Sep 18, 2012

How crippling the RET could cost you

Slashing the RET could actually increase overall costs to consumers. And it appears TRUenergy -- which is now pushing for RET dilution -- agreed just a few months ago.

AGL has just released another of its Applied Economic and Policy Research Working Papers, illustrating a rather counter-intuitive result: that abolishing or substantially reducing the Renewable Energy Target might actually increase overall costs to consumers.

On face value, this doesn’t seem to make much sense because reducing the RET would mean consumers would save a large amount of money from having to pay for Renewable Energy Certificates (referred to as LGCs). However, AGL’s paper suggests there is a counter effect from substantially changing the RET — it causes the finance sector to become more nervous about lending to the power generation sector more generally.

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3 thoughts on “How crippling the RET could cost you

  1. Scott

    Well since the states and Feds have been stuffing about with regulation in the Renewable energy industry since 2004, I would say that regulatory/political risk is already priced into the costs of project financing.
    Adjusting the RET can only benefit consumers in my opinion and should not increase the risk premium by any significant amount (if any)

  2. Warren Joffe

    What is more it is not beyond the wit of homo politicus to choose to undo the adverse effects on financing by sufficiently watertight legal guarantees. It certainly sounds as though AGL is issuing propaganda which will support its competitive position and the bonuses of its senior executives.

  3. Frank Campbell

    Pricing in the power industry is already a tangled, arcane mess, ideal for rent-seekers and chancers. MRET made it worse. Get rid of it.

    It should be clear by now that it makes no significant difference to emissions.

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