This article originally posted at Climate Spectator. View the original article here. The continued decline in demand for electricity in Australia is great news for our transition towards a decarbonised economy. This is a ideal opportunity to retire our old, … Continue reading A window opens to dump dirty generators
This article was originally posted at The Conversation. View the original post here.
The review of the Renewable Energy Target is due to be handed to the federal government any day now, yet amazingly there are still conflicts over whether the policy makes electricity more or less expensive.
Originally posted at Climate Spectator. View the original post here.
Hugh Bannister from one of Australia’s handful of electricity market modellers, Intelligent Energy Systems, has released analysis looking at who would win and lose out of a move to axe the large scale component of the Renewable Energy Target (the LRET).
The headline answer is that the winner won’t be energy consumers, in fact they’ll lose to the tune of a half a billion dollars over the next decade on a net present value basis. Indeed what is likely to cause quite a deal of shock is that the average NSW household would end up paying more on their electricity bill per year from abolishing the LRET then the entire extra cost associated with the carbon tax. Continue reading “Generators to cash in at expense of renewables and consumers”
In the case of the Solar Towns scheme, it will offer a total of A$2.2 million over the next three years to community groups, in barely more than a handful of electorates, several of them marginal seats like Corangamite in Victoria and Moreton in Queensland.
Other axed industry and community clean energy programs include the Low Emissions Technology Demonstration Fund, the National Low Emission Coal Initiative, Energy Efficiency Programmes, the National Solar Schools Plan, Energy Efficiency Information Grants and Low Carbon Communities.
While the axing of so many renewable and low-emission programs was predicted, it is significant. The Australian government cuts to programs driving greater renewable and low-emission energy use come just as we’re being advised to do precisely the opposite by global experts.
As Renew Economy has reported, this week a new report from the traditionally conservative International Energy Agency (of which Australia is a member) shows that the world’s electricity mix needs to switch from 68% fossil fuels now to at least 65% renewables by 2050, if we’re hoping to limit the rise in global temperatures to no more than 2 degrees this century.
There is room to improve the Renewable Energy Target, as I’ll explain. But after this budget, it’s now the last major remaining piece of federal government policy that supports ongoing investment.
As for big power generators’ calls for it to be cut back to a “true” 20% target by 2020 – that’s a stunning reversal from their past position. And I know, because I was there.
Will lobbyists get what they want again?
The Renewable Energy Target has traditionally had bipartisan political support, as a policy started by the Coalition and expanded under Labor. It’s led to A$20 billion of investment, while reducing the greenhouse intensity of the Australian economy and positioning us for future economic success.
The so-called 20% renewable energy target for 2020 is actually 41,000 gigawatt-hours of Large Scale Renewable Electricity (known as the LRET) and a complementary Small Scale Renewable Energy Scheme (SRES) that uses a similar certificate trading mechanism, but actually has no fixed 2020 target.
Big power generators and other industry are now calling for the LRET not to aim for 41,000 gigawatt-hours of electricity, but instead be set at 20% of whatever actual electricity consumption is in 2020 – which is expected to be far lower. They have justified this position by claiming they need “certainty”, and that excess renewable energy generation is cutting into their revenue.
Yet that’s not what they said more than a decade ago.
The original Mandatory Renewable Energy Target was developed from John Howard’s 1997 Safeguarding the Future speech just before the Kyoto Climate Conference. The original proposal was for 2% additional renewable energy (relative to 1997 generation) by 2010.
In intense negotiations, the electricity industry argued strongly for a shift from a percentage target to a fixed amount of generation – 9,500 GWh, in 2010. This rested on their need for “certainty” so they could plan to meet their compliance obligations.
I was involved in these negotiations, and even co-facilitated a four-day workshop in late 1998, in which many issues were addressed. The industry’s underlying reason for the change was that it thought the official electricity forecast on which the 9,500 GWh “effective 2% extra” target was based underestimated likely 2010 consumption. So the shift was likely to reduce their RET obligation.They also recognised that predicting electricity consumption even a year or two in advance is difficult, and would create real uncertainty.
The 2020 41,000 GWh LRET target was based on electricity forecasts of 2007, which were themselves based on data provided by the electricity industry.
But now the industry is seeing unexpected ongoing decline in electricity consumption, so it wants to switch back to a target as a percentage of actual consumption. It argues it needs this for planning “certainty”.
Of course, certainty is a relative concept. For the renewable energy industry, a fixed 2020 generation target does provide certainty, while a percentage target creates uncertainty for everyone, as it is very difficult to predict consumption, even a year or two ahead.
A better plan for the renewable target
The objectives of the Renewable Energy Target are to grow Australia’s renewable energy industry and reduce greenhouse gas emissions. A 2012 review by the independent Climate Change Authority found that it was, in fact, doing that fairly effectively.
In contrast, we could improve the complementary Small Scale Renewable Energy Scheme (SRES).
The SRES has been affected by years of chaotic state and federal government policy on rooftop PV, as well as a complicated revolution related to declining PV panel costs, emergence of new technologies such as storage, and smart demand management.
But its cost is declining, and it has been widely embraced by Australians, with research for the federal government late last year showing that outer suburbs and regional areas have led the way in going solar, as the maps of Australia and Brisbane on the right show. (You can see detailed city and state maps at the end of this report.)
With all that in mind, the government should maintain SRES as it is while implementing a more comprehensive, inclusive policy discussion to deliver a predictable, long-term policy for small-scale distributed energy.
As a side note, the Abbott government and the Productivity Commission both support a trend towards privatisation of the energy sector.
And the Renewable Energy Target has actually been a key driver of privatisation already: around 1.4 million Australian households are now private electricity generators, while the renewable energy industry is privately-owned and operated. So the RET should be seen as entirely consistent with the Coalition’s approach to energy.
Why should Australians reward bad business practice?
Australia’s electricity industry is beginning to confront the kind of change that Telstra’s landline business has had to deal with. Electricity consumption is declining. For a capital-intensive industry that has long-lived assets, this is very uncomfortable.
Major coal and gas generators now seem to see the RET as a focus for blame for many of their problems, particularly their loss of revenue.
But as explained on The Conversation before, the biggest factor driving uncertainty in the need for generation capacity is the trend of falling demand, which is not related to the LRET. The electricity industry has failed to invest sufficient effort to plan for and now understand that trend.
I know of no other large industry that knows so little about how its customers think and behave. Power generators got what they asked for more a decade ago with the design of the Renewable Energy Target – and now they want it changed again, at the expense of renewable investors.
A new study released by the Clean Energy Council finds that renewable energy will deliver cheaper power bills for Australians by the decade’s end.
Australian households can be $50 better off each year by 2020, but only if the Renewable Energy Target remains unchanged. If the target is scrapped householders will pay $140 more on their power bills a year from 2020.
The Renewable Energy Target, introduced by the Howard government, is Australia’s flagship renewable energy policy. It will ensure 41 terrawatt hours of renewable energy generation by 2020.
“This study shows that the Renewable Energy Target is holding electricity prices lower over the long term by minimising the use of increasingly costly gas for electricity generation,” said Clean Energy Council Chief Executive David Green in a press statement.
Analysts at French based energy components company Schneider Electric have concluded that extending or expanding Australia’s renewable energy target would lead to lower electricity prices, lower carbon emissions and increased competition.