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Wednesday, 21 January 2015

Going backwards: Australia's renewable energy investment bucks world trend

Going backwards: Australia's renewable energy investment bucks world trend

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Image courtesy Climate Council

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.

Senator Christine Milne: “How much money was wasted on the RET Review?”

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.


So what is the status of the RET
twelve months since a review was announced? The Abbott government
appointed a panel in February 2014, headed by Dick Warburton, a
Coalition mate and company director whom media reports generally
describe as a climate change sceptic.


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.

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

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_.

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