The scheme which began in 2001 under the Howard government and was reinforced under Labor administration has helped lift Australia’s renewable energy production to more than 11% of total electricity generation (still short of the 20% by 2020 target), and has gone a long way to helping alleviate the nation’s significant carbon footprint. The second part of the story, however, and one which is sadly being ignored, is that this investment has actually been pushing the price of power down in the energy market.
In its current form, the RET works through a market of regulator issued certificates which are distributed to individuals and businesses who install renewable energy generators. Electricity retailers then buy these certificates to meet their mandatory renewable energy targets. Small-scale technology certificates are also issued to households, small-businesses and community groups which install and maintain small-scale renewable energy systems such as solar power or solar power hot water systems. These certificates can then be sold to retailers to offset the cost of installations.
The Abbott government review of the scheme is ostensibly aimed at alleviating any perceived burdens being passed onto consumers as a result of the scheme. However, these perceived costs to consumers fail to stack up on any level when we take a closer look at how the Australian energy market actually works behind the scenes.
Australia’s energy prices are determined by the wholesaler market, where prices are updated half-hourly. During peak periods of energy use, the market price of power is pushed up, which is then passed on to consumers. Renewable energy sources with low running costs, such as wind and solar, have now begun to displace the reliance on high cost generators during peak periods. This has led to lower costs on the wholesale market. These numbers were backed by a recent Meridian Energy Australia commissioned report which showed that wind power had reduced wholesale prices by 40% during the January 7-day long heat-wave which affected South Australia and Victoria.
The peak demand periods, which for forever and a day has been used by base-load producers to price gouge consumers, is now increasingly being supplied by privately installed roof solar systems and other renewable energy sources. With next to zero running costs, these systems have led to an abundant supply of cheap (and clean) energy during peak periods, undermining the competitiveness of the base-load suppliers.
This changing of the guard in the energy sector represents billions of dollars at stake for the major energy retailers, clearly a bitter pill to swallow and why we now see them desperately lobbying to bring an end to the RET.