Review panel puts renewable energy target in crosshairs

Australia’s renewable energy sector has been bracing for the worst, and, as expected, the worst came to pass on Thursday when the government-appointed review panel headed by businessman and anthropogenic climate change climate change skeptic Dick Warburton, released its findings.

Completing its six-month review, the panel offered several options to reform the country’s Renewable Energy Target program, including both the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).

For Prime Minister Tony Abbott, any changes to the LRET would require approval by the senate, where his center-right coalition does not have a majority. However, Abbott has free hand to carry out the panel’s recommended changes to the SRES program.

Looking at the LRET, the panel recommends allowing it to continue to operate until 2030 for existing and committed renewable generators, but closing it to new entrants, also known as "grandfathering."

This, the panel argues, would provide investors in existing renewable generation with continued access to certificates in order to avoid substantial asset value loss and retain the carbon dioxide equivalent (CO2-e) emissions reductions that have been achieved so far. The panel adds that the approach would avoid the costs to the community associated with subsidizing additional generation capacity that is not required to meet electricity demand.

Alternatively, the panel says the LRET could be modified to increase in proportion with growth in electricity demand by setting targets one year in advance that correspond to a 50% share of new growth, thus protecting investors in existing renewable generators and supporting additional renewable generation when demand is growing. Targets would not be mandated for future years, exposing renewable energy investors to the same market risk that other investors in the sector currently face, the panel points out. This approach would result in renewables making up a 20% share of forecast electricity demand in 2020 if current forecasts of electricity demand prove accurate.

The panel again emphasized its recurring argument that, like the first option, this approach would “protect the broader community from the cost of subsidizing unnecessary additional generation capacity if electricity demand continues to fall."

With regards to the SRES, the panel argues that the small-scale renewable energy industry was becoming commercially viable due to "the significant cost reductions of small-scale solar PV systems combined with the increase in retail electricity prices."

It therefore recommended winding back the SRES by either closing the scheme immediately or accelerating the phase-out of the program.

The panel predicts that a repeal of the SRES would have an immediate effect of reducing the install rates of rooftop PV by at least 30% and the number of solar water heaters by around 16%.

“However, by the early 2020s, the rate of small-scale solar PV systems installed each year would recover to a rate similar to that if the SRES was left in place,” it adds.

Another option would be for the government to expedite the SRES’ closure from 2030 to 2020. Under this approach, the panel recommends additional measures to reduce the cost of the program, including earlier reductions in the levels of support provided for the installation of solar PV and solar water heater systems.

The panel also recommends reducing the size eligibility threshold for rooftop solar PV systems from no more than 100 kW to no more than 10 kW, to ensure the scheme is targeted towards households.