Now that the Labor leadership issue has finally been resolved, it is time for the government to get on with governing and to let business get on with investing, innovating and creating jobs.
The greatest barrier to investment in Australia’s clean energy future is political and regulatory uncertainty and that is something the industry is copping in spades.
The International Energy Agency has estimated that a staggering $16 trillion will need to be invested in low carbon technologies globally by 2035 if we are to contain temperature increases to 2 degrees. That’s a massive investment binge, but in Australia right now there is a clean energy investment strike.
The Labor leadership issue has been just one of the giant hurdles facing investors.
The Labor government has much to be proud of with its clean energy record. It has put a price on carbon, established a renewable energy target of at least 20 per cent by 2020, placed a million solar panels on our roofs, put $10 billon into the Clean Energy Finance Corporation and $3 billion into the Australian Renewable Energy Agency and established the successful Carbon Farming Initiative.
This is a strong track record, but the story has been swamped by the ongoing struggle for leadership.
The cloud over the leadership of our country has added to the gloom and uncertainty in the clean energy industry, not knowing if a new prime minister would move straight away to a floating carbon price or make changes to the government’s clean energy agencies.
Kevin Rudd has a strong foundation for campaigning on clean energy. His decision to increase the Renewable Energy Target four-fold has already unleashed more than $10 billion in investment and sparked Australia’s solar revolution. He should campaign on maintaining and strengthening the Renewable Energy Target.
Elections create uncertainty for any industry, but the never-ending 2013 federal election campaign has been particularly harmful, not just because of the Labor leadership imbroglio, but also because of uncertainty about the Coalition’s position.
The Coalition has repeatedly stated publicly that it supports the 20 per cent RET. The difficulty with this is that it is not a 20 per cent target – it is a fixed target of 41,000 gigawatt hours, which has been colloquially called a ’20 per cent target’ but is in fact likely to be significantly higher than 20 per cent by 2020. Whilst the Coalition has emphasised the need for investment certainty, they cannot shake off the perception that renewable energy is in the crosshairs.
A Coalition government would review the Renewable Energy Target in early 2014 and this could provide the perfect opportunity to move to a set 20 per cent target. This could actually cut Australia’s renewable energy output by 14,000 gigawatt hours, possibly cancelling out more than a hundred solar or wind farms. It would also undermine the Howard government’s greatest clean energy legacy, the establishment of the Renewable Energy Target itself.
The RET was subject to comprehensive review just six months ago but the industry is now facing another debilitating review in just six months time. Last year’s review was undertaken by the independent Climate Change Authority, an agency the Coalition has stated it will abolish. It is unclear which independent body would undertake a review under a Coalition government.
To be fair to the Coalition, a Labor government would also most likely undertake a review of the target as it is required every two years under current legislation. The Climate Change Authority recommended such reviews be undertaken every four years to reduce industry uncertainty, and this was supported by the government. Unfortunately the legislation has not been amended so we’ll just have to recycle our submissions and fight our battles again. Meanwhile, investment stalls.
The Coalition has been certain about its intentions to abolish the carbon tax and a string of government agencies, but the timing and likelihood of such action is dependent on the composition of both houses of Parliament after the election.
The Coalition has been very clear that the Direct Action plan will be established by July 2014, but it is unclear whether the Direct Action plan could really co-exist with a carbon tax if it hasn’t been abolished by that time.
It is unclear whether the funding is really sufficient to deliver a 5 per cent reduction in Australia’s emissions by 2020, let alone the level of emissions reductions that climate science is showing is urgently needed.
The Direct Action plan will establish a reverse auction to reward least cost emissions reduction, but it remains unclear how this will work in practice, with the policy subject to a White Paper process before being finalised.
The Direct Action Plan could largely be delivered by closing down one or two of Australia’s most polluting power stations meaning there are no signals for investors in other projects. This is reinforced by the absence of any targets for particular technologies. The fear is investors will sit on the sidelines for 18 months as the policy is bedded down.
As the Chief Executive of an Australian company that is developing projects under the Carbon Farming Initiative, it is unclear how carbon farming will be delivered under Direct Action. If carbon farming is subsumed within the Direct Action plan it is unclear whether it could compete on price with other forms of emissions reductions.
The Carbon Farming Initiative is supported by both sides of politics and is already providing additional income streams for smart famers, but uncertainty about its future is making it difficult to generate new investment opportunities.
At the national leadership level, the Coalition has continued to express support for renewable energy, but the record of Coalition state governments in winding up renewable energy programs and establishing unnecessary planning restrictions on wind projects has made the renewable energy industry nervous. The Queensland, NSW and West Australian governments have all called for the Renewable Energy Target to be reigned in, backed by a number of federal Coalition backbenchers.
Much can be done to calm the nerves of the clean energy industry. Prime Minister Rudd must reaffirm his support for the Clean Energy Future package. The Coalition must affirm its support for the current fixed Renewable Energy Target.
Then – and only then – will Australia see its fair share of the trillions of dollars of clean energy investment that is rushing out the door around the world.
Fiona O’Hehir is CEO of Greenbank Environmental, Australia’s largest independent trader of renewable energy certificates and other environmental certificates. She has a technical background in electronics and power conversion for the solar industry and has been involved in the renewable energy space for over 15 years.
Fiona has spent six years as an elected industry representative on the board of the Clean Energy Council. She has just completed a two-year board position on Renewables SA and is also the Vice President of the REC Agents Association (RAA).