CLIMATE SPECTATOR: Origin's RET games

Origin Energy has proposed a shift in the Renewable Energy Target and it's creating the perception it is still actively trying to undermine or frustrate the policy altogether.

In an interview with Climate Spectator, Grant King has proposed that the level of the Renewable Energy Target be reduced over the period to 2020 but then perhaps accelerated after 2020 to a ‘25 per cent by 2025 target’. King’s argument (in this interview as well as others) has been that there’s no need for new renewable energy projects to meet RET requirements until 2016, but then we’ll have to squeeze a large amount of construction activity into a very compressed time period.

He points out that achievement of the 20 per cent by 2020 target seems unlikely because getting new wind farms up is becoming increasingly difficult – due to more onerous planning approval requirements, as well as inadequate grid infrastructure. A target that delayed the build-up out to 2025, even if it was increased to 25 per cent, was more likely to support a broader portfolio of renewable energy technologies and be easier to achieve, according to Grant.

On face value such an argument has some merit. Also, while there might be a reduction in the amount of renewable energy provided at 2020, there will be far greater amounts of new renewable energy projects required to meet a 25 per cent target in 2025. It all seems entirely reasonable.

But it also has its critics who see it as subtle gamesmanship aimed purely at serving Origin’s own upstream gas resource business and counteract their weak portfolio of wind assets.

Garry Weaven, chair of Industry Funds Management as well as Pacific Hydro, and rated number 6 on The Power Index for the Australian financial sector, has been sufficiently irritated to state on ABC Radio:

"In renewable energy, we don’t really need further government facilitation; we need enforcement of the law in renewable energy and we need the retailers [electricity retailers] not to play games and to start actually providing contracts for the output of new wind farms. Essentially that’s what it’s about, rather than hanging out for perhaps some change in policy which will allow them to continue with their coal-fired assets or to build gas assets.”

Lane Crockett (General Manager of Australian Activities for Pacific Hydro) in part 1 of an interview with Climate Spectator we’ve published today delivers a frank rebuttal and somewhat of a challenge to Origin Energy. Part two will look at Pacific Hydro’s activities in solar and where the Clean Energy Finance Corporation could be either useful or a hindrance to the renewables sector.

Crockett points out that with the Australian dollar so high, and with wind turbine prices very low due to depressed demand for turbines in the US, costs for developing wind farms have never been better.

He also believes that in spite of the road blocks being put up by the Victorian government, and possibly also NSW, related to planning approval requirements, there is a large enough pipeline of shovel-ready projects that achievement of the 20 per cent target is not at threat.

Crockett points out that if achieving the target appears to be so difficult from Origin’s viewpoint, why aren’t they willing to sign long-term power purchase agreements (known as ‘PPAs’) for new renewable energy projects now, to ensure they are built on a timely basis. He believes that regulatory uncertainty is no excuse because the level of the penalty for any shortfall in meeting the target by a retailer, combined with the low prices for wind turbines means that these projects make sense even if the carbon price were to be rescinded.

It’s quite interesting that while a number of vocal renewable energy advocates have painted AGL as a villain, and they have tended to want to develop their own projects rather than contract with others, they don’t come in for significant criticism by Crockett. Nor does TruEnergy. Yet both these companies are direct competitors of Pacific Hydro under Solar Flagships. I’ve noticed a similar pattern in discussions with other business people engaged in the renewables sector as well.

The sense I get is that amongst renewable energy businesses there’s a view that at least AGL and TruEnergy have accepted the rules around the RET and are getting on with it. Origin on the other hand, is perceived to be still actively trying to undermine or frustrate the policy altogether. Hopefully we’ll be able to bring you the alternative side of the story in an interview with Origin in the not-too-distant future.

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