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Friday, 29 August 2014

Clean Energy Has Forced Electricity Prices Down. Time To Change All That | newmatilda.com

Clean Energy Has Forced Electricity Prices Down. Time To Change All That | newmatilda.com

Clean Energy Has Forced Electricity Prices Down. Time To Change All That



By Ben Eltham





The
Renewable Energy Target was transferring wealth away from the rich. The
Abbott Government has come to the rescue once again. Ben Eltham
explains.




The government’s review of the Renewable Energy Target is in.


In a report that surprised no-one, the review recommends dismantling the existing policy.


The Renewable Energy Target is a policy first introduced by the
Howard government. It mandates that the national electricity grid will
source 41,000 gigawatt hours of renewable energy by 2020.



On any analysis, it’s been hugely successful. The renewables industry
in Australia has grown rapidly, particularly at the utility level, as a
result of the target. Wind farms in particular have been key
beneficiaries.



As a result, the RET has had a big impact on reducing greenhouse gas
pollution. Emissions from Australia’s electricity generation have been
falling in recent years, and the RET is the main reason. As cheap, clean
wind and solar outcompete gas and coal on the national electricity
market, they have started to displace those dirtier fuels in Australia’s
energy mix.



That’s good news, right? Not if you’re a big energy company that relies on fossil fuels.


And that’s why the Abbott government has marked the RET for destruction.


“The RET is a high cost approach to reducing emissions because it
does not directly target emissions and it only focuses on electricity
generation,” the report states. “It promotes activity in renewable
energy ahead of alternative, lower cost options for reducing emissions
that exist elsewhere in the economy.”



“In the presence of lower cost alternatives, the costs imposed by the RET are not justifiable.”


The report recommends modifying the RET. It presents two options.
Both would effectively destroy the renewables sector in Australia.



Option one is to close the large-scale part of the RET scheme to new
entrants. This would mean that no new renewable energy generators would
be eligible for the scheme.



The second option is a kind of ad hoc annual target, in which
renewables would get a mandated “50 per cent of new growth.” The only
catch? Electricity demand is falling in Australia. There is no growth.
So 50 per cent of new growth is… nothing.



The reasoning behind the RET Review’s recommendations are derisory.


For instance, it argues that the key justification of the RET is
reducing greenhouse gas pollution, and that here are cheaper ways of
doing that. Therefore we don’t need the RET.



It’s true that there is a much cheaper way of reducing greenhouse gas
emissions: an economy-wide price on carbon pollution. Like the one that
Australia used to have. Oops.



But Australia doesn’t have a carbon price anymore. Nor has Greg Hunt’s bizarre Direct Action policy been legislated.


The report mentions the government’s proposed Emissions Reduction
Fund at length. That’s quite impressive, given the ERF legislation
hasn’t been passed yet, and the ERF hasn’t paid out a single cent.



As a result, the RET really is the strongest and best national policy
to reduce carbon pollution still on the books, if only by default.
After killing off most of Labor’s climate policies, the RET is pretty
much the last policy standing. So the RET is most certainly the cheapest
policy to reduce carbon pollution by virtue of the simple fact that
it’s the only one.



Read a little further into the report, and you can find the real reason for the destruction of the RET.


The way the RET operates means that it is actually pushing down the
price of wholesale electricity. Yes, that’s right: despite eye-watering
hikes in retail electricity bills in recent years, the wholesale price for electrons has been falling.



“The RET is exerting some downward pressure on wholesale electricity
prices,” the report confirms. “Artificially low wholesale electricity
prices can distort investment decisions in the electricity market.”
Translation: this horrible renewable energy is too damn cheap!



Cheaper wholesale electricity is only a problem if you’re making
money out of selling electricity wholesale – say, if you’re a big energy
company. And here we can see what the report is all about.



“The RET does not generate an increase in wealth in the economy,” the
report complains, “but leads to a transfer of wealth among participants
in the electricity market.”



And there you have it. The review panel is telling us that we have to
get rid of the RET, because it is transferring wealth away from big
polluters, and towards clean energy companies. You have to admire their
honesty, at the very least.



We always knew this review would recommend something along these lines.


The assault on the RET might have been the worst-kept secret in
Canberra. Despite repeated promises to keep it by Tony Abbott, Ian
Macfarlane and Greg Hunt before and since the election, everyone in the
affected industries knew that this government was out to slash the
target, or simply abolish the policy altogether.



The rumours were proved true when the government announced the
make-up of the review panel. It is chaired by Dick Warbuton, a former
boss at Caltex and a noted climate denialist
who also happens to have the Prime Minister’s ear. Also on the panel is
Brian Fisher, a notorious energy warrior from the Howard years, whose pro-fossil fuel sympathies have been well documented by Guy Pearse and others.



The industry knew what was coming. Investment in renewable energy fell off a cliff as soon as the review panel was confirmed.


If you think energy policy is about electricity demand, solar panels
or market inefficiencies, you’re kidding yourself. It’s all about money
and political power.



When the sun shines or the wind blows hard, renewable energy can
produce cheaper electricity than coal and gas plants under current
market conditions. That’s costing fossil fuel companies big.



Those big companies – especially the big three “gentailers” of
Origin, AGL and Energy Australia, all of whom have huge portfolios of
fossil fuel assets - have fought back, not in the marketplace, but in
politicians’ offices. Recognising that the RET is effectively a wealth
transfer from big polluters to cleaner energy generators, the big
polluters have concentrated their immense lobbying powers on convincing
the Abbott government to get rid of the RET.



Not that it took much convincing. After all, for many conservatives,
attacking renewable energy is a political rite of passage, a way of
demonstrating your conservative credentials, a marker of tribal loyalty.



This is yet another decision that delivers for corporate Australia,
at the expense of ordinary households and a safe planet for our kids.







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