Solar Trouble Down Under

By Nick Richardson Originally published on Solar Curator

In recent weeks there have been various examples of just how much impact politics continues to have on the solar industry. In the U.K., the fallout from the government’s enforced incentive switch from the Renewables Obligation (RO) scheme to Contracts for Difference (CFD) and resultant legal battle rumbles on. In India, what would be the world’s largest PV power project at a jaw-dropping 4GW has been put on indefinite hold due to state intervention. The ongoing trade dispute between the U.S. and China continues to dominate industry headlines, with the latest news suggesting the first signs of possible negotiations on the matter.

Among these developing stories, the role of government is arguably being felt most of all in Australia. The government seems set to drastically reduce and possibly abolish the country’s Renewable Energy Target (RET) in response to a state-run review into its effectiveness. The story is highly significant, both for the Australian solar industry and the entire renewable energies sector there. The RET requires energy retailers and large customers to source a proportion of their energy from renewable sources to meet the country’s target of generating 20% of its energy from renewables by 2020.

The RET is the fundamental apparatus driving large-scale renewable energy deployment in the country. Without it, many within the clean energy community are convinced that deployment will dramatically shrink. Lane Crockett, the executive general manager of Pacific Hydro Australia, said last week, “If you want to kill an industry, this is the way you go about it.”

Central player in the story is Prime Minister Tony Abbott, whose Liberal Party assumed governmental control in September of last year. Since being sworn into office, Abbott has positioned the RET as being a central cause of rising Australian household electricity prices and has consistently increased his rhetoric against the necessity of the existing 20% target.

Although a review of the RET has been scheduled for over a year, the warning signs that the target might be eradicated have become increasingly visible. Three months into his incumbency in December, Abbott first indicated a possible abolishment. ‘’We’ve got to accept that in the changed circumstances of today the renewable energy target is causing pretty significant price pressure in the system,” he said. “We will be looking at what we need to do to get power prices down significantly.”

Two months later, Abbott supported calls from Stanwell, Queensland’s largest power utility, to remove the RET in response to the company mothballing its biggest gas-fired power stationbecause of  high gas prices. More recently, Abbott finally succeeded in scrapping Australia’s longstanding carbon tax in July during his third attempt, a policy which imposed charges on Australia’s largest producers of CO2 and carbon emissions and, in the grander scheme, worked alongside the RET.

Overseeing the RET review is a four-person team personally put in place by Abbott earlier this year. How the prime minister has gone about constructing and appointing his review team is debatably the starkest warning sign yet.

Handpicked to head the review is Richard Warburton, chairman of Westfield Retail Trust, Magellan Flagship Fund and Citigroup. The appointment of Warburton is highly contentious and poses serious questions about the true motivation for Abbott’s potential action on the RET.

A self-professed climate change skeptic, Warbuton has a penchant for making factually incorrect statements about renewable energy, carbon pricing and global warming,.“I am a skeptic that manmade carbon dioxide is creating global warming,” he reiterated last month. The integrity of appointing Warburton is even more dubious when noting his personal advisory team for the review: particularly fossil fuel lobbyist and former Australian Bureau of Agricultural and Resource Economics (ABARE) chief Brian Fisher, and Shirley In’t Veld, the former head of Western Australia’s biggest coal generator, Verve Energy. As Leigh Ewbank, Friends of the Earth energy spokesperson, commented, “Tony Abbott’s choice of panel members shows once again that this government puts ideology before good policy.”

Abbott’s handpicked review team has been a focus of controversy in and of itself.  State legislature decrees that Abbott should appoint Australia’s Climate Change Authority (CCA), an independent and objective board, to oversee the review. However the PM has been attempting to dissolve the CCA since his term began and has chosen to bypass them, bringing the credibility of the review into further question.

Equally contentious is Abbott’s decision to appoint consultancy ACIL Allen as chief adviser and modeler for the review, an appointment labeled as “farcical” by John Grimes, CEO of the Australian Solar Council.  Many view the consultancy as too cozy with the fossil fuel industry. Its highly contested research formed the basis of the coal industry’s attempts to dismantle the RET in 2012

The selection of ACIL Allen has caused an uproar across the Australian solar and alternative renewable energy communities. “This entire review process needs to be revealed for the sham that it is,” said Grimes in a recent interview. “We can only conclude that the RET review process is heading to a biased and predetermined outcome.”

At the crux of the review are Abbott’s much-scrutinized personal views on climate change, which many believe have defined his motivation to amend the RET. Since ascending to Liberal Party leadership in 2009, there are numerous instances of Abbott questioning the legitimacy of global warming and manmade climate change.

Abbott has been credited with many telling quotes. “I am, as you know, hugely unconvinced by the so-called settled science on climate change. I think that the science is far from settled.” Or “I certainly accept that there’s been far too much theology and not enough proper scientific skepticism in this area.” His most notorious remark on the topic came in 2009: “The argument [on climate change] is absolute crap…. However, the politics of this are tough for us [since] 80% of people believe climate change is a real and present danger.” (Alexander White of the Guardian has compiled an excellent summary of Abbott’s skepticism toward climate change, generously describing the prime minister as a “climate nihilist.”)

Based on such beliefs, it’s logical to see why Abbott is maneuvering to revise the RET and place greater emphasis on utilizing Australia’s abundant sources of fossil fuels. His clearest opinion on the future of the country’s energy mix was made a few weeks ago.: “Who knows one day where the market might go and what other forms of energy might come into their own? But right now, we have massive reserves of coal, massive reserves of gas. Let’s make the most of them.”

Although the government has yet to officially announce the results of the RET review, the effects have already being seen, particularly within the solar industry. Large-scale PV has been the worst affected, with no new utility-scale projects reaching financial closure so far this year. New projects are drying up, and others are being abandoned or indefinitely put on hold until the review findings are confirmed. For example, Silex Systems’ 100MW Mildura concentrator PV project was suspended last week, leaving AUS $75 million project funding in jeopardy.

Uncertainty has extended beyond the domestic players, as international solar companies have also expressed doubts over their future business opportunities in the country. San Francisco-based PV developer Recurrent Energy has announced it will close its Sydney office, explaining that its 1.5GW pipeline and $3 billion in potential investment would likely come to fruition only if the RET were maintained. Recurrent’s move followed a warning from module market leader Yingli that a reduction in the RET would cause the leading Chinese PV company to reassess its investment in the Australian solar market as well as the news that Suntech will shutter its long-established R&D facility in Sydney.

The issue of investment has been a primary concern throughout the review process. In July, 17 renewable energy firms representing more than AUS $10 billion in investment wrote an open letter to members of Parliament that stated any reduction in the RET “would damage Australia’s reputation as a safe place to invest not only in clean energy, but in all forms of infrastructure.”

In an attempt to outline just how much investment is at stake, the country’s Clean Energy Council has calculated that if left untouched, the RET would produce a further AUS $13 billion in investment in addition to the AUS $18.5 billion already generated. Consequently, Infigen Energy’s Miles George went as far as to call any potential government changes to the RET as“economic vandalism.”

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Similar to what has been seen in the U.K. during similar periods of politically fueled industry uncertainty, solar jobs have also been affected, with many leading Australian installers shedding parts of their workforces. The Clean Energy Council has calculated that 81% of its member business would be forced to sack staff if the RET were to be reduced, standing in stark comparison to 60% of businesses increasing staff numbers if the RET continued at its current level.

Kate Thornton, chief executive of the Clean Energy Council, offers a cautionary summary of the situation. “The industry is at a standstill. Whether you’re a small solar company considering employing more people or a big investor building a large project, the commercial viability of the entire industry is based on the RET.”

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Among the doom and gloom for the solar industry, there have been some pockets of positivity. The Clean Energy Council is leading the fight by organizing a number of forums and meetings to garner support for keeping the current RET in place and uniting the renewables community under one voice. The group held a successful first event last week in Petrie, north Brisbane, attracting more than 500 attendees.

Not all market leaders have expressed their concern and possible abandonment of the Australian solar market. SunPower demonstrated its commitment recently by launching a new solar leasing pilot scheme, SunPower Choice, one of the first programs of its kind to be introduced in Australia.

Perhaps the most positive development came from a most unlikely source when review consultancy ACIL Allen revealed its preliminary RET reports in June. It found that while electricity prices would rise slightly with the RET in place, power prices would fall in the long-term if the target remained as it was, arguing that prices would fall even more if the target rose to 30%.

On paper, this would seem to substantially derail Abbott’s attempts at scrapping the RET. But the latest reports suggest that he has chosen to ignore the findings and push ahead with efforts to abolish the target under the guidance of Warburton and his review team.

If the target is eradicated, the landscape for solar and renewables in Australia could become rather bleak. Even without analyzing the isolated, prehistoric position that the Australian government will take by deprioritizing climate change and embarking on a fossil fuel growth spurt, the removal of the target could take with it thousands of jobs, billions of dollars worth of investment, and years of progress made in increasing clean energy deployment in the country.

PHOTO OF TONY ABBOTT COURTESY OF AUSTRALIAN LIBERAL PARTY

Sources: Utility Week, Wall Street Journal, PV-Tech, Australian Broadcasting Corp., The Saturday Paper, The Guardian, The Australian, Sydney Morning Herald, Friends of the Earth Australia, Renew Economy, RT.com, Recharge News, Australian Solar Council, PV magazine, Business Spectator

Disclaimer: Any opinions expressed on this site by persons not affiliated with PV Solar Report reflect the judgment of the author and not necessarily that of PV Solar Report.