Irrespective of the Warburton review’s findings, the uncertainty Tony Abbott has created is killing the green energy sector. By Sophie Morris.
Abbott’s piss and wind power on renewable energy
In this story
Forget inner-city sophisticates. The next battle over environmental policy will be played out in the outer ’burbs, where a person’s home is their castle and rooftop solar cells the very expression of their sovereignty.
At least that is the hope of the Australian Solar Council. At the Redcliffe RSL Club north of Brisbane next Thursday, they will launch a bid to save the Renewable Energy Target.
It’s the last federal policy still supporting renewable energy. Now that the carbon tax is gone, the Abbott government has the RET firmly in its sights.
“This government has badly misread the public view about solar energy in particular,” says John Grimes, the chief executive of the Australian Solar Council.
“They have a blindspot to the fact that almost 1.5 million Australians have solar cells on their rooftop. It’s people in the mortgage belts of the cities and rural and regional Australia. These are the Howard battlers, the people who make and break governments.”
Grimes’s aim is to stir up Coalition MPs in marginal seats to resist a government push to slash the RET, which mandates that large-scale renewable energy must provide 41,000 gigawatt hours of energy by 2020. Small-scale schemes, such as rooftop solar, are expected to contribute another 5000 gigawatt hours.
Renewables advocates hope they can turn this into another “18C moment”, referring to Prime Minister Tony Abbott’s decision earlier this month to put pragmatism above ideology and abandon a plan to dilute the Racial Discrimination Act, which had generated a backlash from ethnic communities in marginal seats.
Even if the government does not slash the RET, renewables companies say it might still strangle the industry just by allowing the uncertainty over the policy to continue.
“If you want to kill an industry, this is the way you go about it,” says Lane Crockett, the executive general manager of Pacific Hydro Australia. Last month, his company shed 10 per cent of its staff.
Treasurer Joe Hockey’s comments to Alan Jones in May that wind turbines outside Canberra were “utterly offensive” and a “blight on the landscape” fuelled the perception the government’s aversion to renewables was motivated more by vested interests than the economics of energy supply.
Supporters of renewables face a campaign from the resources sector and coal- and gas-fired generators, backed by energy-intensive industries, which argue that the target is skewing the energy market and pushing up the cost of electricity because it requires major new investment. Three peak lobby groups – the Business Council of Australia, the Australian Chamber of Commerce and Industry, and the Minerals Council – teamed up to release a report last month warning that the “burden of the RET is real and will only serve to undermine Australia’s competitiveness if not changed”.
Under the RET, renewables must expand, even though there is currently a significant energy surplus, of up to 8950 megawatts. Thus, further growth in renewables will hasten the mothballing of coal-fired power stations.
Some time in the next fortnight, Abbott will receive the report on the RET that he commissioned from a panel chaired by businessman and climate sceptic Dick Warburton.
Warburton is coy about the findings but tells The Saturday Paper that the oversupply of energy, as outlined recently by the Australian Energy Market Operator, and the impact on electricity prices have been major factors in the review’s deliberations.
Already, Abbott has made clear his belief that the RET is “very significantly driving up power prices” and that he favours coal and gas.
This debate can get clouded by numbers, with interest groups on either side manipulating figures to advance their causes.
But modelling by ACIL Allen, commissioned for the Warburton review and using assumptions that did not favour renewables, including forecasts that gas and coal prices would fall at odds with other projections, nonetheless showed “household bills are initially higher with the RET but lower in the longer-term”. Until 2020, the RET, in its current form, would add an average $54 a year to household bills, but they would be lower over the next decade by a similar amount on average than if the RET were abolished.
Abbott’s push to slash the RET encountered a hurdle in late June, when Clive Palmer vowed his balance-of-power senators would oppose any changes until after the next election. Palmer was swayed by arguments including that renewable energy was popular and that Abbott would be breaking a promise if he cut the target.
But still, Abbott has not given up hope. He told an Australian Industry Group lunch last week that energy reform had begun with the carbon tax repeal and would continue with “some work with the RET”.
“Who knows one day where the market might go and what other forms of energy might come into their own?” he said. “But right now, we have massive reserves of coal, massive reserves of gas. Let’s make the most of them.”
As he enthused about Australia’s “natural advantage” with coal and gas, no mention was made of massive reserves of sunshine and wind.
The RET was first introduced by the Howard government in 2001 but significantly increased under Labor from 2009, which also provided subsidies for rooftop solar cells. By the end of last year, renewables were providing almost 15 per cent of Australia’s energy supply. But the industry argues it needs the policy support, an implicit subsidy, until some time in the 2020s, when renewable energy will become cost-competitive with fossil fuels.
Abbott’s views have plenty of supporters on the Coalition backbench, where MPs have been agitating for months for the target to be reduced or abolished completely and for an exemption for aluminium smelters.
A proposal that it be reduced to a “real 20 per cent” has gained traction in the Coalition. When the existing target was legislated it was calculated as 20 per cent of Australia’s 2020 energy requirement.
Since then, electricity use has dropped as the manufacturing sector has shrunk and consumers have embraced efficiencies.
A “real 20 per cent” by 2020 would be about 25,500 gigawatt hours, on current forecasts, involving much slower growth in renewables.
Liberal MP for the regional NSW seat of Hume, Angus Taylor, has rallied Coalition MPs to push for the RET to be slashed. His electorate, centred on Goulburn, includes the wind turbines that Hockey labelled “offensive” but Taylor says his concern is with the cost of the RET rather than the aesthetics.
“The key issue is there are cheaper ways to reduce carbon emissions. We have a scheme that picks one technology and says we will give it preference over all other technologies,” he says. “Without restructuring [of the RET], there are going to be very significant economic costs imposed. We are so far short of that target at the moment. It’s headed for a train wreck.”
He does, however, see a role for rooftop solar power in regional areas, as generation on-site cuts out the cost of poles and transmission wires.
But there are also some Coalition MPs who recognise their constituents support renewable energy – polls have consistently shown this – and that changing the target could be risky.
The Redcliffe solar event is in the electorate of Petrie, which is the government’s second most marginal seat. Liberal MP Luke Howarth can’t attend the night. He sounds a little miffed at “pushy” lobbying by the solar council but he does know that more than 38,000 homes in his electorate have installed solar cells and solar hot water systems.
He says he has told Abbott and Environment Minister Greg Hunt that the government must continue to support renewable energy. “I support solar big-time. I’m actively encouraging people to install solar,” Howarth says. “I support the RET.”
But he leaves room for it to be tweaked, adding: “I wouldn’t want to see it completely abolished, far from it.”
His appraisal of his constituents supports Grimes’s theory that solar mums and dads are not radical greenies, but home owners who saw a chance to reduce their electricity bills.
“My electorate is not really wealthy,” says Howarth. “It’s people getting about their lives, paying the mortgage, raising children. They want to own their home and invest in their own home.”
The fault lines on the issue in the Coalition may widen if the government attempts radical change. Labor and the Greens oppose any cut in the target.
Although the solar council is trying to galvanise voters who have already installed rooftop solar, or who would like to, they account for only a small portion of renewable power generation.
Large-scale providers of solar, wind and wave energy are also speaking out, warning that the uncertainty created by the Warburton review is strangling investment, causing job losses as projects stall.
In the rural Victorian seat of Corangamite, Liberal MP Sarah Henderson has declared herself a “strong supporter of renewable energy”, citing the jobs created by a local solar business.
Such jobs are now precarious. “The industry is at a standstill,” says Kane Thornton, chief executive of the Clean Energy Council. “Whether you’re a small solar company considering employing more people or a big investor building a large project, the commercial viability of the entire industry is based on the RET.”
Thornton’s worst-case scenario is the abolition of the RET but he says shifting to a “true 20 per cent” would also be a devastating cut. Even lack of action from the government, which could just sit on Warburton’s findings, would leave the industry in limbo.
The lingering uncertainty does not augur well for an industry that relies on long-term investments. With his promise of no changes until 2016, Palmer has only granted a stay of execution rather than a promise of a stable future.
Palmer argues it is impossible to provide any guarantees beyond the electoral horizon.
“The reality is for anything that governments change every three years and no future government can be bound by the actions of the present government,” Palmer tells The Saturday Paper via text message.
“That applies to everything as the alp and libs have demonstrated in the past words r meaningless.”
In his speech to the Australian Industry Group, Abbott mused that “who knows” if there might come a day when other forms of energy come into play. But without continued government support for a shift away from coal and gas, it is pretty clear the future will still be powered by fossil fuels.
This article was first published in the print edition of The Saturday Paper on August 16, 2014 as "Piss and wind on renewable energy".
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