ABC fact checks the renewable energy target and affect on power bills
It can be confusing to tell fact from fiction when it comes to the renewable energy target. With an upcoming review and political interests making their opinions public, some outside council can be very valuable. The ABC have unleashed their ferociously meticulous fact checkers on the renewable energy target to determine, in particular, whether it affects your power bill.
Satisfying the conditions of the RET costs the electricity retailers money, a cost that they pass on to consumers (thanks for that!). It’s estimated that between 1 – 5% of our bill goes toward funding the RET. Although it costs energy suppliers more to invest in renewable sources than coal or gas, the electricity comes from a source that is close enough to free, and as a result the cost of producing electricity at the wholesale level comes down. The concern is that due to the fluctuating nature of these reductions, that the overall benefit is not passed on to the consumers (thanks again retailers!). A report from The Business Council of Australia in 2008 suggested emissions trading would reduce the wholesale price of electricity but wouldn’t necessarily be passed on to consumers.
The Climate Change Authority predicts that for each year between 2012/13 and 2020/21, if the RET remains in place in its current form, electricity bills will be roughly $15 higher than they would be without the RET in place.
But surely the price should plummet if renewable energy comes from a free source? Electricity produced by renewable means results in renewable energy certificates. Like any currency the value of those certificates can fluctuate and as more renewable energy is created so to are the certificates. The net result is that the certificates will begin to decline in value with ongoing uptake of renewable energy generation leading to diminished savings for the electricity utilities.
The Australian Energy Regulator reports that in 2011/12 the price of whole electricity dropped dramatically. Reduced energy demand and the uptake of solar was attributed to the fall. But in 2012/13 the price rose again, this time attributed to additional costs resulting from the implementation of the Carbon Tax.
A June 2013 report produced by energy company Meridian Energy Australia and consultancy firm Sinclair Knight Mertz found that customers should enjoy reduced energy costs as a result of the RET between now and 2020 due to reductions in wholesale pricing, although a moderate price increase would likely occur beyond 2020. Apart from this general finding the report makes two other general observations. Firstly, energy companies will need to reduce their profit expectations, and secondly as of mid-2012 established renewable energy generation was not sufficient to result in any meaningful price decrease.
Energy prices in South Australia are expected to fall by 1% per year for the next few years due to the meaningful uptake of solar and wind power in the state. Having already reached 20% renewable energy by 2011 they have reset their sights on a 33% contribution by 202, holding them in good stead for the future as the cost of electricity from burning fossil fuels continues to increase.
In conclusion the ABC fact finders rule that it is unclear whether the RET affects power bills. It is obvious that the RET contributes to the cost of electricity bills, the amount varies from state to state, and that this cost is recouped by energy retailers in additional charges to their customers. They also concluded that while it’s clear that the renewable energy generation effectively pushes down wholesale electricity prices the mechanism of distributing renewable energy certificates may not provide long-term financial incentive and the cost of complying with the RET being incurred by the retailers means consumers don’t clearly benefit.
To editorialise for a moment, these findings seem a little short-sighted. As the cost of producing electricity from coal and gas rises, contributions from renewable energies like solar and wind that come from a free source will have a much higher impact on the wholesale price than it does currently. Look at energy prices ten years ago, projecting similar growth across the next decade is a scary proposition. Even if the RET costs us nothing now, it could pay massive dividends for future generations (and not only when they open their letterboxes).
