Climate Change Authority

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2014 Renewable Energy Target Review

The Climate Change Authority released its second review of the Renewable Energy Target (RET) on 22 December 2014. The review concludes changes to the policy environment in recent years have not weakened the case for the RET. The current 2020 Large-scale Renewable Energy Target should not be reduced, but should be re-phased slightly to increase the chances that it can be met.

The Authority released its second review of the Renewable Energy Target on 22 December 2014.

The review focused on a small set of priority questions, including the 2020 Large-scale Renewable Energy Target, the role of the RET after 2020, assistance for solar photovoltaics (PV) under the Small-scale Renewable Energy Scheme and the basis of exemptions for emissions‑intensive, trade‑exposed industries.

The Authority does not favour any significant scaling back of the 2020 Large-scale Renewable Energy Target of 41,000 GWh. The Authority finds that, while the RET arrangements are not perfect, they are effective in reducing emissions at reasonable cost in the centrally important electricity sector, and are the only currently prospective policy instrument in the electricity supply sector that can be relied upon to deliver sizeable volumes of emissions reductions.

The Authority recommends a rescheduling of the current target to increase the likelihood it will be met. Given the sharp decline in investor confidence, the resulting slowdown in renewables investment and the further reduction in projected electricity demand, the government should: defer the 2020 target for the LRET by, say, up to three years; and extend the scheme as a whole by at least the same amount of time, with a view to providing sufficient time for projects to recover their costs. Given the large overhang of certificates, there is no case to reduce the annual LRET targets until after 2017. These changes are shown in Figure 1.

Figure 1 Proposed re-phase for LRET targets

Figure 1

Source: Climate Change Authority

The challenges of climate change are ongoing and the Authority recommends government consider the role of the RET beyond 2020. The Authority proposes considering the nature and time-frame of possible RET arrangements in the post-2020 period, with particular regard to increasing and extending targets, and expanding coverage to a wider set of technologies. This reflects the Authority's view that, particularly in the absence of credible alternative policies, RET-type arrangements might be required to support increased penetration of renewables in electricity for some time.

The Authority also considered assistance to trade-exposed businesses and assistance for solar photovoltaic (PV) under the Small-scale renewable Energy Scheme; the Authority’s findings on these matters are detailed in the review report.

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