The Review of the Renewable Energy Target released today confirms that the scheme represents a massive ‘transfer of wealth’ within the electricity market and makes a compelling case for substantial reform of the scheme.
The review underlines that the RET is simply an old fashioned industry subsidy, the cost of which is being borne by consumers and export and import-competing industries.
The Minerals Council of Australia welcomes the report’s finding that the scheme is unsustainable. As a major user of energy, the minerals sector has consistently argued for substantial reform of the RET.
The Panel has found the current RET would require a further $22 billion cross-subsidy to the renewables sector in net present value (NPV) terms over the remainder of the scheme (in addition to the $9.4 billion cross-subsidy provided from 2001 to 2013).
A decade ago, Australia’s energy costs were among the lowest in the developed world. Misguided policy interventions including the RET, the carbon tax and green energy schemes have seen Australia surrender this advantage.
As the Panel observes, the RET currently increases retail electricity bills for households by around four per cent, but for commercial and industrial consumers the effect is significantly greater, up to 11 per cent on average. In the minerals sector, the impact is even higher, accounting for as much as 15 per cent of energy costs.
Australia cannot simply afford to give competitor nations such a head start in global markets.
The minerals sector has no problem participating in a debate about whether and how as a nation we want to promote the development of renewable energy.
The minerals industry is actually a user of renewable energy and hopes that it will provide a solution to provision of competitively priced energy, especially in remote areas. And renewable energy depends on the minerals sector – after all, every wind turbine contains 250 tonnes of metallurgical coal.
But the debate must be informed by the real costs of policy measures. The Review has highlighted the enormous scale of the costs, and made a compelling case for substantial reform.