News | 9th Aug, 2013

Cuts to RET will costs consumers, says study

9 August 2013

Australian Financial Review

A proposed cut for the Renewable Energy Target could increase the cost of power to consumers by $1.3 billion between now and 2020 by reducing downward pressure on the wholesale energy market, new research says.
The research by Bloomberg New Energy Finance shows wholesale electricity prices could increase by $5 a megawatt hour by 2020 if the RET requirement of extra power from new large-scale developments were cut from 41 to 27 terawatt hours, as is being proposed by Origin Energy and International Power. The release of the research comes ahead of a meeting of wind companies next week in Sydney to discuss their options under a federal Coalition government.
The Coalition has pledged to retain the present RET, which at present aims to achieve at least 20 per cent of Australia's electricity from renewable sources by 2020, but has promised a review of the scheme early next year. According to Bloomberg, a substantial modification to the RET was likely to raise the cost of wind and large-scale photovoltaic (PV) projects in Australia because it increases financing risk by up to 75 basis points. For wind and large-scale PV projects, it would increase the cost of generating electricity by about $2/ MWh and $3-5/MWh respectively during the 2013-20 period.
A reduction of the RET based on a low demand scenario for national power consumption of a total 235 TWh in 2020 would result in 49 percent less new renewable energy capacity being built, with few new projects being commenced after 2018. As a result, wholesale electricity prices would also increase in the extra 27TWh scenario by about $5/MWh in 2020, because renewable generation tends to exert downward pressure on wholesale electricity prices. This would lead to any savings to consumers from lower cost store tailers of complying with a lower RET $1.9 billion being more than cancelled out by higher retail electricity prices.
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