Undermining the Renewable Energy Target Is A Costly Mistake


If there was any doubt that the Abbott government wants to destroy the renewable energy industry in Australia, this week’s announcement of its plans for the Renewable Energy Target (RET) has cleared things up.

In a media conference this week, Energy Minister Ian Macfarlane said that the government wants to reduce the Renewable Energy Target. The target will be slashed from its current legislated figure of 41,000 gigawatt hours in 2020, to a figure that Macfarlane is calling a “real 20 per cent.”

The “real 20 per cent” is a classic bit of Coalition spin. If you look through the Howard government’s legislation for the RET, you will find no mention of a target of “20 per cent” renewable energy in 2020.

Instead, the Renewable Energy (Electricity) Act 2000 specifies a set amount of renewable electricity generation: 41,000 gigawatt hours by 2020. That’s the law of the land. It was never a percentage figure.

The “20 per cent” was just a handy shorthand used by politicians at the time. 41,000 gigawatt hours was expected to represent around one-fifth of electricity demand by 2020, which most experts thought would keep growing indefinitely.

It hasn’t quite worked out like that. Electricity consumption has actually been falling in recent years, as consumers have reacted to stinging price increases by using less power and installing rooftop solar and energy-saving devices. As a result, 41,000 gigawatt hours will probably represent around 27 per cent of the electricity grid by 2020.

So what, you might ask. If 20 per cent renewable is good, surely 27 per cent is better?

Not according to big fossil fuel companies, who stand to make big dollars from a watered down target. And not according to the Abbott government, which has an obsessive hatred for all things green.

Many Coalition politicians would like to kill off the Renewable Energy Target altogether. But, unlike the carbon tax, renewable energy is extremely popular in the electorate, making such a move rather tricky. Matters aren’t helped by the fact that the RET was originally put in place by the Howard government, and has been bipartisan policy for both major parties ever since. The Coalition went to the 2013 election with a firm promise to retain the RET in its current form.

Lacking the political courage to abolish the RET in its entirety, Tony Abbott and his cabinet decided to review the target instead. The man chosen to do this was noted climate skeptic and former fossil fuel executive Dick Warbuton.

Almost as soon as Warbuton was announced as the chair of the review, investment in the Australian renewables sector fell off a cliff. It was all too clear which way the smokestacks were belching. Sure enough, Warbuton’s eventual report proposed two options, both of which would radically reduce the amount of renewable energy required.

In responding to Warbuton’s report, Energy Minister Ian Macfarlane has tried to paint his decision as moderate and common sense.

By rejecting most of Warbuton’s recommendations, Macfarlane wants us to believe the government is following some sort of middle path, between business as usual and the wholesale dismantling of the RET recommended by the Warbuton report.

But some elementary maths quickly demonstrates that a “real 20 per cent” will be devastating for the renewable energy industry. With electricity demand falling, the new target under the “real 20 per cent” will fall from 41,000 gigawatt hours to something like 25,500. In other words, Macfarlane wants to slash the RET by 38 per cent.

Most energy analysts think this will devastate the renewables sector in Australia – particularly wind. The government is exempting household solar from any changes, which means all the pain will be felt by the large-scale renewables sector. Most large-scale renewable energy in Australia is wind.

That suits the anti-wind activists in the Coalition just fine. Wind turbines have become figures of conservative hate, from Treasurer Joe Hockey down.

Consultants ACIL Allen have tried to model what will happen. It’s pretty obvious: wind loses. Fossil fuels win. “The Real 20% [target]has approximately 15,000 GWh less wind output, which is replaced by increased output from incumbent generation (mainly black and brown coal-fired output)”, they write.

Caption: Under the government's proposed changes to the Renewable Energy Target, renewable electricity in 2020 will fall from 41,000 gigawatt hours in 2020 to 25,500. Source: ACIL Allen.

As a result, we’re likely to see higher prices for wholesale electricity. ACIL Allen estimate that wholesale prices could be 32 per cent higher in 2020. The reason is that wind power is actually keeping wholesale prices for electricity down – as even the Warbuton review pointed out. Because big energy companies make money by selling electricity on the wholesale grid, they would gain hundreds of millions of dollars, perhaps billions, in a “real 20 per cent” scenario.

Of course, for this to happen, the government needs to amend the RET legislation. The government has been attempting to negotiate with Labor over its changes, hoping that it can convince the ALP to accept some of its amendments.

So far, Labor and the minor parties show no sign of budging. In a rare show of spine yesterday, Opposition Leader Bill Shorten savaged Macfarlane’s announcement, calling it a “fraud” and reiterating Labor’s commitment to the original target of 41,000 gigawatt hours.

But the government doesn’t need to change the laws to damage the renewables industry. The ongoing uncertainty of the policy environment, and the sheer hostility of the Abbott government to renewables of any kind, are already having an effect.

This morning, wind tower manufacturer Keppel Prince announced it would close its wind tower workshop and lay off 100 staff. Rather uncomfortably for the Coalition, the job losses come in Portland, in Victorian Premier Denis Napthine’s own seat.

Keppel Prince is the largest manufacturer of wind towers in Australia. New Matilda visited the company in 2012. Even then, Keppel Prince managing director Steve Garner was calling for certainty in energy policy. “There has never been any certainty, ever,” he told us.

Ironically, now there is: the certainty that the Abbott government is intent on destroying renewable energy in this country. As veteran energy journalist Giles Parkinson writes today, “the Abbott government came to power with an unstated platform to kill the large-scale renewable energy industry in Australia, and it is largely succeeding.”

Ben Eltham is New Matilda's National Affairs Correspondent.