Renewable industry's counter attack on TRU and Origin

The Clean Energy Council (CEC), the industry association for the renewable energy sector, has tabled their case for why the Renewable Energy Target (RET) should not be watered down.

In reading through the CEC's submission to the Climate Change Authority, on almost every question, including those that that raise the potential for increasing the level of support for renewables, it pleads for no change.

On the idea of increasing the level of the target in years beyond 2020, the submission says this might be worthwhile considering, but not right now.

The submission says don't worry about increasing the target to offset Clean Energy Finance Corporation investments earning Renewable Energy Certificates (RECs) that will cannibalise the market for other renewable energy projects.

On potentially changing the level of the penalty price for retailers falling short of their requirements, they state there are some risks with changes in the exchange rate and wholesale electricity prices that could damage the viability of renewables projects, but best to just keep things as is.

It's almost like an episode of Mr Bean. The CEC is the bruised and battered victim of a range of accidents caused by well-intentioned but bumbling efforts of others. And consequently it is pleading for the Authority (as a potential Mr Bean) to just not touch anything for fear they might make things worse.

But the area where the CEC is most fearful of change is pretty clear - it's Origin and TRUenergy's attempt to use the drop-off in electricity demand as a reason to reduce the level of the Renewable Energy Target. The argument being that with electricity demand forecast to be far lower the amount of additional renewable energy now required to achieve 20% market share is lower.

The Council's submission states,

“The RET has demonstrated the ability to accelerate and underpin the deployment of both large scale and small scale renewable energy in Australia. The extent to which it continues to do this will largely be determined by the willingness of decision makers to leave the RET scheme to stabilise, and achieve its objective. In particular, any change to the GWh target of the scheme risks undermining investor confidence and the development of the entire industry."

In response to the Climate Change Authority's question of whether the target be set as a percentage of market share, rather than fixed gigawatt-hours of energy they state,

Investing in a 15-plus-year energy project requires long term certainty about the policy settings that will have a material impact on the revenue sources for the investment. This is achieved by a fixed target that provides the highest level of certainty to investors.

….the phraseology of “20 per cent” is essentially a public communications tool to help the public understand the scale of the commitment. But in practice the target has always been expressed in legislation and regulations as a fixed amount.

They also attempt to counter TRU's attack around the cost of the scheme, through drawing on modelling of their own undertaken by ROAM Consulting. Based on this modelling the CEC claim the cost of the scheme is already relatively small at 7 per cent to the average Australian electricity bill, but this will reduce to just 4 per cent by 2020, in spite of the increase in the level of the target over this period.  

This modelling result is illustrated in the chart below taken from their submission.

Source: ROAM Consulting cited by Clean Energy Council

The reason for this counter-intuitive result is largely because of the past blow-out that occurred in the costs of the small-scale renewable energy target. This was due to the over-generous renewable certificate multiplier given to solar PV systems, which has now been wound back. This was explained in Climate Spectator back in May with analysis that showed consumers had already seen a cost approximating more than a 20% renewables target, and now the worst is behind them. 

The ROAM modelling of the cost of the small-scale renewable energy scheme, detailed in the table below, provides another estimate of this drop-off in costs for household consumers.

Source: ROAM Consulting cited by Clean Energy Council