The federal government may be asserting that it has no pre-determined outcome in mind for the review of the Renewable Energy Target, but it looks like the market doesn’t believe them.
The price for renewable energy certificates – known as LGCs – which support the construction of large wind and solar farms as well as hydro and biomass power projects, has plummeted since Tuesday last week.
LGCs began the week at $30 but on the government’s announcement of the review panel members they began to plunge, and by Friday had reached $25.80.
Prices have not been this low since 2006 when the RET was legislated at 9500 GWh, versus 41,000 GWh now.
Three of the four members appointed to the panel to review the target have made public statements critical of either the value of renewable energy policy support or the need to reduce greenhouse gas emissions in the short to medium term.
The chair of the review panel, Dick Warburton, led a business campaign to abolish the carbon price and maintains that he doubts the burning of fossil fuels will lead to global warming.
Another panel member, Brian Fisher, was prominent during the Howard Government in arguing that government should not adopt policies to encourage the deployment of existing low carbon technologies in the immediate term, instead focusing on research and development into future breakthrough technology.
It is understood that energy retailers are some of the key sellers of the certificates, indicating that they believe the government is highly likely to amend the level of the RET.
Some renewable energy power project developers had been of the view that even if the government were to reduce the target, it would be to a level of 20 per cent of electricity demand, which would still require some new projects. However. the LGC price required to support new projects is generally believed to lie at about twice the price certificates traded on Friday.
This suggests that market participants believe that the Renewable Energy Target could be wound-up altogether, and believe the review panel has been handpicked to deliver a harsh verdict on the scheme.