An analysis of Australia's large scale renewable energy target: Restoring market confidence

Abstract

In 2001, Australia introduced legislation requiring investment in new renewable electricity generating capacity. The legislation was significantly expanded in 2009 to give effect to a 20% Renewable Energy Target (RET). Importantly, the policy was introduced with bipartisan support and is consistent with global policy trends. In this article, we examine the history of the policy and establish that the 'stop/start' nature of renewable policy development has resulted in investors withholding new capital until greater certainty is provided. We utilise the methodology from Simshauser and Nelson (2012) to examine whether capital market efficiency losses would occur under certain policy scenarios. The results show that electricity costs would increase by between $51 million and $119 million if the large-scale RET is abandoned even after accounting for avoided renewable costs. Our conclusions are clear: we find that policymakers should be guided by a high level public policy principle in relation to large-scale renewable energy policy: constant review is not reform.

Distributional Effects of the Australian Renewable Energy Target (RET) through Wholesale and Retail Electricity Price Impacts

“…T h e p r i c e i s , h o w e v e r , a l s o i n f l u e n c e d b y p o l i t i c a l e v e n t s impacting the current and expected stringency of renewable energy policy. Nelson et al (2013) note that prices have generally been lower than this expected difference. This is mainly due to uncertainty regarding the future of the RET and an oversupply of permits that occurred due to a multiplier for credits generated by small-scale solar, which had been introduced in 2009 when the target was expanded.…”

Climate change policy discontinuity and its effects on Australia's national electricity market

“…But as Fleishman et al. (2014) explain a key dilemma for policymakers has been to achieve stable and durable, let alone united climate change policy architecture given strong political differences at the national level (Apergis & Lau, ; Byrne et al., ; Freebairn, ; Garnaut, ; Jones, , ; Molyneaux, Froome, Wagner, & Foster, ; Nelson, ; Nelson, Kelley, Orton, & Simshauser, ; Nelson, Nelson, Ariyaratnam, & Camroux, ; Simshauser, ; Wagner et al., 2015).…”

“…But these design errors paled into insignificance by comparison to the last‐minute inclusion of a two yearly statutory review, ironically negotiated by the Greens; and the inclusion of the ‘solar credits multiplier’ (Buckman & Diesendorf, ; Byrne et al., ; Cludius et al., ; Jones, ; Nelson et al., , ). Two yearly statutory reviews of the RET were an unambiguous disaster.…”

Using renewables to hedge against future electricity industry uncertainties—An Australian case study

“…This change has created large uncertainty over the extent and manner in which the electricity sector will need to contribute to emissions reductions in the coming decades. Such uncertainty of carbon pricing policy can have significant impact on the electricity industry in terms of higher societal costs due to suboptimal investment decisions (Nelson et al, 2013).…”