Budget pain could be renewables' gain

The hammering the Coalition has received in post-budget polling is likely to have vulnerable backbenchers asking their climate-sceptic colleagues why they should help out power companies by taking an axe to the Renewable Energy Target.

It may be possible that the budget, in spite of ripping $1.3 billion out of renewable energy by abolishing the Australian Renewable Energy Agency, could be the best thing that ever happened for the renewable energy sector. 

That’s because while the closing of ARENA is a major loss to the sector, taking an axe to the Renewable Energy Target would be catastrophic and now appears much less likely. 

Polls reveal that Tony Abbott has now reached a level of public disapproval equal only to that of ‘Juliar’ Gillard shortly before she was deposed by her colleagues.  

According to News Limited’s Newspoll, Tony Abbott has a net disapproval rating of 30 per cent (60 per cent of people polled disapprove and 30 per cent approve of Abbott’s performance). The poll also puts the Coalition’s primary vote post  36 per cent – its lowest level since Malcolm Turnbull was deposed by Tony Abbott in 2009. Labor is now ahead of the Coalition on the two-party preferred measure by 55 per cent to 45 per cent, which would equate to an electoral whitewash.

And Fairfax’s Nielsen poll reaches similar results. Mr Abbott has a net disapproval rating of 28 per cent which is as bad as any recorded by Nielsen for Gillard, even at her most unpopular. On a two-party preferred basis it has Labor leading 56 per cent, to the Coalition on 44.

This goes to show that Abbott’s hysterical ranting and raving while in opposition about taxes, Julia’s carbon tax lie and electricity prices – as touched on in Tony Abbott a liar? Surely not – is a two-edged sword. It served him spectacularly well while in opposition, but has created a rod for his back in government.

With the Coalition now feeling much more vulnerable, the calls from their ideological core constituency to axe the Renewable Energy Target become much less appealing.

Submissions to the panel reviewing the RET from renewable energy interests, such as Meridian Energy and the REC Agents Association, reveal the following consistent set of messages aimed at making marginal electorate MPs uneasy and uncomfortable.

Message 1 – We won’t be happy

You, in combination with Labor, promised that you supported the Renewable Energy Target, and businesses and householders have invested billions of dollars on the basis of that promise.

The implicit message, and in the case of the Australian Solar Council very explicit message, from this is 'If you break your promise we will be very angry and desperate and therefore prone to say bad things about you'.

Message 2 – You won’t be thanked by energy consumers, only energy producers, for cutting the RET

Axing the target will deliver little if any benefit for householders' electricity bills. The primary beneficiary will be the major incumbent electricity companies who don’t like the extra competition from householders installing solar and new wind farms.

To support these claims, these companies are pointing at analysis from a range of expert energy market analysts. These analysts are regularly relied upon by government authorities to inform policy decisions, as well as energy producers and large energy consumers. There are now reports from pretty much every key Australian modelling house including ROAM Consulting, Sinclair Knight Merz, Intelligent Energy Systems, and Schneider Electric.

As an example of what these reports find, Intelligent Energy Systems concluded:

From the above analysis, a halt to the LRET may not clearly outweigh the benefits of a well-set long term large-scale renewable energy target, nor will it result in the lowest electricity prices due to restrained investments in generation capacity.

Schneider Electric found:

Finally, and most strikingly, is the impact of the LRET on long-term energy prices. The LRET is forecast to result in a generation mix with lower marginal cost, lower carbon emissions, and increased competition in the electricity market, all which serve to reduce prices.

One major omission from the list of experts is ACIL Allen which have been commissioned by the government’s Review Panel. However Climate Spectator has been told that analysis it has undertaken for private sector clients for energy asset transactions have come to similar conclusions. If ACIL Allen was to suddenly come up with a contrary conclusion, its credibility would be badly undermined.

Message 3 – The electorate likes renewable energy, but they don’t like energy suppliers

At the same time polls reveal that the electorate really likes renewable energy.

Meanwhile, polls suggest the electorate really dislikes and distrusts the major incumbent electricity companies who they blame for major price hikes.

The chart below illustrates polling prior to the last federal election by Crosby Textor, who are the Coalition’s trusted polling strategists. It shows that the electorate views wind and solar very favourably, while energy companies were almost as unpopular as Julia Gillard. This polling also found that among unaligned or ‘soft’ voters there was 81 per cent support for keeping the Renewable Energy Target as is, even though it would likely exceed 20 per cent market share for renewables.

Figure: Proportion of people with favourable, neutral or unfavourable views about items mentioned

Graph for Budget pain could be renewables' gain

(Source: Crosby Textor. Polling response to question: 'I’m now going to read out a number of people, organisations and activities, and for each I’d like you to simply tell me whether you have a favourable, neutral or unfavourable view of them. If you don’t know them that’s fine, just say so.')

The end goal they are hoping to achieve from these messages is to have Coalition MPs asking themselves whether the risks associated with undermining the RET are worth it. 

Yes, there will be an avoided cost that will help incumbent energy producers and their shareholders, which include mums and dads super funds and state governments. 

But will this deliver any electoral payoff, especially given the price gouging the electorate believes some of these companies have committed?  

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