Our thanks to Matt Grudnoff from the Australia Institute for this excellent summary of where the government finds itself after dumping their deeply unpopular and flawed Warburton Review.
Cross posted with permission from The Australia Institute
The debate over the Renewable Energy Target (RET) has continued with the government facing up to the reality that its scare campaign on electricity prices is in tatters. With the government’s own handpicked review showing that the RET has almost no impact on retail electricity prices, the government’s ramp up about a fight over cost of living pressures and the RET has melted away.
The government has been left with three very weak arguments. Firstly, that the RET is an $11 billion cross subsidy, secondly that the RET is causing an oversupply of electricity and finally the RET needs bipartisan support for certainty.
The $9.1 billion cross subsidy is difficult to argue since the subsidy is not coming from tax payers or electricity consumers. The subsidy is being paid by fossil fuel generators. The fossil fuel industry is already heavily subsidised and with the repeal of the carbon price have again been given free waste disposal. People are also not particularly unhappy to see this industry struggle. Australia Institute polling has found that 68 per cent of people want to see less electricity generated from coal.
The second argument that the government and its supporters have pushed is the idea that the RET is creating an oversupply of electricity in the network. From a technical standpoint this is clearly not happening. The electricity network is always in balance. If there was an oversupply of electricity then fuses would be popping all over the country as the voltage of the system went up.
Even from an economic standpoint an oversupply of electricity makes no sense. You could just as easily say we have an oversupply of cafes in our major cities. Cafes are not full all the time and new cafes are opening up. Oversupply in a market simply means greater choice and lower prices. While this might be bad news for the firms in the market it is good news for consumers.
It also gets to the point of the RET. The RET was set up to transition the Australian electricity market from fossil fuel generation to renewable generation. You can’t do that unless you have more renewable generation and less fossil fuel generation. People who are concerned that coal fired power stations might shut down miss the point of the policy completely.
Finally, the government has argued that the opposition parties need to negotiate on the RET to give the renewable industry certainty. In the lead up to the 2013 federal election most people thought that there was bipartisan support for the RET and so there was certainty in the industry. It was only post-election that the government revealed it wanted to change the RET and introduced all the uncertainty.
These weak arguments and a hostile senate have forced the government to seek negotiations with the Labor opposition. Let’s hope the Labor party stands firm and protects a spectacularly successful policy.
Other resources from The Australia Institute
- Fighting dirty on clean energy - the RET, the review process, and the case for retaining it
- Will we let the sun shine in?
Visit them at http://tai.org.au
