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Let’s not beat around the shrubbery: the review of the renewable energy target (RET) led by Dick Warburton was a sham designed from the very start to conclude that the RET should be wound back. If you don’t agree with the overwhelming scientific view on climate change you are not going to feel any great need for Australia to bother about pursuing renewable energy. Instead, you’ll view renewable energy as an optional extra – and that view permeates the RET review.
The RET was not implemented because of some random desire to force businesses to use electricity generated by a more expensive method. It was introduced by the Howard government in 1997 to reduce greenhouse gas emissions. It was included as part of “the largest and most far-reaching package of measures to address climate change ever undertaken by any government in Australia”.
Thus, if you think climate change is all a bit of a scam driven by the UN and NASA with an assist from the Bureau of Meteorology and a vast majority of the world’s scientists, media and governments, then your position on the need for renewable energy is rather altered.
Which brings us to Dick Warburton, a man who told the ABC in February that he was “sceptical” of “the claims that man-made carbon dioxide is the major cause of global warming”.
Warburton of course says his views had “no bearing on this report at all”. But it is clear that they did, because throughout the report there are logical inconsistencies which have the RET judged against different criteria than its purpose. The review is also founded on the view that renewable energy is something needed only if the demand for electricity requires it.
Warburton even told the ABC last week that he did not think “there needs to be a large scale of renewables being made into the market at a time when there is so much supply”.
The key issue is that in the past few years Australia’s demand for electricity has declined. Even the current forecasts for high demand due to new LNG projects has Australia’s electricity use in 2023-24 below 2008-09 levels:
As The Australia Institute found, electricity demand has fallen because of the structural change away from high electricity intensive industries (mostly manufacturing), much better household energy efficiency (refrigerators and freezers, better insulation, and also greater use of solar hot water systems) and reduced consumption due to higher prices caused by massive expenditure on new poles and wires.
This reduced demand means that the current target of 41,000 gigawatt hours of renewable energy by 2020 would equal around 26% of our electricity generation instead of the stated goal of 20%.
But rather than view this as a win, the report takes the position it is evidence that the RET needs to be throttled.
It does this by ignoring the purpose of the RET.
The review found quite clearly that the RET has achieved it goals (Lenore Taylor gives an excellent rundown). But rather than conclude this as important, the review instead changes the criteria by which the RET should be judged. It argues that “with the renewables industry now established in Australia, the main rationale for the RET hinges on its capacity to contribute towards the Australian government’s CO2-equivalent emissions reduction target in a cost effective manner”.
Who decided this main rationale? The review did. And on that score it decides that the RET failed because “it does not directly target CO2-equivalent emissions and it only focuses on electricity generation”.
Thus the review did not conclude that the RET failed to fulfil its objectives, rather it concluded that the RET’s objectives were irrelevant.
It’s a bit like judging a wine competition and concluding that while it tastes great, flavour isn’t really as important as whether or not wine gets you drunk quicker than vodka.
So why did the review think the RET failed against this “main rationale”? Because the RET “promotes activity in renewable energy ahead of alternative, lower cost options for reducing CO2-equivalent emissions that exist elsewhere in the economy”.
And this is where the review’s logic is fairly smashed. The report fails to identify these “lower cost options”, but oddly compares it to a carbon price – its modelling notes the cost of carbon abatement under the RET of $35 to $68 per tonne is “at high cost compared to current global pricing”.
But given we no longer have a carbon price, it would seem the report is putting all its faith in the government’s Direct Action emissions reduction fund (ERF). However, the government has not modelled the cost of abatement under that plan; thus the review’s conclusion that there are “lower cost options” is utterly reckless.
The review’s own modelling notes that it “has not incorporated the impact of the ERF as information was not available at the time of modelling about the nature and magnitude of the impact of the ERF on electricity markets”.
The review’s conclusion is akin to a financial advisor recommending you to not invest in a blue chip company but instead to put all your money in his brother-in-law’s snake-oil company which he is sure will be starting up next year... maybe....
If the review had any credibility its recommendation would, at the very least, suggest continuing with the RET and reviewing further once full modelling of the ERF was available.
Moreover, if it was really concerned about the efficient reduction of CO2-equivalent emissions, it would have recommended the reintroduction of a carbon price.
But the review didn’t even like its own commissioned modelling that found, if the RET was retained, electricity prices would be cheaper from 2020 onwards than they otherwise would have been – because while the RET contributes about 4% to our retail electricity prices, it increases supply, which in turn pushes down the price of wholesale electricity. This is certainly nothing like the “significant price pressure” Tony Abbott suggested was the reasoning behind implementing the RET review.
Given that the price impact justification against the RET was destroyed by the review’s own modelling, expect the government to focus on another area: the review’s conclusion that the RET is an inefficient “subsidy” to the renewable industry worth $22bn.
Expect them to also ignore the detail that this $22bn figure is over 15 years, or $1.4bn a year. Has anyone told Dick Warburton about the $2.3bn a year the mining industry claims in fuel tax credits?
But while the RET may be said to subsidise the renewable energy industry, it does so only in the same way that safety standards on cars (which increase their cost of production) subsidise public transport and the bicycle industry. The safety standards are there for a purpose – so too is the RET.
The reality is that this report didn’t give a stuff about renewable energy, or the reduction of carbon emissions. It cared about the profits of coal fired power generators, laughably suggesting the RET might in time cause their profits to fall so low that they would reduce spending on maintenance.
If the government accepts the review’s recommendations to either close the scheme to new entrants or to severely adjust the cap, it can only do so on the basis that its direct action will achieve the same goals more efficiently.
But to do that it needs to show us the modelling. Otherwise they’re just selling us snake oil.
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