CLIMATE SPECTATOR: The target debate rolls on

Climate Spectator

You've got to feel for the Climate Change Authority, given it has to sort through a wide variety of claims and counter claims from each side of the debate on the renewable energy target.

Today the Clean Energy Council fired off its own economic modelling salvo, releasing a report prepared by Sinclair Knight Merz – MMA analysing the impact of the RET.

In short, the key thing it adds to the debate is an analysis of how the renewable energy target is likely to depress wholesale electricity pool prices relative to no RET. Between 2012 and 2030, the analysts expect wholesale prices will be $9 lower per megawatt-hour on a national basis.

As illustrated in the chart below, this substantially offsets the extra cost for household customers of the Large Scale Renewable Target (LRET) and Small Scale Renewable Energy Scheme (SRES) although not completely.

Components of retail electricity price with the RET and no RET (carbon price in place)

How this plays out over time in wholesale market prices is illustrated below with some periods where wholesale prices are higher under the RET but for the majority of the period to 2030, prices are lower, sometimes markedly so.

Trying to reconcile the results of this modelling with other exercises by ACIL Tasman and for the Australian Energy Market Commission are nearly impossible, as each uses different alternative scenarios compared to a business as usual based on the current RET design and carbon price. Adding to the challenge is different assumptions about renewable energy technology costs. 

Yet in the end this report by SKM-MMA, on top of modelling for AEMC, which both show the RET reducing wholesale prices, only adds to the mystery about ACIL and Origin's less than transparent conclusions that the RET would not reduce wholesale prices. This is especially perplexing when you consider the universal protests about the RET from major incumbent generators and TRUenergy's complaint the target would undermine the wholesale market by depressing prices. 

If the RET wasn't going to reduce the prices these generators receive, then why would they be complaining so loudly?