There were fears that ACIL Allen would act as the chief assassin of the Renewable Energy Target. Modelling commissioned from the consultancy will be used to inform the outcomes of the RET Review, currently underway, and could be used as justification for a watering down, or even an outright repeal, of support for the renewables industry.
However, preliminary results presented at a workshop on Monday have highlighted the long-term benefits the scheme, through reduced emissions and cheaper electricity prices, if retained in its current form.
The Renewable Energy Target currently mandates that by the end of the decade, 20 per cent of electricity consumed in Australia must be generated using renewable energy sources. This is reflected as a nominal 41,000 Gigawatt-hour target for Large-scale renewable energy projects and supplemented by additional generation from smaller renewable systems.
Over the life of the scheme, the early results of modelling commissioned by the RET Review panel concluded that repealing the Renewable Energy Target would not lead to long-term savings for electricity users. Repeal would deprive the emerging renewables industry of $12.8 billion in new investment out to 2030.
ACIL Allen found that while the Renewable Energy Target would push prices higher in the short term, by 2021, increased adoption of renewable energy would lead to lower electricity prices compared to an abolition of the target. The modellers found that by 2030, electricity prices would be $91 lower each year, if the target was left unchanged.
Electricity retailers demonstrate compliance with the Renewable Energy Target by purchasing renewable energy certificates, the cost of which is passed on to customers and works to increase electricity prices in the short term while new projects are completed.
However, it is posited that the wholesale price of electricity, which is paid directly to power stations, would be driven lower under the renewables scheme by stimulating investment in sources that do not face a cost for fuel, such as wind and solar. Once built, these sources are able to outcompete fossil fuel power stations in the wholesale electricity market. This would push wholesale prices lower and would more than offset the cost of the scheme.
ACIL Allen’s modelling confirmed that the Renewable Energy Target would stimulate this effect, findings consistent with similar modelling of the scheme commissioned previously by industry stakeholders and analysts such as Bloomberg New Energy Finance.
The results also contrast to comments made by Liberal MP Kelly O’Dywer, who earlier on the same day expressed her opposition to the RET on the basis of concerns about costs. With the RET expected to drive both emissions and consumer prices down, the case for repeal for anything other than ideological opposition to renewable energy seems weak.
In addition to lower prices, modellers confirmed the RET would be a driver of significant reductions in greenhouse gas emissions, saving 23.8 million tonnes CO2-e annually by 2020, and a total of 304 million tonnes CO2-e of cumulative reductions by 2030.
Electricity prices were found to fall even further under more ambitious targets. Under a 30 per cent by 2030 target scenario run by ACIL Allen, annual savings would increase to $158. The higher the target, the greater the savings for end consumers.
The preliminary results of ACIL Allen would also have allayed the fears of coal-fired generators; at least in the long term. ACIL Allen’s projections suggested that around 1,200 Megawatts of black coal generation capacity would need to be mothballed temporarily by 2020. However, these power stations were expected to be brought back online before 2030, in response to forecast increases in electricity demand.
Representatives from ACIL Allen described the RET as a system of “wealth transfer”, with revenues being redirected from energy companies and kept in the pockets of consumers. The representatives queried that if such savings were available to consumers, why wouldn’t the free market drive growth in renewables without a RET scheme in place.
The comments attracted some opposition from stakeholders attending the workshop, who pointed to the practicality of consumers banding together to own up to 20 per cent of electricity generators. It was highlighted that recent polling from the Climate Institute showed strong community support for the Renewable Energy Target as a means for facilitating the same outcome, with 71 per cent of respondents supporting the target in its current form.
Chair of the expert panel reviewing the Renewable Energy Target, Dick Warburton, revealed to workshop participants that over 24,000 responses were received to a call for public submissions to the review.
The review of the Renewable Energy Target is continuing, with the expert panel due to deliver its final report and recommendations by “mid 2014”, with finalised modelling results anticipated to accompany the final report.
Michael Mazengarb is a post-graduate student Australian National University, completing a Master of Climate Change. An environmental mercenary, he has worked numerous roles pursuing environmental conservation and climate change action. Michael edits Omnishambles, and generally writes with a progressive perspective.
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