Macfarlane’s judgement questioned as the RET fallout spreads

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Macfarlane’s judgement questioned as the RET fallout spreads

Tristan Edis 1 hour ago 4

Climate Carbon markets Energy markets Policy & Politics Renewable energy Solar energy Wind power

As investment in large-scale renewables hits rock bottom, stakeholders from across the spectrum of the debate on the Renewable Energy Target are questioning whether Industry Minister Ian Macfarlane has let ego cloud his judgement.

Even though Labor’s position on the level of the large-scale RET at 33,500GWh represents:

a 30% cut in renewable capacity additions relative to Labor’s election platform; and
is endorsed not just by the renewable energy industry but also the Energy Users Association, the Business Council of Australia, the Australian Industry Group, the Aluminium Council, the Cement Federation and (for Senator Jacqui Lambie’s benefit) the Tasmanian Minerals and Energy Council;

Macfarlane continues to claim Labor are asking too much.

Only 32,000GWh is reasonable and sensible, says Macfarlane, even though the speed with which you’d need to construct new projects is virtually indistinguishable from that required under 33,500GWh.

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Source: Climate Spectator analysis

Of course, if the government was really worried about running out of time to reach the target, you wonder why they put the industry into suspended animation the moment they were elected by committing to a review of the RET within 12 months of it already having been reviewed.

If we look at the latest Australian utility-scale investment figures from Bloomberg New Energy Finance (below) we see the real problem with achieving the level of construction to meet the target is the government doing reviews, not the industry’s capacity to deliver. From the fourth quarter of 2012 to Q1 2013 (calendar year), investment died while the industry waited to hear the prior Labor government’s response to the Climate Change Authority review. Once resolved it spiked back up to levels of $800 million per quarter in Q2 and Q3.

If we’d just kept investment at about this level then we’d have been able to build the 8000 megawatts or so of capacity to meet the original 41,000GWh target, let alone 33,500GWh.

Figure 2: Investment in new large-scale renewable energy projects in Australia, Q1 2011 to Q1 2015 ($USm)

Alas in Q4 of 2013 the Abbott Government was elected saying they’d like to review the scheme all over again, and investment dived. Were it not for the Australian Renewable Energy Agency (which the government wants abolished) then even the Q3 2014 $174 million investment largely associated with the Moree Solar Farm would have been obliterated.

What’s interesting is that it’s now reached a point where industry stakeholders outside the renewable energy sector wonder out aloud to you what on earth Macfarlane is trying to prove.

He’s arguing over an amount of energy and a level of cost that is inconsequential for the wider energy market (but very important to the renewable energy sector). Not even the big power incumbents see much of a benefit from his position. Meanwhile, he’s spooking the banks and foreign investors that the electricity sector more generally is now captive to the culture wars.

His claim he’ll do a deal with the cross-bench is laughed off as a hollow threat. Glen Lazarus, Dio Wang and Ricky Muir have all made very public, unambiguous statements that they don’t want to change the RET.

But on top of getting one of them to change their mind, he then needs to cobble together a coalition which includes an extreme libertarian; a social conservative socialist and trade protectionist; a defender of Tasmania as a welfare dependent state; Nick Xenophon, who partly counts on voters that would otherwise vote Greens; as well as Bob Day (but he’s really a Liberal Party person in disguise, so not much problem there).

The one thing in Macfarlane’s favour is that this rabble of five are united in their distaste for wind farms. But Lambie wants another free-kick for Tasmanian Hydro. Madigan wants a range of restrictions placed on wind farms that would slow development, threatening timely achievement of the targets and blowing out the cost. While Xenophon wants the scheme’s target banded into separate sections to support geothermal and large-scale solar, which will increase administrative complexity and also blow out cost. Even then, Xenophon would need to think twice before signing onto such a deal because it will cost him an important segment of his voters with a green tinge.

The end result, if Macfarlane can manage to pull it off, is a scheme that’s an administrative headache and risk management nightmare for the big three power retailers, and that would cost consumers more money than if Macfarlane just agreed to 33,500GWh. It has stakeholders from all sides of the debate shaking their heads.

Meanwhile, Coalition backbenchers with the most at stake are finding it hard to hide their frustration with Macfarlane. Ken O’Dowd was the first to speak out. Regional South Australia MP Rowan Ramsay is also feeling the heat from local constituents who can see first-hand significant economic benefits from the substantial wind farm development in that seat. Sarah Henderson wants a deal urgently knowing her Victorian seachanger seat of Corangamite hangs on a knife edge. And even Dan Tehan, who sits in the safe western Victorian seat formerly held by Malcolm Fraser, was driven to publicly urge a deal last week. While being careful to not directly criticise Macfarlane, Tehan said jobs were on the line. Local employer and wind tower manufacturer Keppel Prince has already had to lay off a large proportion of its workforce due to uncertainty over the RET, and there’s a few billion dollars of wind farm investment on the line in that seat. On top of this, Tehan’s seat includes an aluminium smelter desperate to get the exemption currently on offer from Labor.

Given Macfarlane has so publicly dug himself into resisting calls from stakeholders to agree to 33,500GWh, hopes have switched to Tony Abbott intervening to overrule his minister. But so far Abbott doesn’t appear too concerned.
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