Politics could short-circuit Australia’s clean energy future

Australian consumers want renewable energy, and investors are stepping up investments in clean power; but the country’s potential to capitalise on this opportunity is limited by political uncertainty, say experts.

Australia can reduce its carbon emissions and uncover new economic opportunities by scaling up renewable energy but the country’s potential to do so is hamstrung by a lack of political commitment to the issue, said government and business leaders at an industry event last Tuesday.

Speaking at the Australian Clean Energy Summit at Sydney’s Hilton Hotel, Kane Thornton, chief executive of industry association Clean Energy Council (CEC), noted that currently, there is about A$8 billion (US$6.4 billion) worth of renewable energy projects under construction, or in the planning pipeline. 

This investment boom indicates that Australia is “in the midst of an energy revolution, but 2020 looms large,” said Thornton, referring to the date when the country’s Renewable Energy Target (RET) is set to expire. 

The RET sets a goal of 33,000 gigawatt hours (GWh) of large-scale renewable energy capacity by 2020, which amounts to about 23.5 per cent of total electricity generation in the country.

To ensure this target is met, the government has provided financial incentives by enabling large-scale renewable projects and households, small businesses and communities alike to produce ‘certificates’ for every megawatt of renewable energy they generate. Electricity retailers are legally obliged to buy a certain number of certificates every year. 

But there is no target—or the accompanying financial incentives—beyond 2020. If there is no longer a scheme that allows renewable energy developers and hosueholds to produce and sell certificates to electricity retailers, they will also lose the certainty that their investments in renewable energy will deliver ecoomic returns.  

To ensure that renewable energy investments don’t falter after 2020, Australia’s chief scientist Alan Finkel suggested in a recent review of the country’s electricity market, that Australia adopt a Clean Energy Target (CET) after 2020; this was one of 50 recommendations to make the market more secure, reliable, affordable and clean. 

A CET would operate in a similar manner to the RET, but rather than insisting on renewable energy uptake, it would impose an emissions threshold on electricity generation. Companies would be able to choose their own technology solutions to meet these requirements.

Other solutions Finkel proposed include requiring power plants to give advance notice of their intention to close, and taking measures to improve the integration of various energy sources in the national energy grid. 

At a July 14 meeting of national and federal politicians, however, the Council of Australian Government (COAG) Energy Council Meeting, adopted 49 of Finkel’s recommendations, but did not reach consensus on a national CET. 

“It’s clear that without the 50th recommendation, it’s still a fail,” Thornton said at Tuesday’s event. “If politicians back the CET, we will have more investment in renewable energy and jobs.” 

“If there isn’t agreement, business, electricity consumers, workers and households will all suffer,” Thornton told the 500-strong audience. 

If politicians back the CET, we will have more investment in renewable energy and jobs. If there isn’t agreement, business, electricity consumers, workers and households will all suffer. 

Kane Thornton, chief executive, Clean Energy Council

Policy plays 

Also speaking at the event, leaders of the opposition Labor party as well as the Australian Greens echoed the urgent need for a CET as well as tangible measures to scale up the adoption of clean energy technologies. 

Richard Di Natale, leader of the Australian Greens, told the audience that due to the falling costs of wind and solar energy, as well as growing investor interest in renewables, the sector had “terrific opportunities” for growth. 

“We are not seizing this future because of the uncertainty that confronts your industry,” he added, attributing much of this to the ruling Liberal party’s support of coal power and fossil fuel subsidies. 

But it was dangerous for the industry to pin all its hopes for certainty on a single policy measure, the CET, said Di Natale. All it would take to throw the industry into turmoil and cause investments to cease would be for a future politician to initiate a review of the target, or even merely use aggressive language to criticise the policy, warned Di Natale. 

A more diverse set of solutions includes shutting down polluting power stations, boosting energy efficiency technology, and legislation known as ‘reverse auctions’. The latter practice, implemented by the Australian Capital Territory’s Labor-Greens government, gets developers to bid for renewable energy projects in exchange for competitive prices for feeding energy back to the grid.  

“We leave the electricity market unchanged at our own peril,” said Di Natale.

Labor party leader Bill Shorten, meanwhile, expressed concern about the steady upward march of electricity prices and offered to set aside political differences to work with Malcolm Turnbull’s government on addressing this issue. 

The government estimates that electricity prices for households have increased by 72 per cent between 2003 and 2013; for households, they have increased by 60 per cent over the same period. 

“For us, renewable energy is front and center, both economically and environmentally,” Shorten said. The fact that one in four Australian homes has rooftop solar power indicates that the public is ahead of policymakers when it comes to renewable energy progress, he added. 

“Every day the government refuses to take action, prices rise,” said Shorten. “We need policy certainty; it’s time for parliament to put a price on pollution.” 

Shorten added that Labor was “prepared to compromise” on whether this should take the form of a Clean Energy Target or an Emissions Intensity Scheme (EIS), although the party prefers the latter option. An EIS would set a legal limit on how much carbon dioxide can be emitted per unit of electricity generated. 

“We are prepared to make a concession from opposition but we need the government to also move,” Shorten said. 

He added that addressing Australia’s energy challenges “requires all of us to life above politics as usual and stare down vested interests; taking action on climate change is more important than the next opinion poll”. 

In a later address at the event, Australian Deputy Prime Minister Barnaby Joyce acknowledged the need for change in Australia’s energy system, but said that the government’s biggest energy-related priority was to prevent blackouts.

“Any political party would not be able to survive a blackout,” he said. The Federal government has consistently blamed South Australia’s high level of renewable energy use for blackouts last December, but many experts have disputed this.

Joyce shared that the government has made heavy investments in renewable energy, such as the A$2 billion expansion of the Snowy Hydro energy storage scheme in New South Wales, but maintained that Australia also has a “moral responsibility” to export coal to the world—Australia is the world’s fourth largest coal producer—because it provides the greatest amount of energy per unit. 

Ultimately, the Finkel Report’s recommendations would be a “large debate” in Canberra, said Joyce. “What is important is that we get some form of resolution on this; all parties will have to move,” he noted.

“We have to get to a position where we can show investors, as well as those in the renewable, coal, and gas industries that they have a sure future in their investment cycles,” he added.

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