With the wind industry reeling after the RET review panel delivered its recommendation to slam the door shut on any more wind farms (see our post here), it’s sought to whip up support for the mandatory RET by enlisting the usual band of useful Marxist idiots (like GetUp! and 350.org) to rally a band of imaginary troops (apparently ready to die on the barricades); and to rattle cans to fund super-shrill ad campaigns. What’s that they say about “astro-turfing”?

What the wind industry has counted on (so far) in its attempt to retain the RET, is support from the solar industry; and its many satisfied customers.

The wind industry and its parasites like to shelter under the same umbrella as the solar boys: blancmanging the two very distinct animals under the “renewables” tagline.

There are, however, a number of key distinctions between the wind industry and domestic (rooftop) solar. The differences are significant, have political consequences, and the Coalition government is alive to them.

Installing rooftop solar has created a big number of specialist installers (mostly electricians and panel fitters) who way outnumber the handful of permanent jobs created in the wind industry. This band (numbering some 18,000) work for, or operate, hundreds of small businesses across Australia; and, therefore, have the potential of becoming very vocal regarding any threat to the small scale renewable energy scheme (SRES) – which doles out subsidies for rooftop solar.

The RET review panel delivered a recommendation that the SRES should be scrapped immediately. However, STT hears that (for reasons that follow) the Coalition are not going to follow that recommendation.

Unlike the wind industry, rooftop solar has lots of friends and no real enemies.

Were the Coalition to cut the SRES, thousands of solar installers would immediately face an uncertain future: no doubt, many would lose their jobs. There are thousands of panel installers who are currently employed or who own business built on the SRES – all feel threatened – and have been lobbying Coalition members for a retention of the SRES.

In suburban Australia, rooftop solar has become an aspirational good – with families planning their next home (or new home) with panels; or otherwise hoping to take up rooftop solar in order to reduce their spiralling power bills. To an extent, given the massive take-up of rooftop solar to date, getting solar panels has become a game of “keeping up with the Jones”.

So, between thousands of rooftop solar installers and tens of thousands of families who see solar panels as a right of household passage (all of them potential Coalition voters), the Coalition faces a serious loss of political capital were it to chop the SRES (as recommended by the panel).

The wind industry, on the other hand, has very few friends and lots of enemies (see our posts here and here). Its “friends” are panicky investors and died-in-the-wool Labor and Green voters (predominantly inner city trendies from the hard-green-left) who would never vote for the Coalition in a fit. Pandering to this lot has no political upside for Tony Abbott and his team.

The wind industry was brought to life by the Large-Scale RET (LRET). The RET review panel has recommended that the current target set by the LRET of 41,000 GWh be slashed and that the scheme be closed to new entrants from here on.

STT hears that the Coalition, starting with Tony Abbott, is all set to follow that recommendation. While Environment Minister, Greg Hunt has been working flat-out in the media, touting claims that the Coalition supports a real 20% target, he couldn’t be more isolated from his own party than if he were Robinson Crusoe. STT hears that, for his recent efforts, young Greg is about to have his wings clipped by the Head Boy (as soon as he returns from his trip to India).

Unlike rooftop solar and the SRES, were the LRET scaled back and closed to new entrants hardly any current wind industry jobs would face immediate threat.

In the wind industry, most of the jobs involve the fleeting work created during wind farm construction (see our post here). Australia doesn’t manufacture wind turbines: every single one of them has been imported from Denmark, India, Germany and China.

In Australia, wind farm construction is almost at a standstill: “investment” in the construction of wind farms went from $2.69 billion in 2013 to a piddling $40 million this year (see this article). So it’s not as if thousands of currently employed construction workers will lose their jobs as a result of changes to the LRET.

As to the few permanent jobs created by the wind industry, most of these involve the repair and maintenance of turbines (changing oil, changing over gearboxes, bearings etc); and these jobs are not under immediate threat – turbines put up in the last decade will continue to need repairs (and more so, as time passes).

Employment in the wind industry is all about what might be; rather than what is. With hardly any jobs under immediate threat, the Coalition has little political capital to lose and much to gain in following the panel’s recommendations regarding the LRET.

The SRES is estimated to cost a further $1.5-2 billion, which is chickenfeed compared to the future cost of the LRET. The wind industry has been, and would be, the only practical beneficiary of the LRET; and stands to reap a further $50 billion in subsidies via the REC Tax levied on all Australian power consumers (see our post here).

From a political perspective then, the options are a “no-brainer”: keep the SRES and kill off the LRET.

By closing off any threat to rooftop solar, the Coalition avoids a battle that it’s likely to lose – and also allows it to target the wind industry standing all on its lonesome.

In the battle to “win hearts and minds” over the fate of the RET, the wind industry has used the solar industry as a kind of “human shield”: avoiding political flack by hiding behind a sea of suburban solar panels; the hundreds of small businesses that install them; and the mums and dads that own (or want to own) them.

With the Coalition coming out in support of the SRES, the political “stink” being kicked up by the solar lobby will simply fade away – and the wind industry will lose its “solar shield”. Oops!

Leading the Coalition’s charge to maintain the SRES (and government support for rooftop solar); and to kill the wind industry (by following the panel’s recommendation on the LRET) is STT Champion, Angus “the Enforcer” Taylor. Here’s a piece Angus penned for the Australian Financial Review, outlining the Coalition’s shift on renewable policy.

Time to get rational about the RET (Renewable Energy Target)
Australian Financial Review
Angus Taylor
4 September 2014

Now that the renewable energy target (RET) review panel has published its findings, it is time to focus on home truths and explode some myths relating to renewables.

As politicians’ inboxes fill with carefully crafted messages from vested interests with huge dollars at stake, it is important to keep a grip on the facts.

First, we need to remember that, strictly speaking, there is no RET. In fact, there are two schemes. The large scale renewable target (LRET) focused mostly on wind, and the small scale renewable energy scheme (SRES), focused mostly on roof-top solar. Many renewables interests, particularly the wind industry, want to confuse the two, because roof-top solar has far more mainstream political support than other renewables. However, the review made quite different recommendations for the two, and the government will need to announce different policies for each scheme.

Second, the review and other recent work showed that there are many cheaper carbon abatement options than renewables. We should not forget that the purpose of the exercise is to reduce carbon emissions, not to build an industry. If an industry emerges out of our efforts to reduce emissions, then well and good, but industry pork-barrelling has not been an aspiration of this government.

Deloitte tells us that we all wear these costs, but the least well-off are hardest hit by higher retail electricity prices, as with the carbon tax. Investment is not a free lunch, and bad investment reduces productivity, wages and jobs, despite all the talk about green jobs. Deloitte’s estimate is that the cost is 5000 jobs and over $1250 in lost earnings for the average Australian.

A FLAWED TARGET

Third, it is now very clear that the 20 per cent renewable target was flawed. In an atrocious decision, the former government decided to translate the 20 per cent target into 45,000 GWh of new capacity, allocating 41,000 of the target to large-scale schemes. This was based on ridiculously optimistic views of electricity demand growth and effectively eliminated demand risk for the renewables industry – a risk that other businesses face every day. In reality, electricity demand has been going backwards, not forwards. The forecaster responsible for the current target, AEMO, has done some serious soul searching and will need to do more.

Fourth, according to the spin from the renewables sector, the schemes are costless, because of a magical impact on wholesale electricity prices. No serious economist agrees that these schemes are costless. The review estimates the cross-subsidy to be $22 billion, and the only serious work done on economy wide impacts (Deloitte again) put that at $29 billion.

The critical question is who wears these costs. In reality, they are shared between electricity consumers (via higher electricity bills), electricity generators and the broader economy. The renewables industry likes to imagine that household bills will not go up, but the review rejects that argument, particularly in the next five years. Of course, if the cost of renewables drops in the longer term – which would be a great thing – then subsidies are no longer necessary.

INVESTMENTS IN GOOD FAITH

Finally, the review panel recognised the legitimate claim from the renewables industry that past investments were made in good faith, and those investments should be protected from changes to the LRET or the SRES. At the same time, non-renewable generators invested in good faith, and have had to wear a massive increase in capacity while demand has shrunk. We shouldn’t forget that many of the shareholders in these companies are mum and dad investors.

As a result of these competing considerations, the panel rightly recognised the need to scale back the LRET to reduce the massive subsidies to the wind industry, while simultaneously protecting past investment. The review offers two options that will strengthen the economy and reduce electricity prices in time, while maintaining a commitment to large scale renewables.

The prospects for solar are quite different and are positive. The SRES is planned to be phased out in coming years and is responsible for a fraction of the renewable subsidies, but much political noise. In the absence of new hugely expensive state-based feed in tariffs, solar’s future is hitched to its ability to cash in on the excessive network charges in electricity bills. We should support that goal.

Vigilance with the facts and measured policy debate will ensure noisy vested interests don’t subvert the national interest.

Angus Taylor is the federal member for Hume.
Australian Financial Review