CLIMATE SPECTATOR: TRU and Origin vs renewables

Power producers are squaring off in the battle to control the renewable energy target. It will lead to a long and fiery debate.

Climate Spectator

TRU’s departure from silence on the scheme adds to a bad week for clean energy policy with contracts for closure falling through at the negotiation stage.

Origin and TRU will be joined in their lobbying against the current scheme by the likes of the Australian Coal Association, the Business Council of Australia and the Australian Industry Greenhouse Network, not to mention the Queensland government.

AGL currently has the Clean Energy Council, the Gillard government, the Greens and even the owner of the coal-fired Hazelwood power station – International Power – in its camp.

For those unfamiliar with the renewable energy target, it is legislation designed to meet the stated bipartisan policy commitment of at least 20 per cent renewables by 2020. It was first introduced to Parliament by the Howard government in 2001 and has been changed on several occasions to finally reach its current form of two separate streams at the start of 2011 (the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES)). It is due to be reviewed every two years, with the first such one to be complete by year’s end.

The legislation itself does not mention 20 per cent, rather it focuses on a fixed target expected to ensure at least 20 per cent based on energy demand forecasts made when the legislation was passed.

Since that time, demand has not met predicted levels and has been revised down in forecasts out to 2020. This gave Origin’s Grant King an opening to attack the policy earlier this year, and now this week the Australian Coal Association, Queensland government and TRUenergy have all received media coverage for their criticism of the scheme.

In fact this week almost appears to be an orchestrated attack on the key piece of clean energy legislation – and expect it only to become more vociferous as we move toward the final RET Review report at the end of the year.

TRU talk

Concerns that TRU would turn on the RET were first raised after it appointed Clare Savage – known to be a strong critic of the target during her time at the Energy Supply Association of Australia – to the role of executive manager policy, strategy and sustainability in April.

Those fears were exacerbated when TRU told Climate Spectator in late July that
it was "still considering its response” to the RET review. Staggering given the legislation, a significant one for utilities, had been in place in its current form for a year and a half. How could the company not have formed an opinion?

The fresh stance on the legislation coincided with TRU’s release of an ACIL Tasman report it had commissioned into the costs of the RET out to 2030. The report claimed that reducing the target to 20 per cent of current forecasts would reap a saving of $25 billion.

"While policy stability is very important we need to balance this with a scheme design that can adjust to fluctuations in demand and not impose unnecessary costs on the economy and our customers,” the company’s managing director, Richard McIndoe, said today.

It’s an interesting perspective and a change of direction from its submission in response to the release of the draft Energy White Paper.

"A key element of providing attractive destination for international financiers is a stable regulatory environment,” TRU divulged in its submission in March this year.

"Figure 3 shows the LGC (large-scale generation certificates) prices in the RET market responding to government announcements in relation to the RET scheme. The range of LGC price movements are significant enough to directly impact the returns these renewable energy projects achieve. The volatility in prices also in turn can increase the cost of capital and the willingness of global investors to invest in renewable energy projects in Australia more generally.”

Sounds to me as if the company is adamant any change is bad news for renewable energy and investors… unless of course it all of a sudden is seen as a major burden to the company.

TRU and Origin are of course just doing what best suits their business interests. That is indeed the case for AGL as well.

TRU’s joint venture with Roaring Forties has been a major disappointment and Tru’s wind development pipeline is weak. Origin also has nothing to get excited about when it comes to its wind portfolio, with its biggest project – Stockyard Hill – facing difficulties and potentially up for sale. AGL meanwhile, is the market leader in large-scale renewables and with projects like the Macarthur wind farm, its Solar Flagships project and Silverton wind farm, has one of the best renewables development pipeline in the country.

With such strong business interests in play, the next couple of months will bring fiery debate.

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