The Renewable Energy Target & the REC Tax: a Political Time-Bomb for Tony Abbott

Tony Abbott macfarlane 18.12.13

Watch out Tony – there’s a serious political liability right behind you.

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Following the Coalition’s first budget, Australian political discourse is bouncing firmly along the bottom of the gutter.

Barrackers for the hard-green-left lunatic fringe – like the ABC, SBS and the Fairfax Press – have taken to seizing on Coalition “horrors”: like the fact that the Treasurer and Finance Minister were unrepentant about being “caught” committing the heinous “crime” of choofing on cigars at the end of a hard day’s graft.

The Head Boy provoked foaming outrage for winking at an ABC radio presenter, when a talk-back caller – an old age pensioner – identified herself as a phone sex worker. No, seriously – this was front page fodder this week for the Sydney Morning Herald and Age.

Labor hacks slammed the PM for being “sleazy” and the Trotskyite’s favourite windup toy, Sarah Hanson-Young was enlisted to call Tony Abbott “a creep”. How quickly they forget: it wasn’t that long ago when Labor was headed up by a thug named Mark Latham, who still revels in the fact that he beat up a taxi driver and broke his arm. The typical Labor apology for that plainly criminal act was “well, that’s Mark just being a lad”.

Not sure how a knowing wink justifies howling moral outrage on the one hand, and assault occasioning actual bodily harm barely raises an eyebrow, on the other? But that’s where we are.

Whether it’s Cuban cigars, nudges or winks – or the $7 co-payment to be levied for a visit to the GP (the rest of the cost being covered by Medicare) – the Coalition simply can’t take a political trick, at the minute.

But the ticking time-bomb for the Coalition is the extraordinary cost of the mandatory Renewable Energy Target and the Renewable Energy Certificates issued under it.

Pure and simple, RECs are a Federal Tax on all Australian electricity consumers which are transferred to wind power generators as a direct subsidy. To adopt the phrase used by Tony Abbott in opposition about the likely cost of the Green-Labor Alliance’s carbon tax, the cost of the REC Tax: “will go up, and up, and up” – and with it – the price Australian households and businesses pay for electricity.

The exorbitant cost of propping up wind power generators through the mandatory RET and the REC Tax has now taken centre stage.

The Australian is Australia’s paper for grown-ups, which carries detailed and thoughtful economic discussion and analysis from the likes of Judith Sloan, Henry Ergas and Alan Moran. When its editor is moved to call for the abolition of the RET, it’s probably the time for the Coalition to sit up and take serious notice.

Renewable Energy Target is driving up living costs
The Australian
23 May 2014

THE review of the renewable energy target, which is due to report mid-year, is an opportunity for the Abbott government to heavily reform or even abolish one of the most illogical cost pressures on business and households. A new analysis by the Minerals Council of Australia, reported on yesterday’s front page, has quantified the inefficiency of renewable energy subsidies. If maintained, subsidies for schemes such as rooftop solar panels and wind farms would cost electricity consumers up to $21.6 billion by 2020. The opportunity cost of the RET would be an untenable $36bn.

Company director and former Queensland treasurer Keith De Lacy summed up the views of many hard-pressed householders and businesses when he said it was “plain crazy’’ to have such carbon abatement schemes driving up living costs. Apart from helping environmentalists lacking economic sense to feel good, they achieve little.

By their nature, programs such as the RET subsidise the most expensive methods of reducing carbon emissions. This is why they are fundamentally incompatible with cap-and-trade schemes that use market mechanisms to find the cheapest way to cut carbon.

For consumers, the main problem with the RET is that it is highly regressive and unfair. It forces lower income households, which cannot afford to pay tens of thousands of dollars to install voltaic solar panels on their roofs, to pay higher power bills to subsidise wealthier families who invest in the technology. The rich families then pay virtually nothing for power.

Three years ago, the Productivity Commission warned renewable energy schemes were an exorbitant form of government intervention. The commission calculated the cost of carbon saved from solar panels would be $400 to $1040 a tonne. Such an impost is many times the $23 a tonne carbon tax. And on current market prices, a cap-and-trade system would be far cheaper than the carbon tax.

As Minerals Council of Australia chief executive Brendan Pearson argues, access to cheap, reliable energy was traditionally a “source of economic strength’’ for Australia. But this was no longer the case. After a decade of soaring power prices, cutting or reforming the target of 41,000 gigawatts an hour of renewable energy by 2020 would help industry capitalise on Australia’s comparative advantage as one of the world’s most energy-rich nations.

The review of the RET is also an opportunity for Australia to learn from the mistakes of overseas nations. In Britain, the Cameron government, formerly a strong advocate of subsidies for renewable energy, has cut handouts to solar farms in order to reduce power bills. It is also curbing the building of wind turbines. In the US, the wind power industry is reeling from the removal of subsidies and from strong competition from cheap natural gas.

However the Abbott government tailors its “direct action’’ approach to carbon abatement, it must avoid the trap of consumers subsidising inefficient energy sources.
The Australian

In calculating the outrageous costs of the RET, the miners (and The Australian) for some unknown reason stopped the clock at 2020.

In this post we covered the fact that Australia’s miners have rounded on the RET, pointing out that the REC Tax/Subsidy will cost power consumers around $21.6 billion up until 2020 (as cited in the editorial above).

We also covered the $65 per MWh fine – aka the “shortfall charge” follow the links here and here – to be levied against retailers for every MW that they fall short of the mandated annual target of 41,000 GWh set for 2020.

And we also detailed the fact that the mandatory RET – the REC Tax/Subsidy – and the $65 per MWh fine for failing to meet the target – that all goes with it – continues until 2031.

Between 2020 and 2031, a further $25-30 billion will be collected from power consumers: either by generators in the form of the REC Tax/Subsidy; or by the government in the form of the $65 per MWh fine.

In our earlier post we pointed out that by 2020, the $65 per MWh fine will be levied on an annual shortfall of around 18,000 GWh – which means a total of around $1.17 billion (18,000,000 MW x $65) will go straight into general revenue every year until 2031 – when the RET expires.

This means that – from 2020 to 2031 – a total of close to $12 billion will be added to power bills and pocketed by the Commonwealth. However, there will be: NO additional renewable energy; NO “break-through” on-demand renewable energy technologies; NO reduction in CO2 emissions – just a GREAT BIG TOXIC TAX on ALL Australian electricity consumers.

UPDATE

Since this post went to press in May last year it’s become evident that the total contribution of eligible renewable generation sources available to meet the LRET target is (and will remain) stuck at 16,000 GWh annually. That means that the cost of the shortfall penalty over the life of the LRET will top $30 billion. For the breakdown and details, see our posts:

LRET “Stealth Tax” to Cost Australian Power Punters $30 BILLION

Ian Macfarlane, Greg Hunt & Australia’s Wind Power Debacle: is it Dumb and Dumber 2, or Liar Liar?

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The vast majority within the Coalition are alive to this brewing energy market fiasco – and are itching to scrap the mandatory RET in its entirety, as soon as possible.

Wind power outfits – like Infigen – have been bleating about “sovereign risk” and bullying the government through the media with nonsense threats about seeking “compensation” for “losses” they will incur if the mandatory RET is scrapped. This has led to talk about “grandfathering” wind power investments – by limiting the reduction in the target to a figure that would “protect” existing investments.

Talk about “sovereign risk” in reference to the withdrawal of an industry subsidy scheme is complete bunkum (see our post here). And the idea that a government should “protect” every private investment from the consequences of regulatory change (change which was built into the legislation itself) is simply an extension of corporate welfare on steroids.

There is no legal basis upon which a company benefiting from a Commonwealth industry subsidy scheme can obtain “compensation” (or damages) from the Commonwealth for a reduction or removal of that subsidy. The High Court answered that question in the negative 60 years ago (see our post here). Industry calls for “grandfathering” or “compensation” from the Commonwealth should be treated with the contempt they deserve.

STT hears, however, that Infigen & Co have (yet again) enlisted their “go-to-man”, Ian “Macca” Macfarlane – in one last ditch attempt to save their skins.

During the last week, Macca has been seen pounding the corridors of power pressing Infigen’s case on its behalf; pestering his colleagues in an effort to garner support for a partial retention of the mandatory RET (the “grandfathering” lurk) – and to make sure his buddies at Infigen are “duly compensated” for any “losses” (the “compensation” perk).

Although we’re not sure whether that’s supposed to extend to the $135 million Infigen “lost” over the last 2 financial years? (see our post here) But knowing Infigen’s audacity, and Macca’s past form, it wouldn’t surprise us if that’s on their “compensation recovery radar” too.

During an interview with James Delingpole last Friday, Alan Jones tipped a giant bucket on Macca – talking about the well-known fact that he’s “in bed with the wind industry”; and denouncing him as “a political liability” for the Coalition – not least because he continues to support the wind industry and the mandatory RET, despite its insane cost and non-existent benefits.

Fortunately, the vast bulk of Coalition members are well aware of Macca’s rather unhealthy links with Infigen & Co and, quite rightly, remain unmoved by his pleading on their behalf.

The “benefit” (if any) of placating a handful of near bankrupt wind power outfits in the short-term will soon be forgotten: Infigen doesn’t get a vote; and the wind industry draws its supporters from the lunatic fringe of the hard-green-left, who would never vote for the Coalition in a fit.

The other group solidly behind the RET are the Labor and Union heavies who control – and benefit handsomely from – the Union Super Funds that have bankrolled the wind industry from the outset. Why would the Coalition seek to help Labor and the Unions continue to build their war chests by retaining the RET – a subsidy system upon which Labor’s political funding (and, therefore, power and control) depends?

However, if the mandatory RET is not scrapped in its entirety now, the future political “cost” for the Coalition will be colossal.

The Coalition will be justifiably punished at the next election by old-age pensioners (whether phone sex workers or not); struggling small business owners; the workers sacked from soon-to-be defunct energy intensive businesses (like aluminium smelters); and the vast voting rump in the middle who will, by then, have worked out that the reason they can no longer pay their power bills is that the Coalition decided to maintain the most pointless and expensive industry subsidy scheme in the history of the Commonwealth.

STT thinks the mandatory RET is a ticking political time bomb – far more serious than the odd Cuban cigar or knowing winks.

Tony, no time like the present to defuse it and give your team a chance at a second term.

time-bomb_dynamite

Time’s running out, Tony – kill the RET before it’s too late.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Terry Conn says:

    STT is correct to call the RET a ticking political time bomb for the coalition. As Grace Collier (The Australian) points out in the weekend Australian the Government needs to focus on ‘who voted for Abbott and why and what they might be expecting in return’. The rabid bleating from the ‘leaners’ and ‘rent seekers’ has to be ignored and that includes ‘Macca’ MacFarlane. Every class has a ‘bully’ that runs with the rats in the sewer and ‘Macca’ is it for the coalition. The figures quoted by STT are logically correct but I believe will be a lot worse in reality because of the ‘chaos’ factor that accompanies all government intervention in the market place. With government intervention you also get massive obfuscation and myriads of words and excuses and blaming of others when your ‘computer modelling’ doesn’t stack up. The resulting chaos distorts the market place and puts prices through the roof. The proof is Europe and States in the USA and provinces in Canada (and South Australia) that have mandated renewable electricity targets. If this government sees fit to cut subsidies to ‘Holden’ but doesn’t quit the RET in its entirety then it is dead in the water — we that voted for them will never forgive them that.

  2. Jim Hutson says:

    Compensation loss for Wind Turbine owners – that would be right. Can’t have these frauds out of pocket. Oh, I nearly forgot – How about compensation for the poor Wind Turbine victims? You know the ones that have had their lives ruined by Wind Turbines, can’t sell their properties, can’t live in their homes and are suffering through health issues? The ones through no fault of their own, no longer want to live near these things but have no other option than to stay. Has anyone in Government thought about us? No, it’s all about the Wind Turbine companies. I wonder why that is?

Trackbacks

  1. […] $50 billion to power bills between now and 2031, when the RET expires (see our posts here and here). By failing to take into account these fundamental relationships, the boffins at ACIL Allen have […]

  2. […] to kill thousands of jobs in the aluminium industry, the Coalition are just waking up to the ticking political time bomb created by the most pointless and costly policy ever devised. Here’s The Australian reporting on […]

  3. […] our earlier posts (here and here) we outlined the fact that – under the mandatory Renewable Energy Target – retailers are […]

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