Subsidies for clean energy to hit $21bn 

Subsidies for renewable energy schemes such as rooftop solar panels and wind farms will cost electricity consumers up to $21.6 billion by 2020, a new analysis has found.

A submission by the Minerals Council of Australia also warns that more gas- and coal-fired power stations could be mothballed or permanently closed as the renewable energy target puts pressure on the electricity market and slashes their revenues.

If this happens, retail electricity prices “can be expected to increase”, according to an economic analysis commissioned by the council which represents mining giants including BHP Billiton, Rio Tinto and Glencore Xstrata.

The analysis also hits back at fresh claims by the clean energy sector that the RET will create up to 18,400 jobs by 2020, declaring “the most immediate effects” from subsidising the renewable sector are job losses as cheaper forms of energy are crowded out.

“Additional job losses can be expected to arise from the drain on economic activity as a result of higher electricity prices,” it finds.

Former Queensland treasurer Keith De Lacy – now one of the nation’s best-known company ­directors – declared it was “plain crazy” to have schemes such as the RET, solar feed-in tariffs and carbon tax that were driving up power bills.

“The Australian public keep complaining about the increases in the costs of living and this has become even more so since the budget,” Mr De Lacy told The Australian yesterday.

“But one of the biggest increases in cost has been the price of electricity … It’s the most fundamental of services to the Aus­tralian public … These kind of things just make some people feel good but don’t achieve anything.

“They’ve got no place, I believe, in a modern economy.”

The comments add to pressure on the Coalition, given it is split over what to do about the RET.

According to the Principal Economics review commissioned by the Minerals Council, the RET scheme has an opportunity cost (money that could have been invested elsewhere) of more than $36bn by 2020-21.

The analysis finds that subsidies that are recovered through the sale of renewable ­energy certificates, which are ­directly passed on to consumers, could reach between $19.3bn and $21.6bn by 2020-21, covering part of the cost to build the ­infrastructure.

The miners are wielding the figures in a bid to convince the government-appointed RET review panel that the scheme is ­excessively costly for households and industry, and cannot continue the way it is.

“These are the additional costs paid by energy consumers: households, domestic firms and exporters such as the mining sector,” the council’s submission says.

The submission also warns that the RET will encumber business with “uncapped and high costs for subsidies”, particularly for the scheme for rooftop solar PV panels, “because of poor ­design and a series of inchoate policy shifts”.

In 2010, then federal minister Martin Ferguson said the RET was a “bonus to the renewable sector of the order of another $20bn to $30bn in commonwealth government support”.

The Australian Industry Group has called for the RET to be maintained, despite demands by some businesses that it be scrapped because it is expensive.

The AiGroup says that while the cost of building wind farms and solar panels is passed on to customers, extra energy from wind farms and solar panels has pushed down wholesale prices.

This has also been a key pillar of arguments by the Clean Energy Council, which is wielding its own research by ROAM Consulting that finds household energy prices would be $50 a year lower by 2020 with the RET, and that leaving it alone would create 18,400 jobs.

The Minerals Council has told the panel lower wholesale prices are not a “function of competitive forces but of government intervention”, are likely to be short-lived and undermine investments in coal- and gas-fired power stations needed for reliable electricity supplies.

The analysis points to power station retirements including the permanent shutdown of the Munmorah black coal power ­station in NSW and temporary closure of South Australia’s Playford.

“Overall retail price rises have therefore been lower than they otherwise would have been,’’ the analysis says.

Wholesale electricity prices are “likely to increase” if power generators that become unprofitable close. Minerals Council chief executive Brendan Pearson said access to cheap, reliable energy had been a “source of economic strength” for Australia. “This is no longer the case,” he said.

The analysis draws on previous modelling. It quotes estimates by SKM MMA for the Climate Change Authority in December 2012 that put the cost for buying certificates for large-scale renewables at $15.9bn by 2020-21 and for small-scale renewables at $3.4bn – totalling $19.3bn.

Like most of the figures cited in the new analysis, these are based on an assumption of no carbon price – which the analysis says is appropriate as the Abbott government has announced its plans to repeal it.

To get to the $21.6bn figure, the analysis cites modelling by ACIL Tasman for TRUenergy (now EnergyAustralia) – which wants the RET scaled back – that puts the subsidy for the small-scale scheme at $5.7bn.