations of the rest of ‘Team Australia’ to kick renewable energy goals.”

Get on with the business of investing in new projects: Ric Brazzale, Green Energy Trading

Ric Brazzale, managing director of Green Energy Trading – an environmental credit agent – said the biggest challenge facing the renewables industry is the federal government review of the Renewal Energy Target.

Mr Brazzale said he feared the removal of support for solar would “suck the lifeblood out of the industry”.

“Activity will halve. More than 6000 people will lose their jobs and I promise you I am not being alarmist – they are the cold, hard facts,” he said.

“More than 1.3 million Australian families have already embraced solar energy and if the renewable energy scheme is left alone that number will double in five years.”

Mr Brazzale – a keynote speaker at All-Energy Australia – is instead calling for policy certainty from the federal government, asking it to leave the RET as it is and allow industry to, “get on with the business of investing in and developing new projects.”

“Industry will be brought to its knees, unless it does a better job selling its ‘solar is good’ message to politicians and the broader community.

“We need a grass roots campaign. Businesses have to get out there and pound the pavement, make contact with local MPs and demonstrate the benefits of the projects they continue to undertake.”