With negotiations over the Renewable Energy Target (RET) reaching a political impasse, the Clean Energy Council has taken the initiative to get the two major parties to resume talks.
Earlier this week, we sent a letter to Prime Minister Tony Abbott and Opposition Leader Bill Shorten outlining our position on the RET and what the industry needs in order to get on with the job of generating billions of dollars of new investment and securing the jobs of 21,000 people.
In the letter, we said that no strong case has been made as to why the RET should be reduced. Reducing the RET will lead to higher power prices for consumers and have a material impact on the $10 billion of investments in large-scale projects already made.
However, it has become clear over the last few months that a compromise is necessary to restore bipartisan support for the RET and provide the policy certainty the industry needs.
We believe there is scope for reaching agreement on the future of the RET, particularly given the substantial agreement on the following aspects of the policy:
- Providing full exemption for Emissions-Intensive Trade Exposed (EITE) industries, noting this would equate to approximately 3000 GWh of production by 2020. There appears to be bipartisan support for this position.
- No change to support for residential solar, and leaving the current threshold for inclusion in the LRET at 100kW. Consideration of any other changes to the support for commercial scale solar (10kW-100kW) under SRES must ensure upfront deeming continues.
- Removal of the legislated requirement for a review of the policy every two years. The industry has never supported the inclusion of legislated reviews and requests that this be removed completely from the legislation. To minimise the massive uncertainty associated with any review, any future reviews should be explicit in ruling out any reduction in targets.
While we do not accept there is any cogent public policy case for reducing the LRET, in order to restore bipartisanship on the policy we would consider proposals with a target for LRET in the mid-to-high thirty thousands in 2020, contingent on the following key factors:
- The short term targets (2016 and 2017) should be increased to absorb the current LGC surplus to provide a strong signal for new investment. This would also provide some offset for the impact on existing projects resulting from any lower long-term targets that reduce the demand for and therefore price of LGCs.
- There is scope for re-profiling of the target to provide a more sustainable growth path. This would need to be considerate of the need to retain current trajectories in the near term (per above point) and an extension (per below point) should the target peak be shifted beyond 2020.
- Any deferment of the peak of the target beyond 2020 should be accompanied by an extension of the scheme beyond 2030 by the corresponding number of years. Investments in large-scale renewable energy projects require a 15-year revenue stream, and ideally the scheme would continue for 15 years beyond the peak of the target.
The Clean Energy Council is keen to have this impasse resolved as soon as possible.