Senator Lambie, the RET is a money spinner for Tasmania
This morning Jacqui Lambie quit the Palmer United Party – the bright-yellow political collective that promised earlier this year to protect the Renewable Energy Target. It's another significant political shift for the politics of renewable energy in Australia.
In earlier days, Lambie agreed with Clive Palmer's position on the RET, classifying the government's desired changes to the scheme as an ‘illegitimate reform' (though, she did also hint at minor alterations to the scheme in the same month).
Now, Lambie has signalled the possibility of supporting the government in passing significant changes to the RET. It's based mostly on her desire to see the aluminium industry exempted from the RET – something the renewable energy industry agrees with. She said, during her media conference after the speech that:
“Basically we've been getting the worst end when it comes to the RET”
This seems to be a direct inversion of reality – Tasmania sees an enormous benefit from the RET, at a near-negligible cost to consumers.
The benefits of the RET
Hydro Tasmania, owned by the Tasmanian Government, has clearly outlined the economic benefits that the RET (designed to incentivise the construction of new clean technology) facilitates. In its submission to the review of the RET conducted earlier this year, it stated that “in Tasmania, more than $60 million was spent with Tasmanian businesses to support the recent construction of the Musselroe Wind Farm in northeast Tasmania, and more than 200 workers will be employed over the life of the project”.
Hydro Tasmania also recently reported record profits, some of which are attributable to revenue from the RET scheme. It states that it passed on $117 million of this revenue to Tasmanian citizens.
Some of us in the office decided to perform some ‘back of the envelope' calculations regarding the flow of large scale generation certificates in 2013, using the REC registry. We found that Tasmania receives around 14% of the national RET certificate revenue (estimated to be $45 million). Our calculations are rough, but it's clear that every year, Tasmanian generators create a fair quantity of high-value clean energy, all of which is eligible for the RET scheme.
In the first half of 2014, Tasmanians picked up a quarter of national certificate revenue (possibly related to the carbon price repeal) – though it varies year-to-year, it's clear that Tasmania's gained a decent share of the creation of the certificates over the course of the scheme.
Tasmania consumes a much smaller percentage of national electricity – around 5%. These data show Tasmania's percentage of scheduled demand – this time, only for the NEM (rather than the whole country), and only since 2005, but still illustrative:
There's more to the Hydro Tasmania story than meets the eye, but it's clear that the government-owned group has been a major beneficiary of the scheme, despite the fact that most of Tasmania's hydro power stations can only claim renewable certificates, or LGCs, for that proportion of their generation above their pre-1997 historical average.
What about jobs? The Climate Council estimates that there are 990 renewable energy jobs in Tasmania, according to a recently released report on state performances, where they also state that Tasmania has the lowest per capita emissions of any Australian state at 15.23 tCO2e per person (in 2012).
So, has the Tasmanian Government identified any problems with the RET scheme? It says in its RET review submission that “Tasmania is heavily invested in renewable energy through both hydro and wind assets, and that investment would be significantly undermined if the fundamental objectives of the RET scheme are weakened, or if the market for LGCs [Large-Scale Generation Certificates] were to be materially adversely impacted”.
The impact of RET changes on Tasmania
Senator Lambie also expressed concern about the impacts of the RET scheme on electricity bills – about 3 per cent of the average yearly electricity bill. But the government's RET review found that reducing or scrapping the scheme would ultimately lead to an increase in retail electricity bills, due to lower levels of ‘low short run cost' clean energy generation.
A “real 20%” scenario, the government's preferred change, would lead to “cumulative increase in average household bills from 2015 to 2030 [of] $118 in NPV terms” – running this against Tasmania's 232,370 private dwellings, that's a $27,407,860 increase in how much Tasmanian households pays for electricity. Not really a win for Tasmanian households.
Modelling commissioned by business groups including the Minerals Council of Australia found slightly different results: in the long term, bills would decrease, but only by approximately $1 per week.
Senator Lambie's concern about the impost of the scheme on the aluminium sector – an industry that relies heavily on the purchase of electricity – seems somewhat more rational. The industry bears a share of the costs but often gets no benefit from lower wholesale prices due to the long-term contracts that it has in place – the renewable energy industry sides with Lambie on this.
But it is clear that the only benefactors of cutting the scheme would be large mainland power companies: $1.9 billion to Energy Australia, $2.7 billion to Macquarie Generation and AGL, and $1.5 billion to Origin Energy, as outlined by the Climate Institute earlier this year.
As the make-up of the Australian Senate shifts in unpredictable ways, the future of Australian clean technology gets pulled along with it. In this case, we hope Senator Lambie stays true to her words. Her desire to see things work out for Tasmanian citizens ought to inspire her to keep the RET exactly as it is.
Ketan Joshi is research and communications officer with Infigen Energy.