If there was any doubt about the impact of the Abbott government’s prevarication over the Renewable Energy Target, it can now be cleared up: renewable energy investment in Australia fell in the past year, writes Max Berry.
Bucking a global trend that saw a 16 per cent rise in renewable energy investment to a total of $US310 billion, investment in wind, solar and other clean energy sources in Australia fell by 35 per cent in 2014, according to Bloomberg New Energy Finance (BNEF).
BNEF attributes the fall in renewable energy investment to $US3.7 billion – the lowest level since 2009 – squarely to the Government’s review of the Renewable Energy Target, which has triggered uncertainty in the minds of investors and delayed decisions on projects. The RET was established in 2001 and since 2010 the target has been to ensure that at least 20 per cent of Australia’s electricity is generated from renewable sources by 2020.
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The decline is in stark contrast to other countries across the “West”, developing and totalitarian states. Indeed, thanks to the brakes put on by the RET “Review”, Australia’s investment in renewable energy projects slumped below that of even Algeria, Thailand and Myanmar.
Brazil appears to have won the mantle for the biggest rise in clean energy investment in BNEF’s annual survey. The South American giant saw an enormous 88 per cent rise.
Other big contributors to the global rise in clean energy projects were China (32 per cent), Canada (26 per cent) and Japan (12 per cent). Sure, Australia is not quite alone in seeing a fall in renewables investment. Italy had a 60 per cent fall after its government abandoned tariff support for solar.
In the global rise in renewable energy, solar projects are the major contributors, driven by a big improvement in the cost competitiveness of roof-top solar photovoltaics and solar thermal power stations. Prominent examples include the investment of $US1.1 billion in the 250 MW Setouchi Mega PV project in Japan and the $US1 billion 100 MW Solar One thermal plant in South Africa.
Big wind projects, too, are on the rise across the world. There were no fewer than seven billion-dollar offshore wind projects in Europe that reached the “final investment decision” stage in 2014, BNEF found, including the 600 MW Gemini array off the Netherlands, the 402 MW Dudgeon project in UK waters, and the 350 MW Wikinger project in the Baltic for Germany.
The panel’s report found, no doubt inconveniently for the chairman and his political masters, that the RET had, in fact, succeeded in reducing electricity prices by encouraging the increase in generation capacity powered by solar and wind sources.
Assigning climate sceptic Warburton to #RET review was like appointing PhilipMorris to advise on tobacco control policy.— Simon Chapman AO (@SimonChapman6) August 28, 2014The review panel was also forced to admit that the RET was also effective policy in achieving its primary objective of reducing emissions.
Presented with a couple of options, the government responded to the review by a simple cut to the RET from 41,000 GW hours of renewable-generated electricity to 26,000 GW, arguing that with the fall in grid-produced electricity consumption, the 20 per cent target was closer to 27 per cent.
The panel’s report makes several references to “alternative and lower cost methods of reducing emissions”, code for the government’s planned but unlegislated Emissions Reduction Fund, the centrepiece of its Direct Action Plan. But there is simply no way yet of knowing whether it would be a cheaper means of reducing emissions than the RET. This fact was highlighted in an interview given last year by Warburton to Radio National’s Fran Kelly. As Business Spectatorpointed out, it wasn’t Dick’s best day.
To be fair to Warburton and his panel, the government’s response of a simple cut in the RET for large projects doesn’t reflect its recommendations. The panel recommended either “grandfathering” the scheme – closing it to new renewable generators but leaving it in place for existing players – or a more sophisticated approach of setting targets based on renewables having a 50 per cent share of new growth in electricity demand. When governments decline to adopt even the recommendations of panels headed by their friends, one wonders why they were even appointed.
What is clear is that the ERF will represent a transfer of funds from taxpayers to businesses for greenhouse gas reduction projects that those businesses could be incentivised to complete at their own expense through an emissions trading scheme. The government has squandered enormous political capital over the past year in a failed attempt to introduce price signals for healthcare, yet declines to set price signals for businesses – through either a carbon tax or an emissions trading scheme – for the costs borne by the whole community of their greenhouse emissions.
The Direct Action Plan is also at odds with the government’s stance on transfer payments, which it abhors when the recipients are the unemployed, single mothers, and a range of disadvantaged groups.
Above all, the ultimate irony in Australian politics today is that the centre-right party that generally supports free markets disavows a market-based approach to emissions reduction in favour of a highly uncertain form of taxpayer-funded government intervention that has drawn widespread scepticism.
Meanwhile, the scaling back of the RET and the policy uncertainty for investors has had real and negative consequences in the renewables sector. A manufacturer of wind turbines in the west Victorian town of Portland, Keppel Prince, last year mothballed most of its fabrication works and sacked 100 workers after orders dried up. Turbines for at least one of the few wind farms given approval in Victoria recently were imported.
Legislation introduced by former LNP government with new 2km setbacks for wind farms
But the Abbott government cannot be squarely blamed for this through its RET review.
The then Coalition state government of Denis Napthine should shoulder a fair amount of the blame for its hostility to wind farms, with severe restrictions on their location. Since Keppel Prince is in the former premier’s electorate, perhaps the Coalition’s loss of office in November was poetic justice.
You can follow Max Berry on Twitter at @maxberry_.