Thursday, 4 April 2013

Germany grabs renewable lead as Australia drops back
14 Mar 2013

In 2009, Germany sprinted past the European Union's 12% Renewable Energy Target three years ahead of schedule. Germany's response? Raise the bar.

Europe's biggest economy is now aiming for 35% of energy to be derived from renewable sources by 2020, 50% by 2030, 65% by 2040 and 80% by 2050. Meanwhile, 7,000 km to the east, China-a nation with a less stellar record than Germany on the energy and environmental front-is making similarly aggressive strides towards renewable energy targets.

When China hit its solar-specific goal of 5 GWs of capacity by 2012 also three years ahead of schedule-it lifted the target to 21 GW by 2015. An ambitious quadrupling of the goal, and then some. Since then, the Beijing bureaucrats have started to ponder whether the new target is ambitious enough. The talk, perhaps encouraged by the dire pollution dogging the Chinese capital, suggests the new 2015 goal will be more like 40 GWs.

Surprise surge
And Australia? As power demand continues to decline in eastern states, catching the big private and public utilities off guard, the energy debate is shifting-in the other direction. The 41,000 GW-hour goal for renewable energy by 2020 now looks like being closer to 25% of total generation by 2020 rather than the 20% envisioned by the scheme's designers.

As a result, the Climate Change Authority, the government and the coalition are under immense pressure to pull back. To recap: Germany and China achieve their aims early and respond by lifting their sights. Australia is on course to reach its target and is now considering a cut.

Slow-mover disadvantage
Figures out this week from Pitt and Sherry show the share of coal-fired power to the National Electricity Market Management Company dropped below 75% last month for the first time. That trend, now more than four years long, has prompted incumbent generators to mobilise. Activity, though, is not being focused on grabbing a bigger share of the renewable energy market but rather the marshalling of lobbyists to get a softer RET. The target may be unwelcome for some private-and state-owned generators but is it bad for Australia?

The Climate Change Authority found the cost of the RET policy was negligible-that it was delivering substantial benefit to the economy and that its compliance cost was balanced by the resultant reduction in wholesale electricity prices. Meanwhile, studies continue to show that a transition to 100% renewable energy is technically and economically feasible for Australia-and would be highly popular. Even the government's own energy economics forecaster advised that renewable energy would be the cheapest form of electricity by 2020.

In spite of this, it appears Australia seems content to lag its international competitors. According to the Climate Change Authority, only 10% of Australian energy production in 2010 11 was from renewable energy sources-and half of that came from pre-existing hydroelectric. Of the $5 billion invested in renewable energy deployment in 2011, more than 80% was by households purchasing solar power systems. By contrast, more than $50 billion was spent by both the USA and China in the same year.

All up, entrenched interests are lobbying for a reduction in Australia's Renewable Energy Target, our competitors are increasing their lead, often mastering technology and skills-think solar PV-developed in Australia. The government needs to consider whether ceding further ground-which would no doubt occur if the RET were weakened-is the wise move to make.