Renegade PUP – Jacqui Lambie – Heralds Demise of the Mandatory RET

Not as “United” as their name suggests …

The credibility of any political party pronouncing any policy position is directly proportional to the unity demonstrated by elected members within that party: Politics 101.

Barely a week has passed since big Clive Palmer announced that his Palmer United Party (PUP) would use its balance of power in the Senate to block any changes whatsoever to the mandatory RET.

As STT followers are aware, Clive’s 3 PUP (soon to be) Senators – plus (apparent) PUP ally, Ricky Muir of the Motoring Enthusiasts’ Party – are able to block any legislation put up by the Coalition in the Senate, where Labor and the Greens oppose it; or, conversely, to side with the Coalition and get legislation passed where Labor and the Greens choose to block it, with the support of 2 of the cross-benchers, like John Madigan and Nick Xenophon. That leaves Palmer with the ability to throw his considerable weight against or behind Coalition backed legislation.

Palmer has made much of his claim that his 3 PUP Senators are peas-in-a-pod-loyal to him and his policies (whatever they might be?).

Now – out the blue – one the PUP’s Senators – Jacqui Lambie – who hails from the economically beleaguered state of Tasmania – has just broken ranks with her boss.

Jacqui has called for substantial changes to the mandatory RET; in an effort to save the Bell Bay aluminium smelter, along with unspecified Tasmanian “businesses”. At first blush, it looks as if Jacqui has just declared that Tasmania will be seceding from the Federation – so as to avoid the impacts of one of the most pointless, disastrous and costly Federal government policies ever devised. Fair enough!

There’s a wild card in every deck: this one’s wearing yellow.

The renegade PUP joins the growing list of Coalition MPs who are also looking to take an axe to the mandatory RET. Here’s The Australian on the inevitable demise of the mandatory RET.

Coalition MPs urge sharp cut in RET
The Australian
Sid Maher & Jamie Walker
30 June 2014

TONY Abbott and his cabinet face new pressure on climate policy, with 25 Coalition MPs urging a reduction in the Renewable Energy Target and a key Palmer United Party senator-elect breaking ranks to call for Tasmania to be exempt from the scheme.

The 25 Coalition MPs, comprising about half the government backbench in the lower house, have written to Environment Minister Greg Hunt and Industry Minister Ian Macfarlane calling for the RET to be dramatically scaled back to enable a full exemption for the aluminium industry. They say this would cut the industry’s costs by $80 million a year by 2017.

An exemption for aluminium could open the way for other electricity-intensive industries to also seek an exemption.

As the Coalition MPs stepped up pressure on cabinet for the scheme to be scaled back, Tasman­ian PUP senator-elect Jacqui Lambie broke ranks with her leader to call for changes to the RET.

Last week, PUP leader Clive Palmer ruled out changes to the RET as he agreed to scrap the carbon tax in return for a legislated guarantee that lower prices arising from the repeal would be passed on to consumers.

But Ms Lambie, who will take her seat in the Senate next week, warned she would seek exemptions from the RET for businesses in her home state of Tasmania, underlining the potential for the balance-of-power party to split.

While Ms Lambie insisted her PUP colleagues understood her position, Mr Palmer yesterday reaffirmed the party’s commitment to the existing target to source 20 per cent of the nation’s energy needs from renewable sources such as wind and solar power by 2020.

“The Prime Minister said before the last election he would not interfere with it, he wouldn’t worry about it, so we have decided to keep him to his word,’’ Mr Palmer told an open house for local voters at his Sunshine Coast resort in Queensland.

But Ms Lambie said she had already sought the support of her colleagues for Tasmania to be treated as a “special economic zone” in recognition of the state’s lagging growth and employment problems.

Asked if operations such as Rio Tinto’s struggling Bell Bay aluminium smelter in the state’s north should be exempted from the RET, she said: “Yes, that’s what I will be asking under the special economic zone. That is correct.”

Bell Bay, which has an annual RET liability of more than $8m, has warned it will need to sack staff unless it is granted an exemption from the scheme.

The RET is being reviewed by a panel headed by businessman Dick Warburton that is due to report in early August. Cabinet is expected to consider the review within two months.

Falling electricity demand means the current target of 41,000 gigawatt hours of largescale renewable energy generation by 2020 will dramatically exceed the 20 per cent benchmark, with some estimates putting it as high as 27 per cent.

The Coalition MPs support scaling back the RET from its current 41,000 GWh target to a “true” 20 per cent target by 2020. That could see the RET reduced to 26,000 GWh or lower.

The Coalition MPs want the 100 per cent exemption for aluminium to begin from January 1 next year.

The letter to Mr Hunt and Mr Macfarlane, delivered late last week, says while the RET has successfully increased renewable energy production, “it does have consequences for aluminium smelting which is unique amongst Australian industries for the intensity of its electricity usage during production … Put simply, aluminium has a greater exposure to the RET than any other industry.”

The MPs say individual smelters are paying between about $10m and $25m a year in RET costs even though smelters already have a partial exemption.

“These costs reduce the international competitiveness of Australian smelters at a time when smelter viability is finely balanced — one smelter having closed and another smelter closing this year,” the letter says.

The industry employs about 5000 people and produces export earnings of about $3 billion a year.

The Australian understands that Mr Hunt believes the call from the MPs represents a sensible peace settlement and a good common-sense balance. But the backbenchers are understood to have signed on to a “true” 20 per cent on the proviso of a 100 per cent exemption for aluminium.

Some are understood to want to scrap the scheme altogether but would accept a “true” 20 per cent if it produces savings for aluminium, while others are more supportive of the scheme.

Victorian Liberal MP Dan Tehan said aluminium smelting was “unique in the amount of electricity used in production and therefore should be exempted from the RET”. “The industry estimates the RET will cost it $80m by 2017 and with profit margins being constantly squeezed this is a cost it shouldn’t have to pay, especially given the important role it plays in providing (electricity) grid stability,” Mr Tehan said. “The aluminium industry is trade-exposed and emissions-intensive so the RET costs we place on it mean we run the risk of sending jobs in the sector overseas.”

Tasmanian Liberal MP Andrew Nikolic, whose seat of Bass contains the Bell Bay smelter, said the operation consumed 24 per cent of the electricity in Tasmania and was one of the most important facilities on the state’s economic landscape. He said both workers and management had been tightening their belts. “The worst thing we can do is to put their weighted average cost of capital into further difficulty,” he said.

Queensland Coalition MP Ken O’Dowd, whose electorate encompasses aluminium operations in Gladstone, said industry had to be allowed to operate on a competitive footing. He said he planned to talk to Mr Palmer to put the case for reductions in the RET to allow for a 100 per cent exemption for aluminium.

Under the RET, large energy users can take on direct responsibility for their renewable energy target liabilities, which is the case with aluminium smelters.

As MPs move for changes to the RET, the Climate Institute yesterday launched a rearguard action to save the carbon tax through a national advertising campaign in support of the tax.

The Southern Cross Climate Coalition, which includes the Australian Conservation Foundation, the Australian Council of Social Service, the ACTU and the Climate Institute, is also writing to MPs, including the PUP, urging the retention of the carbon tax.
The Australian

It’s good to see politicians taking an interest in the economic future of their constituents. However, their narrow self-interest in seeking to save their own political skins is not quite so admirable.

Those that are simply seeking to exempt aluminium smelters from the horrendous costs burdens imposed by the mandatory RET, bravely ignore the impact of spiralling electricity costs on thousands of other businesses and millions of households, across the country. STT thinks that kind of political ignorance is not just brave, it’s “crazy” brave.

The mandatory RET must go. As retiring Queensland Senator, Ron Boswell put it: “We can have a carbon price and renewable energy targets or viable manufacturing. We can’t have both” (see our post here).

The wind industry and its parasites heralded Clive Palmer’s stated support for the mandatory RET as their instant salvation. STT is at a loss to understand why?

The fundamentals of the equation haven’t changed. No retailer possessed of their earthly faculties is going to enter a Power Purchase Agreement in the present circumstances; notwithstanding Clive Palmer’s “assurances” about the life expectancy of the mandatory RET.

The RET Review Panel are highly likely to recommend that the 41,000 GWh mandatory RET be substantially scaled back or even scrapped; the great majority of Coalition MPs are itching to scrap it; and at least one PUP Senator is more likely to follow the Coalition, than her boss, on that score.

In those circumstances, why on earth would a retailer signup to a PPA with a wind power outfit for 15 or 25 years and risk being left with a pile of worthless Renewable Energy Certificates? Scrap or scale back the RET, and REC prices will plummet in a heartbeat.

And, even if the Coalition are unable to kill the mandatory RET this time around, under the Renewable Energy legislation there will be a further review of the target in 2016. Moreover, if efforts to repeal the Renewable Energy legislation fail during the life of this parliament, it is highly likely that the Coalition would take the abolition of the RET as an issue to the next election; and obtain a mandate to kill it the next time around.

It would be a very brave retailer, indeed, that signed up to a 15 or 25 year PPA with those simple facts in mind.

In the absence of a PPA, there is no way that a hopeful wind farm developer will obtain finance from any commercial lending institution. The ONLY source of finance available to build wind farms was – until recently – the Clean Energy Finance Corporation.

With Joe Hockey and Mathias Cormann using their powers to prevent the CEFC from lending to wind power outfits (see our post here), the wind industry will have nowhere else to go: there will be no finance for the construction of wind farms for the foreseeable future.

The wind industry and its parasites have been complaining about “uncertainty” preventing wind power outfits from covering every last inch of Australia with giant fans, for what seems like years now.

With the number of Coalition members voicing their desire to scrap the mandatory RET growing daily, and the PUP camp clearly divided on the issue, things aren’t going to become any more “certain” anytime soon. Oh dear, how sad, never mind.

The wind industry’s future: just as dark and uncertain, as ever …