CLIMATE SPECTATOR: Shrinking the cost of renewables

Climate Spectator

On Wednesday, the front page of The Australian and the third page of The Australian Financial Review carried stories of complaints about the renewable energy target. It was followed up today by an editorial in The Australian and one suspects many more similar pieces in coming weeks. It represents the last roll of the dice for those critical of the scheme to influence the Climate Change Authority on the RET Review, but it will probably come to nothing.

The renewable energy sector has fired its own salvo, with the Clean Energy Council taking out full-page ads in both The Australian and AFR today. The best fight back against claims the RET is too costly came however, from a mistake in the modelling done for the CCA's preliminary report – and it has received plenty of press today.

Recognised by modellers SKM MMA, the error (counting the cost pass through to end users attributable to RET certificates twice) led to a correction yesterday from the Climate Change Authority.

As a result, the expected impact on consumer electricity bills has been slashed. Over the period 2012/13 through to 2030/31, it will add $15 per annum to the average bill of over $1500, less than a quarter of what was initially reported. That is compared to no RET at all. Opposed to the preferred reduced target of Origin Energy and Energy Australia, it will only add $4 per annum to average yearly bills, more than $20 per annum below the flawed forecasts published last week.

The graphs and tables below highlight the impact the RET will have on consumer bills, with the target actually serving to lower bills in some years due to its depressive impact on wholesale prices.

Source: Climate Change Authority Corrigenda

Given the Climate Change Authority has come to a preliminary conclusion that the benefits outweigh the costs based on the original modelling that overstated costs, surely its opinion on the worth of the scheme has only gone up in light of this development.

Those against the large-scale scheme in its current form are going to have to shout mighty hard to get through now given the costs have been shown to be so moderate. In fact, their chances of getting the CCA to alter its mindset in the next few weeks appear remote.

Party tensions?

Labor's chief whip Joel Fitzgibbon threw the cat amongst the pigeons on Monday night by declaring he was "surprised” by the findings of the preliminary review into the RET.

"While I respect and acknowledge the expertise of those who serve on the authority and do the research and the modelling, this is a preliminary recommendation which comes as somewhat of a surprise to me,” he said.

"I am tempted to say we should not have a renewable energy target at all, that we should stick with one market mechanism for dealing with this issue to reduce our carbon price and to encourage investment in renewable energy.

"But I will not say that because the reality is that the RET is here to stay and businesses have made very important investment decisions based on the fact that we have a renewable energy target.”

The comments have been seized on by the Greens as a sign Labor is not consistent on renewable energy, but what should be noted, and indeed was by Fitzgibbon himself, is that the chief whip is beholden to his Hunter electorate, a coal mining stronghold.

"Much of what we say in this place reflects our local electorates, and that is only natural and that should be the case,” Fitzgibbon noted.

"I represent an electorate where coal mining forms a very important part of our economy. I represent an electorate where coal-fired power generation represents an important part of our economy.”

It's when a cabinet minister comes out as strongly against the scheme that eyebrows should be raised. In the meantime, the official line from both major political parties is that they will respond shortly after the final report is published in December.

The coalition, like the Labor government, has said previously that it will back the findings of the review.

What few have picked up however, is that the Climate Change Authority is a body the coalition will disband if it wins power at the next election. In other words it has said it will accept the advice of a body it doesn't think should be in place.

While the final recommendations are likely to differ little from the preliminary, it's going to be an interesting end to the year for the clean energy sector.