Wednesday, 2 July 2014

Abbott slams green power industry

Abbott slams green power industry

Abbott slams green power industry

BY Phillip Coorey

Phillip Coorey
Phillip is the AFR's chief political correspondent, based in our Canberra bureau.


Abbott slams green power industry
“We should be the affordable energy capital of the world,” says Tony Abbott. Photo: Rohan Thomson

Phillip Coorey and Jacob Greber

Tony Abbott has sparked a war with the renewable energy sector by
claiming their product was driving up power prices “very significantly”
and fostering Australia’s reputation as “the unaffordable energy capital
of the world”.

The companies struck back at the Prime Minister, accusing him of
grossly exaggerating the impact of renewable energy. They also warned
that the government’s plans to exempt aluminium refineries from paying
for renewable energy would create a sovereign risk by hitting both
current and future investments in the sector.

The attacks came as Nobel laureate and Columbia University professor
Joseph Stiglitz and former Reserve Bank board member Warwick McKibbin
told the Crawford Australian ­Leadership Forum, co-sponsored by The Australian Financial Review, that Australia should have a carbon price.

The new Senate is set to abolish the carbon tax next week but the
professors argued an emissions trading scheme would give the nation a
long-term competitive economic advantage.

Renewable companies, including Infigen, Pacific Hydro and
­Senvion, as well as the Clean Energy Council, reacted angrily after Mr
Abbott attacked the renewable energy target which mandates that 20 per
cent of electricity must be generated from renewable sources by 2020.

“The RET is very significantly driving up power prices,” Mr Abbott said.

This, he said. posed a threat to domestic budgets and industry competitiveness, especially energy-intensive industries.

“We should be the affordable energy capital of the world, not the
unaffordable energy capital of the world and that’s why the carbon tax
must go and that’s why we’re reviewing the RET.”

The government will heed a campaign from its backbench to exempt
aluminium refineries from paying for renewable energy under the RET.
Already, most refineries receive a 90 per cent exemption.

The government argues that when the RET was conceived, it was
­estimated that the production of a 41,000 gigawatt hours of renewable
energy would constitute 20 per cent of forecast electricity generation
by 2020.

But with the collapse of the car in­dustry and the loss of two
aluminium plants, estimated power generation for 2020 has been lowered.

Exempting remaining aluminium refineries from using renewable energy
would still ensure that 20 per cent of power used by 2020 was from
renewable sources. But this would equate to producing about
26,000 gigawatt hours of renewable energy.

Clive Palmer will prevent the ­government from scrapping or ­scaling
back the RET until after the 2016 election but its move to exempt
aluminium enables it to weaken the sector while still adhering to a
20 per cent target.

Miles George, managing director for Infigen, said dropping the target
from 41,000 to 26,000 would be “devastating” for investment and be a
broken election promise. He said the sector invested on the basis of a
fixed production target, not a percentage of a moveable target. “It
would be devastating for our industry,” he said..

All players told the Financial Review that modelling conducted
by ACIL Allen for the government’s Warburton review into the RET found
that power prices would fall as more renewable energy was deployed.

Andrew Richards, head of external affairs at Pacific
Hydro, said the RET added about $40 a year to average household power
bill. This, he said paled into insignificance against recently approved
gas price rises in NSW which will add up to $240 a year to the average
household bill.

“Let’s keep things in perspective. Changing the RET to lower energy
prices is mucking around in the shallow end of the pool,” he said.

“If you really want to tackle energy prices, there’s bigger fish to fry.”

Russell March, policy director for the Clean Energy Council, said the
lower prices forecast by the ACIL Allen report would, over the long
term, “support tens of thousands of new jobs and billions of dollars in
investment, with many of these benefits flowing into regional areas
where clean energy projects are located”.

“The alternative to the RET is to get more of our electricity from
gas-fired power, which is predicted to triple in price this decade.

A spokesman for Senvion, which has built and operate about one third of the nation’s wind farms, said:

“We’re all concerned about keeping power pieces low and if the RET is
left alone, people’s power bills will be cheaper by 2020 than if you
cut or lower the RET target.”

“ACIL has found the average household power bill will drop $56 if left to run it’s course.”

With the abolition of the carbon price, and the government facing
Senate obstacles in establishing its direct action policy, the RET would
be the last carbon abatement mechanism Australia would have.

Professor Stiglitz said “taxing carbon is a no-brainer, it makes more sense” than taxing labour or capital”.

He said another advantage of moving sooner rather than later on
carbon was that it was inevitable the rest of the world would eventually
join in.

“If you ran out an incentive structure that encourages Australian
firms to think about saving natural resources, saving carbon now, it
puts you at a competitive advantage in 10 years, five years,” he said.

“In the US, the east coast and west coast, which are the only
productive parts of our economy, are going ahead with taking strong
actions about carbon.

“We know that in some naive sense it puts us at a little bit of a
­disadvantage, but we believe that over the long run it puts us at a
competitive advantage.”

Professor McKibbin said; “We need to start putting in place frame
works to start reducing emissions as quickly as possible as
insurance policy against potential future outcomes.”

He said climate policy was not just about environmental issues but
about broader economic factors given the links between carbon,
government revenues, budget deficits and incentives to invest.

“We don’t know if climate change is going to be a very large negative
to the world or a very small negative - the point here is you need to
take out insurance,” Professor McKibbin said.

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