Burchell Wilson: Sectors Should Join to Beat the RET

 

Together we can protect  small business and mums and dads from the burden of bad energy policy

Jacqui Lambie wants to exempt Tasmania from the RET.
Burchell wants to exempt the whole Country.

Burchell Wilson holds the chief economist role at the Australian Chamber of Commerce and Industry. He’s been on the front foot for some time now, seeking the abolition of the mandatory RET – which he sees as “corporate welfare on a massive scale”. Here’s Burchell unloading in today’s Australian.

Sectors should join to beat RET
Burchell Wilson
The Australian
17 July 2014

A QUIET but effective lobbying campaign is under way by the Australian Aluminium Council to deflect the unnecessary economic damage being inflicted on the industry by a dramatically expanded renewable energy target.

Rather than tackle Labor’s hidden carbon tax head-on, representatives of the aluminium industry understandably are seeking to exempt themselves from the fatal toll the RET is inflicting on Australian producers of aluminium.

From a political economy perspective the strategy adopted by the sector makes sense and would appear to be an attractive option, at least as far as the aluminium industry is concerned.

However, exempting aluminium refiners and smelters alone from the RET has the effect of shifting the cost of the scheme on to other energy users. It may allow aluminium producers to save hundreds of millions of dollars in energy costs, yet it unfortunately heaps the cost burden of the scheme further sideways on to mums and dads and small-business operators at the expense of the broader community.

The likelihood that those who would be asked to bear the cost of these exemptions will provide sufficient political resistance to these proposals is limited. Small businesses are too busy keeping their heads above water to be overly engaged in policy machinations and most households are focused on putting food on the table and ensuring their kids get the best chance in life.

Similar behaviour by sectoral interests was seen around the imposition of the carbon tax. Rather than opposing bad policy outright, many focused instead through necessity on carving themselves out of the policy to minimise exposure. As a political dynamic this is one reason so many policy failures get up in the first instance. There can be only limited effective opposition to bad policy when industry sectors focus instead on narrowly targeted campaigns to moderate their own impacts.

All of which serves to highlight the importance of broad-based industry associations in the political environment as advocates for good economic policy. The Australian Chamber of Commerce and Industry represents the interests of a large base of energy users in the business community covering 300,000 businesses and acts on their behalf to ensure their views are considered in the national policy debate. The broad interests of industry in relation to the RET also happens to largely coincide with those of household energy users; both groups would benefit considerably from the scheme being phased out or scaled back.

The RET operates to drive up electricity prices for the sake of high-cost carbon abatement opportunities. Soon to be released modelling for ACCI by Deloitte Access Economics shows this will not only impose costs on energy consumers directly, it will also lead to broader economic damage to the Australian economy to the tune of $30 billion across the remaining life of the scheme. Jobs and investment will also be a casualty of the RET due to the loss of competitiveness it inflicts on Australian industry. The chief bene­ficiaries of the RET are in the wind industry, which will pocket $37bn in subsidies until 2030, or about $2.5bn a year on average.

Rather than seeking an exemption for individual sectors, ACCI is seeking wholesale reform of the RET on behalf of all energy users. Just as Palmer United Party senator Jacqui Lambie wants to see the entire state of Tasmania exempted from the scheme, ACCI believes the most appropriate exemption is one for the entire country.
The Australian

Here’s a reminder of Burchell’s cracking interview on the ABC’s 7.30 with Sarah Ferguson broadcast on 17 February 2014 (see our post here) – transcript follows.

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Transcript:
SARAH FERGUSON, PRESENTER: A day after US Secretary of State John Kerry described climate change as perhaps the world’s most fearsome weapon of mass destruction, the Abbott Government has today taken another step towards overhauling the climate policies left over from Labor’s years in power. The Government has announced a major review of the impact of clean energy on retail power prices. It’ll be headed by a self-confessed global warming sceptic, businessman Dick Warburton. And it’s widely expected to result in a decision to wind back the current Renewable Energy Target, which aims to ensure that 20 per cent of Australia’s power comes from renewable sources like wind and solar by the year 2020. Industry groups are lobbying for the target to be abolished or cut. Among them is the Australian Chamber of Commerce and Industry. Its chief economist, Burchell Wilson, joined me earlier from Canberra. Burchell Wilson, thank you very much for joining the program.

BURCHELL WILSON, AUST. CHAMBER OF COMMERCE & INDUSTRY: You’re welcome.

SARAH FERGUSON: There was a substantial review of the Renewable Energy Target in 2012. Why do we need another review so soon after?

BURCHELL WILSON: Well the review is scheduled by legislation to take place in 2014, so obviously it has a parliamentary mandate to take place. But the other thing about the scheme is there needs to be more clarity around the cost it’s imposing on consumers, the cost it’s imposing on industry and the sort of inefficiencies it’s giving rise to in the energy sector.

SARAH FERGUSON: What about those people who are investing in the renewable sector, are they not part of the Chamber of Commerce as well?

BURCHELL WILSON: Look, the problem with the Renewable Energy Target is it’s imposing a cost of $1.6 billion across the economy. It amounts to about five per cent of household energy costs now and that’s just going to mushroom over time as the scheme continues to be rolled out.

SARAH FERGUSON: Let’s just talk about the domestic cost for a minute because the Climate Change Authority did look at the consequences of scrapping the target, if that were to happen as a result of the review, and they found that the effect on domestic energy prices would be negligible. Why do you say it’s such an important factor in this decision to review the target then?

BURCHELL WILSON: Look, you’ve had a range of regulatory authorities around the country come out in recent – in recent months and say – and tell us that the cost of the RET to average households is around $102 per annum, which is about five per cent of their electricity bill …

SARAH FERGUSON: And how much of that is covered by government compensation?

BURCHELL WILSON: None of it. It’s all – it’s a consumer subsidy. Taxpayers don’t foot the bill, energy users do. That just makes it more insidious. It’s not on the budget anywhere. It’s a cost to consumers that they don’t really know that they’re wearing.

SARAH FERGUSON: Is $100 a year a good enough reason to consider scrapping the Renewable Energy Target, if that is indeed one of the factors at play here?

BURCHELL WILSON: Look, the problem with the Renewable Energy Target is it’s a very inefficient way of abating carbon. The Productivity Commission’s told us – told us this. It’s costing up to $525 per tonne to abate carbon under the renewable energy target. There are low-cost alternatives available and, effectively, we’re undermining our emissions reduction effort by persisting with the Renewable Energy Target.

SARAH FERGUSON: Would you like to see it scrapped?

BURCHELL WILSON: Ah, we need to see it wound back in terms of its ambition and gradually phased out would be desirable from the perspective of industry and energy users.

SARAH FERGUSON: Phased out over what period? What are you actually calling for here?

BURCHELL WILSON: Look, this has to be examined as part of the review. There needs to be some provision made for the sunk investment under the scheme, but over time we should be winding this back, allowing the sunk investment to naturally decay and fall away and allow the renewable sector to compete on an even – on a level footing with baseload generators and efficient sources of energy.

SARAH FERGUSON: And is that something that you can realistically expect, were you to wind back the Renewable Energy Target in the short term, as you propose?

BURCHELL WILSON: Look, if people want to consume renewable energy, there are schemes available for them to opt in on a voluntary basis, but mandating this cost on consumers without providing any sort of level of clarity around the costs they’re imposing is bad policy and it’s bad for energy users.

SARAH FERGUSON: Let’s just have a look at the make-up of the panel who are going to consider this review. Dick Warburton is a self-avowed sceptic. His views on the subjects are well known. Is he an appropriate person to be leading this review?

BURCHELL WILSON: Absolutely. Dick led the charge against Australia having the highest carbon tax in the world. You’ll realise that Australians per capita pay $380 per head under the carbon tax, whereas Europeans under the ETS, they’re paying about $1.50. So there is no comparison between what we’re doing domestically and the efforts that are taking place abroad. We are an outlier.

SARAH FERGUSON: Just stay with the make-up of the panel for the moment. We’ve also got Brian Fisher, who has a long history of being opposed to pricing mechanisms in this area. It does sound as though the outcome of the review is to some extent preordained?

BURCHELL WILSON: Brian Fisher is a first-rate economist, one of the best in the country. If he – I don’t think he has any predetermined views on the matter, but he will approach this like an economist and he will …

SARAH FERGUSON: But a long history of opposition to pricing mechanisms for tackling climate change.

BURCHELL WILSON: Well, I don’t know if that’s true, but what he will tell you is the Renewable Energy Target is high-cost, it’s inefficient as a means of abating carbon, and if that’s your primary objective with respect to the RET, then we should scrap it altogether.

SARAH FERGUSON: What do you expect the outcome of the review to be?

BURCHELL WILSON: Look, we’re hopeful that at least the scale of the ambition for the Renewable Energy Target will be scaled back, but also hopeful that there’ll be some provision made for phasing the thing out over time and putting the renewable sector on a competitive footing with other forms of generation.

SARAH FERGUSON: It’s not going to be an an even footing though because if you remove the mandated target, that’s going to harm investor confidence in the renewable sector, isn’t it?

BURCHELL WILSON: Look, the Renewable Energy Target is – it’s corporate welfare on a massive scale directed towards the renewable sector. I don’t know why anyone would have any level of sympathy for businesses that – they don’t employ many people, that they don’t export anything and they’ve surreptitiously imposed these massive costs on energy consumers for the sake of lining their own pockets.

SARAH FERGUSON: Do you have any sympathy for investors in the renewable energy sector in Australia tonight?

BURCHELL WILSON: Ah, well, they’ve run quite a disingenuous campaign in recent years, they’ve hidden the cost of the RET and they’re finally experiencing a level of accountability. I think that’s entirely appropriate and it’s strong leadership from the Prime Minister, the Industry Minister and the Environment Minister in putting the RET on the table and having an honest examination of the issue.

SARAH FERGUSON: Thank you very much indeed, Burchell Wilson, for joining us. We’ll see how the review pans out.

BURCHELL WILSON: Thanks very much.
ABC 7.30

STT says: “Hats off Burchell.”

About stopthesethings

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

Comments

  1. Mr Burchell Wilson at the Australian Chamber of Commerce ‘gets it’. I thank him for emphasising hidden and elevating costs to taxpayers through rising electricity prices and ongoing detrimental impacts on traditional energy sources. Without consumer funding and coal or gas back-up, the ‘renewable’ energy system could not exist.

    1.6 billion taxpayer funded dollars impacting the Australian economy is mandated and rightfully legislated to be RET reviewed every two years. Why should we all be paying the hidden costs to the detriment of real and permanent jobs for an energy system that is useless at providing energy when and where it is needed?

    According to an article in the Australian by Andrew White, an Associate Editor, July 14, 2014; the RET review has lowered the price of large scale energy certificates issued to generators and traders of renewable energy to $22.43. If the RET stays in place, wind farm operators with Purchase Price Agreements may gain LGC’s up to $30.50 or higher per megawatt hour.

    Four main banks hold 5.9 million unredeemed LGC’s issued from the Clean Energy Regulator. It is normal in any business for investment values to fluctuate according to supply and political policy. What is abnormal to me is the push by the renewable industry for continued and highest subsidies, when they cannot abate carbon emissions and like a one legged donkey loudly braying, are unable to stand alone.

    Wind project operators want to build more turbines with bigger blades, with higher generation of electricity in order to up their profits to get more and more LGC’s, which they don’t get when the wind doesn’t blow or turbines are inoperative.

    The Victorian Planning Department and other Government bodies pave the way with current backdated planning amendments and planning laws; impractically giving free reign to wind facility operators to function as they please without proper monitoring, without public input to operational changes and without protective health measures for neighbours and communities.

    “Levels of accountability” are not only to wind farm operators but to those allowing the long lasting and devastating economic, health and environmental impacts of this not clean, not green and unsustainable industry to continue.

Trackbacks

  1. […] Renewable Energy Target and its product: the wind industry (for just a few examples, see our posts here and here and here and here and […]

  2. […] Renewable Energy Target and its product: the wind industry (for just a few examples, see our posts here and here and here and here and […]

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