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The Future of Renewable Energy and Energy Efficiency in Australia: the Missing Policies.

July 26, 2010

In a previous post, we hypothesised that the climate policy options for the Government were unlikely to include any effort to implement economy-wide carbon pricing.  That summation is correct. Let’s not dwell on that.

Irrespective, we dared to assume that there are other, progressive, policies that one or other of the main political parties might take up and announce in an effort to demonstrate a real ambition to drive the green economy forward and carve out a credible platform with the electorate.

These included measures to further push energy efficiency and alternative energy such as  geothermal or solar through means other than a carbon price. 

Although, as Frank Jotzo pointed out in the Fairfax publication ‘The Age’ a few weeks ago, carbon pricing must remain a central plank in any emissions abatement strategy, if any meaningful emissions reductions are to be achieved.

Just to be clear: there is no breaking news of any kind on climate policy in Australia.  No useful policies have been announced.

Neither the Coalition nor the ALP have announced, nor can be expected to progress, any meaningful measures in the next Government.

Here we list the measures that we had perhaps foolishly considered possible.  Either party could have considered taking the lead on one of these measures, and gained both credibility and electoral favour:

  • An energy efficiency target has been mooted.  While this might leave some complications for any future cap-and-trade programme, as negotiations between the NSW administrators of the Greenhouse Gas Abatement Scheme and the Federal architects of the Carbon Pollution Reduction Scheme (CPRS) have shown, a programme could enhance investment and the provision of a price signal.
  • Enhancement of ‘command and control’ mechanisms such as continued tightening of appliance performance standards.
  • The issuance of a pending Regulatory Impact Statement on mandatory disclosure of energy efficiency for households, which would require an assessment and rating undertaken on each residential dwelling at point of transaction.  Through an emergence of a real price value attributable to energy performance, this measure would incentivize investment in domestic energy efficiency.
  • Other options involve the ‘push’ variety:  investment tax incentives, and other direct subsidies such as rebates and capital grants, targeted (‘cherry picked’) at particular technologies for both energy efficiency and renewable energy which could support other measures.  After all, with electricity prices so cheap (though this is expected to rapidly change in the future due to regulatory issues and underinvestment in infrastructure – discussed here and here) many energy efficiency measures without further price support are unlikely to meet hurdle rates or make it to the desk of the CFO.  The powerful Property Council of Australia is active in lobbying for such subsidies.  However, the only support mechanism announced by the ALP has been a tax rebate for moving NABERS-governed commercial office buildings from one band of assessment to another (detail here).

As for renewable energy, new policy options could have encompassed:

  • Exploration tax rebate benefits previously announced for geothermal companies but now appear to be canned due to the Government back-down on the minerals ‘super profits’ tax could be re-instated or enhanced.  Geothermal companies are in a poor state as can be seen from an examination of ASX-listed geothermal stocks, with market capitalizations imploding.  A leg-up is needed if they are to deliver a large part of the Government’s Enhanced Renewable Energy Target.  While a rebate is imperfect, this is just one measure that could assist to drive investment interest in the sector.  The only measure announced by the ALP is a direct subsidy to support the Geodynamics remote site in the Cooper Basin.  While grid connection is an issue for a number of developers, most pressing is technical and drilling constraints.
  • A leading prospect might be further subsidy for solar.   Polling from both sides of politics, all over the world, prove that solar is a big vote-winning opportunity – and implies costs that are distributed across the entire economy, rather than focussing costs on one segment – thus making it politically easy to implement.  An additional subsidy to solar would further accelerate take-up rates through shortening payback periods.  The obvious choice of instrument is a national feed-in-tariff, which would involve a level of consolidation of existing State tariffs.  Such a measure has been discussed extensively at the Federal level already, and is actively supported by the Greens. 

NB: As far as we are aware, none of these measures have been announced or are prioritised.




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