The Federal Government and Opposition have recently settled on the revised national Renewable Energy Target in an agreement likely to bring long-awaited relief to Australia’s renewable energy developers and suppliers.
While the agreed annual target of 33,000 GWh is lower than the originally planned 41,000 GWh, it comes at a time when domestic and international energy suppliers have several billion dollars worth of wind and solar construction projects on hold.
Renewable Energy Target (RET)
The RET scheme was created in 2000 and requires electricity retailers to source a minimum percentage of total energy they provide from renewable methods. If a retailer fails to achieve this, it is liable to pay a shortfall pecuniary penalty. This lead to the creation of a viable market for renewable energy in Australia. The RET scheme also allowed developers to invest in large scale projects that typically have a 25-year operating life. In 2010, the scheme was extended to 2030 with a target of 41,000 GWh, approximately 20 per cent of projected total energy demand by 2020, subject to biennial reviews.
On the back of falling wholesale energy prices in 2011, 2012 and declines in projected energy usage, the Abbott Government appointed the Warburton Committee to review the RET. The report, released last year, suggested a decrease in the target to 26,000 GWh and was met with strong Senate opposition, preventing legislative change. Since then, there has been mounting uncertainty for investment in renewable electricity infrastructure projects across Australia. This includes AGL’s approved 282 turbine wind farm in Silverton, NSW valued at $2.2 billion and Senvion’s approved 200 turbine wind farm in Ceres, SA valued at $1.5 billion.
In addition to the RET being reconsidered, the Labor party and the Clean Energy Council expressed significant concerns in retaining the biennial reviews process, citing it as a source of ongoing uncertainty. There is also no consensus between the Federal Government and the Labor party on the burning of native wood waste as a source of renewable energy under the scheme.
On May 18, bipartisan support was reached for a reduced target of 33,000 GWh in addition to the removal of biennial reviews. In place of the reviews, the Clean Energy Regulator will report annually to Parliament in relation to target progression and its impact upon energy prices. The use of native wood waste remains in contention and is likely to be considered separately. Legislation affecting the RET amendments is likely to come before parliament in the coming weeks. The Labor party has also announced that leading up to the next Federal election it will seek to increase the RET.
If the agreed RET amendments proceed through parliament as intended, the scheme would be expected to come into effect in July this year. It is believed the suppliers of wind energy will be the first to take advantage of the RET capacity given the number of development approvals and scale of investment. Although the RET has reduced by 20 per cent, this agreement provides certainty for renewable energy developers and suppliers which is likely to translate into an increase in renewables projects in Australia.