Rumour and innuendo is causing grief in Australia’s renewable energy sector, an industry that craves certainty yet has found little in recent times.
The Abbott government’s planned review this year of the renewable energy target is fanning fierce speculation about the future of the scheme, none of it especially rosy.
There’s talk that the RET – which mandates that 20 per cent of all electricity come from renewable sources by 2020 – could be revised down, or worse still, scrapped altogether.
All the dark gossip – and so far, that’s all it is – has sent an industry familiar with investor skittishness into overdrive.
“It’s fairly paralysing,” Bloomberg New Energy Finance Australia head Kobad Bhavnagri told AAP.
“The uncertainty is nothing new, although I don’t think it’s ever been this acute.”
Analysts say businesses are finding it hard to finance projects, with investors spooked the review will lead to a policy change. The government insists it remains committed to the RET and hasn’t announced the scope of the review, but industry isn’t too reassured by what it is hearing.
Talk of “sensible adjustments” have been sounding out from the frontbench, with mounting speculation the target could be halved. Some of the scheme’s more strident opponents – such as veteran Nationals MP Ron Boswell – are calling on government to ditch it entirely.
Prime Minister Tony Abbott says he supports the “sensible use” of renewables, but is concerned the RET is driving up domestic power prices.
“We’ve got to accept though that in the changed circumstances of today, the renewable energy target is causing pretty significant price pressure in the system,” he said late last year.
That set alarm bells ringing, and not without reason.
Since being elected, the government has cut $435 million from the nation’s clean energy agency ARENA, and ordered the $10 billion Clean Energy Finance Corporation to stop financing renewable projects.
But energy analysts agree abolishing the RET would be truly disastrous for the renewables sector in Australia.
“If the renewable energy target… were to be abolished tomorrow, investment in large-scale renewables would cease and the majority of companies concerned with that would close,” Bhavnagri said.
The importance of the scheme to the industry can’t be underestimated.
Clean Energy Council CEO Kane Thornton said the RET has underpinned the entire renewables industry in Australia for the past decade, creating thousands of jobs and driving billions in investment.
“Every large-scale project built in Australia has been built as a result of the RET,” he told AAP.
The figures speak for themselves. Australian businesses and households alike have a proven appetite for renewables.
By the end of 2011, about $10.5 billion had been invested in large-scale renewable energy projects such as wind and solar farms.
Just last month, the government’s Clean Energy Regulator announced that Australia had installed more than two million small-scale renewable energy systems like solar panels.
More and more renewable energy is being generated at a time when – for the first time in decades – demand for electricity is actually falling in Australia.
By 2020 it’s expected renewable power will actually make up more than 20 per cent of the energy mix, prompting calls for the target to be readjusted or the time frame extended to 2025. Critics say clean energy is expensive and unnecessarily hikes power bills.
This is a concern for Abbott, who wants Australia to be an “affordable energy capital” and has commissioned an energy white paper to find ways to lower electricity costs. Despite the speculation, not everyone is jumping the gun.
“I think those scenarios of shutting down the RET or substantially reducing it are unlikely,” Thornton said.
For one, the RET has been enormously successful in reducing carbon emissions, a fact acknowledged recently by Environment Minister Greg Hunt.
More than once it’s been called Australia’s largest and most successful carbon abatement policy, one that could significantly assist the government in meeting its five per cent emissions reduction target by 2020.
Sustainable Energy Association head Kirsten Rose said told a recent Senate inquiry the RET would be crucial to the success of the government’s direct action plan, and do most of the heavy lifting.
“Any move to relax the RET will mean that the emissions reduction hurdle will only be higher for the government’s direct action policy and therefore more costly,” she said.
Others believe the scheme won’t be touched because the review will expose what the industry has claimed for some time – that the RET is not a primary factor in increasing power prices.
“Renewable energy is actually helping to keep wholesale energy prices low and therefore having a very very negligible impact on retail electricity prices,” Thornton argues.
Bhavnagri agrees, pointing to Bloomberg analysis that shows reducing the RET would have “zero to little” impact on lowering power prices.
Labor senses the argument about power prices is really a cover for a broader attack by those ideologically opposed to renewables – namely traditional coal and gas companies and Abbott’s top business adviser Maurice Newman.
It argues the government is deliberately trying to mislead the Australian public that the renewable energy target is driving up power prices.
“But Australians are smarter than Tony Abbott thinks,” a spokesperson for shadow environment minister Mark Butler told AAP.
The industry is playing the long game. It doesn’t like policy change, but it hates the constant disruption of reviews that saps investor confidence.
It’s hoping the spotlight will shift elsewhere once this review is done and dusted.
“Ultimately, we want stability,” Thornton said.
By Nick Perry