Models can’t hide true RET cost
25 Aug 2014
Studies relied on by the renewable energy lobby to justify the continuation of the Renewable Energy Target make a lot of noise about the RET’s effect on the wholesale price of energy.
But as shown in this newspaper today, force feeding up to 30 per cent renewables such as wind- and sun-generated electricity into the power grid may put downward pressure on wholesale prices amid weak demand by artificially boosting supply. But the effect of forcing more power into the system will then show up in other ways: by increasing retail prices through the cost of renewable energy certificates. Those increased prices will reduce gross domestic product, by depressing productivity and by pushing up prices and costs elsewhere in the economy. That is, it is a highly expensive way to reduce emissions.
As previously discussed in this newspaper, an ongoing review of the RET led by Dick Warburton to make recommendations about winding back or even ending the scheme has resulted in considerable argument over the scheme’s effect on the electricity markets. These arguments include contradictory findings by computer modelling groups, with the RET lobby relying on studies pointing to the effect of dumping a lot of additional capacity into the wholesale market at a time of stagnating demand. However,
as the coverage in today’s Financial Review notes, retailers still have to buy the Renewable Energy Certificates required to meet their obligations under the RET from the renewable generators, and that is expected to cost $37 billion between now and 2030, or as much as the electricity itself. That is $37 billion that must be reflected in higher prices elsewhere.
The arguments over the Renewable Energy Target show just how deftly skilled lobbyists can distort the debate, but we should not lose sight of the fact that the RET in any form will cost many billions of dollars in return for an hypothetical social benefit of the carbon emissions being offset.
The Australian Financial Review