Windfarm owner said he was astonished by attitude of the head of the Coalition's renewable energy review

Windfarm owners say the head of Tony Abbott's renewable energy review recently told them they were foolish to “build a whole business model on government largesse”, raising fears he will recommend a severe winding back of the renewable energy target.



Simon Holmes a Court, the founding chair of Hepburn Wind, a community windfarm, told Guardian Australia he had been astonished by the comments from businessman Dick Warburton at a meeting last week.

Meanwhile, the now-independent Climate Council has released a report arguing Australia’s coal-fired power stations are among the oldest and dirtiest in the world and difficult to retrofit with carbon capture and storage technology – leaving renewables such as wind as the least-cost “zero emissions” option.

Holmes a Court said Warburton asked “didn’t we feel foolish basing a whole business model on government largesse”. The “government largesse” being referred to was the renewable energy target (RET) that was first introduced by the Howard government, has enjoyed bipartisan support ever since and has attracted about $18bn in investment.

“If the RET was to be abolished our project will fold. Two thousand people invested in this community windfarm on the basis that this was settled bipartisan policy. We are not feeling foolish, we are feeling betrayed,” Holmes a Court said.

Warburton’s review is expected to deliver a draft report to government next week.

The Coalition went into the election promising to keep the RET, which underpins investment in energy sources such as wind and solar, but saying it would review the fact that the policy was exceeding its original goal of delivering 20% renewable energy by 2020 because of falling electricity demand.

But, after the election, the Coalition began debating whether the RET should be scrapped altogether or – a more likely outcome – “grandfathered” so only existing projects will benefit.

The terms of reference for the RET review said it would look at “the extent of the RET’s impact on electricity prices, and the range of options available to reduce any impact while managing sovereign risk”.

And even government backbenchers who question the science of climate change and oppose the RET concede its total abolition would constitute “sovereign risk” – a situation where governments change the rules after investment decisions have already been made.

George Christensen, who the climate-sceptic Heartland Institute is sponsoring to address its conference in Las Vegas next month and who chairs the Coalition backbench industry committee, said there were “conflicting views within the Coalition because we are acutely aware of its impact on power prices but on the other hand there is a strong argument we should not disadvantage people who have invested on the basis of what was bipartisan policy”.

But the Institute of Public Affairs (IPA) thinktank – which has long lobbied against the RET – has used a submission to the Warburton review to argue for its abolition, dismissing concerns that abolishing the RET would constitute “sovereign risk”. Like Warburton, the IPA suggests businesses should not have based investments on government “favours”.

“Sovereign risk involves a ‘taking’ of property and should be avoided because, ethical issues aside, it creates great uncertainties for investment, especially investment with long payback times. But sovereign risk from the government withdrawing a favour is different from when it takes a property. No investor can reasonably expect a subsidy to prevail for 15 years as is notionally the case with windfarms and other exotic renewable facilities. And there would be few precedents for a government committing its successors to what would become 24 years of worthless expenditure,” the IPA says in its submission.

“If removal of such favourable and lengthy regulatory provisions was considered to constitute reimbursable sovereign risk, the motor vehicle manufacturers now abandoning production in Australia would have a case for compensation … The termination of the renewable energy requirements should be done immediately.”

According to the IPA, there are three options for modifying the RET scheme:

• Reduce it to a “real” 20% of the current electricity market. It says this would reduce the amount of renewables from 41,000 gigawatt hours (20% of what was the estimated size of the market in 2020) to a maximum of 33,000 GWh.

• Allow only the existing and committed projects to proceed as subsidised. This would mean about 15,000 GWh.

• Totally abandon the RET and force “renewables to immediately compete without subsidy, as their adherents always claimed they would eventually be able to do”.

The climate commission, which became a crowd-funded independent body after it was abolished by the Abbott government, will release a report on Tuesday arguing that “the least-expensive zero-emission option available at scale for deployment today in Australia is wind, closely followed by field-scale solar PV”.

“These costs are falling fast as take-up globally accelerates. Wind should be 20% to 30% cheaper by 2020, solar PV is expected to halve in cost,” the report says.

Assuming Australia does need to reduce emissions from its power sector, the report says moving to renewables would be cheaper than trying to “clean up” coal-fired plants.

It says that by 2030, 65% of australia’s power stations will be over 40 years old. The nation’s older power stations cannot be made more efficient without vast expense, and their age limits the potential for retrofit CCS investment, it says.

After the election, Abbott took control of the RET review of his own department and appointed Warburton – a self-professed climate sceptic – to head it.

Warburton, a veteran industrialist and the chairman of the Westfield Retail Trust, described his views on climate science in a 2011 interview on ABC in this way: “Well I am a sceptic. I’ve never moved away from that. I’ve always believed sceptical,’’ he said. “But a sceptic is a different person than a denier. I say the science is not settled. I’m not saying it’s wrong. I’ve never said it’s wrong, but I don’t believe it’s settled.”

Others, including Abbott’s top business adviser, Maurice Newman, want the RET scrapped altogether.

Newman, the former chairman of the ABC and the ASX, has said persisting with government subsidies for renewable energy represented a “crime against the people” because higher energy costs hit poorer households the hardest and there was no longer any logical reason to have them.

Under legislation, the next review of the RET is supposed to be undertaken by the independent Climate Change Authority (CCA) but the government is seeking to abolish the CCA.