Capital strike brings renewable energy to its knees

Port Augusta's dirty coal fired power station.
Thursday, March 17, 2016

Australia's large energy companies appear to prefer to accept fines for not building renewable energy rather than build it and weaken their investments in coal and gas generation.

When the Tony Abbott government passed legislation to reduce the Renewable Energy Target (RET) by about 20% in June 2015, some supporters of renewables hoped that an end to policy uncertainty would free up finance for investment and get planned projects into the construction phase.

With the target apparently settled and the deadline of 2020 fast approaching however, the main work of building large-scale renewable energy is occurring outside of the RET, for a scheme created by the ACT government for their separate target.

While the 2020 deadline and apparent policy certainty have pushed up the price of Renewable Energy Certificates and, theoretically, the safety of investment in constructing new wind farms, finance is not flowing and construction is not commencing. The essential element for a large project such as a wind farm is a Power Purchase Agreement (PPA) with one of the big energy companies, to ensure the project can sell its output. PPAs are not being signed, and it appears energy companies would rather pay fines than build extra renewables.

Experienced commentator Giles Parkinson, editor of RenewEconomy, has labelled the actions of the big power companies a “capital strike” and the label is accurate.

The RET was subject to a concerted campaign by the fossil fuel mafia over many years, bending first the Labor government — in Energy Minister Martin Ferguson's White Paper — and then the pliable Abbott government, to push their agenda. Having destabilised the investment climate for renewables, and getting a 20% cut to the target through parliament, they are not satisfied but rather emboldened.

The Australian Financial Review reported the situation backwards on March 9 with the headline “Renewable power subsidy fails to drive wind, solar investment”. Journalist Ben Potter's leading paragraph gave the game away. “Less than a tenth of the wind and solar generation capacity required by the Renewable Energy Target this decade is under construction, which could force the [Malcolm] Turnbull government to renegotiate the controversial scheme with the opposition.”

This bizarre victim-blaming reversal of logic really lets the big end of town's agenda slip. Big energy operators are blocking the construction of new renewable energy in defiance of government policy, so we will have to renegotiate.

The National Electricity Market (NEM), where electricity generators sell their output to retailers who then sell it to consumers, has a glut of supply. In 2014 it was estimated that “between 7650 megawatts and 8950 megawatts of surplus capacity” existed in the NEM. For comparison, that is similar to the entire electricity generation capacity of Victoria.

Despite this, there are no plans on the table to close any of the surplus power stations. Victoria's fleet of brown coal burning power stations are cheap to run, but have the worst carbon pollution levels in the country. When the carbon price legislation was announced in 2011, state Nationals MP Russell Northe voiced concern about jobs that might be lost should one power station (Hazelwood) be closed.

While coal power station jobs always seem newsworthy, the 500 or so jobs at Hazelwood are dwarfed by the little-reported 5000 jobs that have been lost in the solar industry between 2012 and 2015, according to the Australian Bureau of Statistics.

Like big renewables, mostly the wind industry, the small solar industry has been hit by big cuts to the rate at which homeowners are compensated via feed-in-tariffs. In a few years, the tariff in Victoria went from more than 60c, to just above 5c a kilowatt hour. The costs of solar panels have fallen dramatically, but not nearly that much. Other states have seen similar reductions.

South Australia is about to close its only coal-fired power station at Port Augusta. The state will rely on wind, solar, gas and imported electricity from interstate. The Port Augusta community and renewable energy advocates are pushing for the first full-scale solar thermal power station to be built in its place, with world-leading solar thermal companies interested in the prospect.

RenewEconomy reports that the South Australian government's aim of sourcing all its power from “clean energy” could give solar thermal the power sales contract it needs to be built at Port Augusta. Much hinges on the ambition of the South Australian government in this regard.

A concerted attack by capital and governments is blocking Australia's renewable energy industry. As climate change speeds up, it is a question of how long they can get away with it — and can they be pushed out of the way before they do too much more damage.

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