Renewable energy target lowers energy prices

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Business Spectator’s Tristan Edis is onto a truth I’ve pointed to many times but simply does not get a wider airing for some reason. Australia’s carbon mitigation policies are not the cause of power price hikes. Indeed, the wholesale cost of electricity for Autumn is no higher than the decade average:

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Warm weather has helped a little but a report commissioned for the Renewable Energy Target Review shows why. From Edis:

The federal government’s hand-picked economic modeller to evaluate the impact of the Renewable Energy Target, ACIL-Allen, has found that a wind-back of the scheme’s target would end up costing electricity consumers money, to the benefit largely of fossil fuel suppliers and generators.

This is even though the modeller was instructed by the government to attribute no monetary value whatsoever to carbon emissions.

Also, the modelling suggests that the renewable energy industry should be able to meet the current level of the target without a blowout in the cost of renewable energy certificates to the price cap.

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Whocouldanode? As well, the review found that raising the target would decrease energy costs further with the optimal blend being a raised 30% target:

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The driver of the price falls is competition. There is a lot of new power chasing customers.

As I’ve pointed to before, neither the carbon price nor the RET is responsible for utility price hikes. That honour goes to the distributors of the power who have over-invested. The following chart is from the Garnaut Review tells the tale:

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The extraordinary politicisation and poor policy around climate change mitigation continues.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.