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  1. Tim Taylor

    AGL and other electricity suppliers and the RET (renewable energy target)
    In the post below, I have endeavoured to add balanced analysis within the limits of my ‘layman’s’ understanding of the larger picture. At least, as a teacher, this will help me in classroom discussion, should the topic ever come up.

    The AGL working paper at is a very technical piece. Most of Australia understands that the purpose of introducing clean and renewable energy was to phase out non-renewables and therefore lower our carbon emissions as a nation. The energy industry assumed, according to the working paper, that the purpose of the RET was to allow more players to come on to the market because the supply needs were expected to keep growing and therefore the renewable energy sources would make up the gap.
    The paper warns that our energy needs have declined and therefore it undermines the basis for which energy suppliers allowed or supported the RET in their discourse.
    In other words, energy companies always believed that a baseload electricity supply could only ever be filled by thermal power stations and even though low percentages were quoted in the initial stages (Renewables will only ever be able to supply x% of the total load and that they are unreliable) the fact that renewable energy has been growing has meant that they are able to take a greater percentage of the market.
    It is important to say, ‘They are ABLE to’ because the reality is that the thermal power sources are not being retired. This is despite, as the paper says, the plants being decades past their use-by dates- which renders them even more inefficient.
    Why aren’t they being retired? The ‘barriers to exit’ named in the paper seem to be the largest obstacle. It costs hundreds of millions to decommission a plant. Rather than spend this money, suppliers mothball plants. This means that, for a relatively low cost, the plant can be maintained but inoperative. BUT, and this is important, because they are ABLE to come on-line with relative ease, the number of suppliers in the market stays high and the relative price for supply stays competitively low enough to make new ventures unviable.
    So my understanding is that the reason suppliers like AGL oppose the RET is because, although many have shown a commitment to supplying renewable energy (AGL’s home page is splashed with them) they are unwilling to retire the thermal (gas and coal) power stations because of the huge costs.
    I would dispute this. $300 – $500 million dollars is a large sum but not in the bigger picture. Who should be made to pay it though? Isn’t this cost the sort of thing that Renewable Energy Certificates are meant to pay for? If AGL spends $500 million on a wind farm, should they then have to spend the same again to retire a thermal plant it replaces? If they do not retire the coal/gas plant, then the price of power makes the investment uneconomic, especially if more and more renewable energy plant is built.
    So the solution is not to give up on the RET but to look at what the barriers are to retiring thermal plants. We also need to look at the power of the coal and gas lobby who even reinvent themselves and say that some of their energy is ‘clean’ because it is less filthy than other varieties.
    Perhaps Australians need to look at how we might help retire thermal plants. This would mean a cost – largely for remediation because the all plant and machinery would have been written off progressively over decades as part of normal company tax minimisation and asset management. How can we support large organisations to rethink approaches but support them to do so. How can we encourage companies to continue to invest in renewables (and they are) without having them cut their own revenue stream in doing so. And how do we break the taboo of not questioning the power of coal and gas miners on the merits of continuing to dig when they continue to be touted a our largest exporters.

    I am pleased AGL supplied me with the paper to read. Although I feel they might be locked into a thermal perspective, the paper does raise a wider context. The renewable energy certificates should be something which help with remediation costs and I am surprised that they do not.


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