Obsession with market policies dooms renewables

The recent collapse of Solar Systems, the only company in Australia capable of building large-scale solar power stations, has exposed Rudd’s failure to support renewables. Central to this is the obsession that building and funding renewable energy must be left to the free market.
Rudd is relying on three major policies to encourage renewable energy.
The first is his Carbon Pollution Reduction Scheme, which by putting a price on carbon, “will drive investment in the low carbon technologies and low pollution jobs of the future,” Penny Wong claims.
Yet that price is so low that experts like Mark Diesendorf have said, “At best, some black coal will substitute for some brown coal and a little more gas will be used for electricity generation and heating” (see back page).
Rudd’s second major policy is the Solar Flagships program, announced in the budget in May. This set aside $1.6 billion of government money to build 1000MW of solar power in up to four large power plants.
But many have raised doubts about the program. The Clean Energy Council bluntly told the government “this level of funding will not be enough to build the targeted 100MW” in its submission to a report on getting Solar Flagships up and running.
The Victorian government also criticised the program, recommending scaling down its size.
Maintaining the government’s obsession with the free market, Rudd’s program provides only a fraction of the funds for each power plant. It will require $2 of private funding for every $1 of government money to build them.
The failure of Solar Systems, which was promised government funding of $129 million towards a $420 million project, shows that these new power plants may never end up being built. Solar Systems only received $500,000 of government money—most of it was not scheduled to be released until the project was virtually completed.
The economic crisis has meant banks are less willing to lend to developing technologies like large-scale solar power.
As the Clean Energy Council’s Matthew Warren put it, “It’s been a tough year for all businesses to find investors, and even harder for companies like these that are years away from providing a return on the investment.”

Renewable Energy Target
The other key policy is an increased Mandatory Renewable Energy Target (MRET). It claims this will ensure 20 per cent of Australia’s electricity comes from renewable sources by 2020.
That sounds impressive. But like the CPRS, the scheme is riddled with loopholes.
MRET relies on a market mechanism, which is supposed to ensure the cheapest form of renewable energy is favoured. But because renewable energy producers can hoard credits under the scheme and sell them at a later date, there is an incentive to install the cheapest renewable energy as quickly as possible.
As a result the scheme will lend no support to the development of new technologies like large baseload solar power stations or geothermal energy. There will be some wind power built, “likely to account for 50-70 per cent of the new [MRET] supply” according to Fairfax journalist Paddy Manning.
Worse still, MRET’s definition of renewable energy is ridiculously wide—it even includes methane gas released as waste during coal mining, which is neither clean nor renewable.
There are also special incentives for the installation of small household solar power systems and solar hot water heaters.
Such small systems receive extra Renewable Energy Certificates for the power they produce compared to wind farms or large power stations.
These have been labelled “phantom credits” because they do not lead to the creation of new renewable energy and reduce the amount of renewable energy generated under the MRET.
Their inclusion has seen the price of credits, which are traded on the market, plummet.
In late October the Financial Review reported that almost the entire renewable energy target for 2009 looked like being filled by household solar hot water systems and solar panels.
Even wind energy is being squeezed out. Victoria’s Keppel Price Engineering, which supplies 40 per cent of Australia’s wind turbines, may be forced to cut 150 jobs as a consequence, according to the Financial Review.
The result is that we will not reach anywhere near 20 per cent of our energy being generated by renewables.
These problems underline the failure of Rudd’s market-based approach.
At best it will deliver small changes, like a slight increase in the use of wind power.
If there is going to be a shift in the way the bulk of energy in Australia is produced, there needs to be state intervention to commit the substantial investment in renewables this requires.
To win this the climate movement needs to unite with the unions to demand green jobs and government investment.
By James Supple


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