Guest Post by Tim Kelly. Tim 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.