Slashing the RET – it’s about defending mates, not consumers

Apparently we need to slash the RET to reduce power bills. That's what they also said about the repealing the carbon tax. So what do the latest inflation figures show we actually saved and can we trust them that this isn't just about helping out their corporate mates?

It was interesting to note yesterday that when asked about the government’s plan to significantly cut the Renewable Energy Target, Barnaby Joyce’s response was that it was a tricky balancing act between the government wanting to support more renewable energy but at the same time the need to help meet the electorate’s demand for lower power prices. No one wants to pay any more on their power bill, he explained.

Yet is that what it’s really all about?

Yesterday we finally got to see how much our cost of living would be improved by the repeal of the carbon tax.

So, how much do you think the cost of goods went down last quarter?

They didn’t.

The end result was an overall rise in the cost of a representative basket of consumer goods that we use to measure inflation by 0.5 per cent for the July to September quarter. Interestingly, in the preceding quarter prior to the abolition of the carbon tax (April to June) it rose by precisely the same amount – 0.5 per cent.

Doesn’t really match up with Tony Abbott’s rhetoric, does it?

Now, it must be acknowledged power prices did go down, by 5.1 per cent. But the government had promised us they’d go down by 10 per cent. Indeed before they got elected they were talking about how the carbon tax was responsible for electricity price rises of 20 per cent, 30 per cent, and even 50 per cent.

Now, if just type into Google: ‘electricity prices discounts’ you’ll find power retailers offering discounts of 22 per cent (Lumo), 25 per cent (Alinta) even 27 per cent (EnergyAustralia) off their standing offer rates.

So essentially a discount on our power bills that is a fifth of what’s on offer from typing just three words into Google is the difference that would lead to a “python squeeze” to our economy and an “unimaginable” hit to our cost of living that would “clean out people’s wallets”.

And now they are telling us that they must reduce the Renewable Energy Target because, while they apparently are keen to see more renewable energy installed and carbon pollution reduced, they need to bring power prices down.

An interesting new wrinkle in this whole debate is that the government is now saying it'd like to extend the exemption heavy industry receives from somewhere in the realm of 50-70 per cent to a full 100 per cent. The rhetoric Environment Minister Greg Hunt has been using is that manufacturers are struggling, and we desperately need to help them by getting power prices down.

Yet the government’s own economic modelling by ACIL-Allen – as well as that by other respected energy analysts ROAM Consulting (now part of Ernst & Young); Intelligent Energy Systems; Jacobs (formerly Sinclair Knight Merz); and Schneider Electric – says this isn’t true. Reducing the target will, on net balance, increase power prices because while there’s an extra subsidy cost to build the extra capacity from renewables, this is offset by it lowering the price of all electricity sold across wholesale electricity markets.

Interestingly, analysis by the University of NSW found that far from heavy industry suffering under the RET, they were making out like bandits. The reduction in wholesale electricity prices delivered by the extra supply of renewables made a very big difference to their power bills because they don’t pay much in network and retailer charges compared to households and small business. Meanwhile, they were able to saddle households and other businesses with most of the cost of paying for the extra renewables supply.

So is all of this really about power prices in reality?

Is this why they had to dump Malcolm Turnbull, who happens to be the most popular federal politician in the country, and replace him with a deeply unpopular Tony Abbott – to save less than a fifth off our power bill that a Google search can deliver?

Or could this this perhaps be more about helping out those they see as friends, as one of them; while spurning those outside the group who are new, unfamiliar and a potential threat to the existing establishment?

It is incredibly intriguing that former Liberal Party leaders Turnbull and John Hewson have both embraced the idea of carbon pricing and the renewable energy target, while many of their Liberal colleagues seem to consider these schemes the devil incarnate. I suspect it reflects Turnbull and Hewson’s careers as innovative businessmen who have made money by shaking up and taking on cosy incumbents. Even Turnbull’s legal endeavours in the Spycatcher case were one of taking on the establishment. Having briefly met both of them I couldn’t help but get swept away as they drew upon examples from their extensive experience in high finance and business to inform their ideas about government policy.

For Hewson and Turnbull, overturning the old and stimulating the new is the very essence of progress. Joseph Schumpeter is their economic guide and they do not fear, but rather embrace, creative destruction. They appreciate that you can’t hope to succeed by trying to make time stand still, as you’ll be overwhelmed by new technology and hungry new entrants.

But Barnaby Joyce, Nick Minchin, Cory Bernardi and their man Tony Abbott never had such business careers. They have not been exposed to the business deal-making where entire industries often need to be taken on and cleaned out to make way for something better. Instead they are uncomfortable with change and uncomfortable with that which is different.

This is definitely not about power prices, it’s about defending the corporate establishment against change they should have seen coming.

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