Combet's unequivocal RET support

Climate change minister Greg Combet has offered a ringing endorsement of the current renewable energy target, and provided unequivocal government backing for the scheme ahead of the review to be conducted by the Climate Change Authority.

In a wide ranging speech at the Clean Energy Week Conference, Combet said that calls for alterations to the RET and the carbon price failed “to understand how the carbon price and the enhanced RET were always intended to work together to drive clean energy.” It would also undermine investor confidence, a call echoed by AGL Energy CEO, Michael Fraser.

The climate change minister informed delegates that the renewable energy target of 20 per cent by 2020 simply could not be met without the carbon price. Likewise a carbon price without a RET will not give Australia the opportunity of reaching 20 per cent by 2020. The cost-effective nature of the two market mechanisms working in tandem would ensure a Coalition government “will not make a serious attempt to repeal the carbon price.”

“(Tony Abbott) can't and won't repeal the Clean Energy Act,” he contended.

This was assuming the Coalition stuck with their pledge to have 20 per cent renewables by 2020.

Combet insisted the RET and carbon price provided the “most economically responsible way” to shift to a cleaner energy supply, with the introduction of the carbon price helping to keep the costs of the RET down. Without the carbon price, the cost of the RET could balloon by $20 billion by 2030.

Upon saying the RET retained Labor's support, the minister delivered a reassuring message to the clean energy industry that the review, “should not be interpreted in any way as a risk to the RET itself.”

The news is positive for the sector, with confirmed Labor support further alleviating concerns there may be any backtracking from a rare piece of bipartisan policy. Another positive for supporters of the RET was that Anthea Harris, chief executive of the Climate Change Authority, offered one hint that the review was not looking to deliver wholesale changes – although she gave little away on the exact nature of the broad review.

Harris noted that even if the review process did find something to fix in the scheme that would make it more efficient and/or cost-effective, the Authority would then weigh up whether it would be worth fixing. A key issue to be considered by the review is how it will impact foreign policy and clearly Harris is well aware that changing the policy could diminish Australia's standing as a place to do business – a point raised several times throughout the morning session of the conference. It is this point that should comfort those arguing for the RET staying as it is – the Authority will only suggest changes if there are major failings with the scheme, which does not appear to be the case.

“What a bad idea”

AGL's Fraser, in a thinly veiled swipe at Origin Energy CEO Grant King, said calls to change the RET to a variable target would undermine a key part of what made the policy effective.

“What a bad idea (a variable target would be). It's like asking a footballer to kick a goal and then keep moving the goalposts.”

Major changes to the current scheme would add sovereign risk, destroy confidence and cost thousands of jobs, the boss of one of Australia's ‘big three' energy retailers said. In contrast, if the RET stays in its current form, Fraser is “very confident we are going to see an investment boom in renewables” and utilities will be there to offer power purchase agreements – an issue that has been slowing large-scale renewable development in recent years.

Fraser went a step further by arguing that the plans to review the scheme every two years were only going to cause confusion and limit clarity on effective policy. He is, perhaps optimistically, hoping that the RET review may indeed deliver the conclusion that the two year review plans are too regular and should be scrapped.

While the debate will continue to go on until the final report is delivered on or before December 31, the overwhelming sense is the policy will stay in its current form – although perhaps with a few minor tweaks. And the typical view is that the policy is working successfully to drive a least cost approach toward the 20 per cent by 2020 target. However, while there are some parties looking for the introduction of a policy out further into the future – for say 30 or 40 per cent by 2030, this appears an unlikely objective in the near-term.

Indeed, Combet said that the government would not support raising the target in the “short to medium-term”, while Fraser added that the current focus must be on making sure we keep the current scheme going in its current form.

Bloomberg New Energy Finance's Australian manager, Seb Henbest, argued that with the prices of wind and solar rapidly declining and a carbon price in play, an enhanced RET may not be needed as certain renewable energy sources could be the economically sound choice for companies as early as 2020.

A reduced RET doesn't add up

A cost-benefit analysis provided by Bloomberg New Energy Finance clearly outlined the reason to keep the policy in its current form. With a reduction of the target, from say 41TWh to 27TWh, investment in renewable energy would crumble by about half, from an expected $19.5 billion to just $9.8 billion. Despite this, the cost of the scheme would only fall by around a quarter (26 per cent). The cost-benefit analysis is clearly swayed in favour of the current target, rather than a lower one. Indeed, the lower one (27TWh) would see the costs of the scheme outweigh the total investment it creates.

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