Encouraging overt support for the RET
18 Apr 2012
The Renewable Energy Target (RET) has continued to feature as a topic of debate in the media over the past few weeks as it has been blamed on proposed significant increases in electricity prices. The RET including the small-scale technology scheme (STC) has come in the firing line of a number of industry groups that have been arguing that these measures are not required with the implementation of a carbon price.
Let’s address each of these claims in turn:
Firstly electricity prices are expected to rise significantly. The Independent Pricing and Regulatory Tribunal (IPART) has come out with a draft determination that will see power prices rise in NSW by around 16% from 1 July this year. The increase is due in equal measure to the introduction of the carbon price and increases in network costs (poles and wires). Renewables were not responsible for any increase. More broadly across the eastern states the Australian Energy Market Commission (AEMC) expects that electricity prices will rise by 30% over the two years to 2013/14. Of the expected increase 40% is due to rising network costs and 40% due to higher wholesale prices (including the carbon price). Renewables schemes only accounted for 3% of the increase over this period.
Secondly the renewables scheme is a complimentary measure to the carbon price and works to build industry capacity and capability and deliver cost reductions to key technologies so that the cost of reducing greenhouse emissions is lower in the longer term. The RET has clearly delivered this in the case of solar PV where the installed cost of PV has fallen by 75% over the last five years to around $3.25/watt at present.
Given the dramatic increase in network costs that is primarily the cause of rising power prices, doing more to assist distributed solar and energy efficiency technologies will lead to lower electricity prices for consumers in the longer term. As we obviate the need for expensive network investments.
It is important that political support is maintained for these complimentary measures in particular with the proposed review of the RET that is to take place later this year. The recent changes in the political landscape with Christine Milne taking over the leadership of the Greens we expect that these issues will continue to be at the centre of the political debate in Canberra this year.
The renewables scheme is a success story when many government grant programs have failed to deliver. The RET has resulted in lower power consumption which will result in lower wholesale prices, delivered lower installed costs for solar and created many thousands of new jobs.
Managing Director, Green Energy Trading