Clever Leyonhjelm gives Abbott a template to kill wind power

Libertarian senator David Leyonhjelm is showing himself to be a canny schemer of a politician with his proposal to win over the crossbenchers to slash the Renewable Energy Target (RET).

According to media reports (and statements from himself) he already has four of the six crossbench senator votes needed by the government to pass such a reduction in the RET.

Leyonhjelm thinks climate change is crap or at least would like to think it's crap because he’s concerned it might lead to greater government regulation – something he considers to be manifestly bad. Indeed if he happened to see the film Thank you for smoking, there’s little doubt he’d be the one guy in the cinema cheering-on the anti-hero main characters – lobbyists for the tobacco, alcohol and gun industry.

But he realises that other politicians can’t be quite so overt as him in letting the world suffer the consequences of giving free reign to corporations to engage in a competitive race to the bottom in pursuit of a dollar.

After all most politicians actually need people to deliberately and consciously vote for them. They can’t depend on voters’ confusion to cause them to vote for you accidentally through cleverly naming your political party something (Liberal-Democrats) similar to another far more popular political party (the Liberal Party, not to mention the Democrats). Nor can they harvest preferences by creating several front-group parties all linked to the same individual group.

So while he thinks the Renewable Energy Target is an abomination whether it’s a fixed target of 41,000 gigawatt-hours or 20 per cent of electricity demand or even 2 per cent of demand; he appreciates that other politicians, including the Liberal-National Coalition, aren’t prepared to face up to the voters to overtly kill-off the one major policy left constraining Australia’s carbon emissions.

So what to do in order to make some progress in ridding Australia of this abomination of government intervention, given the following?

– The government wants to slash the scheme but want to look like they are just “recalibrating” it to a target of 20 per cent of power consumption.

– Other crossbench senators have heard loud and clear from their constituents that they reckon solar is great. So they don’t want to pull support for that part of the RET which helps solar.

– Senators Nick Xenophon and John Madigan don’t like wind power because they reckon it's harming the little guy neighbour (but have been essentially duped by a group led by incredibly wealthy and powerful people with hobby farms who's views are threatened by wind farms).

– Jacqui Lambie is keen to help out working class Tasmanians where the metal smelters and the hydro are some of the biggest single employers.

Leyonhjelm has pulled out the calculator (or perhaps more likely someone else has, and passed on the results to him) and, lo and behold, he has found a way through which:

– keeps the large-scale Renewable Energy Target fixed at 41,000 gigawatt-hours as called for by the renewable energy industry,

– allows the government to cut the level of renewables down to 20% market share

– leaves rooftop solar alone,

– helps out Tasmania,

– while, most importantly, gutting that technology all right-wingers love to hate: wind power.

The trick is to allow hydro generators, even ones that commenced construction back when Menzies was prime minister, to get a Renewable Energy Certificate subsidy, paid for by electricity consumers, for almost every unit of power they produce.

Now, old hydro generators already manage to rort the RET by getting these certificates but only where their generation exceeds an historical average baseline. The logic being, why give a low-emission power generator a subsidy for something they are going to do anyway without a subsidy.

This proposal would mean rather than old hydro claiming a subsidy for an average of about 1500GWh from the 41,000GWh target, they would instead claim “at least” an additional 10,400GWh below their historical baselines. All without any change whatsoever in hydro plant capacity nor (importantly for Jacqui Lambie to note) hydro employment.

Combined with 14,500GWh of other renewable generation already in operation this leaves 14,600GWh for new renewable energy projects. Whereas if things were left as presently structured, there would be demand for an additional 25,000GWh from new projects.

Yet Leyonhjelm’s proposal should actually cause him some real moral qualms as a libertarian, if you understand your economics.

You see, even though the hydro generators essentially get to create an extra 10,400GWh worth of renewable certificates for no cost, that doesn’t mean they’ll sell them for nothing. Note that Leyonhjelm’s proposal still requires another 14,600GWh from new renewable energy projects. So Hydro Tasmania and Snowy Hydro will naturally sell their certificates at a price set by the competing cost of alternative supply – which is a new wind farm.

So Leyonhjelm’s proposal will mean we’ll probably have to pay about an extra $60 for every megawatt-hour of electricity we already get from hydro generators (which will go into the coffers of their government owners), and we won’t actually save much at all on our power bill. That’s because the amount of renewable energy certificates we’re required to buy is exactly the same – 41,000GWh.

In fact, things are worse than that.

At least if we kept things unchanged, for the extra $60 you pay for new renewable generation you (the consumer) save money in two ways:

– That extra new supply from renewable generators acts to supress wholesale electricity market prices by pushing out high cost generators (according to government modelling this saving actually outweighs the extra $60); and

– It means you pay less in tax to fund the government’s Direct Action scheme for purchasing abatement from polluters.

So when you boil it all down, Leyonhjelm is proposing the exact opposite of what he stands for: increased revenue to governments who continue to retain ownership over power generators.