Jolting some common sense into the RET debate

The RET debate has lost its way to such an extent that only devotees of the cult (and their visceral opponents) can understand the claims and counterclaims.

This was wonderfully illustrated by the tabloids getting into a froth this month over claims from a trio of green-boosting lobby groups, based on an interesting piece of modelling by consultants Jacobs Group, that household prices would rise if the measure was not retained in its present form.

The ‘hit’ on ‘mums and dads’, to quote the tabloids, would be $30 a year, part of a $10 billion ‘rip-off’ by big, greedy energy “gentailers” (retailers with lots of generation).

Item the first: $30 a year is 8.2 cents a day. You can’t buy much for that.

Item the second: there are 9.3 million households attached to power grids across Australia and the ‘hit’ on them works out to $280 million annually which, over the 15 years from 2015 to 2030 canvassed by Jacobs, comes in around $4.2bn in aggregate.

Item the third: even the green trio concedes that this increase is ‘slight’ and mostly will take place after 2020. 

Hands up anyone who ‘knows’ what the average cost of power bills will be in 2021.

Anyone who has ever commissioned modelling, and I have commissioned a fair few reports in my career, will know the skill lies in telling the consultants what you want covered and then presenting the report to play up your angle to the extent that the modellers will allow, as they swallow hard and pocket their loot.

In some respects, it’s a lot like opinion polling.

One of the recent polls in the RET-go-round told us 64 per cent of respondents supported renewable energy. You had to look rather harder to spot that a lot of them did so on the proviso this was not going to add to their bills.

I suspect that the hoi polloi, the masses, have long since switched off, except to form vague notions that ‘renewables are good’ or ‘wind power is bad’ or ‘Tony Abbott is bad because he hates renewables’. (Let’s leave poor old Joe Hockey out of this, shall we?)

The lobbyist trick here is to muster sufficient federal politicians to one side or the other, either to retain the RET in its present form or to cut it back. (Despite the hysteria, I seriously doubt that Tony Abbott will attempt to abolish the scheme, leaving behind only the grandfathered remnants.)

In this game, anything goes.

The new adjective of choice, I see, is ‘decimate’, by which users mean ‘destroy’ rather than reduce by one in 10, the Roman way.

But what does it mean in the context of the RET? 

This is where the debate really takes off over the heads of the tabloid readers, radio audiences etcetera -- what Paul Howes has called the “sensible middle” in Australia.

There are two separate but linked points.

The first is obvious: what do you get if you reduce the RET to whatever 20 per cent of power demand is?

The second is more obscure, but very important. Unless policymakers can clear up the present east coast market “dog’s breakfast” (thank you, Tony Wood), we run the real risk of a much less reliable NEM with long-term implications for consumers.

Says who? 

Well, the mainstream power suppliers, for one. But also the Australian Energy Market Commission, which is not a greedy, coal-fired profiteer but the trusted adviser of nine governments. It has made warning noises to both the Warburton RET panel and the Harper review of competition policy.

The Energy Supply Association, a body with a vested interest that also echoes what the AEMC is implying warns in its new yearbook that “the continued roll-out of renewable power, resulting in the likelihood that flexible plants will be pushed out (of the NEM) in part due to higher gas prices while baseload plants remain to balance growing intermittent generation, suggests the current market settings may not sustain the appropriate price signals for investment in flexible and reliable energy capacity”.

Some suppliers would like to see the AEMC required by CoAG energy ministers to investigate the barriers to exit from the over-supplied market before the problem becomes bitey.

Which brings us round to the Jacobs modelling.

It sees a true 20 per cent RET -- perhaps 27,000 GWh in 2020 -- although who can tell what demand will be then. This will require $11.36bn in renewables investment between next year and 2025 versus $24.4b if the Rudd/Gillard RET is retained.

In round terms, perhaps another 4,500 megawatts of new investment in wind farms, mostly in New South Wales, Victoria, Tasmania and South Australia.

A fair chop for those who stand to profit from building, servicing and operating wind farms under today’s RET, but ‘decimation’?

Perhaps those peddling this view may care to take on another somewhat old-fashioned word: ‘holistic’.

It’s what the non-ideologues in the congregation would fervently like both Tony Abbott and Bill Shorten to embrace in energy and carbon policy.

But that would require adherence to another word that seems to have gone out of fashion: ‘bipartisan’.

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. He was made a member of the Order of Australia in 2004 for services to the energy industry.