RET Review Panel gets to work

The wind industry and its parasites are still reeling about the prospects of the Coalition’s RET review – which could well result in the mandatory Renewable Energy Target being scrapped altogether.

The Expert Panel appointed by Tony Abbott to undertake the review – Dick Warburton AO LVO (chair), Dr Brian Fisher AO PSM, Shirley In’t Veld and Matt Zema – have no love of giant fans and are well aware of the costs associated with trying to rely upon intermittent and totally unreliable wind power.

Critically, Tony Abbott has taken a direct interest in the Panel’s work with the Panel supported by a secretariat in the Department of the Prime Minister and Cabinet – the Panel, therefore, reporting directly to the Prime Minister. The Head Boy’s interest is, no doubt, in part due to Greg Hunt’s policy illiteracy when it comes to the RET’s impact on energy costs and Ian “Macca” Macfarlane’s all too close links to outfits like Infigen – these days Macca and Infigen’s Miles “Boy” George are so inseparable it’s as if they’re out to play Danny DeVito and Arnold Schwarzenegger in a remake of “Twins”.

The Panel have just released a paper setting out the scope of the review, the terms of reference and a series of questions highly relevant to the impact of the RET on power prices and, therefore, Australia’s economic welfare (here is the paper: RET_Review_Call_Submissions).

And here’s some of the important points raised – and questions to be considered – by the Panel.

RENEWABLE ENERGY TARGET REVIEW TERMS OF REFERENCE

Background

The Renewable Energy Target (RET) scheme, comprised of the large-scale and small-scale schemes, is aimed at increasing renewable energy generation and reducing greenhouse gas emissions from the electricity sector. It is designed to deliver the equivalent of 20 per cent of Australia’s electricity from renewable sources by 2020.

Scope of the review

The review is to examine the operation and costs and benefits of the Renewable Energy (Electricity) Act 2000 (‘the Act’) and related legislation and regulations, and the RET scheme constituted by these instruments. This includes considering:

1. the economic, environmental and social impacts of the RET scheme, in particular the impacts on electricity prices, energy markets, the renewable energy sector, the manufacturing sector and Australian households;

2. the extent to which the formal objects of the Act are being met; and

3. the interaction of the RET scheme with other Commonwealth and State/Territory policies and regulations, including the Commonwealth Government’s commitment to reduce business costs and cost of living pressures and cut red and green tape, and the Direct Action policies under development.

The review should provide advice on:

4. whether the objective of the RET scheme, to deliver 41,000 gigawatt hours (GWh) and small scale solar generation by 2020, is still appropriate;

5. the extent of the RET’s impact on electricity prices, and the range of options available to reduce any impact while managing sovereign risk;

6. the operation of the small-scale and large-scale components of the RET and their interaction;

7. implications of projected electricity demand for the 41,000 (GWh) target; and

8. implementation arrangements for any proposed reforms to the RET, including how to manage transition issues, risks and any adjustment costs that may arise from policy changes to the RET.

The review is also to consider the Government’s election commitment to reinstate native forest wood waste as an eligible renewable energy source.

Process

The review is to be led by a panel of experts appointed by the Ministers for Industry and the Environment, supported by a secretariat in the Department of the Prime Minister and Cabinet.

The panel is to undertake public consultations, seek submissions and provide a report to the Prime Minister and the Ministers for Industry and the Environment by mid-2014.

3.3 Impact on electricity prices

Electricity prices have increased by 58 per cent over the past four years15 due to increases in network costs (the poles and wires) and the impact of environmental schemes such as the carbon tax, state and territory feed-in-tariffs and the RET. The RET influences electricity prices in two ways:

• The RET places costs on liable entities, largely energy retailers, who are required to purchase certificates to comply with the scheme. These costs are passed onto consumers and currently represent around four per cent of the average household electricity bill.

• The RET also has the potential to influence wholesale electricity prices as it affects the balance between electricity supply and demand by stimulating investment in renewable generation capacity that would not otherwise be forthcoming.

Understanding the two factors at play; certificate prices and wholesale prices, is important in considering the changes in retail prices that can reasonably be expected from any changes to the LRET. The modelling commissioned as part of the review will provide estimates of the overall effect of different LRET targets and the impact this may have on household electricity bills.

Questions:

• How has the RET performed against the objectives in the Renewable Energy (Electricity) Act 2000?

• Are there more efficient and effective approaches to achieving these objectives?

• Do the objectives of the Act remain appropriate, in light of falling electricity demand and the Government’s target and policies for reducing greenhouse gas emissions?

• How has the RET influenced the development of the renewable energy industry?

• Should the LRET be abolished, reduced or increased?

• If retained, what level should it be?

• What would the impact of such changes be?

• Do small-scale renewable energy systems still require support through the SRES?

• If so, for what period will support be required for? Should the LRET and SRES schemes be recombined?

• What impact is the RET having on electricity markets and energy markets more broadly?

• How might this change over time?

• Are the current exemption arrangements appropriate?

• How should reforms to the RET be implemented?

• What transitional issues could arise and how might they be addressed?

• How does the RET interact with other government policies that have, or will have, an impact on the operation of the RET, or that impact on renewable energy or energy markets more generally?

• What can be done to improve the efficiency and effectiveness of these interactions in delivering intended policy objectives?

• Should any other energy sources be included in the LRET?

• Should any non-renewable (but low emissions) energy sources be included?

STT thinks that that set of questions is a pretty fair place to start.

At no point in this debacle has a proper cost/benefit analysis of wind power generation ever been undertaken. The wind industry’s wild and unsubstantiated claims about CO2 abatement have never been put to the test – this time around it’s clear they will be.

Nor has there been any serious effort made to assess the consequences of using a power generation source which can only be delivered at crazy, random intervals – namely, the exorbitant costs of peaking power increasingly being provided by highly inefficient Open Cycle Gas Turbines and the increased CO2 emissions generated by OCGTs (3-4 times per unit generated compared a modern coal/thermal plant) and the need to burn mountains of coal and gas without generating a single spark just to hold sufficient “spinning reserve” (see our post here) to cover wind-watts when they disappear every day and, frequently, for days on end (see our posts here and here and here and here).

For a summary of the operation and impact of the Renewable Energy legislation – the RET and the REC – on power prices see our detailed post here.

The Panel is set to report their findings mid-Year. With Dick “RET Slayer” Warburton firmly in charge, STT doubts that the wind industry is going to relish the results.