Renewable power scores a consumer endorsement

Six of the nation's leading consumer and community groups - including the Brotherhood of St Laurence and ACOSS - have written an open letter calling on the government to consider the consumer benefit in retaining the RET.

*Some of the country’s top consumer groups have joined with the renewable energy industry to write to the federal government calling on it to leave the Renewable Energy Target alone, citing analysis from the RET Review's ACIL Allen on power prices.

Dear Prime Minister,

Re: cutting the Renewable Energy Target would hurt household electricity consumers

On behalf of Australia’s electricity consumers and the clean energy industry we write to you to urge you to keep the Renewable Energy Target in its current form.

Australia’s consumer advocates and the renewable energy industry have come together to call on the Federal Government to continue the strong bipartisanship which the RET has enjoyed since it was created by Prime Minister Howard in 2001.

The economic, environmental and social impacts of the RET scheme have been well documented prior to the current review and are overwhelmingly positive for Australians.

Throughout this year, while the panel reviewing the RET has been considering options for its future, you have personally emphasised that the impact on electricity prices was your central concern. As you noted on February 6:

We've got a review of the renewable energy target coming up this year and I'll be asking that review to consider the impact of the renewable energy target on power prices and doing what it can to bear down on power prices.

Modelling by ACIL Allen, commissioned by the Warburton review panel itself, has shown that in all of the scenarios in which the RET is reduced, the result will be higher prices for consumers. This is shown in the graph below.

Figure 1: Total average household expenditure on electricity from 2015 to 2040

Graph for Renewable power scores a consumer endorsement

Source: ACIL Allen modelling for the RET Review

We share your concern about electricity prices. Low income and vulnerable households have suffered financially as a result of increases in power prices largely driven by over-investment in distribution networks. The increase in network prices alone led to an increase in average household power prices in NSW of $500–$600 since 2007/08 (Independent Pricing and Regulatory Tribunal, 2013, Final Report – Review of regulated retail prices for electricity from 1 July 2013 to 30 June 2016, Page 17).

The Warburton review accepted that the gross cost of the RET is only 4 per cent of average household power bills. By 2020 there will be a net benefit to consumers of around $35-$56 per household, per year, as a result of the impact the RET has on lowering wholesale electricity prices.

The greatest threat to household energy prices in the next five years is the sharply rising cost of natural gas as a result of linking Australia’s gas price to the international LNG market. Wholesale gas prices have already more than doubled and this is a major concern to consumer advocates and other sectors such as manufacturing.

If the RET is cut, Australia’s greater reliance on gas-fired power will increase the cost of power for all energy users. 

The RET has helped more than two million Australian households to take up rooftop solar PV and solar hot water systems as a way of managing rising electricity prices.

Further, the areas which have the highest penetration of solar systems are those where the community is disproportionately on lower or fixed incomes, and it is these types of consumers that will benefit from retaining the RET in its current form.

In recommending a cut to the RET, the Warburton review panel seems to be ignoring the results of the research and analysis that it commissioned, as well as your own wishes that the review focus on cost-of-living issues for consumers. We urge you to reject the review’s recommendations and retain the current RET for the good of Australian electricity consumers.

We urge the government instead to focus on other areas that have had a vastly more significant effect on driving up power bills. These include electricity network pricing, wholesale gas prices and retail competition and regulation. We need your government to counteract instances of market failure and ensure that Australia’s market provides electricity that is accessible and affordable to all residential consumers.

Yours sincerely,

Graph for Renewable power scores a consumer endorsement

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