There sometimes appears to be a cacophony of voices calling for the Renewable Energy Target to be abolished, but the truth is very different. That cacophony is really a small echo chamber, with the voices of vested interests reinforcing each other.
Listen carefully, and you won’t hear the sound of families or small businesses clamouring for the RET to be abolished. That’s because the RET helps families and small businesses to reduce their power bills, and will help all Australians reduce their power bills over time.
It is worth reflecting on why the RET is so important and why it must be maintained. My company – as with most companies trading renewable energy certificates – works in the small-scale solar space, so I’ll particularly focus on the Small-scale Renewable Energy Scheme.
Solar helps families and small businesses
First and foremost, the SRES is working. It is doing precisely what successive governments intended it to do – helping families and small businesses reduce their power bills by installing solar panels and solar hot water systems, as well as creating a strong new industry.
With gas prices set to wreak havoc on Australian families and businesses, undermining the SRES protects the interests of the incumbent industry at the expense of all energy customers. Solar is the perfect hedge against soaring power bills, so you would think governments would be making it easier – not harder – for families to invest in solar.
Solar reduces wholesale cost of electricity
The cost that gets passed through to customers for the SRES from 2015-20 amounts to an average of 0.32 cents per kilowatt hour – equivalent to 1.1 per cent of an average customer’s electricity bill.
The average reduction in the wholesale price due to the installation of solar systems over the 2015-20 period amounts to 0.49 cents per kWh – which means that residential customers are benefiting by 0.17 cents per kWh or $10 per annum.
Beyond 2020 the net savings to customers increases further as the cost pass-through reduces as deeming is phased out.
SRES critical to success of solar industry
The SRES is critical to the ongoing success of the solar industry. Green Energy Trading’s analysis suggests that if the SRES was axed, the solar market would fall by around 40-50 per cent almost immediately. That means thousands of firms would shut down and thousands of Australians would lose their jobs. This would happen right across the country, with a major impact on regional areas and in the mortgage belts of our big cities.
SRES addresses barriers to uptake of solar
Some people have argued the cost of solar is now so low that it doesn’t need incentives. That is a misunderstanding of the economics of solar and consumer decision-making. Just as there are barriers to investment in energy efficiency – despite it making economic sense – so are there barriers to investment in solar. The SRES helps reduce those barriers.
Barriers to investment in solar are well documented, and include:
– Energy is typically a small proportion of a consumer's total income and does not get the attention that it deserves;
– Capital is often not available to fund the investment and where it is available, very short investment payback periods are required;
– Energy consumers lack the knowledge or information to assess and implement energy reduction activities; and
– Split incentives between landlords and tenants.
Increasing the upfront cost of solar hot water systems and solar panels creates an immediate barrier for families. This is particularly the case for solar hot water systems that cannot compete on price at point of sale with gas and greenhouse intensive electric hot water systems. In the case of solar panels, if the RET was abolished the upfront cost of a system would increase by 40 per cent.
SRES is being phased out
It must be noted the SRES took a significant haircut as a result of the last RET review (just 17 months ago), with the phasing out of deeming. Photovoltaic solar now only receives 14 years of small-scale certificates in 2017 (15 years now) and this reduces by one year each year to 2030. This means that the cost of the scheme reduces dramatically over time.
SRES meeting government’s expectations
The SRES is meeting the objectives of its governing Act, which has been signed off by successive governments over the past 13 years. It is encouraging the additional generation of renewable energy, indeed, making a material difference by helping five million Australians install solar.
The RET is helping Australians take direct action and responsibility on climate change and is helping the nation meet its climate change obligations. The RET has been the primary driver of emissions reductions in this country. Australia would not have met its Kyoto target under the First Commitment Period without the RET.
An analysis by SKM for the Clean Energy Council indicated that emissions are more than 22.5 Mt CO2e lower as a result of the RET. Take away, or substantially reduce, the RET and there is no way the government is going to meet its 5 per cent emissions reduction target.
The solar industry is delivering and is geared up to continue to deliver over the life of the RET. Some 4000 small and medium sized enterprises employ around 12,500 Australians. Correlating with where solar is most prevalent, most of the businesses are in rural and regional areas and in the mortgage belts of our large cities.
Solar businesses have made substantial investments on the back of promises by successive governments, including a very clear election promise by the current government.
The SRES is working as intended. There is no need for change. The current review of the Renewable Energy Target should reach the same conclusion as the last RET review, just 17 months ago that:
Ric Brazzale is president of the REC Agents Association and managing director of Green Energy Trading.
You can find the REC Agents Association’s submission to the latest RET Review at www.recagents.org.au