How Australia Ended Up With A Renewable Energy Target

John Howard and a ray of light

The Creator of The Renewable Energy Target. Mr John Howard.

Australia’s Renewable Energy Target, or RET, was first introduced in 2001 by Liberal PM John Howard. It has been almost entirely responsible for getting Australia’s graceful collection of wind turbines erected and getting solar panels on the roofs of 19% of our homes.

However, despite all its success, not many of us know very much about the RET.

This is understandable, as on the surface the topic is fairly dry. But once you get past that desiccated surface you soon discover what lies beneath is actually about as dry as crawling through the Simpson Desert without water for three days and then eating six plain SAO biscuits off a salt flat.

But don’t worry, I’m going to save you from having to experience that yourself. I recently filled in the gaps my knowledge of the RET and I’m ready to present you with all the juicy tidbits of information I gleaned from that dry and dusty landscape.

Feel free not to read on if you are already confident in your mastery of the topic. But before you do that, just be certain you can answer in the affirmative when I ask, do you get RET yet?

Why We Have A Renewable Energy Target

Why do we have a RET? The answer to that question is, to reduce our carbon emissions to stop the icecaps from melting and prevent the planet in the future resembling a Kevin Costner flop. And having met the man personally, I can tell you that a floppy Kevin Costner is not a pretty sight.

Kevin Costner in the movie Water world looking through the metal bars of the cage he is locked in.

That’s right, Kevin Costner. You stay in that prison and think about your sins.

But just what has the RET done to prevent our planet from turning into a badly done Mad Max rip off? And why did we go with that approach back in 2001 rather than something else, such as a carbon price or a phase out of coal power? Well the answer to that is, there is a good economic reason to have a RET and there are some not quite as good political reasons that made it more acceptable than the alternatives.

The economic reason for having a RET was to support the initial development of renewable generating capacity in the country and get it through the early stages where costs were high and private enterprise would be unlikely to support it without the legal requirement the RET provided

And the not so good political reason is the coal industry has a lot of influence and almost certainly would have blocked anything it found more threatening to its interests. But the rumor anything more substantive than the RET would have been blocked because the majority of Australian politicians worship Gilgamax the God of Carbon is almost certainly untrue. Most astute political observers regard the worshippers of Gilgamax as only forming a plurality at best.

What The RET Has Done For Us

Renewable energy has come a long way this century. Rooftop solar and wind power are the most cost effective forms of new generating capacity in Australia. But things were very different 15 years ago when the RET was first introduced. Solar panels cost 7 times per watt more than now. And wind turbines cost one seventh more more per watt than now.

But to be fair to wind turbines, 15 years of inflation means they are considerably cheaper in real terms than they were, they produce more energy per watt of capacity than they used to, and have improved reliability and lifespans, so the cost of the electricity they produce has fallen considerably.

Fifteen years ago PV installations were as rare as hen’s teeth. And the funny thing is, since all hens start off with one, you’d think they’d be pretty common. But take a look around you right now and tell me if you can see any. Unless you are all cooped up, I very much doubt it.

The only thing solar you saw on roofs back then were hot water systems. When it came to PV we probably had more houses with solar cells on their roofs from Skylab crashing into Western Australia than from actual installations.

But now wind turbines are cheaper to build and operate than new coal or gas power stations and rooftop solar is the cheapest source of electricity available to most Australians. As rooftop solar competes with the retail price of electricity and not the much lower wholesale price, it would still out compete coal and gas even if they could generate electricity for zero cents per kilowatt-hour.

While the RET can’t take all the credit for the decline in cost and spread of renewable energy in Australia, it can take a massive amount of credit for wind power. Without the RET it almost would not exist in this country. And along with high feed-in tariffs, hardware cost declines, and the massive run up in retail electricity prices, it has been a major driving force behind the rapid uptake of rooftop solar.

A picture of three survivors of a world wide environmental disaster from the movie Waterworld.

The average Australian family in 2100 has 1.2 children and 2.9 American accents.

How did the RET lower costs?

As you have traveled down life’s highway, or perhaps blundered through the roadside ditch beside it, as I am prone to do, you may have noticed that doing things can be hard. And doing things for the first time can be very hard. Whether it is studying a new language, learning to ride a horse, or following my own calling of becoming one of Australia’s most skilled lovers, beginnings can be fraught with difficulty. Generally when learning something new there is an initial hump in the road that can take extra time and effort to get over, but once that is done the rest comes much easier. I know that as far as my own personal goal is concerned, I’ve never been able to get over my first hump.

Imagine if I gave you a heap of blueprints and instructions, and a really large box of parts, and asked you and your friends to put together a wind turbine. Chances are you wouldn’t have a clue what you were doing. It would probably take you ages to put it together and maybe you’d end up dropping a nacelle on a couple of your mates. And even after you got it up you’d probably have to go back and fix everything you got wrong. But, imagine how good you and your surviving friends would be at building wind turbines after 12 erections, or 30, or 100. You’d be quite expert at it, since nothing beats hands on experience.

Installing rooftop solar isn’t quite as complex, but the principle is the same. The more you do something, the better you get at it and the more ideas you have on how to improve what you’re already doing.

The problem is, no one wants to pay for a wind turbine or rooftop solar system built by people with no experience. Would you want people who hadn’t done it before mucking around with electric cabling on your roof? But inexperience is pretty much unavoidable when a new industry is getting started. By making it a legal requirement for electricity retailers to source a portion of the electricity they sell from renewable sources, the RET got wind power and rooftop solar over this initial hump. It didn’t just get the ball rolling, it pushed the ball up the hill and has now got it to a point where it can roll down by itself, if need be. We know the drive to lower the cost of renewables has been successful because at current costs Australia will never build another coal power station and is not likely to build any significant amount of new gas capacity either. You may have heard the Coalition Government call for a new coal power station in North Queensland to power a coal mine to mine coal to power the new coal power station, but trust me, that’s not going ahead.

And it is not just improving construction and installation skills that lower costs. There are a whole slew of factors that have all worked together to decrease them. Finance is an important one. Back at the start of the century banks were leery of lending money to renewable projects because they had no experience with them and didn’t know what level of risk they were taking on. But things have since been completely turned around and now banks don’t want to lend money for new coal power stations and coal mines, while financing for wind farms has become mundane and rooftop solar installation is regarded the same as any other business.

In addition, the RET has resulted in economies of scale which include the sourcing of hardware. For example, it is considerably cheaper to import 1,000 solar panels at a time than 2. And it has also played a small part in the world wide decrease in the cost of renewable hardware. The more solar panels or wind turbine components that are made, the cheaper they get as manufacturers improve their production techniques and more is spent on researching ways to lower their cost or improve their quality, either get a jump on the competition or just make money from licensing the newly developed technology.

Limits To RET Technology Development

While an RET technically could encourage the development of all sorts of renewable energy, in practice to tends to only focus on what is the cheapest. For the first 10 years of the RET, apart from some small biomass and hydroelectric generation, the main technology that was developed was wind power. While solar did receive some assistance it didn’t have a large effect on its development. It wasn’t until 2011 when the RET was divided into large-scale and small-scale technologies that rooftop solar, with the help of other incentives, was able to take off.

And even after the RET was split in two, it still focused mainly on just one technology in each area, wind and rooftop solar, because they had the lowest cost in each category. For example, because wind power was and still is cheaper than large-scale solar, no large solar farms would have been built in Australia if they hadn’t received additional assistance besides the RET.

It is possible to design a RET so it will give support to more than one main type of technology, as ours did after it was cut in two. Without the split we almost certainly would have missed out on rooftop solar becoming the most cost effective form of new renewable energy in Australia.

Dennis Hopper from the movie Waterworld riding a jet ski and wielding a machete.

Abbott from Waterworld… Sorry, I mean Deacon from Waterworld, looking for a Renewable Energy Target to cut.

Why A RET And Not A Carbon Price Or Other Method Of Cutting Emissions?

A RET is great for getting the development of renewable energy started and bringing down its cost. But, it doesn’t do much to stop existing fossil fuel plants from operating and spewing greenhouse gases into the atmosphere. Or at least it wasn’t supposed to when it was introduced in its initial form. And that’s the reason why the Coalition under John Howard introduced the RET in 2001 rather than a carbon price or a coal phase out. Because it was not seen as a threat to existing generators or the coal industry.

Back when the RET was first introduced it was called the Mandatory Renewable Energy Target and only called for new renewable energy equal to 5% of electricity consumption at that time by 2020. Eight years later the RET was expanded out to 20% by the Rudd Government. But even the small 5% target was enough to get Australia’s wind industry under way and while it wasn’t nearly enough to get rooftop solar to take off, it did breath some life into it.

But back in 2001 Australia’s electricity consumption had spent the past 40 years growing at an average rate of almost 6% and substantial increases were expected to continue. So fossil fuel interests at the didn’t consider a RET that would only come to a small portion of the new generating capacity they thought would be required each year was any kind of significant threat.

And that is why we have a renewable energy target rather than some other scheme for reducing carbon emissions. Because fossil fuel interests didn’t think it would be anything other than a mild annoyance. But even a very low carbon price of only $10 a tonne would have been seen as a threat to the coal industry and would not be something likely to have been passed by the Howard Government. And as for regulations requiring a phase out of coal power, well that wasn’t going to happen. The first four letters of the Coalition’s name isn’t coal because they always do the bidding of the coal industry. That was just pure luck.

Because of the expectation that growth in electricity demand would continue, the opposition to the Rudd Government expanding the RET to 20% in 2009 was not insurmountable. The coal industry and incumbent generators weren’t happy about it, but their existing investments were regarded as being safe because demand was still expected to increase by more than the amount of new renewable electricity that would be provided.

However, by that point in time, growth in electricity demand had slowed to a crawl. This was unexpected, but almost everyone involved in the electricity industry saw the slowdown as only a temporary aberration and believed growth in demand would soon pick up again. Or at least they had a vested interest in making people think that it would. So it is amusing that in 2010, one year after the RET was expanded, electricity demand actually fell and continued to fall for four years after that. As a result the RET did start to cost fossil fuel interests money.

Clearly they weren’t going to stand for that and it led to fossil fuel interests supporting the Abbott government and the removal of our short lived carbon price and the reduction of the RET. But that sordid series of events is a whole other story.

About Ronald Brakels

Many years ago now, Ronald Brakels was born in Toowoomba. He first rose to international prominence when his township took up a collection to send him to Japan, which was the furthest they could manage with the money they raised. He became passionately interested in environmental matters upon his return to Australia when the local Mayor met him at the airport and explained it was far too dangerous for him to return to Toowoomba on account of climate change and mutant attack goats. Ronald then moved to a property in the Adelaide Hills where he now lives with his horse, Tonto 23.

Comments

  1. Abbott…abbott wanted to keep jobs.

    Howard…costello was the man that kept howard afloat..

    Solar power. It’s the best..nothing can beat it..but employment prospects are low.

    So..piss off coal power..and more unemployed so maybe thats where the haters come from. labor govt and unions?

  2. Business makes opportunity. People make opportunities happen.

  3. Colin Spencer says

    South Australia uses the most renewable energy of all Australian states but has the highest price per kwhr of all Australian states. In fact, it has equal second highest rates in the world, equalling Germany. Renewable energy is not all it was cracked up to be. I’m in country Victoria, and we pay about 20% less than another family member living in Adelaide. South Australia might be heading in the wrong direction on this. Considering that the state has such a high unemployment rate.

    • Ronald Brakels says

      Colin, if you were going to erect a wind turbine or install rooftop solar, which would be the best state to put it in? Well, the easy answer to that is, if you like earning money, you would put it in the state with the highest electricity prices. South Australia has always had the highest electricity prices in Australia and that is why it has the most solar and wind capacity. If you check what South Australia wholesale prices were like before the state had any renewable power you will see they were quite high. They didn’t become high after renewable capacity was built and renewable energy has helped to lower them.

      You have got your cause and effect completely back to front.

      • Colin Spencer says

        Well, Ronald, you have managed to put up a spin on energy prices that leaves me breathless. The only reduction in electricity prices in unregulated state energy markets was when the Carbon Tax was removed by the current government. All those fancy wind turbines that don’t turn a blade on windless days can only produce electricity at a market rate, if the poor old consumer coughs up the capital, and massive subsidies on solar power are in place. That insane system has been brought back to reality now. AGL and Alinta are increasing energy prices in South Australia at present at an increase of around 15% to 18%. South Australia DOES have the highest energy prices of any state in Australia, and if you can call an increase a decrease then there is little hope for you. Other than the “reality check” we saw when the carbon tax was removed, that is. Look at present market prices. Compare them with prices before 2007. Coal fired power in South Australia was only 17% of the mix until the coal fired power stations were shut down. Industrial energy use has decreased enormously in that state, and with 44% of the state’s power being supplied from natural gas fired power stations, one would think that with the current world price of gas bottoming out, the price would be down. Nope. The increases are real. The big disappointment is that solar in SA is only 6%. Wind is 33%, but with removal of massive subsidies, don’t expect to see wind being any more viable than solar in the future. The point I made is this: With Coal Power switched off in South Australia, why is South Australia selling electricity to consumers at the second highest price per kw/hr of any country in the world? And why is that going to be the HIGHEST in the world next month? Think about that. It certainly is not a “reduction” by any stretch of the imagination. It is “unspinnable”. BTW, I am a great fan of Solar.

        • Ronald Brakels says

          Colin, here’s a simple question for you. Ten or more years ago when South Australia had no, or next to no, renewable energy capacity, were South Australia’s electricity prices, retail or wholesale, the highest of any state or not?

          • Colin Spencer says

            The answer might not be simple enough to satisfy you, because pricing during the past ten years has not been consistent. But, during that period, South Australia did in fact reach the highest price ever for electricity. See: http://www.aemo.com.au/Electricity/Data/Price-and-Demand/Average-Price-Tables/Average-Price-Tables-Annual As you can see, the answer is not a simple yes or no, and is what it is for a large number of factors. One of which, ten years ago, was an abundant supply of cheap electricity from the Victorian generators.

          • Ronald Brakels says

            Colin, the answer is quite simple. For all the states on that chart South Australia had the highest average wholesale electricity price from 10 years ago to when the figures start in 1998-1999. So the answer is South Australia’s wholesale electricity prices were the highest. If you don’t believe me, add the figures together and work it out yourself.

            But you haven’t finished. Now answer the question: Were South Australia’s retail electricity prices the highest of any state 10 or more years ago when the state had no, or next to no, renewable capacity?

        • Ronald is right, they always had high prices due to complete lack of fossil resources. It’s just as windy in TAS or VIC but wind farms could be built in SA and sell into the higher priced market.
          Also increasing supply necessarily reduces price. Lower priced bids push out higher ones; wind is bid close to zero.

          • Colin Spencer says

            Complete lack of fossil resources? What about the Leigh Creek Coal Mine? South Australia has enough coal to operate two coal fired power stations, and the assets are or were all paid for. Closed down now. What helped to kill it off was the carbon tax. So, the decision to invest in wind power had to be made to balance out the cost of the carbon tax. Unfortunately, all capital costs have to be recovered – from the consumer. Renewables are not economically viable, and if you talk to hard up people in Adelaide’s suburbs, they simply cannot afford to use electricity other than for absolute necessities. The only way they can get relief from the cold or the heat is to hang about in shopping centres.

  4. Seriously? “graceful wind turbines” ??? your being facetious ?

    This things are damn ugly and I mean uuuuuugleeee!!!!
    They are a blight on our landscape and the last time I was in France I remember seeing a field of a few hundred with about 25% turning.what waste.
    What I suggest on top of solar panels on homes a mini turbine which can produce power not only in the day but at night when it is most needed would be something that could not only be cost effective but could of over come partially the need and cost of batteries of course the wind would need to blow and at the moment the wind is blowing so hard at my place the solar panels are about to take flight.

    • Ronald Brakels says

      For the love of God, Eric, do not look at our 720,000 Stobie poles here in South Australia. If you find wind turbines ugly then their lack of aesthetic qualities will probably annihilate your delicate soul.

      Funny thing is through, Stobie poles are everywhere in South Australia and seen everyday by the vast bulk of the population, but no one ever seems to complain about how they are ugly. It’s almost as if people with delicate sensibilities are extremely selective in which parts of electricity infrastructure they find distasteful in a very unrealistic manner.

      • Several centuries ago domestic power infrastructure was built into the architecture of the houses, both inner city terraces and country estates – vis-a-vis chimneys. [Now it wasn’t so much the chimneys themselves but what appeared above them that was the problem.] My suggestion is to replace the chimneys with similarly shaped structures – vertical axis wind turbines – with the generator in the roof

  5. Colin Spencer says

    Ronald, I included a link above to give you accurate information on electricity prices for each state going back ten years as you requested. I shouldn’t have to type it out as a comment. Did you read it? Did you see the peak price in the chart?

  6. Colin Spencer says
    • Ronald Brakels says

      That is a gated article I can’t read, Colin. (Thank goodness for small blessings.) So you are going to have to make the argument that solar power does not work here or anywhere else yourself.

  7. Colin Spencer says

    Sorry Ron. But ignorance of the facts is a very poor defence. After years of saying I wouldn’t, recently I paid the subscription of $4.50 per week just to catch up on what the journalists were putting out there. I stopped reading printed newspapers over twenty years ago because there was very little to read in them other than advertisements. This article is written by one of the old school Labor people. It is simply pointing out the fact that renewables, after having Trillions of Dollars spent on them over the past twenty years, still amount to less than 1% of the total energy requirement world-wide. Similar percentages overall in most advanced economies.

    Mind you, I am still a fan of solar. One of my departures from logic.

    • Ronald Brakels says

      Colin, there are solar panels above my head. I know exactly how much I paid for them. I know exactly how much the STCs were. I know that even without STCs lowering their price the rooftop solar system was still be worthwhile. So I feel no need to pay $4.50 a week, or even 5 cents a week, to be told something I know is not true.

      • Colin Spencer says

        Well, I put 56 panels and two inverters onto the two phases at my winery shed a couple of years ago. Bad decision. Spending around $16,500 on such an excellent idea at the time was simply a waste of capital. For most of the first year, we were told that the feedback application had not been received three times consecutively, then, when I took a different tack, and gave them the option of discussing the issue in front of a Supreme Court Justice in Chambers or getting on with it, they got on with it. Then charged me $100 to have a bloke come out and press three buttons on the “smart meter”. Then, surprise, surprise, no reduction in power bills for the next three quarters. A kind soul following this site, said he was connected with the retailer involved, and all of a sudden the quarterly bill dropped from $1,300 to $480. But only once. We sold the property in January this year, so we simply dumped the investment. It added nothing to the value of the property at all. I won’t be doing that again.

        • Ronald Brakels says

          I think I see the problem, Colin. My situation is different from yours. Most people’s situations are different from yours. And your problem appeared to have been not with solar power itself, but with the surplus electricity it generated being stolen. Unfortunately those who engage in this illegal and shameful activity appear to have no sense of shame.

        • At best on domestic I save roughly 50% with 6.3KW of panels on a 5.3KW converter.
          Your price on the system seems quite low for the day 28 panels on each string.
          Plus because you are a business your cost would be a tax offset so would save you roughly 30% of the $16,500 in the first full tax year or would it be claimed as a depreciating asset ? .I did notice a bill went before the senate in 2015 regarding this so you might be able to clarify how the government sees the installation of solar panels for small business.
          I also note that in many parts of the USA a small business gets an immediate tax break of 30% .

          • Colin Spencer says

            Tax offset is only relevant if the company is making a profit. Most small businesses have not made a profit during the past five or six years. Depreciation is not relevant when the property is sold. Accumulated losses on that business (as with just about all wine businesses for the past five years, are huge, adding to the list does nothing to stop the losses. All gone now. So, I wasted the money. I did get a good deal on the system and installation. A mate is the CEO of the manufacturing company in China.

          • Ronald Brakels says

            Colin, a 56 panel system is very large and would generate a lot of electrical energy. I assume it is still in place and both reducing grid electricity consumption at the location and sending excess solar electricity into the grid, displacing fossil fuel generation and reducing greenhouse gas emissions and emissions of particulates, heavy metals, ozone, and other forms of pollution. So thank you for that. Your investment may not have turned out the way you wanted, but it is helping people both here in Australia and around the world and is appreciated.

  8. Bert Goodwin says

    I had a 3kw system installed and connected to the grid in March 2010 at a cost of $16500 I paid cash so no interest incurred, as is June 2016 I am still approx $4000 short of my outlay .
    Not a very good investment , I defiantly won’t rush into purchasing a battery pack

  9. Hi Ron,

    Enjoyed your article, and interesting to hear the background to the creation of the RET. I find that many people think that they’ve missed the boat on solar being worthwhile now that the higher feed-back tariff is gone, but don’t realise that as well as getting clean electricity for the next 25 years, their solar system is still subsidised to the tune of about $700 per kW through the RET scheme.

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