'Doom' scenarios for green energy

28 Aug, 2014 03:20 PM
Closing the LRET to new entrants is likely to cause certificate prices to collapse

THE price of renewable energy ­certificates would collapse and the value of the large-scale renewable energy sector would be "destroyed'' under the more drastic proposal contained in the review of the Renewable Energy Target, which is due to be released on Thursday.

The lesser proposal, to scale back the target to reduce the amount of renewable energy produced, would not be much better, the industry says, setting the scene for a fiery fortnight before the government issues its final response to the review.

It is understood the review, conducted by a panel led by businessman Dick Warburton, modelled five options and settled on two key recommendations. The first, known as the "true 20 per cent" option and which is favoured by Environment Minister Greg Hunt, would reduce the annual production of renewable energy in 2020 from 41,000 gigawatt hours to 27,000GWh.

This is because forecast total energy production has been downgraded for 2020, and that 27,000GWh is now 20 per cent of the renewed forecast.

The second, and more drastic option, and which is understood to be favoured by Industry Minister Ian Macfarlane, involves winding up the scheme but grandfathering existing large-scale projects to protect current investments.

An appraisal by Bloomberg of this option, known as "closed to new entrants'', warns of dire consequences for the industry. "Closing the LRET to new entrants is likely to cause certificate prices to collapse and the value of the Large-Scale Generation Market to be destroyed,'' it says.

Existing renewable projects could be exposed to lower wholesale electricity market prices which would be less than half their costs.

"Equity investors will be quickly wiped out and projects will likely default on debt payments,'' it says.

"Bankruptcies of renewable developers could then be expected and exposed renewable energy assets will probably be stranded.''

The government has already determined its response and is working on a proposal to go to cabinet as early as next week or the week after for an announcement in mid-September. It is tight-lipped about which option it will choose but assures it remains cognisant of investor certainty and ­sovereign risk.

But it faces a legislative nightmare with Labor and the Greens opposed to any change and Clive Palmer saying he will block any change before the 2016 election because the government has no mandate.

Liberal Democratic Party senator David Leyonhjelm said the scheme should be axed altogether and her accused Mr Palmer of advocating for higher power prices.

The industry maintained that either recommendation in the Warburton review would spell its doom.

Infigen Energy chief executive Miles George, who was in Canberra on Thursday lobbying, said the "so-called real 20 per cent would be a tiny rate of growth that you wouldn't have sufficient activity in our industry to keep big players here and keep it competitive".

"[Regarding the grandfather clause] It would be extremely complicated to put in place a form of market mechanism that is supposed to compensate for the stream of revenue that we would have otherwise got if the legislation hadn't been reduced.

"Either option [from Warburton review] is death without full compensation and pretty grim with compensation," he said. Mr George said an overhaul of the target would force investors to look overseas.

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28/08/2014 4:50:12 PM

Investing to receive a government tax payer funded handout doesn't sound like sustainable business. Let them go overseas....all they've achieved in Australia is higher power charges for pensioners and those who can least afford. What a gravy train for those noisy few. It's high time all this overhead fluff was exposed for what it really is.
29/08/2014 5:44:31 AM

If hte Govt won't compensate farmers for purposely destroying our stock prices why should they compensate foreign owned companies releying on govt handouts for their profits. Shut down the industry especially wind, it is a con and destroys the landscape and the envioronment.
29/08/2014 11:36:21 AM

pepper So I guess you were vehemently opposed to the Managed Investment Schemes introduced by Howard. Also you should be opposed to; the subsidized low tax rates available to those investing in superannuation, negative gearing, direct action, etc. Please rail against all handouts, not just cherry pick some. BTW, pensioners and those who can least afford were fully compensated until the latest budget.
Bruce Watson
29/08/2014 3:34:56 PM

pepper and Inverell have cut straight to the chase on this. Precise and pertinent comments. Let's hope a few politicians read them and act immediately.
29/08/2014 3:52:32 PM

Hey bg stay on topic....but fyi any compulsory super has achieved an inflated stock market for the circling sharks to raid during the GFC, negative gearing is a no brainer when you study who benefits and why would anyone invest in a business that returns on a tax refund...good business.....just like the RET...absolute nonsense. I don't cherry pick in fact I don't even like cherries.
29/08/2014 4:41:08 PM

Inverell, So I guess coal mining, coal fired power stations and CSG do not destroy the landscape and the environment. How is that?
Cec Rapp
29/08/2014 9:51:43 PM

pepper 28/08/2014 6:20:12 PM Wrote "Investing to receive a government taxpayer funded handout doesn't sound like sustainable business" Sorry mate but you are wrong, the renewable energy suppliers borrowed the money from the Clean Energy Authority and must repay the same as if it was borrowed from any other financial institution plus interest. It just happens to be run by the government and the profits goes back to the investors (tax payer).
Cec Rapp
29/08/2014 9:53:47 PM

Inverell 29/08/2014 7:14:31 AM Wrote "Shut down the industry" If it was not for the renewable energy market you and everyone else would be paying even more for your electricity. Even the Warburton report states that.!
30/08/2014 10:13:46 AM

Inverell thinks that wind energy "is a con and destroys the landscape". Why? Because start-up projects are subsidised? Because it's not all Made in Australia? Just as true of the coal industry, largely foreign owned, which really does destroy the landscape (and the atmosphere, and the GBR.) Inverell seems to have totally missed the point about renewable energy. It's renewable! And see: "Market Forces estimates that the tax-based fossil fuel subsidies amount to over $10 billion per year federally." http://www.marketforces.org.au/ff s. (This message typed and sent by solar/wind energy)
31/08/2014 6:28:41 PM

I also agree with Inverell and Pepper. BG, don't you realize that the Govt would have more funds for the poor and needy, if the already rich capitalists where not being funded by Govt to lose money on useless RET's while at the same time increasing power costs for those least able to pay.
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