November 12, 2014
Australia

RET deal off: The only certainty is uncertainty for the clean energy industry

Peter Hannam, Environment Editor, The Sydney Morning Herald | November 12, 2014 | www.smh.com.au

The only certainty the clean energy industry has now is uncertainty, after Labor broke off talks with the Abbott government over cutting the renewable energy target that no one but the most-hardened pro-coal backers would want.

Put simply, investors basically stopped investing in new large-scale wind, solar or other renewable energy projects for the past year once it became clear the Coalition had ended bipartisan support for the 2020 goal.

As Bloomberg New Energy Finance noted recently, just seven projects have been financed in 2014, worth a meagre $238 million while September quarter investment was down 78 per cent from a year earlier.

And all seven of those ventures received backing from the Australian Renewable Energy Agency and the Clean Energy Finance Corporation, two federal bodies the Coalition would have axed had the Palmer United Party not sided with Labor and the Greens to block the move in the Senate. “None were backed by non-government lenders or investors,” Bloomberg said.

Renewable energy used to be a bipartisan, even tripartisan, policy since it was set up by the Howard government in 2001 to drive an expansion of the sector with an initial goal of 2 per cent of total electricity. One prompt was an effort to offer some action to curb carbon emissions blamed for warming the planet.

The current target is not a percentage target but an amount of electricity – 41,000 gigawatt-hour a year by 2020 – despite regular commentary of a “20 per cent” goal.

July promise

The Abbott government was asking Labor to become a party to a broken promise. Back in July last year, less than two months before the elections, Liberal Senator Simon Birmingham told an industry conference the Coalition was committed to 41,000 gWh – not 20 per cent, or any other percentage.

For Labor to have agreed to a reduction – the Coalition wanted a 40 per cent cut to 27,000 gWh – would have meant signing up to a broken pledge. As it happens, renewable energy is widely welcomed in the community, far more than placing a price on carbon.

The government’s handpicked Warburton review of the target, led by businessman and climate change sceptic Dick Warburton, called for the dilution if not scrapping of the goals for large- and small-scale renewable energy.

Roof-top solar panels are very popular, particularly in the McMansion outer suburbs – and marginal electorates – where soaring power and gas bills pinch hard. The government duly promised to leave “household” solar schemes unchanged.

Animosity within the government towards large-scale renewable energy, though, has regularly surfaced, with Treasurer Joe Hockey happy to stand by his views that wind farms are “utterly offensive”.

The industry, though, does have a problem that must be addressed at some point. Since power demand has been surprisingly weak, the 2020 target looks like being more like 27 per cent of total power.

Clock ticks

As the clock ticks down, reaching the legislated target will get harder – especially if the pipeline of new projects remains a trickle.

Labor’s decision to end talks for a compromise leaves the government no options but to try to secure another Palmer United Party back-flip. Given PUP’s U-turn on its support for the government’s direct action plan to pay polluters to cut emissions, another reverse can’t be ruled out.

The renewable energy industry will remain focused on the lost jobs as current projects finish and no new ones appear. Some 21,000 jobs hang in the balance, it says.

As a result, expect that each time there’s a major lay-off – such as the 100-plus lost last month in Victorian Premier Denis Napthine’s own electorate just as his re-election bid kicked off – the blame will be pointed the Coalition’s way.

“A compromise deal and return to certainty now seem unlikely, and the fight over renewable energy policy looks set to get dirty,” said Kobad Bhavnagri, head of Bloomberg New Energy Finance in Australia.

“Under these circumstances the outlook for investment is bleak. With another year of near-zero project development on the horizon, the survival of many companies will be brought into question,” he said.

For now, the ACT government is offering the only projects worth competing for. It will announce winning tenders among 18 bidders for 200 megawatts of wind power involving an investment of about $500 million next month.

Unlike the national scheme, suppliers will receive a 20-year feed-in tariff rather than rely on renewable energy certificates with variable prices. Such a model may need to be copied by states, if they keep to their own targets, such as NSW’s own 20 per cent goal by 2020-21.

For now, though, the industry is in a stalemate but can’t remain so. If the RET is to remain unchanged, the government will just have to blink and move on, hoping investment will revive fast enough for a massive ramp-up in the final years of the decade.

If the government does secure a cut in the goal with minor party support, it will have to wear the political flak from its main electoral opponent at the next elections.


URL to article:  https://www.wind-watch.org/news/2014/11/12/ret-deal-off-the-only-certainty-is-uncertainty-for-the-clean-energy-industry/