The federal government’s Climate Change Authority has given the middle finger to those who would reduce public subsidies to renewable energy — although it’s accepted that solar rebates are probably too high.

The statutory body established four months ago to advise Canberra on climate policy has released its first draft of a major review into the renewable energy target. The process has flushed out a wave of hostility to the RET from coal-fired power stations and their allies, who want the target cut back.

But they haven’t been heard. The Authority — under the guidance of its chair, ex-RBA governor and superannuation pin-up man Bernie Fraser — has stuck with the status quo and recommended no major changes.

The RET, broadly supported by the Coalition, is arguably a more expensive but more effective way of greening up electricity supply than the carbon tax. It obliges retailers to buy renewable electricity (consumers pay for it). The RET is one to watch — if the Coalition wins the election, and struggles to repeal the carbon tax as promised “in blood”, pressure may build within the party to gut the RET.

The hottest topic for the RET is the level of the target: it’s supposed to mean 20% of electricity is generated from renewable sources from 2020 to 2030, but the actual target in the legislation is set at 41,000 gigawatt hours per annum. Electricity demand is lower than predicted, so that fixed target will end up being more like 25% of electricity, according to estimates in the review.

In its discussion paper, the Authority flatly rejected the idea of winding back the 41,000-gigawatt hour target, as proposed by a phalanx of industry players — the Business Council of Australia, retailers Origin Energy and Energy Australia (the new TRUenergy), the Minerals Council, the Australian Coal Association, etc. The Authority stuck with the existing target because “the benefits of any change at this time (either an increase or decrease) would be outweighed by the costs of increased regulatory uncertainty”. The Climate Institute’s Erwin Jackson told Crikey “they’ve rebuffed the flawed arguments of a few coal-fired generators”.

Effectively lifting the RET from 20% to 25% of electricity will cost $4.4 billion between now and 2030, according to modelling contained in the review, but that’s over a long period in a large sector; “the net present value of the impact on average household bills between now and 2030 would not be significant”, the review states. (A genuine 20% target would be 26,400 gigawatt hours, not 41,000.)

It’s not surprising the Authority has backed Labor’s RET, given its members are mostly figures who accept (indeed, in some cases write) the science of anthropogenic climate change, and have been receptive to Labor’s climate policies. Scientist David Karoly, academic Clive Hamilton and serial Labor board appointee Heather Ridout sit on the board.

To put Australia’s RET in context, China this week announced it would aim to generate 30% of electricity from non-fossil fuels (i.e. renewables and nuclear) by the end of 2015.

The Authority does want the RET tweaked. The army of householders putting solar panels on their roofs could get less money from it; the Authority has proposed reducing the multiplier of RECS credits to less than one, which would mean lower up-front cash rebates. This is part of the sector-wide scaling back of public subsidies, as solar costs come down, installations build up and governments stare in horror at their budgets. Solar homes currently get an upfront federal rebate (through the RET) and ongoing subsidies for their electricity produced (through state-based feed-in tariffs); both are now on the chopping block.

The review recommends fixing up the RET clearing house for RECS permits, so that it acts less as a dumping ground for householders optimistically expecting $40 a REC, and more as it’s supposed to; the Authority recommends permits only be lodged when the facility needs them.

The Authority has squibbed on whether to increase the RET target to accommodate the Clean Energy Finance Corporation, a publicly-financed green bank which will tip billions into various projects from next year. Some conservation groups want the RET increased so CEFC projects are genuinely additional, but the review has put that decision off until 2016.

The Authority also proposes it does less work. Legislation states reviews of the RET should take place every two years; the review wants that changed to every four years.

Jackson says the Authority “has taken a common sense and economically rational approach to the review”, and welcomed the recommendation to retain the 41,000-gigawatt hour target, saying this meant more renewable energy, which would reduce greenhouse gas emissions.

Coalition Senator Ron Boswell, an outspoken critic of the RET, told Crikey he was “personally opposed to all renewable energy, I think it’s too expensive and it’s phasing the cheaper power out”. Boswell says, at the least, the gigawatt hour target should be reduced so that it genuinely represented a 20% target, as Labor had promised. “It should be based on the real target,” Boswell said.

The Coalition’s climate spokesman Greg Hunt says his party will consider the Authority’s review with an open mind and seek a meeting with the Authority to discuss its recommendations.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey