Deal or no deal - Shorten says a real 20% RET is unreal

Labor's Bill Shorten has said dismissed the idea of slashing the RET to a 'real 20%' describing it as vandalism and unreal. Meanwhile Minister Hunt continues to talk about the target as being 20%, but there's a face saving opportunity for the Coalition to compromise.

When Prime Minister Tony Abbott decided to intervene over the wishes of his Energy and Environment ministers to appoint avowed climate science doubter Dick Warburton and long-time opponent of clean energy deployment policies, Dr Brian Fisher, to its Renewable Energy Target review it was an open declaration of war on the renewables sector.

This came after a long simmering cold war while the Coalition was in Opposition. It deliberately evaded efforts to clarify what its support for the Renewable Energy Target meant in practice, and brought investment to a standstill by committing to a review of the scheme once elected.

It seems incredible to believe that the Coalition got some something it was unprepared for when the Warburton-Fisher review recommended shutting the RET scheme down. The moment the government announced who it had appointed to lead its review, the spot market for Renewable Energy Certificates, known as LGCs, plummeted in price, given the background of Warburton and Fisher.

But in recent months the Coalition has lost its earlier bravado and appetite for shutting the scheme to new investment. The government's language now suggests the worst case is for a 'real 20 per cent' target, predicted to represent about 26,000 gigawatt-hours by 2020. But this remains decidedly unattractive to the renewables sector because it would halve investment in utility-scale projects relative to the existing large-scale target of 41,000GWh.

There is a degree of indignant outrage among members of the renewable energy sector about the Coalition seeking such a large cut to the scheme when they refused to make this explicit before being elected. Even though such a target would be better than nothing, there is no appetite to accept such an offer.

This will be reinforced by comments reported in The Guardian on Friday by Labor leader Bill Shorten that Labor won’t sign onto a deal to halve renewable energy investment. He said:

" ... the government has failed comprehensively in making the case to vandalise the RET. The industry says the real 20% is not viable for future investment.

“We are interested in what the market thinks and what works in the real world – and we think the real 20% is unreal.”

Environment Minister Greg Hunt made comments on a visit to Tasmania on Friday which essentially reinforce the idea that the Coalition is keen for a deal. But they are still referenced in terms of 20 per cent market share, which he is well aware is significantly below the target embedded in legislation.

He told the press:

"We have already ... recommitted to the Renewable Energy Target. We have a long standing bipartisan policy of 20 per cent renewable energy and that hasn't changed.

"We're now entering into a period where we're working with the ALP ... to ensure that we can achieve our renewable goals but without pressure on projects such as Bell Bay or other Tasmanian operations.

"So it's the balance of achieving the goal of our 20 per cent whilst taking pressure off jobs in manufacturing areas and manufacturing firms and reducing pressure on bills for households and manufacturers."

The continued reference to a target of 20 per cent by Hunt in contrast to Shorten’s comments could be interpreted to mean Labor and the Coalition are miles apart in deal negotiations. But there is an alternative, more optimistic interpretation in looking at the subtleties of Hunt’s language.

Hunt appears very keen to leave the impression that the Coalition is not attempting to make a major change in policy. Note how he explains that the government is “recommitting” to the target and its policy is “longstanding” and “hasn’t changed”.

Backroom discussions have revealed that the Coalition now realises that the Warburton Review has not worked well for them politically. So how can they back away from the original strategy behind the review and dump their image of being renewable energy destroyers, while still not looking like they are beating a hasty retreat with their tails between their legs?

They need something to save face that explains-away why they chose to throw the entire renewable energy sector into a state of turmoil by undertaking the Warburton Review.

Changing the exemption regime for aluminium may be just that opening to get the Coalition out of this quagmire. They might, and I emphasise ‘might’, accept a deal with Labor that involves a a relatively moderate reduction in the target – to say 39,000 GWh – in conjunction with a slight push back in the timing for the target.

They can then argue it was never their intention to slash and burn, they just felt the need to do some ‘rebalancing’. They then point at the exemption for aluminium they have ‘won’ from negotiations to claim that a satisfactory rebalancing has been achieved. 

This is clearly not the Coalition’s first preference. Scaling back the target to a real 20 per cent seems to be what they’d ideally like. And, given Abbott’s improving polling numbers on the back of terrorism concerns, they might just be tempted to stick to this position.

But if they decided they’d prefer to take the issue off the table, a larger exemption for aluminium could offer a way out.