Climate of uncertainty
Ben Cubby, Tom Arup August 19, 2013
Renewable energy: Analysts fear a cash shortfall if Coalition wins. Photo: Jessica Shapiro
EXCLUSIVE
- Full election coverage
- Election Live with Stephanie Peatling
- All the dirt on carbon
- Fact Checker: Does direct action plan have a hole?
About $4 billion in private funding would be sucked away from Australia’s solar power and renewable energy industries over the next three years if the Coalition wins government, confidential data obtained from banks and financial analysts shows.
The Coalition’s climate change plan is also $4 billion short of the funding required to meet its promised 5 per cent cut in greenhouse emissions by 2020, and is on track for a 9 per cent increase by that date, according to analysis commissioned by The Climate Institute, an independent think tank.
Although the Coalition rejects that analysis, big investors are planning for the impact if Opposition Leader Tony Abbott axes the carbon price and dismantles the clean energy finance system.
They expect that about $4.1 billion in private funding would be funnelled away from large-scale renewable power, starving the sector of capital due to regulatory uncertainty and a lack of returns, according to sources in the carbon finance sector. This would likely lead to the construction of a rash of cheap wind farms after 2016, to meet the mandatory renewable energy target, which commits Australia to 20 per cent clean power by 2020.
”Under this scenario, the winners are probably going to be the gas guys and the wind guys. You will see a charge towards getting lots and lots of wind farms up at lowest cost because you have still got to meet the [renewable energy target],” a source within the sector said. ”It’s going to change the shape of the industry.”
Mr Abbott said on the weekend that spending under his ”direct action” climate change plan would remain capped at $3.2 billion, even if it meant missing the Coalition’s pledge to cut greenhouse gas emissions by 5 per cent by the year 2020.
The Coalition climate change spokesman, Greg Hunt, said $3.2 billion allotted for ”direct action” would be enough to meet the 5 per cent target because cutting emissions was getting cheaper.
”First, because of a collapse in overseas demand for our manufacturing goods our emissions task is lower,” he said. ”Second, the available quantity of abatement is
higher. We did not include revegetation in our initial assessments and there is significant opportunity there. Third, the likely cost is now lower than we expected.”
The renewables sector, which now employs more people than Australia’s car industry, is nervously awaiting the election result.
”Australia’s significant clean energy potential is being held back by seemingly endless rounds of review and, like the rest of the energy industry, our main need is for policy stability to drive investment in major projects,” said the chief executive of industry group the Clean Energy Council, David Green.
It comes as a survey of businesses found uncertainty about the future of the carbon price has had a negative impact on more than half the responding firms.
The survey by consultants AECOM covered 180 leading companies, firms having to pay the carbon price and members of the group Business for a Clean Economy.
It found 65 per cent of businesses supported an emissions trading scheme, while 29 per cent supported a carbon tax. Just 7 per cent of businesses supported the Coalition’s direct action policy.
The Business for a Clean Economy group – which was set up to endorse carbon pricing – includes energy giant AGL, furniture retailer IKEA, Westpac and multi-national Unilever.
A spokesman for the group, Andrew Petersen, said: ”While businesses across all sectors are getting on with the job of transitioning to a clean economy, substantial investment is being delayed due to the uncertainty around retention of the carbon price.”