From the Australia Institute’s Richard Denniss today in Crikey:
In a clear vote of no confidence in the Australian economy, Australia’s largest ever investment in solar energy was scrapped this week. The problem for the government is that while there is a big difference between media strategy and economic strategy, this government doesn’t appear to be doing a good job of either.
Whoever leaked the rumour that the Prime Minster was keen to kill off the Renewable Energy Target (RET) is no doubt pleased with the front-page splash he or she achieved in The Australian Financial Review. No doubt slashing “green tape” cheers up the conservative base that are still angry over the decision to backflip on 18C.
But the leak, or announcement, led directly to a major investment in regional Australia being cancelled. Most of the workers and voters of the Mildura region, regardless of their interest in the RET, now know that planned jobs and investment are no longer going ahead thanks to a possible policy backflip by the government.
Here is the project:
Australia’s renewable energy sector took a hit when plans for the country’s biggest solar power stations were scrapped due to climate change doubts. The $75 million fund for the 100-megawatt Mildura solar power station has been suspended amid uncertainties thatAustralia‘s renewable energy target will either be reduced or totally abandoned.
…According to reports, Silex Systems, the company behind the Mildura solar power station, said the scrapping of the project would only result in funds being withdrawn. The company feared that the Australian Renewable EnergyAgency and the Victorian government will take the money back.
Silex Systems blamed the cancellation of the solar power station to the low wholesale prices of electricity and doubts over the renewable energy target. The project would have provided an alternative source of power to 40,000 homes.
At the AFR, Grattan’s Tony Wood argues:
In the next few weeks the federal government is expected to apply radical surgery to the only policy that Australia currently has to address climate change. This looks bad and the next steps are very unclear.
The government is expected to shortly release the report from its Renewable Energy Target (RET) Review Panel chaired by Dick Warburton, with a decision to follow within weeks. That decision will require support from Labor or minor parties to get through the Senate.
While extreme outcomes are possible, the government is expected to adopt a recommendation to cut the target of 41,000 gigawatt hours of renewable energy by 2020 to somewhere between 16,000 and 27,000 gigawatt hours. This will be a big change and subject to loud criticism. So, how should the panel’s recommendation be judged?
…There is no politically or economically correct answer to the challenge posed to the RET panel. A recommendation along the lines described above, including a firm commitment to no further reviews, will represent a least bad balance between support for renewable energy and cost to electricity consumers. How this avoids serious destruction of investments made in good faith will lie in the detail. Criticisms citing sovereign risk will be unavoidable.
My own take on the RET is twofold. In the absence of any other climate change policy to deliver on Australia’s mitigation commitments, scrapping the RET is ad hoc policy that exposes the nation all kinds of risks.
Second, the RET is not a bad second best to a carbon price in terms of efficiency because it helps promote energy decentralisation (think lot’s of solar panels of roofs) that reduces the gold-plating of infrastructure needed to service a very limited number of peak usage days. That lowers the big infrastructure costs that are the real cause of Australia’s rising utility bills.
