Published: 01/09/2014

Australia’s Renewable Energy Target (RET) came in to the spotlight in August following the Warburton review commissioned by the government. The RET was initially established with the aim of sourcing 20% of the nation’s electricity from renewable sources by 2020.

The way the RET works is through the creation of tradable certificates issued through a central registry and managed by the Clean Energy Regulator. Through the scheme, large renewable power stations and small-scale system owners (such as solar panels, wind and hydro) are eligible to create certificates, which then get purchased by electricity retailers who on-sell electricity to households and businesses. These electricity retailers have a legal obligation to ensure that a proportion of the electricity they supply is sourced from renewable sources.

The Warburton review states that the RET will impose significant costs on the economy in the form of subsidies amounting to AUD$22 billion. The review argues that there is no need to spend this money to develop additional renewable investments given the abundance of power supply in the market already. This includes incentives handed out to homeowners who have installed solar panels, which while successful, are seen as an expensive way to cut greenhouse emissions. We note that it is because of oversupply and competition that wholesale electricity prices have been pushed down.

The review also raised a concern about the back up of power in the event of no sun or no wind. In response to this the Clean Energy Council cited that South Australia currently sources over 40 per cent of its power from wind energy. Its power supply has been reported as reliable and stable and the state has not had to rely on alternative sources to support it.

At this time, the Government has not finalised its position on the Warburton review.
In the same week the Warburton review was aired, China announced they were looking to do exactly the opposite. The government of China confirmed its plans to phase out the use of coal and close coal-fired power plants by 2020 and intends to boost the development of renewable energy capacity where the goal is to have 15 percent renewable generation by 2020 (echoing the European 20/20 renewables goals).

If the recommendations of the Warburton review are implemented by the government, the changes could mean closing off the scheme to new large-scale wind and solar farms, while also ending incentives for households to install solar panels and other domestic-scale technology. Whilst Australian RET hangs in the air, we stay tuned to Australian clean technology development companies which in the meantime, are able to market their intellectual property to offshore markets that are working towards meeting their renewable energy targets.

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