RET subsidies are driving the switch from coal to solar
Proponents of renewable energy, from the International Energy Agency to green groups and investors in the sector, like to claim that solar and wind power are becoming so efficient they can “stand on their own two feet’’. If only. Investments in the sector stack up only because they are heavily assisted by government policy and largesse.
The economic reality, as David Crowe reports today, is that taxpayers and consumers are subsidising energy company AGL’s giant solar energy projects at Nyngan and Broken Hill in western NSW by hundreds of millions of dollars. This includes direct state and federal grants, and renewable energy certificates.
At the same time, AGL is determined to close its ageing coal-fired Liddell power station in the Hunter Valley by 2022 because, its chief executive Andy Vesey said last week, “keeping old coal power plants open won’t deliver the reliable, affordable energy our customers need”. At a time when the Australian Energy Market Operator has warned that Australians face major energy shortages from next year, Malcolm Turnbull and Energy Minister Josh Frydenberg are negotiating with AGL about keeping Liddell in operation until at least 2027 to help maintain baseload power supply. As the Prime Minister said last week: “We can’t get into the situation where we have done before, where we have large amounts of baseload or dispatchable power going out of the system and then you get a shortage of power and then you get a rapid increase in prices.’’
Avoiding such situations over the medium term, however, would require scrapping or reworking the RET, which is making the rush to renewable energy so attractive for AGL and other businesses. While the long-standing subsidies for the Nyngan and Broken Hill energy plants, agreed in 2015 under the Abbott government, will stand, the RET, which the Coalition has backed out of political convenience, is the core of the problem. It should be replaced with a pragmatic, effective policy if the Turnbull government is to differentiate itself from Labor and help guarantee reliable supply and cheaper prices.