Guest essay by Eric Worrall
The Australian government is so impressed by the alleged plunge in renewable and battery storage costs they think it will no longer be necessary to subsidise renewables.
Coalition rethinks need for clean energy target as renewable cost plunges
The Turnbull government is rethinking the need to adopt a clean energy target, believing the rapidly falling cost of renewable energy means there may no longer be a requirement for subsidies.
In the keynote address to The Australian Financial Review National Energy Summit, federal Energy Minister Josh Frydenberg will highlight the falling costs of wind and solar energy, including battery storage capacity, as he stresses emissions reduction cannot come at the expense of reliability and affordability.
“It is challenging but possible to simultaneously put downward pressure on prices and enhance the reliability of the system, while meeting our international emissions reductions targets,” he will say at the start of the two-day summit that begins on Monday.
The speech will signal a possible shift away from plans to design and implement a CET from 2020 onwards, in the belief emissions reduction can be achieved without such a scheme.
Mr Frydenberg will place great emphasis on reliability. Apart from already flagged reliability measures such a strategic power reserves over the next four summers, and the push to keep open the Liddell coal-fired power station, Mr Frydenberg will flag the introduction of “day-ahead commitments” to apply to the renewable energy industry.
Currently, a wind farm, for example, produces power on the same day it sells it into the market. Under the change, it would have to commit to provide the power the day before, meaning it would need either back-up storage or an agreement with a gas generator, for example, to meet the commitment should the wind not be blowing.
“It is against this backdrop of a declining cost curve for renewables and storage, greater efficiencies that can be found in thermal generation and the need for sufficient dispatchable power in the system that we are considering the Finkel review’s 50th recommendation to which we’ll respond before the end of the year,” he will say of the plans for a CET.
Sadly existing subsidies will be maintained for now, but at least at face value this announcement by the Australian federal energy minister appears to provide a roadmap for the eventual complete elimination of renewable subsidies, and a normalisation of the relationship between renewable providers and other energy providers.
If this announcement is followed by swift action to axe all renewable subsidies, and remove all special privileges for renewables in the marketplace, it pretty much eliminates my objections to renewables. All I ever demanded is that renewables compete on a level playing field. If renewables businesses are now able to compete due to plunging costs of renewable installations and energy storage, good luck to them.
Of course, if claims of renewable and energy storage cost parity with fossil fuels all turn out to be a pack of marketing spin, with market normality restored most existing Aussie renewables businesses will die by the invisible hand of Adam Smith.