Scrapping or reducing Australia’s Renewable Energy Target would shelve $12-21 billion of investment in clean energy, cut 7000-11,000 future jobs in wind and solar industries every year, lead to higher power prices for consumers and deliver power companies $6-12 billion of extra revenue from 2015 to 2020, according to new analysis from research firm Bloomberg New Energy Finance.
The White Paper produced by BNEF’s Sydney analysis team shows that the current Renewable Energy Target – which is being reviewed by the federal government – is expected to drive $35 billion of investment in clean energy by 2020, employ 25,000 workers each year in construction and operations, reduce emissions from power generation by 5 per cent and prevent future surges in power prices by supplying electricity for 20-25 years with no ongoing fuel costs.
It will, however, oversupply the electricity market and could place pressure on the profitability of existing electricity generators.
By comparison, the study finds that reducing the target in line with some power company proposals will lead to $12 billion less investment, 6600 fewer clean energy jobs each year, 3 per cent higher carbon emissions and power prices that are $16 per year (1 per cent) higher in the year 2020 for the average household. That will increase to an extra $68 (3 per cent) per year in 2030, because there will be less renewable power capacity helping to push wholesale electricity prices down with their low-running costs.
Cutting the target altogether leads to greater impacts, with $21 billion less investment, 11,100 fewer clean energy jobs each year, 5 per cent higher carbon emissions and power bills that are at least $44 (2 per cent) more in the year 2020 for consumers. By 2030, the average household can expect to pay at least $142 (6 per cent) more on their annual power bill than if the renewable target were kept in place, because the costs of generating electricity are forecast to surge without low-running cost renewables.
“Cutting or reducing the Renewable Energy Target is likely to result in less competition among fossil-fuel power generators and strong future increases in the price of electricity,”, said Kobad Bhavnagri, Bloomberg New Energy Finance’s head of Australia.
“This helps to explain why many of Australia’s largest power companies are now pushing for a reduction in the target."
The analysis shows that scrapping or reducing the renewable target would strongly benefit power companies rather than consumers. Although costs to the average household would fall by $10 per year for the first four years if the target is cut, prices would surge after that due to less supply and competition in the power markets. Existing electricity generators would then receive an extra $11.5 billion in revenue between 2015 and 2020 if the target were scrapped, and a massive $70.2 billion between 2015 and 2030, the study finds.
If the target is reduced, existing generators would receive an extra $6.1 billion between 2015 and 2020, and $40.3 billion between 2015-30. The majority of this extra revenue will flow to coal-fired power stations, which dominate Australia’s current power mix.
The study finds that the RET will cost the average household around $9-14 each year from 2015-19, but then actually reduce bills from 2019 onwards, compared to if the policy was scrapped. In 2020, it will save the average household $44 a year, increasing to $142 in the year 2030.
“This is because renewables like wind and solar – which have no fuel costs – push down the price of producing power from coal and gas on the wholesale markets," Bhavnagri said.
"In only four years, this more than offsets the cost of building the new wind and solar power stations under the Renewable Energy Target.
“For an accurate assessment you have to look at both sides of the equation – what do the assets cost to build, but then how much money do they save. Governments and power companies that stand to profit handsomely from abolition of the scheme have so far only talked about the costs. But that’s like only talking about the costs of buying a new house and forgetting that you don’t have to pay rent anymore."