Manufacturers' peace plan for RET dead on arrival

The government has been offered a pathway for achieving a compromise on the large scale RET that everyone should be able to agree on, if only logic prevailed. But it already looks dead in the water.

Representatives of the aluminium, steel, cement, oil and gas sectors and, notably for Jacqui Lambie, the Tasmanian Minerals and Energy Council have written a letter to the Prime Minister and Labor Leader Bill Shorten that could provide a middle road pathway to a compromise agreement on the Renewable Energy Target. However feedback from a range of sources suggest it won’t fly.

The letter still suggests a dramatic cut to the large-scale target in 2020 from its current 41,000GWh down to 32,500GWh but, crucially for the potential acceptance of the renewables sector, it gently suggests that the government look at further increases in the level of the target beyond 2020.

Beyond of course asking that industries classified as 'emissions intensive and trade exposed' receive a full exemption from paying an already diminished share of the cost for new renewable energy projects, it argues:

We are of the view that a LRET target of 32 500 GWh in 2020 – with further resolution required on the year that the target may subsequently peak, the level of the peak, and the shape of the target between 2014 and its peak – would be a solution that is workable for most of the stakeholders involved, including EITE industries like ourselves, but also for investors in renewable electricity generation.

Now the reality is that an LRET target of 32,500GWh in 2020 is completely and utterly unacceptable to the renewable energy industry. Climate Spectator spoke to several of the largest players in the wind industry and all were unambiguous in their rejection of such a target. Clean Energy Council chief executive Kane Thornton when asked what he thought of the proposal said "the answer is a simple NO". In addition, a spokesperson for shadow environment minister Mark Butler said Labor was uninterested in signing on to such a dramatic cut to the target.

So if 32,500GWh is the target in 2020 then there has to be growth in the level of the target beyond that time if a deal is to be struck. And that also means the end-date for the scheme must be extended beyond 2030 as well. One long-time player in the energy sector told Climate Spectator that any growth in the target beyond 2020 would be meaningless without pushing out the end-date of the scheme, because a wind farm would be unviable with less than 10 years of revenue from Renewable Energy Certificates.

One would have thought this could be a sensible compromise given the government has switched its argument from ‘the RET has to be cut because it increases power bills’ (which doesn’t work given their own review found it to be untrue) to instead being ‘the RET must be cut because we don’t have enough time to build sufficient projects to meet the 41,000GWh target by 2020’.

We saw this line being trotted out by Nationals Senator Matt Canavan today in The Australian, where he wrote:

There is too short a time to build so many wind turbines so fast ... that will mean the price of renewable energy certificates will increase to a shortfall charge of about $93 a megawatt hour in post-tax dollars increasing the burden of the RET threefold.

So if it’s not the actual level of the target which is a problem but rather the time available, and Macfarlane and Hunt are genuine when they say the government is keen to encourage growth of renewables, then it leaves one begging – why not simply extend out the time to reach the target?

Given this letter today from major manufacturers and the oil and gas sector, you’d think such an approach could allow everyone to walk away with some dignity claiming a win.

The government could say they “fixed the RET”, avoiding an impending shortfall of renewable energy supply and at the same time made life easier on the manufacturing sector doing it tough. They could even hold a straight face when they said they want to encourage renewable energy, without someone screaming ‘liar’.  

The renewables industry would regain investment certainty and also get revenue certainty for their projects over a greater period of time, even if they had to accept business moved slower than what it lawfully should have, were it not for the Coalition playing games.  

Meanwhile Labor could say they rescued the renewables sector from the evil clutches of the Coalition by maintaining a target very close to its original level, even if a bit delayed.

But this is politics, not just logic.

One Canberra lobbyist told Climate Spectator that the government is completely unwilling to contemplate any extension of the duration of the RET scheme. The view of several senior Cabinet ministers was that it’s about time this sector stood on its own two feet.

Also a spokesperson for shadow environment minister Mark Butler explained that this letter would not do anything to restart stalled negotiations. Instead Labor needed to see something concrete from the government clearly indicating that they were willing to move substantially from their public preferred position of about 27,000GWh in 2020.

Lastly the renewable energy industry are almost universally mistrustful of the government. They fear any compromise on their part will be pocketed by the government and further concessions sought. For example, the cut to 32,500GWh could also come with an additional sting that it would cover commercial rooftop solar that currently sit within the small-scale renewable energy scheme.

So it looks like this new proposal from heavy industry and the oil and gas sector moves us no closer to a resolution.