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Oct 26, 2012

Coal rebuffed: review sticks with status quo on RET

A broad-based attack on renewable energy subsidies has failed, as the government's Climate Change Authority defiantly sticks with the status quo on the renewable energy target.

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.

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17 comments

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17 thoughts on “Coal rebuffed: review sticks with status quo on RET

  1. Microseris

    B*swell opposed to all renewable energy. Typical of the Coal ition. A selfish dinosaur from last century who won’t live to see the full effects of climate change and doesn’t care.

    I wouldn’t care if they reduced the price per REC, as long as you got 1 for 1 on the feed in tariff instead of subsidising power retailers as they do in Vic. The new feed in tariff is 8c per kwh whereas retail is up to 30.64c per kwh for supply. Another (Victorian) Coal ition joke.

  2. John Bennetts

    If Micro thinks that it is fair and reasonable that solar power be paid for by the retailer at 30 cents per unit when all they need to pay for power eslewhere averages 5 cents per kWh, he is asking for a free ride, a gift from the other retail customers.

    If he doesn’t like 8 cents, then he has an option, which is to disconnect from the grid and sit in the dark and shiver whenever the sun sets or a cloud passes overhead.

    He has a further option, which is to purchase and maintain batteries and a backup small deisel or petrol generator for the 75% of the time when solar power is simply not available from the sun.

    If, instead, he decides to remain grid-connected, then he must be prepared to pull his weight and pay for the services which make his grid connection possible, ie to wear charges for those services.

    Real negotiation would not be along the lines of 8 cents or 30 cents, but would be designed to tease out reasonable charges for all those other services and systems and oncosts which are implied by grid connection, including the management by grid operators of the grid under wildly fluctuating load conditions whenever the sun ducks behind a cloud or emerges again and the safety systems which are needed to ensure that grid employees are not fried by backfed electricity from the domestic PV installations, despite having opened the circuit breakers that supposedly isolate the mains from the feeders.

    Talk about whingeing!

  3. AR

    Hunt claims “an open mind”! Jeez, any sign of a mind in the tory party would be welcome.
    I objected to the initial, wildly generous, feedback tariff in principia but saw the practical/political point – to encourage/bribe the waverers to go PhV but it was never equitable as the cost to the generators was passed on to the average consumer.
    One of the fascinating hypocrisies of the NuRight, with its blather about economic rationalism, is that the last thing the incumbent rentseekers sought was a level playing field, having tilted it in their favour for so long.
    Let’s have subsidies for renewable generation, 1 for 1 for PhV and FULL COST rating for the fossils.
    They’d go bankrupt tomorrow. Or last week.

  4. Joel

    <sarcasm>Well, I’m sure the Australian Coal Association’s reasons for wanting to cut the RET are based purely on the scientific evidence regarding climate change, so that’s alright then.</sarcasm>

    Why would anyone be interested in their thoughts on the matter, exactly?

    In other news: Microsoft encourages schools to use Windows on their computers. Colgate recommends use of Colgate-brand toothpaste. Pope recommends Catholicism as a pretty good religion.

  5. Person Ordinary

    The myth that electricity can only be used in real time must be debunked. Any form of energy can be converted into potential energy and then back into electricity as required. Sure there are various levels of efficiency, or loss, but we are smart enough to design storage in the grid to perfectly suit our needs.

    What it takes is clever public policy, which depends on constructive collective political will, which depends on an informed public, which depends on quality media …

    All mistruth, untested presumption, belief and untruth must be exposed, and this invalid argument against renewable energy is no exception.

  6. John Bennetts

    Ordinary Person has made a sweeping statement which has, thus far, a very elusive answer.

    Energy storage, whether as potential (ie gravitational) energy, or chemical energy (in batteries) or thermal energy (hot water or steam or hot solids) or chemically (by producing a material which can be used to store energy for later release, such as methane) or in flywheels or springs or compressed air have all, at some time, been extensively and enthusiastically supported.

    Currently, most of the above technologies are not commercially competitive. They are simply too dear.

    The front runner is pumped hydro, which is used in several places in Australia but for which significant expansion is not practical. Between one third and one half of the energy used is recovered. Possibly, pumped salt water storage has a future, but currently projected costs are excessive.

    Batteries are capital intensive, maintenance intensive, dangerous and are thus justified only for limited applications.

    Everything else appears to be less useful, though not without any hopes at all.

    My point is that, unless practical solutions to the problems inherent in energy storage are found, then energy storage will remain strictly limited.

    Despite being hypothetically possible, storage at practical scales, is currently out of reach. To say otherwise, or to claim that lack of affordable practical storage options an “invalid argument against renewable energy” is nonsense.

    Reliability, schedulability, availability and other supply standards are not optional. In order for energy systems to work, they are essential parameters which cannot be brushed away with unhelpful contrary assertions.

  7. John Bennetts

    Apology:

    Up to 2/3rds of energy sent to pumped hydro is recovered after allowing for losses due to transmission, pumping, regeneration and retransmission.

    My typo.

  8. Person Ordinary

    A considered response. Good.

    What is going to bring the costs down? Current public policy, or something that does not start from the presumption that fossil fuels must, for the foreseeable future at least, continue to provide “base load power?”

    Imagine if, for example, the resources wasted on “clean coal” were instead directed at economical storage. We could have many technologies competing for a share in the bonanza of a much faster transition to renewables.

    It helps to take a step back, and consider the politics that influence the progress of technology and the incentives within the system. It helps to realise that an accidentally untested presumption can actually reinforce a misguided perspective, and actually take us further from our objectives.

  9. Mark Duffett

    Good to see someone in government recognises there is such a thing as ‘cost of regulatory uncertainty’. Hopefully they can explain it to Tony Burke (of 11:59 pm fishery regulation fame).

    Person Ordinary makes an interesting reference to ‘our objectives’. We would all do well to remember that these are plentiful, reliable, low-carbon energy – and that the best path to this may not necessarily be a ‘much faster transition to renewables’. Political influences indeed.

  10. Person Ordinary

    Sorry Mark Duffett, I don’t follow. What are you referring to with “plentiful, reliable, low-carbon energy” if not renewables?

    And if you take into account the potential impact of even minor climate change, such as a sustained food price driven economic crisis, we must all have the objective of a much faster transition.

    All of us are threatened, whether you are prepared to confront it or not …