Submission on Proposed Approach to Key Modelling Assumptions for
2014 Review of Renewable Energy Target
Dear Sir/Madam
Thank you for the opportunity to comment on the Consultation Paper on the
Proposed Approach to Key Modelling Assumptions for the 2014 Review of the
Renewable Energy Target (RET).
The Australian Solar Council is the peak body for Australia’s solar industry.
With more than 2,000 members, the Australian Solar Council is the largest
renewable energy industry association by membership numbers. Our
members include solar manufacturers, retailers and installers, academics and
interested individuals. Our membership includes residential, commercial and
large-scale solar PV, solar thermal and solar hot water companies. You can
find more information on the Australian Solar Council at www.solar.org.au
Context
Under the Renewable Energy (Electricity) Act 2000 [the Act], there is a
statutory obligation to review the Renewable Energy Target every two years,
including 2014. The Climate Change Authority (CCA) has a statutory obligation
to review the RET, and the Australian Solar Council believes the CCA should
manage the 2014 RET Review and the modeling exercise as required by law.
The RET was last reviewed in 2012, with a final report in December 2012, just
16 months ago. SKM MMA undertook extensive modeling for the 2012 RET
Review, and that work should be the basis for the modeling assumptions for
the 2014 Review.
It is important to note the RET Review cannot make any recommendations
that are inconsistent with the objects of the Act (s162 (11) of the Act). The
modelling assumptions should reflect this fact.
The objects of the Act are:
(a) to encourage the additional generation of electricity from
renewable sources; and
(b) to reduce emissions of greenhouse gases in the electricity
sector; and
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(c) to ensure that renewable energy sources are ecologically
sustainable.
The RET is designed to ensure that at least 20 per cent of Australia’s electricity
generation come from renewable energy sources in 2020. The Terms of
Reference for the RET Review and the Consultation Paper on the Proposed
Approach to Key Modelling Assumptions incorrectly state the “RET scheme is
designed to ensure that 20 per cent of Australia’s electricity generation will
come from renewable energy sources by 2020”.
Modelling assumptions
Any model that ignores the science of climate change and fails to incorporate
any price on pollution is fatally flawed and any output from such a model can
have no validity. The modelling must include a scenario where there is a price
on carbon at varying rates at a minimum based on international carbon
pricing schemes, e.g.: EU ETS1, or in the USA the RGGI2 and other countries3.
The science on climate change is as robust as any other. It is simply not a
rational or sustainable position to ignore such a large body of evidence, which
if incorporated in modelling, would have a major and critical impact on the
comparisons and assessments being made.
A critical point in the context of the RET is the primary aim of emissions
reductions. That means that any comparisons drawn should be to known best
practice. Business and policy makers everywhere who undertake risk and
financial assessments try to do so using world’s best practice. In this case
world’s best practice is zero net lifetime emissions for renewable technologies
– which is precisely why they are called renewable and sustainable.
This means all comparisons must be between current known polluting high
emissions technologies and zero or lowest emissions technologies that are
deployable commercially now, such as solar PV, concentrated solar power
(CSP or solar thermal generation) and wind and the range of mature and
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2
http://ec.europa.eu/clima/policies/ets/index_en.htm
http://www.rggi.org
3
http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/
pubs/BN/2012-2013/EmissionsTradingSchemes
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emerging low temperature solar technologies for hot water and process heat
applications.
The established methodology in energy industries of comparing with the
worst polluting technology for power generation, coal, is a false comparison.
When comparing with the worst polluters and emitting technologies rather
than the best we get a ranking of least worst rather than best to worst. That is
a poor assessment process which inevitably gives skewed outcomes favouring
least worst polluting technologies i.e.: cleaner rather than clean technologies.
Technology Costs
In recent years, Government agencies have consistently overestimated the
cost of solar and underestimated community support for solar. Government
reports have often been so conservative or simply outdated in a rapidly
changing marketplace that they have been overtaken by real world results
even at the date of the release of a report.
The renewables sector, even mature areas like wind, are amongst the fastest
growing and most innovative in the world with learning rates that bring rapid
cost reductions flowing through to price reductions. The modelling on
demand and in all other areas should cover ranges – not simply select a midpoint, median or average figures – and the ranges should include at least a
low and high scenario that might be now thought unlikely or very unlikely. The
assumptions can vary widely and the outcome on models will vary greatly
when those assumptions change.
The Australian Solar Council supports the use of data from the Bureau of
Resource and Energy Economics, but this should be complemented by data
from the Clean Energy Regulator, the REC Agents Association (and its
individual members) and solar industry analysts Solar Business Services and
SunWiz. The Australian Solar Council believes BREE has overestimated the
cost of solar thermal, so these costings should be complemented by
discussions with the solar thermal industry. Sensitivity analysis should include
what might be thought outliers, but also should use recent international
historical data on the rapid cost reduction side.
Sensitivity analysis should also incorporate a wider range of fossil fuel input
pricing than what might be thought ‘consistent with Treasury estimates’ –
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e.g.: gas at $A20 GJ, $A25 GJ, $A30 GJ & $A40 GJ – all possible global price
points for LNG out to 2020 and beyond to the extent of expected operational
life of generators (at least 20-30 years). Treasury and other estimates have
been found to have a wide margin of error, over 30%. Increases in coal, gas &
oil prices have the effect of increasing the competitiveness of all renewables
even absent the large price/ cost reductions which have been the history of
renewables. An important implication of this is that the modelling should look
at future gas prices, as well as electricity prices.
Consumer focus
The modelling approach appears to be internally focussed and highly technical
which expresses a strong bias towards existing market participants and
support for their business models. Whilst the consultation paper highlights
changes in energy demand from the closure of emissions intensive industries,
it does not highlight the growing trend towards the democratisation of
energy, with householders protecting themselves from soaring electricity and
gas prices. The assumptions do not mention the emerging trend towards
energy storage at a household and larger-scale, and this omission should be
corrected.
The focus of the modelling should be amended to more adequately reflect the
goals and objectives of the COAG/ SCER agreement on consumers
http://www.scer.gov.au/workstreams/energy-market-reform/nationalenergy-customer-framework/ – i.e.: the residential and small business
consumers who currently are greatly under-represented in the energy
discourse. The changes to the energy market through distributed energy will
follow the experiences in the EU and the USA and be of greatest advantage to
residential and small business consumers.
In assessing renewables market share, Australia’s total electricity generation
needs to be considered. Total electricity generation must also incorporate the
impact of:
 Non-scheduled generation.
 Generation that is sitting behind electricity customer’s meter - this
should include fossil fuel generation (including cogeneration) that is
used on a customer’s site as well as renewable generation (solar PV)
that is installed at a customer’s premises
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 Where energy avoided by solar hot water is included as part of
renewable generation then its contribution needs to also be included in
measuring total Australian generation.
 All generation from any location and from any source should also be
included, including Australia’s territories and protectorates, which
include renewable generators supported by the RET.
The modelling should examine the impact of the Large-scale Renewable
Energy Target and the Small-scale Renewable Energy Scheme on wholesale
electricity prices. The modelling should examine the extent to which the
reduction in wholesale electricity prices caused by renewable energy is being
passed through to residential and small-business electricity consumers.
The modelling must also incorporate the Government’s commitment to
deliver an additional million solar roofs by 2020 through its Million Solar Roofs
program.
Should you wish to discuss these matters further, please contact me on
0400 102 396.
Yours sincerely
John Grimes
Chief Executive
17 April 2014
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