The day after the Prime Minister defeated the spill motion against him he was asked about his policy on renewable energy. In the Prime Minister’s response he said
And they want to keep the Renewable Energy Target not at 20% but at more like 27% which means much higher power prices for the people of Australia.
There is an abundance of modelling done on the effects the Renewable Energy Target is having on electricity prices including SKM MMA, Intelligent Energy Systems, ROAM, Schneider Electric and Bloomberg New Energy Finance. All of them found that while the Renewable Energy Target had increased electricity prices by a small amount in the short term (about three to four and half percent), over the longer term it would put downward pressure on electricity prices.
Probably the most interesting modelling result came from the government’s own review of the Renewable Energy Target last year. The Warburton review, named after the self-confessed climate sceptic that the government put in charge, commissioned modelling that found the Renewable Energy Target was indeed putting downward pressure on electricity prices.
They modelled a number of scenarios including closing the RET to new entrants, repealing the RET, what the government calls a ‘real 20% target’, leaving the RET as it is and expanding the RET to 30% by 2030. The only scenario that had a lower electricity price than leaving the RET as is, was expanding the RET to 30%. You can see the impact of the various policies in the graph below which is taken directly from the Warburton report.
Reference means no change to the current RET.
This result comes about because additional renewable energy is increasing the supply of electricity at a time when demand for electricity is falling. This new form of energy is adding competition into the electricity market which is forcing down the wholesale price of electricity. Renewable energy has lower running costs than existing forms of electricity generation, particularly coal and gas generation. This is because renewable generation, like solar and wind have no fuel costs. They are effectively undercutting fossil fuel generators and forcing them out of the market.
Tony Abbott’s claim that a higher target for the Renewable Energy Target will lead to “higher power prices for the people of Australia” is incorrect. Not only is this contrary to many other studies done on the issue but it is also contrary to the government’s own review of the Renewable Energy Target.
Hopefully such a misunderstanding of the Renewable Energy Target’s effect on electricity prices is not influencing the government’s current position in its negotiations over changes to the target. We also hope that someone within the government will quickly explain to the Prime Minster his mistake. It’s never a good look when your own evidence refutes your claims.