CLIMATE SPECTATOR: Six questions for the year ahead

The coming year will bring intense challenges in the business of addressing climate change, from Direct Action to solar growth.

Climate Spectator

One hectic and topsy-turvy year in clean energy and carbon abatement is over. Yet it looks like we’ll continue to be confronted with a challenging environment in the business of helping the environment over 2013.

Here are the top six questions Climate Spectator will be focused on covering next year.

1- How will the government and Coalition respond to the review of the Renewable Energy Target?

The health of the renewable energy sector here in Australia is pretty much dependent on what happens with the Renewable Energy Target.

Will the government back up its rhetoric about policy stability and investor confidence by keeping the scheme largely as is?

And will the Coalition stop talking about "20 per cent”, which is open to varying interpretation, and instead make an unambiguous commitment to leave the RET legislation unchanged?

2- Will Europe fix its sick and ailing carbon market?

If the carbon price manages to survive beyond the 2013 federal election, then eyes will need to shift to Europe. That’s because in 2015, when the carbon price converts to a trading scheme, the value of reducing carbon pollution will hinge on supply and demand in the European Emissions Trading Scheme.

The effectiveness of the EU ETS hangs in the balance right now – dependent on the European Parliament and European national governments agreeing to clean up a huge surplus of emission allowances. If they don’t act to address this surplus next year, we might as well give-up on the Australian carbon trading scheme. The price on carbon will be so low as to make virtually no meaningful difference to investment decisions.

3- Will the electricity market continue to squeeze coal?

The decline of manufacturing, increasingly energy conscious consumers, the growth of photovoltaics, the growth of wind, combined with the carbon price took their toll on coal generators this year. Prices in the National Electricity Market, correcting for the carbon price, are at record lows. And several coal power generating units were put into mothballs.

Is this drop off in demand an anomaly or a permanent structural change? Will peak demand suddenly spike up again after being on holiday over recent years? Will there be further power station casualties? And will the AEMC make meaningful reforms to engage the demand-side of the market?

4- Can solar PV maintain its stellar growth?

The Australian solar PV sector could be in for a very tough year. Feed-in tariffs and the renewable certificate multiplier are no longer. In addition network businesses are moving to change tariff structures to make it harder for customers to use PV to escape their gold plated price increases. 

The commercial sector promises much, but so far it is just a shadow of the residential market and is proving a tough nut to crack.

In addition, at a global level solar PV module producers are bleeding red ink. Can they give anymore on price reductions or will we see module prices stabilise? Which companies will remain standing in what is a major battle of attrition?

5- Will the national energy efficiency target scheme continue to be ignored?

Sitting on the Department of Climate Change AND Energy Efficiency’s website is some highly detailed design work for a scheme that could fix Australia’s appalling energy productivity. In addition there is over 100 pages of economic analysis suggesting that the benefits of implementing such a scheme would substantially outweigh its costs. Yet neither the government nor the Coalition seem to want to acknowledge its existence.

Will the Coalition recognise this as the means to put some serious muscle on the bones of its almost spineless Direct Action skeleton?

Will the government have the courage to put in place good policy even if it runs the risk of an Abbott scare campaign?

6- Will Direct Action remain a mystery?

The Coalition’s Direct Action policy presently resembles something akin to the liquid metal shape-shifting assassin from the Terminator 2 movie. It is so vaguely defined that you hate to think how it might get interpreted by the Coalition party room once they get elected. 

How will they define the emission baselines applying to existing and new facilities? What will be the fine for companies exceeding their emission baselines? How exactly would they implement their tender/auctioning scheme and ensure that selected firms deliver the abatement that they promise? And who in the right mind would attempt to "clean-up” Hazelwood when it’s far easier and cheaper to shut it down and replace it with something new?

Few who know Greg Hunt doubt his sincerity about climate change. The problem is that he’s just one vote in the Cabinet and Coalition Party Room. And who’s to say he’ll be the minister responsible for climate change issues if the Coalition forms government?

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