Research shows bills would not fall, but the coal industry would reap a massive windfall if renewable energy target was scrapped

Coal and gas generators will reap $10bn in extra profits over the next 15 years if the Abbott government pares back the renewable energy target (RET), and the nation’s electricity bills will not fall, according to new research.



Coal and gas generators have been among the most vocal supporters of reducing the RET, which requires 41,000 gigawatt hours of power to be sourced from renewables by 2020, but the research by Jacobs found reducing the target would also be in those companies’ interest.

Reducing the RET – one of the most likely options being considered by a review that is about to report to the government – would deliver $8bn in additional profits to coal generators and $2bn to gas generators.

This would include $1.9bn for EnergyAustralia, which runs the Yallourn brown coal power stations in Victoria, $1.5 billion for Origin, owner of the huge Eraring black coal power station in NSW and $1 billion for AGL, which owns the brown coal Loy Yang A station in Victoria. AGL’s windfall would be much larger if it acquired Macquarie Generation. In that event AGL would gain by $2.7bn.

The RET policy was intended to deliver 20% renewables by 2020, but is set to deliver about 28% because of an unexpected fall in electricity demand. The estimates of windfall profits are based on the policy option of reducing the RET to deliver a “real” 20% when measured as a proportion of the current market.

The research, commissioned by the Climate Institute, WWF and the Australian Conservation Foundation also confirms several previous studies which found that winding back the RET would not reduce household power bills – the ostensible reason for the government’s review and likely changes.

Tony Abbott took control of a RET “review” after the election and appointed businessman Dick Warburton – a self-professed climate sceptic – to head it, arguing the RET needed to change because it was pushing up power prices.

“We have to accept that in the changed circumstances of today, the renewable energy target is causing pretty significant price pressure in the system and we ought to be an affordable energy superpower … cheap energy ought to be one of our comparative advantages,” the prime minister said last year.

But according to the new research, reducing the RET would not cause power bills to fall and may make them rise in the longer term.

This is consistent with ACIL Allen modelling done for Abbott’s own review which shows the current target will increase the average household bill by an average of $54 a year between now and 2020, but will reduce bills by a similar annual amount over the following decade compared with what they would be if the RET were repealed. That modelling used assumptions highly unfavourable to renewable energy, including that coal and gas prices would remain almost unchanged until 2040.

Separate modelling for the Clean Energy Council by Roam Consulting – with different assumptions about gas prices – found that bills would be $50 a year lower by 2020 if the RET were retained.

Another modelling exercise, commissioned by three business groups from Deloitte, found household bills would rise by at most about $50 a year.

John Connor, chief executive of the Climate Institute, said the Jacobs modelling “highlights the cynical self-interest behind power companies’ calls to weaken the Renewable Energy Target”.

“Companies like Origin and EnergyAustralia are pushing to weaken the target not, as they like to claim, because that would be good for customers, but because a weaker target is better for their bottom line,” Connor said.

Kelly O’Shanassy, Australian Conservation Foundation chief executive, said the research showed “power companies have 8 billion reasons to attack clean energy and they have actually forgotten about their customers – and the air we all breathe”.

The additional share for fossil fuel generators would also mean an additional 150m tonnes of carbon emissions by 2030 and $8bn less investment in renewables, the Jacob research found.

EnergyAustralia’s former managing director Richard McIndoe has called for the RET to be reduced to “a real 20%” to “strike the right balance between driving more investment in renewable energy and keeping costs down for consumers”. Origin Energy has also called for a “real 20%”.

Abbott’s top business adviser, Maurice Newman, wants the RET scrapped altogether and has said that persisting with government subsidies for renewable energy represents a “crime against the people” because higher energy costs hit poorer households the hardest and there was no longer any logical reason for them. Many backbenchers are also determined to stop the RET from assisting any further investment in wind energy.