Solar Credits – just bad policy!

Guest Post by Tim KellyTim works as a Principal Climate Change Advisor in the Water Industry and is a regular contributor to Brave New Climate.

From June 9, 2009 when a householder is seduced into signing across Solar Credits associated with their small scale Solar, Wind or Hydro generation schemes, they will continue to reduce their emissions yet for every deemed megawatt hour (MWh) created, they will displace 5 MWh of accredited Renewable Energy already required under Australian Law. They will be causing a net 4 MWh to be continued to be produced from fossil fuel sources and therefore will cause more greenhouse gas emissions and do more harm to the environment than doing nothing.

When the Government released its exposure draft legislation on the design of the Renewable Energy Target in December 2008 there were many issues created in the legislation that should have been relatively straight forward. In my submission on the Exposure Draft, I raised concerns including that the Expanded Renewable Energy Target did not neccessarily secure the Government’s 20% of electricity sourced from renewable energy by 2020 Election Pledge, and might also count the voluntary efforts of individuals and businesses towards the expanded target effectively creating a ceiling on what could otherwisede be achieved.

Now the Exposure Draft Legislation has been re-released and is due to be presented to Parliament next week. There have been some changes such as maintaining the mandatory component at 45,000 gigawatt hours (GWh) per year from 2020 through to 2030, rather than eroding this requirement from year 2025 onwards.

In this posting I would like to concentrate on the policy consequences of the Solar Credits proposal.

Why has the Government moved to a Solar Credits mechanism?

The reason that the Government has moved from its Small Scale Generation Unit Rebate Scheme to a Solar Credits Scheme is simply about Government cost cutting. The current scheme was costing the Government too much money and the replacement Solar Credits scheme shifts the cost burden back to all electricity consumers.

What has the Government Actually proposed?

The Government has proposed that a multiplier be used in relation to the deemed output from small scale generation units that are eligible to create Renewable Energy Certificates (RECs). Between 9 June 2009 and 30 June 2015, instead of just 1 REC being created from 1 deemed MWh of generation, a multiplier can be used to ‘create’ more RECs.

To 30 June 2012 the multiplier will be 5, then from July 1, 2012 to 30 June 2013 it will be 4, and then from 1 July, 2013 to 30 June 2014 it will be 3, then from 1 July 2014 to 30 June 2015 it will be 2 and finally it will return to a 1:1 ratio from 1 July 2015.

What are the issues?

Even with the pre 9 June 2009 system, in addition to the rebate, householders were typically encouraged to sign across their RECs with little disclosure on what this actually means. Most householders consider their RECs sales as a rebate. Many are shocked to learn that these RECs are typically used in a way that displaces other accredited renewable energy that was already required under Australian law, such that there is zero gain in renewable energy and zero greenhouse gas reductions Australia wide.

The other potential use (much smaller) is that the RECs are used to create GreenPower that is promoted in such a way as to lead the GreenPower customer into a false belief that they are reducing their personal emissions. (legally the greenhouse benefits don’t go to the customer under the National Greenhouse and Energy Reporting Determination 2008). It is not clear if GreenPower will continue to allow RECs from multiplied SGUs.

Now with the use of the multiplier of 5 for the first few years, 5 MWh of Accredited Renewable Energy that is already required under the Renewable Energy (Electricity) Act 2000 will be displaced. The greenhouse benefit and renewable energy use is still claimed by the householder, and 5 extra MWh for every MWh created are eliminated. We actually go backwards 4 MWh for every MWh created.

I regard the use of multipliers without any foundation in the actual energy output as being in the same category as counterfeit money.

Whilst the Government may have ‘solved’ its rebate cost problem, and the Solar industry is still being subsidised for a few years (as it needs to be because there is no adequate cost to greenhouse gas emissions pollution), it has failed to maintain sight of the fundamental objective of householders and businesses, which is to reduce emissions.

How on earth does Government come up with such a bad concept, which would fail any basic checking of whether the policy would work?

To cap things off

Under the latest Exposure Draft Legislation, partial exemption certificates may be issued to Energy Intensive Trade Exposed Industries so they can avoid a significant portion of the cost of the expanded Renewable Energy Target and the cost of subsidising Solar Credit RECs.

There is no exemption, however, for customers that are already paying for 100% accredited Renewable Energy, so they will end up paying for more than 100% renewable energy and will also pay for the Solar Credits subsidy — effectively paying extra for a policy that reduces Australia’s renewable energy and increases greenhouse gas emissions from the Electricity Sector.

Should members of Parliament pass the Solar Credits sections of the Renewable Energy (Electricity) Amendment Bill 2009, it will, in my view, reflect very badly on their policy assessment skills, will harm the environment, and will ultimately be an ongoing detriment to the small scale renewable energy industry.

A different approach is needed, such as National Feed-in Payments for any surplus energy exported to the grid, but without displacing renewable energy already required by law.

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34 Comments

  1. Tim,
    I find it very difficult to understand the issues from this post. My understanding is that by 2020 45,000GWh of electricity will have to be generated from renewable energy and that export exemption or multipliers will not reduce this amount after 2015.Surely the final target is the issue.
    Is your concern that solar roof instillation’s will be included as part of that 45,000GWh? Why would this not be counted towards the target? isn’t the purpose of the solar rebate to help meet the targets?

    I see the Green-power a separate issue, presumably you would like to see Green-power as an extra above the targets. Isn’t green-power benefiting from REC’s?
    I would agree with your 1st recommendation to have an adjustment in the target above 45,000 GWh if electricity consumption increases( quite possible if we start using electric vehicles). Should there be a credit for reducing oil consumption?

  2. This is the first I’ve heard of this multiplier. A renewable energy contribution should be recognised once only towards a target. I think it is reasonable however that a homeowner assigns the rebate to the installer to save upfront cost.

    When I had 2 kw PV installed in 2005 I got $4k back no questions asked. First of all I think crystalline PV is an overly expensive way to generate electricity. It may be a stepping stone to $1 a watt thin film combined with a 2 day UPS that could really help the grid. The second point is that the bureaucrats just keep making a mess of everything. First the emissions trading scheme now the renewables target.

    My guess is that shysters lobby the minister who then instructs the bureaucrats to wangle a special concession for them. This is hopeless. It needs a top down approach based a simple question ‘will it reduce coal burning?’.

  3. How on earth does Government come up with such a bad concept, which would fail any basic checking of whether the policy would work?

    That depends on what is meant by ‘work’.

    It might not reduce greenhouse gas emissions, but if the public doesn’t know this and believes that it does, then from a certain political perspective, the policy ‘works’.

    What is the viability of a chicken farm where, for the purposes of balancing the books, one egg must be counted as five?

  4. Unfortunately behind the publicly stated acceptance of AGW’s reality and the need for policy to deal with it is a deeper and wider spread denial of it’s urgency and until a sense of urgency is the norm we’ll continue to get policy that avoids any loss of coal royalties and coal jobs. That there will be new jobs building clean energy infrastructure will continue to be seen as revenue and jobs that don’t exist versus ones that do; ie they have the logical excuse to go with business as usual. That this undermines that fundamental objective of reducing emissions will fit in with the “let’s wait until someone else (everyone else) takes serious action and anyway Australia’s emissions are small compared to other nations” school of thought – in which Australia’s place as the world’s biggest coal exporter doesn’t even get an acknowledgement.

  5. This is highly relevant, from the US (AP news story):
    Congress is all but abandoning President Barack Obama’s goal of producing fully one-quarter of the nation’s electricity from renewable sources — wind, solar and the like — by 2025, though a push for at least some increase is making headway… Nothing near that amount will actually be achieved by the mandate — or even required — because of compromises made to exempt some utilities and allow others to substitute efficiency improvements for a large chunk of the renewable energy requirement.

    Read on here.

    At least nuclear would be recognised as a low-carbon source:
    The measures also would scale back the mandate if a utility builds a coal plant that can capture carbon dioxide, builds a new nuclear power plant, or increases power generation from an existing reactor.

  6. Pingback: Australia’s Renewable Energy Policy « LitFuse

  7. Barry,
    The AP story by Josef Herbert, seems to be confusing legislation to reduce greenhouse gasses and legislation to increase renewable energy.
    Obama’s goals were 10% renewable electricity by 2012 and 25% by 2025; according to IEA , Obama’s Stimulus package legislation already passed is going to increase wind from present 2% to 5% and all renewables to 14% by 2012 see Climateprogress article http://climateprogress.org/2009/05/18/eia-stimulus-wind-power-renewable-energy/

    Many states already have high renewable energy targets, the legislation referred to above was to ensure all states do something to reduce AGW. The SE states that have the highest CO2/person emissions (and few wind resources) have been given an alternative to reduce AGW, conservation, more nuclear or CCS.
    So how does the 2025 target of 25% renewable look if 14% is achieved by 2012.? The EIA forecast for wind in 2014 is 64GW but not to grow in the following 16 years.
    I wrote to Christopher Namovicz who is in charge of renewable energy projections at EIA, and he replied that because the current PTC was due to expire in 2012 they cannot assume it will be renewed for projections beyond 2012. Since the PTC has been renewed for last 10 years, it’s likely that wind and solar energy will continue to expand beyond 2012, and a growth of 1% renewable electricity per year would seem reasonable giving 27% renewable plus additional nuclear.Any reductions in electricity use (by efficiency measures) will make these targets easier to achieve. I don’t think anyone is seriously expecting much CCS by 2025.

  8. Neil, the way I read it is that you used to get a rebate and 1 REC for a 1kw solar array on your roof. They have got rid of the rebate and said you get 5 RECs for a 1kw array, so when you sell your RECs to a power producer or whoever, well they are worth 5 RECs.

    There was always a slight problem with the old method, as when you put 1kw on the roof, then someone else bought the REC so in the grand scheme of things they didn’t have to put in 1kw, and the householder actually did not increase the amount of renewables as the sum total of all RECs equals the Renewable Energy Target.

    But now every 1kw a householder puts on the roof, power generators get to avoid putting 5kw on the grid. It really does seem like a very dodgy way to operate.

    When you say “by 2020 45,000GWh of electricity will have to be generated from renewable energy”… well I differ in that my reading is that by 2020 there will have to be 45,000GWh of REC equivalents in existance, and all those generated from household solar arrays are artificially inflated by a factor of 5.

    THis is the problem with a debate that is between sceptics and alarmists… the actually policy escapes scrutiny. Just like the CPRS.

  9. Theoretically Matt, they’ll be back to 1:1 translation before 2020. So Neil is technically right.

    But given this unbelievable policy Tim has outlined — the latest in a line of distortions of once good intentions which track back to the start of the GreenPower, NGERS and CPRS policies — do you really believe that a future government, in 7-9 years time and facing a yawning gulf between 45,000 GWh and reality, will not invent some new ‘policy’ that does the same sort of quintuple counting? [it will be some other ‘inventive’ manipulation of the truth, worthy of Sir Humphrey Appleby, no doubt).

    No? Call me cynical, but neither do I…

  10. And where is the logic in the Republicans alternative:

    “Meanwhile, House Republicans, many of whom opposed a federal electricity mandate, offered an alternative energy plan Wednesday that would create a fund to be used to spur investment in renewable energy. The fund would use money from expanded offshore oil and gas development.”?

    So, they propose to decrease carbon pollution by making the proffered funding reliant upon growth in carbon pollution?

    Sheesh.

  11. Canberra is already speaking with a forked tongue by making heat pump water heaters eligible for prevailing solar rebates eg http://www.enviro-friendly.com/quantum-heat-pump-water-heater.shtml If installed in a cupboard these gadgets never see a photon of solar energy so call them something else.

    A forthcoming example of doublespeak I predict will general grid powered desalination plants ‘offset’ by renewables. Another may be gas backed wind and solar. I suspect for MRET purposes some percentage of gas fired Mwh’s will be deemed to be honorary renewable and will contribute to the target.

    These manipulations are not entirely bad but point to how governments will fudge the figures when it suits. I thought we elected governments to solve problems, not to lie to us.

  12. John,
    You are mixing up a rebate to promote an energy efficient water heater with a renewable energy target. They both involve government money they are both good for reducing AGW but I don’t see the water heat pumps counting as renewable energy, what gave you that idea? Is it because they both are getting the solar energy rebate?

    I don’t see any evidence of fudging 2020 figures for renewable energy, who cares if solar counts X5 in 2010, it’s the final outcome that’s important.

  13. The point is that Obama’s 25% renewable energy goals are already on track, the legislation has been passed.
    Efficiency improvements are a valuable additional contribution, especially in SE states that have very high CO2/capita even with nuclear power providing some of the electrical energy. Alabama releases four times more CO2/person than NY or CA.
    Republicans seem to hate the fact that Obama is setting the US on a new low carbon energy path, which has a role for nuclear as well as other renewable energy.

  14. You’d think if a nonsolar device is eligible for the solar rebate it would logically be included in solar output to make the figures look good. Measured perhaps as the Mwh difference relative to gas or electric element devices. In a no growth economy I again suggest if we have an MRET but we are still burning as much coal as ever then something is seriously amiss.

  15. I think the whole thing comes down to a perception that by putting up renewable energy assets we are reducing CO2e emissions. People on this thread have already pointed this out and that its nothing but a fig leaf and I suspect that at the policy development level within Australia this is the perception/presupostion that people work from while from other quarters this thinking would be encouraged so as to support agendas.

    I don’t think anyone at legislative level has faced up to using low carbon generation to shut down coal. We know across the community that this is the intention but the link hasn’t been constructed. So you get these policy instruments such as rebates and targets being developed and then linked to similar instruments but not to the wider need i.e. stopping CO2e. Hence we end up with this problem with RECs.

    We’ve discussed before on other threads the problems with an ETS and I see the discussion on this thread as just another example of the problems behind an ETS. The view I posted was that the ETS had changed from being primarily a mechanism to reduce CO2e emissions to a mechanism that shielded against such reductions. Thats the same fig leaf with renewables.

    A way to change this could be through pointing out that the Australian economy won’t die if coal withers. We are still locked into this idea that it is integral to our economy and this idea holds sway in the boardroom and on the back and front benches. If we can show that withdrawing from coal won’t kill us and persuade people that this is so then I think we will get somewhere. Otherwise the thinking will continue to be along the lines, “well renewables are fun but we still need to coal to turn our lights on but we will throw some money their way” or “well of course nuclear has potential but IFR is a long way off so we had better stick to coal and invest in new generators now and not wait”.

    I think my country, Australia, as a society finds it very hard to make changes (unless its buying the latest twinkly gadget) and I have to compare it with here in the UK where I’m currently living. The Brits seem much more bolshie than us so they will go and occupy a coal fired power station as part of an ongoing campaign. They have a dept of climate change and energy, maybe a fig leaf but it demonstrates that the perceptions are different. Its also interesting that the Brits destroyed their coal mining industry under a right wing government as a deliberate action but thats a separate story.

    Sorry if this has been too discursive.

  16. Neil,the renewable power percentage (RPP or target in a particular year)requires a given number of RECs. When householders take what they believe to be additional voluntary action, and this multiplier rubbish ends up reducing the actual renewable energy required by 4 MWh for every 1 new SGU MWh created that is a policy failure in my view. Not only is the householders additional coluntary action cancelled but the RPP is in reality 4MWh short for every new MWh created.

    I like Finrod’s cynicism that the policy may work for other motives, but I will just assess this against the stated claims by the Government that the Bill will increase renewable energy and the objective of the Bill Schedule 1, 1 Section 3, is to “to reduce emissions of greenhouse gases in the electricity sector”. Well the Solar credits idea produces less renewable energy and increases greenhouse gas emissions in the electricity sector so it fails in that regard.

    I have faced the argument that “This is precisely how MRET is designed to work” argument many times and it has been used by many officials when I have complained that the old system was achieving zero increase of Australia’s Renewable energy above that already required by law. My response has been to these officials has been to say “OK, just tell people in plain English what is going on”. I have urged for clear disclosure standards on all RECs transaction documents for solar hot water heaters and SGUs, but this never happens.
    The majority of householders that I meet (who sign across their RECs) have no idea that their solar systems have provided zero additional renewable energy for Australia.

    I agree that the GreenPower issue is separate. With GreenPower it does currently create more renewable energy and reduce Australia’s emissions, but it doesn’t legally allocate the ‘reduced emissions’ or the ‘use’ aspect to the paying GreenPower Customer. I have covered this before and will have a great deal more to say in the near future.

    Cheers

  17. Tim,
    The gas industry opposition is understandable, an electric heat pump conversion from NG heater will use electricity at 400% efficiency(on a heat basis), so even if all of that electricity is generated by new NG power plants (50% efficiency) it will use only half as much NG. This type of appliance will work very well with a smart grid, increasing the value of nuclear and wind energy, saving NG for peak power.

    So I hope your argument is not with encouraging hot water heat pumps, but using REC rebates. Perhaps the government should have set up a completely separate system for hot water heat pumps. The big picture is that we are now going down a path of increasing renewable energy much faster than then when we had a 1%(or 2%?) target in 2007.

    If we don’t get close to the 20% by 2020, it won’t matter what was included in REC’s. The issue is, by 2020, what is counted. We know the solar X5 multiplier will not be operating by then and no one has been able to say if the heat pump hot water is being counted or it’s a convenient way of also stimulating another good measure.

    I am more interested in what happens after 2020, we need to build up capacity to manufacture and install solar hot water, solar PV, , heat pumps, wind energy, CSP solar (and at least start with nuclear). The fact that one individuals PV does not increase the overall 20% target, or one industry makes zero contribution, or one state(SA) exceeds the target is irrelevant it’s the direction of the final target that matters, and will the 2030 target be 30% or 40% renewable (and nuclear)?

    If the purists scream because of the REC for heat pumps, or X5 temporary multiplier for solar, imagine the screams if nuclear is included in 2030 or 2040 renewable targets, although in practical terms it should be included.(lesson for future Liberals; if you want to divide opposition to coal, include all energy measures opposed by coal industry into a “non-coal” target and allow opposition to coal fight amongst themselves).

  18. Neil,

    I agree that heat pumps should be dealt with in a different mechanism as should solar hot water hreaters which currently produce around 20% of required RECs.

    As I said, the changes to the Act should have been straight forward in regard to what was required for the Government to reachits 20% election pledge committment.

    When policy blunders are introduced I don’t accept that we should turn a blind eye because of other high level arguments and future high level target matters. If we always take the view that we must move on with a given policy and trivialise flaws then we eventually end up with policy that becomes ineffective.

    To date we have:
    * An ETS proposal that could not possibly deliver least cost abatement due to its compromises;

    * An ETS proposal that cripples voluntary mechanisms and the Government can only trying to intervene where there is some transaction to measure (and it won’t wan’t to recognise too much);

    * A household solar credits scheme that will cause more greenhouse pollution compared with doing nothing;

    * A GreenPower scheme doesn’t legally assign the greenhouse benefits or use aspects of to GreenPower customers (despite what the GreenPower marketing messages say);

    * A voluntary cancellation of permits idea cancels out traditional voluntary actions using the Government’s own logic (There is a case that it is legitimate to reduce the cap in line with tangible voluntary achievements, however there is no case that permits can be removed in isolation of tangible voluntary achievements without cancelling out the freed up permits of other separate voluntary initiatives; and,

    * A combination of the mandatory and voluntary mechanisms proposed that completely fail to give protection or legitimate choice for customers to buy low emissions electricity as a way to avoid carbon costs (ie a low emissions retail market economy that works in a sector that accounts for half of Australia’s emissions, and accounts for most of the CPRS coverage).

    I don’t want do divide opposition to greenhouse pollution and I don’t regard myself as a purist but I think that if Governments (and oppositions) were really called to account for bad policy sections and bad policy detail then they might not try so many short cuts in the future and we could better focus on the short, medium and long term targets and changes needed.

  19. Finrod,
    What laws of physics will prevent wind power’s present 2% of electricity production rise to 18% by 2025(assuming solar and hydro account for the other 7%)?
    Is it the low density recovered(4W/sq meter), the fact that only 3% of the winds energy available is harvested, the high EROEI, the high growth rate of new wind capacity or because wind energy doesn’t need water for cooling or produce waste?

  20. Finrod,
    What laws of physics will prevent wind power’s present 2% of electricity production rise to 18% by 2025(assuming solar and hydro account for the other 7%)?
    Is it the low density recovered(4W/sq meter), the fact that only 3% of the winds energy available is harvested, the high EROEI, the high growth rate of new wind capacity or because wind energy doesn’t need water for cooling or produce waste?

    No. I was thinking more of wind power’s intermittancy and variability, and the extreme difficulty with which it is integrated into the grid unless mated to hydro. Yeah, it can be matched with natgas as well, but is that really a good AGW mitigation scheme?

    There’s also the matter of wind’s resourse-intensive nature (more concrete and steel per kW.h than nuclear, and by a considerable amount).

    Of course, from an AGW mitigation point of view, the real question is how much coal will be left in the ground which would otherwise have been burned? How’s that going with Denmark?

  21. Finrod,
    I was referring to Obama’s 25% renewable energy target by 2025, not sure how Denmark is relevant, but certainly retiring coal burning power stations in the US is very relevant. Coal fired electricity can best be kept in mothballs in case of a NG pipeline failure or a few nuclear plants expectantly shutting down. NG at 10% capacity working with wind at 35% capacity is a very big improvement on coal base load as far as GHG are concerned.

  22. I think everyone here is confusing bad policy with, at worst, opaque policy.

    The RET has not been designed to reduce GHGs over its operative period. Therefore, the fact that it fails to reduce GHGs does not mean it fails.

    The CPRS is the primary response to reduction of GHGs – its through this mechanism alone that we reduce GHGs. The CPRS allows governments the flexibility to pick a reduction target its thinks appropriate and also the mechanism to impose the costs of that reduction in the least cost way. It’s great that we are arguing about the target, but that’s where the argument should stay. The question as to whether the reductions should come from private actions and / or commercial and industrial restructuring is simple – who can reduce more for less pain? My argument, and I think the government’s argument, is that people changing light bulbs or turning off their VCRs are not going to stop Climate Change. You have to hit the big emitters at their very foundations.

    So, to really change the structure of our energy economy we need to place a price on GHG emissions (i.e CPRS). Unfortunately, to put a price on GHGs which will induce business to invest significantly in renewable energy will take an impost of about $60-$70 per tonne of CO2e. As that sort of financial impost will be economically damaging for Australia, the price of CO2e can really only be around $20-$30 (set by the market).

    Therefore, we also need a mechanism to induce renewable energy investment which stands apart from the CPRS – i.e. RET. The RET is there to induce investment in renewable energy which it does by mandating a set amount of renewable energy by 2020. It doesn’t actually matter if that in itself reduces GHGs prior to 2020 – what it does is create an infrastructure that is low-emission. Five RECs for 1 MWh is an incentive to get one of these damn things on your roof.

    The CPRS lowers emissions the RET creates low-emission infrastructure. They are different policies for different policy outcomes.

    Unfortunately, I do not think that the Australian people are ready for deep and economically injurious cuts in emissions – the Green movement know this and rather than fight a battle on targets that will undoubtedly fail, they want to point out the limitations of the legislative response. But, I hope that we all don’t get caught up in a fight that only the climate sceptics can win. I do not want to see the Green movement go the way of the Republican movement.

    Please, complain about the target. Everyone stand up, hit the streets and say Australia wants deeper cuts, but don’t get caught up in the obfuscations. To be clear; this is not bad policy just policy that doesn’t go as far or do as much as some would like it to.

  23. Agree, it is a good speech. But I thought a commenter on Crikey (Mark Duffett) made an excellent observation:

    http://www.crikey.com.au/2009/06/17/milne-the-climate-nightmare-is-upon-us/#comment-28765

    “Unfortunate that the only mention of the word ‘nuclear’ was in relation to weapons. Senator Milne doesn’t seem to realise that technological development has been taking place in nuclear energy as well as mobile phones since the 60s and 70s. In this she is just as wedded to Old (Green) Thinking as the “Old Parties and Old Polluters” she decries.”

  24. Kit, lets take a look at the stated policy objective of the Renewable Energy (Electricity) Act 2000.

    “The objects of this Act are:
    (a) to encourage the additional generation of electricity from renewable sources; and
    (b) to reduce emissions of greenhouse gases; and
    (c) to ensure that renewable energy sources are ecologically sustainable.”

    This is very clear that the object of the current act is to increase renewable energy and decrease greenhouse gas emissions.

    Now lets look at the subtle change in the Renewable Energy (Electricity) Amendment Bill 2009, that was made by the Government in full knowledge of the perverse impacts on voluntary action that cap and trade mechanisms cause. The amendments to the object are:

    “Omit:
    (b) to reduce emissions of greenhouse gases; and
    Substitute:
    (b) to reduce emissions of greenhouse gases in the electricity sector; and”…

    You may have noted that in my submission on the previous RET Exposure Draft Legislation http://www.climatechange.gov.au/renewabletarget/consultation/sub_ret/5Kelly.pdf, my Reccommendation 6 suggested removing the reference to reducing greenhouse gas emissions in Section 3, as the “purpose of the legislation can no longer to be “to reduce emissions of greenhouse gasses” and this should therefore be removed from the Objectives of the Act. In acknowledging that it is only by reducing the number of permits released under the CPRS that will reduce emissions, it is misleading to suggest that increasing the use of renewables would result in a reduction of greenhouse gas emissions either economy wide or even in the electricity sector” (and some additional explanation).

    The Australian Government has however persisted with its claim that this Bill will “reduce emissions in the electricity sector”. Furthermore, at the Voluntary Action Public Consultation Workshop held in Adelaide last week I asked a very specific question regarding whether the Government stands by its logic that traditional voluntary actions like energy efficiency, walking to work, or using household generated renewable energy will ultimately reduce emissions by freeing up permits and lowering the costs to the economy? – the answer was a definite yes.
    Your comment that “The RET has not been designed to reduce GHGs over its operative period” is therefore not supported by the Object of the current Act, the Bill or the Government position. I can only assess the the success or failure of the government’s policy based upon its stated objectives and position.

    So with the policy objective stated by Government including both to encourage more renewable electricity and to reduce greenhouse gas emissions in the electricity sector, the Solar Credits concept fails on the basis of mathematics. Every extra MWh displaces 5 MWh of renewable energy already required by law. It fails in both renewable energy created which decreases by 4MWh per MWh deemed and fails again in that greenhouse gas emissions are not reduced in the electricity sector, they are increased by a nearly 4 tonnes CO2-e per MWh.

    It could be aregued that the RET as a whole requires more renewable energy, yet it will always fall short of the annual Renewable Power Percentage whilst there is a multiplier of solar credits in existence. The Solar Credits concept fails when considered by itself as it results in less renewable energy and causes more emissions compared with householders taking no action.

    This question is not about “whether the reductions should come from private actions and / or commercial and industrial restructuring”. It is about where customers make a choice to install solar systems does the Solar Credits concept result in more or less renewable energy and more or less renewable energy infrastructure. There must be purpose to getting one “one of these damn things on your roof”. Householders are actually led to believe that they are creating more renewable energy and reducing emissions. If customers fully understand that their actions will actually result in less renewable energy, the chances are that they would do something else.

    Yes targets are important and I have not sought to diminish this priority in any way. At the same time we also require sensible policy that does not cause the waste of funds and resources in schemes that actually result in more harm than good.

    Transitioning to a fully functioning low carbon economy will take more than just stronger targets in a CPRS that cripples voluntary mechanisms. We require policies that will work and not pretend. It is only then that industries like the household solar industry can have confidence in the future of their industry.

  25. GreenPower and RECs both lack transparency and accountability for the consumer and taxpayer. The consumer is being mislead to believe GreenPower is buying renewable energy power that is worth testing under the Trade Practices Act. Then there is accounting cycle of RECs and what RECs buy makes for interesting transparency for the consumer.

  26. Tim,

    Thanks for the reply and I stand corrected in relation to the Act’s objectives clause.

    That said, an objects clause only goes to the purpose or objective of the Act. The objective of the Act is to mandate a certain level of renewable energy for the purpose of reducing emissions. This doesn’t mean that the Act’s job is to reduce emissions, it simply means that the reason the Act is there (or its purpose) is to reduce emissions.

    For instance, the Trade Practices Act’s (TPA) objective is to “enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”. The job of the TPA is to promote competition etc and its objective is to enhance the Australian people’s welfare.
    Put in the same terms as the TPA, the RET Act’s objective is to “reduce emissions through the promotion of renewable energy” . That is, the Act’s job is to promote renewable energy and its objective is to reduce emissions.
    If it wasn’t for greenhouse gas emissions, the RET’s objective may be different although its job the same. That is, the government may wish to “reduce demand for overseas fossil fuels through the promotion of renewable energy”. Same Act different purpose or objective.
    In summary, because increased use of renewable energy by its nature will reduce emissions compared to business-as-usual, the RET Act will be true to its objective if it results in the uptake of renewable energy.

    As I said in my reply above, the current design may not significantly reduce emissions today, but this does not make the policy a failure.

    By the way, I agree wholeheartedly that we need to do more regarding emission reductions, but I just think that we need to tread very lightly at this stage of the process in Australia. This country is heavily dependent upon fossil fuels both literally (generation and exports) and emotionally.

    I think that we need to get the infrastructure in place to reduce emissions. The fact that it may not be perfect insofar as wholesale emission reductions are concerned is regrettable but an absolute reality born of public fear. Now it would be great top think that we could shut down the coal industry but it is not going to happen.

    So, notwithstanding my mixed metaphors, I believe we should tread lightly on outcomes at this stage, lest it scare the horses, but assemble a very large legislative superstructure which will ensure that, in 50 years, low emissions will be the norm.

  27. Update on the Renewable Energy Target and Solar Credits

    It was announced on August 14 that the proposed expanded renewable energy legislation is likely to be split from the CPRS Bill package. This would enable the renewable energy legislation to be passed by the senate next week,

    The Greens have proposed amendments to the bill including a fix for the solar credits bad policy:
    “* Fix the problem of ‘phantom renewable energy credits’ created by the solar multiplier and lift the size limit on solar installations;
    * Replace the ill-thought-out solar multiplier with a gross national feed-in tariff for all forms of renewable energy;” See http://christine-milne.greensmps.org.au/webfm_send/202

    At the Senate Committee hearings into the Renewable Energy (Electricity) Bill 2009, the Government defended its solar credits multiplier that creates false RECs as follows:

    “In response, the Department of Climate Change explained:
    Solar credits will commence from 9 June 2009 and be phased out by 2015-16, recognising that technology costs are going down and the role of CPRS in providing incentives for renewable technologies. The timing of the phase-out by 2015-16 means that Solar Credits will not adversely affect reaching the 20 per cent target by 2020″.

    So if I commit fraud against my employer, so long as I don’t adversely affect my employer’s targets in a few years time that makes it OK??????.

    Coalition Senators accepted this explanation.

    On one final point, neither the Greens, the Government or the Coalition opposition have taken any interest in better defining the 20% target to ensure that voluntary efforts are not counted towards the 20%. At the moment, if the old baseline of 15000 GWh plus the expanded mandatory bit of 45,000 GWh is 20% of Australia’s energy use then everything is OK. But if in 2020, Australia’s energy use is greater than 300,000 GWh then the Government can also use voluntary renewable efforts to contribute to 20% extinguishing the merits of the voluntary actions.

    Voluntary efforts can be made meaningless by any number of bad policy decisions by Government. To be effective, they need to be made to work under emissions trading (my view is that this is almost impossible) they need to count for the customer and they need to be above the volume thresholds mandated by Government. A failure on any one of these areas is not acceptable.

    OI believe that there should be a separate and additional place for voluntary renewables .

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