Australia’s Renewable Energy Target is once again under review, with sweeping changes on the cards. This White Paper examines five possible scenarios for the policy and analyses the potential impact of these changes on renewable energy investment, capacity, power sector emissions, jobs and the cost to consumers.
- Our modelling indicates that the current 45TWh Renewable Energy Target (RET) is expected to drive AUD 35bn of investment in 14.2GW of new renewable capacity by 2020. This will come at an average nation-wide cost to end-consumers of AUD 0.5bn per annum from 2015-20, with 24,800 workers employed each year in construction and operations. It will also reduce power sector emissions by 8.7MtCO2e (5%) in 2020, compared with 2013 levels.
- Over the longer term (2015-30) the RET will save end-consumers on average AUD 2.0bn per annum, because the costs of the policy are outweighed by the reductions to wholesale electricity prices it achieves. However the scheme could run into trouble if the 10-year tail end of the current design proves too short for projects to obtain financing.
- If the target is abolished, renewables investment will fall by 59% and 63% less capacity will be installed by 2020 than the current set-up. The cost to consumers over 2015-20 will be 22% higher at AUD 0.6bn a year as no savings are made to wholesale power prices but legacy assets continue to be compensated. Power sector emissions will be 5% higher and 11,100 fewer people will be employed. Small-scale PV will be the only viable clean energy industry.
- If the target is reduced to 27TWh for large-scale energy and 8TWh for small-scale, investment in renewables will drop by 33%, and 34% less capacity will be installed by 2020 compared with the status quo. The average cost to consumers will be 53% lower to 2020, but 43% higher from 2015-30 as wholesale power prices rise more with less renewable capacity. Power sector emissions will be 3% higher in 2020 and 6,600 fewer jobs will be created each year.
- If the target is deferred to 2025, investment in renewables will be 4% lower than if the current policy is left in place, with 10% less capacity installed by 2020 as build is shifted to 2020-25. The average cost to consumers will be 3% higher than the current arrangement from 2015-20, but will be 15% lower from 2015-30, as wholesale power prices are forced down further than in the current scheme and overall the mechanism works more efficiently.
- If the policy’s large- and small-scale components are recombined into one scheme, the system will likely become unworkable, due to the unpredictable nature of the small-scale market. But if large projects can find a way to be viable, the target will be achieved in the long run, but investment, capacity and jobs will be lower to 2020 compared to the status quo.