Renewable target needs a rethink

Australian
Monday 12/10/2009 Page: 26

THE accelerating slump in the price of renewable energy certificates is putting pressure on the federal government to review the structure of the system that supports its renewable energy target. The price of certificates fell more than 15% last week to $28, its lowest in almost three years, extending a steady slide since reaching a peak of $51 in May and taking the fall since the renewable energy target legislation was passed in August to 30%. Certificates, each representing 1MW hour of renewable energy produced, are the currency generated by the renewable energy target scheme and are supposed to bridge the gap between the price of coal and gas-fired energy and renewables.

But the market is being swamped by certificates generated by domestic solar hot water and heat pump systems, and some industry analysts say if this continues it could last for several years and may cause the delay or cancellation of wind energy and other renewable projects because the price signal will simply not be strong enough to make the projects viable. The renewable energy industry is putting pressure on the government to alter the scheme by creating a separate heat market for solar hot-water systems and heat pumps, particularly if governments mandate that all new houses be equipped with solar hot water.

And the industry is calling for annual targets to be adjusted and take into account the anticipated flood of phantom certificates created by the multiple credits allowed for household solar systems. But there is a view in the industry that some government bureaucrats are happy with the present situation because they do not believe the target, which calls for the production of 45,000GW hours of renewable energy by 2020, can be met by renewable energy sources alone and are happy for the heat technology to fill the gap. The market slump might suit energy retailers such as Origin Energy, AGL and TRUEnergy, which need to either buy certificates to meet target obligations, or who are less affected by the market because they source their supply of certificates from their own windfarm developments.