The Renewable Energy Target review headed by Dick Warburton, a 72 year old climate sceptic, has recommended the government either close the large scale renewable energy target to new entrants or have it be modified to increase in proportion with growth in electricity demand corresponding to a 50 per cent share in new growth. It also has recommended either immediately closing or accelerating the phase-out of the small scale renewable scheme for households and small business.
The renewable energy sector has said the move could bankrupt the industry and stifle innovation. Labor has also attacked the findings, saying it is a review written by sceptics, for sceptics.
“With the renewables industry now established in Australia, the main rationale for the RET hinges on its capacity to contribute towards the government’s emissions reduction target in a cost effective manner,” the executive summary says.
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“However, the RET is a high cost approach to reducing emissions because it does not directly target emissions and it only focuses on electricity generation. It promotes activity in renewable energy ahead of alternative, lower cost options for reducing emissions that exist elsewhere in the economy. In the presence of lower cost alternatives, the costs imposed by the RET are not justifiable.”
Large scale Renewable Energy Target
The review gave two options for the Large scale Renewable Energy Target
“The first is to allow the LRET to continue to operate until 2030 for existing and committed renewable generators, but closing it to new entrants, otherwise known as ‘grandfathering’. This will provide investors in existing renewable generation with continued access to certificates so as to avoid substantial asset value loss and retain the CO 2-e emissions reductions that have been achieved so far. Importantly, this approach avoids the costs to the community associated with subsidising additional generation capacity that is not required to meet electricity demand.
“Alternatively, the Panel suggests that the LRET could be modified to increase in proportion with growth in electricity demand, by setting targets one year in advance that correspond to a ‘50 per cent share of new growth’. This would protect investors in existing renewable generators and would support additional renewable generation when demand is growing. Targets would not be mandated for future years, exposing renewable energy investors to the same market risk (that future levels of electricity demand are unknown) that other investors in the sector currently face.
“If the current forecasts of electricity demand prove accurate, this approach would result in renewables making up a 20 per cent share of forecast electricity demand in 2020, but the share may be different if demand is higher or lower than expected. Importantly, this approach would protect the broader community from the cost of subsidising unnecessary additional generation capacity if electricity demand continues to fall.”
Small scale Renewable Energy Scheme
The panel recommended winding back the Small scale Renewable Energy Scheme, through either closing the scheme immediately or accelerating the phase-out of the scheme.
Labor says review written by sceptics, for sceptics
Shadow climate change minister Mark Butler said the recommendations were a “devastating blow” for Australia’s clean energy industry and would be another broken election promise from the Coalition.
“This is a political document – not an independent review,” Mr Butler said. “The climate change denialism endemic in the Coalition is written throughout this document.
“This is a report written by climate change deniers, for climate change deniers, and it shows.
“Tony Abbott’s ideological attack on renewable energy goes against good public policy reason.
“Tony Abbott likes to say that Australia is open for business. This report shows that that is just another lie.”
Clean Energy Council says it will bankrupt the industry
Clean Energy Council acting chief executive Kane Thornton said the recommendations could bankrupt the industry and put thousands of workers out of a job, while also terminating competition and innovation.
“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 over a decade of bipartisan support to date.
“These recommendations would create a major sovereign risk issue, sending a very clear signal to international investors and financial markets that Australia’s energy sector is not open for business.”
Mr Thornton said the only winners from a RET windback were “a handful of old coal power plants which were decades past their retirement date”.
GetUp says fossil fuel industry wrote the review
“The fossil fuel industry got its way with this review, because they wrote it,” national director of GetUp Sam Mclean said, referring to review lead Dick Warbuton’s fossil fuel connections and noted “scepticism” of anthropogenic climate change.
“It’s in their interests to stop the move to renewable energy and stop people saving on their household power bills.”
Sham review, farcical conclusions, says REC Agents Association
“The Warburton Review of the Renewable Energy Target has been a farce from the day it started,” president of the Renewable Energy Certificates Agents Association Ric Brazzale said.
“The Warburton Review has been a kangaroo court for the renewable energy industry, a show trial for solar, with a predetermined outcome. The Abbott Government must reject this show trial, and stick to its pre-election promise in order to restore confidence in Australia’s solar industry.
“The Warburton Review is arguing that now that the renewables industry is established – the RET is no longer required. That is – now that we have created an industry Warburton recommends that it be dismantled.
“They have reached their conclusion by overstating the costs of solar and ignoring many of its benefits. They discount the benefits of reducing wholesale prices notwithstanding their consultant’s modelling. Their assumptions about costs and demand for solar are heroic, and fly in the face of detailed industry analysis.”
Pacific Hydro calls for Inquiry
Wind developer Pacific Hydro executive general manager Lane Crockett told Fairfax Media that a reduction in the RET would be met by a call for a Senate Inquiry.
“This is a bizarre situation to be in – it was a promise by this government before the election to keep the RET,” Mr Crockett told Fairfax. “Frankly, if they do this, I would call for a Senate inquiry into what’s gone on.
“There’s certainly the numbers in the Senate to get an inquiry up.”
Aluminium Council welcomes findings
One happy body was the Australian Aluminium Council, which welcomed changes to the RET, saying the scheme was damaging its competitiveness.
“We welcome the acknowledgement by the Review Panel that the RET impacts electricity prices for trade exposed businesses such as aluminium smelting and alumina refining – and that significant adjustments are required to the scheme to reduce its cost burden ” the council’s executive director said.
It also said it would be seeking a full exemption from the RET.
Read the full report.