Big energy hates renewables

Ben Courtice

As Chain Reaction goes to press, there are ongoing negotiations between the Federal Coalition and Labor over a compromise agreement on the Renewable Energy Target (RET).

Currently, the latest offer from the Coalition is to reduce the target (from 41,000 gigawatt-hours of renewable energy by 2020), to 31,000 gigawatt-hours (they had previously said 26,000 would be their preferred figure).

Labor, who have said they will take direction from the renewable energy industry, are so far holding out for a figure in "the mid to high 30s", a level that the Clean Energy Council has suggested they could live with.

The ongoing uncertainty over the future of the target means that there is pretty much zero investment happening. Banks won't loan money for renewable projects, because no-one knows what the future will bring.

Unfortunately, if Labor does negotiate a reduced target with the Coalition, we could be in the position where a significant reduction in the target will be painted as a victory by many in the industry − because it gets the finance and construction of projects happening in the short term.

This is despite the fact that the existing, 41,000 gigawatt-hour target could still be met by new wind farms before 2020, with no reduction needed.

There have been threats from the industry that they will not be able to meet the target, and now that they will simply ignore it – a capital strike, as RenewEconomy editor Giles Parkinson put it. Energy giant Origin Energy has threatened to opt out of the target and instead pay the fines for not meeting it.

Perhaps these big energy companies feel they've been swindled. When the RET was initiated under the first Rudd government, it was expected that the growth in renewable energy would simply fill a part of the overall growth in energy demand.

Since 2009−10, around the same time the current RET was brought in, actual energy demand has unexpectedly fallen, every year. Big energy generators are finding that instead of adding a renewable portfolio to their productive, growing investments, the RET is seeing renewables take a growing slice of a shrinking pie.

Whatever deal is cut in parliament, there have now been several years of growing uncertainty over the RET, since Martin Ferguson was Energy Minister. There have been reviews followed by inquiries followed by an explicitly hostile federal government, and the uncertain investment environment has certainly prevented some new wind and solar capacity being built. The only beneficiary of this has been the incumbent fossil fuel generators.

The big energy companies (Origin, Energy Australia, AGL, Alinta and others) have increasingly lobbied against the RET. The latest threat of "capital strike" by Origin is a new escalation, but it follows the pattern.

We have seen many fabricated stories about renewable energy schemes costing the bill-paying public circulated in the press. But the evidence is, in fact, that the only players who lose from building renewable energy are those with investments in big fossil-fuel power stations.

The Yes2Renewables campaign of Friends of the Earth Melbourne has for years now understood that what analysts call the "merit order effect" means that renewable energy reduces wholesale power prices in our electricity market system. Big energy companies made up to a quarter of their annual profit in a few days' peak prices during the 2009 heatwave that led up to Black Saturday. A few years later, in a comparable heatwave in 2013, peak prices were significantly lower, as millions of solar panels that had been installed in the interim kept the money in the community instead of the big energy companies' pockets.

Big energy hates renewable energy, because renewables are reducing the superprofits that the operators of huge, centralised coal power stations had become accustomed to. The behaviour of the big energy companies over recent years is a blatant corporate standover operation – albeit with willing collaboration from government.

So if a deal is stitched together, and investment resumes toward a new, lower RET target, perhaps already done and dusted by the time you are reading this – some in the industry will be quite understandably relieved. The pressure on their jobs and businesses may ease. Finance may become available to build the projects they have been sitting on for the last five years.

A deal for a reduced RET should not be seen as any kind of victory for renewable energy. It just illustrates the depths to which the fossil fuel industry will sink to maintain its stranglehold on our electricity supply – and keep its profits flowing.

Ben Courtice has at times worked for the Yes2Renewables campaign at Friends of the Earth Melbourne, Green Left Weekly, and climate solutions think-tank Beyond Zero Emissions.

From Chain Reaction #123, April 2015, national magazine of Friends of the Earth, Australia, www.foe.org.au/chain-reaction/editions/123