RET issue just won’t go away

The Australian Financial Review today (10 Feb) ran a story on the Renewable Energy Target failing to incentivise the development of large-scale renewable technologies. Its worth having a look at (www.afr.com.au)

As many of the readers of this blog know, AGL has consistently argued for a 4 point ‘roadmap’ to be adopted by State and Commonwealth Governments to solve this issue. The roadmap is supported by AGL Energy, Pacific Hydro, Vestas, Suzlon, Elgas, Epuron, The Gas Industry Alliance, Jemena and Siemens. The detail is outlined below:

The Australian energy industry believes existing policies measures with appropriate amendments can deliver a boom in investment and employment and contribute towards a significant reduction in greenhouse gas emissions over the coming decade. While each signatory to this document has its own policy position, the broad policy outline below represents a suite of solutions which are broadly acceptable.

Our plan is based upon four simple policy principles:

1.         HOT WATER

 The Commonwealth has announced that from 2010, only gas (LPG or reticulated natural gas) or solar gas boosted hot water (SHW) will be able to be installed where gas is available. This policy will ensure that low emission SHW and gas hot water will displace electric hot water systems over the coming decade as existing hot water systems are replaced at the end of their economic lives[1].

 Minor policy amendments required:

• Removal of eligibility of all forms of hot water under the Renewable Energy Target with support being provided through energy efficiency schemes

2.         ENERGY EFFICIENCY 

There are energy efficiency schemes now operating in South Australia, Victoria and NSW. These schemes provide an additional source of revenue for companies that provide energy efficiency services.

Minor policy amendments required:

• Amalgamation of state-based energy efficiency schemes into a single national energy efficiency obligation on energy retailers
• Inclusion of all forms of low emission hot water (gas, LPG and SHW) as eligible sources of energy efficiency

3.         SMALL SCALE RENEWABLE ELECTRICITY GENERATION (PV) 

There are various feed-in tariffs in place in different states which provide varying levels of support for household scale renewable photovoltaic solar generation (solar PV). The NSW and ACT Governments have the most generous schemes through a ‘gross’ feed-in tariff which provides installers of solar PV with additional revenue for all energy generated.

Minor policy amendments required:

• All states to implement a feed-in tariff for residential solar PV; or
• Inclusion of residential solar PV as an eligible form of energy efficiency; and
• Faster removal of multiplier for small scale generation under the Renewable Energy Target

4.         LARGE SCALE RENEWABLE ELECTRICITY GENERATION 

The expanded RET will underpin the delivery of the Government’s renewable energy commitments by driving investment in large-scale renewable generation.

Minor policy amendments required:

None

---

[1] Outside reticulated natural gas areas a policy to preference LPG boosted solar will assist in delivering the ability to extend the natural gas network.

Renewable Energy Target: Discussion between the Greens and Opposition

In an article in The Australian newspaper this morning (http://www.theaustralian.com.au/news/coalition-greens-talk-alternative-power/story-e6frg6n6-1225823774745), there is significant discussion about the failure of the Renewable Energy Target to drive investment in new large scale renewable projects. AGL has stated for some time that the failure of the policy is due to overlapping complementary policies that over-incentivise particular technologies: namely solar hot water and solar PV.

As a result of uncoordinated policy settings, solar hot water is now receiving more in subsidies than the wholesale cost of the units themselves.[1] Similarly, the payback period on installing residential solar PV in NSW is now less than 3 years[2]. These unsustainable funding levels are the result of State and Commonwealth policies overlapping each other with little or no coordination. As a result, the REC market is now oversupplied for many years with new large scale investment not required until at least the middle of next decade.

AGL and other industry participants have come up with the Energy Industry Roadmap which was referred to by the Sydney Morning Herald a week or so ago (http://www.smh.com.au/environment/energy-smart/kick-out-solar-installers-says-industry-20100117-meed.html). The Roadmap calls for the removal of all hot water technologies from the RET Scheme. These technologies do not generate renewable electricity and are therefore inconsistent with the objective of the Act: “to encourage the additional generation of electricity from renewable sources” (Renewable Energy (Electricity) Act 2000). It should be noted that the recent announcement by the Commonwealth in relation to building standards, effectively mandates solar hot water where electric units are replaced (www.abcb.gov.au). The Roadmap supports the continuing recognition of the generation that solar PV and other small scale technologies can contribute to the RET Scheme, if there is a rapid removal of the Solar Credits multiplier. 

---

[1] A solar hot water unit costs around $2,700 wholesale and receives up to $3,000 in rebates (through REC revenue, the $1600 rebate and various State energy efficiency rebates and schemes

[2] Solar PV in NSW now receives the artificial REC revenue through the ‘multiplier’ as well as a gross feed-in tariff of $600/MWh

AGL involved in clean energy industry “road map”

Today, the Sydney Morning Herald and The Age featured a story on a clean energy industry “road map” which has been adopted by the leading clean energy companies in Australia. The “road map” puts forward some simple solutions to overcome the problems being experienced with the Renewable Energy Target as a result of poor coordination of complementary policies. For example, solar hot water now receives nearly $2600 in rebates which allows it to be almost given away free of charge. The road map outlines how it could be transitioned into energy efficiency schemes so that the Renewable Energy Target would go back to supporting large scale renewable electricity generation (e.g. wind and solar).

To read the article, click here: http://www.smh.com.au/environment/energy-smart/kick-out-solar-installers-says-industry-20100117-meed.html

Impact of carbon pricing on electricity pricing

There has been alot of discussion about the pass through of carbon pricing into electricity prices. Modelling studies done for governments and industry groups differ significantly in their findings. The range of pass through estimation in the first year of the proposed CPRS starts at around 15% and goes as high as 115%. This is absurd when one considers that only existing power stations can be used to meet a target in the first year. As such, the modelling variation cannot be put down to different assumptions about new plant costs.

The most logical answer is that wholesale electricity prices will increase by around the same amount as carbon prices. Consider the following: the greenhouse intensity of electricity supplied within the National Electricity Market is around 1 tonne of greenhouse gases for every MWh of electricity supplied; as such, the average cost increase for generators will be around 1 permit for every MWh produced; therefore the extra cost is likely to be around 1 permit per MWh. As the elasticity of demand for electricity is almost perfectly inelastic, full cost pass through is highly likely in the first few years of the scheme.

This is supported by a recent consultants report for the NSW Independent Pricing and Regulatory Tribunal (IPART). In their report, Frontier Economics state: “The levels of carbon pass through are high – this will be the case for the period where the CPRS is active but prior to new investment coming into the NEM in response.”

International Standard ISO26000: Guidance on Social Responsibility

The purpose of this blog is to start a discussion about the International Standard ‘Guidance on Social Responsibility’ (ISO 26000) which is currently being drafted.

The ISO established a multi-stakeholder working group in 2005 to develop ISO 26000. The multi-stakeholder approach involves experts from more than 90 countries and 40 regional organisations, representing different stakeholder groups, including consumers, government, industry, labour, and NGOs.  The Standard is due to be published in late 2010 (at the earliest), and a draft version of the Standard has been circulated for comment.

The stated aim of ISO 26000 is to occupy the middle ground on the social responsibility continuum between legislated controls on one end, and complete freedom for organisations at the other end.  The Standard will attempt to provide “common guidance on concepts, definitions and methods of evaluation” whilst still enabling flexibility.

Key points

Importantly, ISO 26000 is a voluntary standard. It is not a management system standard (unlike ISO 9001 and ISO 14001) and we understand that it will not be a certification standard.

Seven core subjects are outlined in the Standard to assist an organisation to define the scope of SR, identify relevant issues, and set priorities. These subjects are:

• Organisational governance;
• Human rights; 
• Labour practices; 
• The environment;
• Fair operating practices;
• Consumer Issues;
• Community involvement and development.

 

Other key considerations in the Standard include:

• Comprehensive engagement of stakeholders;
• The assessment of an organisations sphere of influence;
• The development of specific and measurable indicators to chart the progress of social responsibility; and
• Effective communication of social responsibility.

Implications

In its current, draft format ISO 26000 is voluntary and non-prescriptive, and it is as yet unclear just how organisations will demonstrate use and adherence to this Standard.

The philosophies and principles outlined in the Standard are broadly reflected within AGL’s sustainability program. There are many parallels between the Standard and a number of other initiatives which AGL is undertaking:

• The Standard recognises the importance of reporting, and promotes the effective communication of social responsibility through the provision of transparent, comprehensive and balanced information to stakeholders. This philosophy is also embodied in the GRI framework and the AA1000 assurance standard, both of which are used to guide AGL’s approach to sustainability strategy and reporting.
• ISO 26000 reinforces the need for independent verification of data, and recommends the application of robust reporting standards to enhance the credibility of sustainability reporting. This coincides with the findings from a number of studies on the state of corporate sustainability which show an upward trend in the adoption of both the GRI and the external verification of sustainability reports.   
• The Standard also recognises the importance of engaging stakeholders, and AGL mechanisms such as the Customer Council and the Climate Council provide valuable communication pathways for maintaining and improving relationships with our stakeholders.
• The importance of developing measurable performance indicators and metrics to chart an organisations progress against social responsibility is clearly stated in the Standard, which supports our continuing work in this area.

Questions

So, some questions:

• Do you think organisations should adopt this standard?
• How do you think organisations will use and demonstrate adherence to this standard?
• Will using this standard make a difference to an organisations sustainability performance?

Tell us your thoughts!