When Tony Abbott claimed victory for the Coalition in the 2013 election before a euphoric crowd of supporters, he was quick to proclaim that Australia was once again open for business.
But try telling that today to our country’s hundreds of renewable energy businesses, or the industry’s 21,000 employees who are nervously waiting for the federal government’s decision on its review of the Renewable Energy Target (RET) – the scheme that underpins all renewable energy in Australia.
Home-grown renewable energy businesses are getting an uneasy feeling that the prime minister doesn’t want them on Team Australia.
This week The Australian Financial Review reported that there was a push by Mr Abbott and senior ministers to slash the RET altogether. The news sent shockwaves through an industry which has been enduring its worst year for investment since 2001, due to the uncertainty created by the RET review process.
Many major businesses have already downsized in 2014. Others have closed – or left Australia to do business in one of the 144 other countries with a more stable or ambitious target for renewables.
More than $20 billion has already been invested behind the RET, with half going to large-scale renewables and the other half to household technologies such as solar panels and solar hot water.
This has led to Australian and international enterprises investing money in the Australian economy, opening offices and factories, employing and training people and building their businesses. Most of this would be blown if the RET is slashed.
Any reduction in the target will ultimately affect how much more renewable energy we see built and installed in Australia, but it will also have a massive impact on the $10 billion of investments already made in large-scale renewable energy. These investments were made based on the legislated policy, which provides the extra revenue to pay off projects out to 2030.
If the RET is cut, the revenue these projects are banking on would collapse, smashing the companies who invested in good faith based on the RET legislation and its long-standing bipartisan support. No investor expects a government to move the goal posts half way through the game.
There’s no doubt that abolishing the scheme would hit the renewable energy sector hard. But don’t be fooled into thinking a change to the so called “real” 20 per cent target is some sort of sensible compromise.
AN ECONOMIC KING HIT
We are already about 40 per cent of the way to meeting the legislated target of 41,000 gigawatt-hours of large-scale generation. If we were to reduce this target to a “real” 20 per cent , it would actually mean a cut of almost two-thirds of the additional renewable energy required. It is not the reasonable middle ground.
It would be an economic king hit on the industry sending hundreds of businesses to the wall and thousands of hard-working men and women onto the employment scrap heap.
If the government honours its election commitment and leaves the RET as currently legislated, we can expect to see more than $20 billion of investment flow and tens of thousands of people employed around the country.
This is part of the reason why renewable energy has strong community support. Of the more than 20,000 submissions to the RET review, 99 per cent were supportive of the current scheme. And people have been putting their money where their mouth is, with more than 4 million Australians already living or working under a solar power system.
The cost of renewable energy continues to be a hotly discussed topic. At the moment the RET makes up about 3 per cent of the average power bill, and the cost is falling. It is somewhat counter-intuitive, but while renewable energy is more expensive than coal and gas today, the way the scheme is designed actually results in lower wholesale energy prices.
All of this means that cutting or abolishing the RET would actually result in higher power prices out to the end of the decade and beyond. That would be good for a handful of old coal generators which in some cases are decades past the point when they should have been retired. But it is bad for power bills.
The choice in front of the government is now stark. It can slash the RET, devastate hundreds of Australian renewable energy businesses and thousands of jobs, driving up power prices to the benefit of a handful of coal companies. Or it can honour its election promises and ensure that Australia remains open for business, and follows the world towards a renewable energy future.
Acting Chief Executive, Clean Energy Council
This piece originally appeared in The Australian Financial Review on Wednesday 20 August 2014.