Aug 22 2014

Is Energy Australia lying to its customers?

My household recently switched energy companies. The main reason was that the one we left, Energy Australia, has been lobbying to sabotage the federal Renewable Energy Target (RET). When an employee asked us why we were leaving we told them so, to which they innocently responded that Energy Australia is a leader in renewable energy and couldn’t possibly be doing anything to oppose it. I’ve heard similar platitudes before from an Origin Energy employee.

One of the most frustrating things in politics is having to deal with professionals who assume they know more than I do, when it’s pretty clear to me that they are either misled or lying. Either that employee has naively bought into their corporation’s propaganda, or they are wilfully promoting it. Here I’ll expose the duplicity.

Energy Australia is one of the country’s big three “gentailers”, invested in both the generation and retailing of electricity, and the vast majority of its generation investments are in fossil fuels. Based on Energy Australia’s latest Sustainability Report, 96% of the company’s electricity generation assets are coal- or gas-fired, and if you also include gas storage and processing, an even greater proportion of the total energy generated by the company. In the last five years it has increased its fossil fuel capacity by 75%, making Energy Australia the third largest emitter in Australia’s electricity sector.

The other two gentailers, Origin and AGL, also continue to invest in fossil fuels; Greenpeace has just released a report describing them as the “Dirty Three”. Origin, betting on a gas boom, has increasingly invested in coal seam gas (increasing its fossil fuel capacity by 87% over five years) and moved away from renewables (which now produce a mere 0.5% of its electricity). AGL has more investments in renewables, but this week bought Macquarie Generation, more than doubling AGL’s fossil fuel investments and making it the biggest polluter of all (with over 90% of its profits to come from fossil fuels). All three do offer a “100% GreenPower” option, but that just places the responsibility to pay for climate action on individuals rather than corporations or governments.

Moreover I want to ask the gentailers’ defenders: If you think they are so great on renewable energy, then how do you explain the fact that they are campaigning against it?

Undermining the Renewable Energy Target

Australia’s Renewable Energy Target mandates that electricity companies must buy a certain quota of renewable energy generation, represented by Renewable Energy Certificates (RECs). The current target is 45 terawatt-hours (TWh) of new renewable energy by 2020, split into the 41 TWh Large-scale Renewable Energy Target (LRET, which supports mainly wind) and 4 TWh Small-scale Renewable Energy Scheme (SRES, which supports mainly rooftop solar PV). That would bring the total amount of renewables to 20% of the demand which was projected for 2020 at the time the legislation was passed. Since energy demand forecasts have been revised downward, the RET could potentially deliver enough renewables to provide around 27% of Australia’s power in 2020.

The choice of 20% was always an arbitrary number, as we need to get to 100% renewables as soon as possible. Human-caused global warming is the most urgent threat facing humankind. It is already causing an increase in extreme weather events which are costing lives, and there is ever more evidence that the Earth is poised on dangerous tipping points. To have any hope of stabilizing the climate, we urgently need to leave fossil fuels in the ground and replace them with renewables. We have the technological capability to repower Australia with 100% renewable energy within ten years. Considering that renewable energy is essential to maintaining a safe climate yet a relatively new industry, it is appropriate for it to receive subsidies and support from government. The current RET is far too low and hamstrung by policy uncertainty and a surplus of RECs that will last until 2016; a higher target is needed to incentivize new projects.

In these circumstances, any reasonable person would welcome the possibility of the RET being exceeded and see it as an opportunity to strengthen the target. But not Energy Australia and the other gentailers, because the rise of renewable energy threatens their profits. They have a vested interest in protecting the profitability of their fossil-fuelled power plants, which are already struggling to compete with renewables in the context of falling demand and need to be shut down to solve global warming. They also have a vested interest in killing the rooftop solar industry, because it reduces the daytime demand for electricity from retailers (indeed rooftop solar installations are double-counted as part of the demand reduction that is being used to justify reducing the RET). Accordingly, Energy Australia demands in its submission to the current RET review that the LRET be revised downwards to merely deliver a “real 20%” in 2020 and the SRES be phased out.

Energy Australia’s argument is that the RET hurts consumers by driving up electricity prices. It’s touching that Energy Australia is so concerned about overcharging its customers (if only it displayed the same eagerness in delivering on its own promised rebates for paying bills on time). The argument ignores the fact that renewables reduce wholesale electricity prices, because wind and solar power involve no fuel costs and are hence prioritized in the “merit order”. The RET only costs consumers in the sense that retailers pass on the costs of the RECs they are mandated to buy; if Energy Australia is so concerned about consumers it could choose to absorb the costs itself. Furthermore, the argument that the RET raises electricity prices for consumers is only supported by economic modelling based on dubious assumptions and presentation and associated with the fossil fuel industry – the same people who wrongly foretold the carbon tax would destroy the economy. Even under the extreme worst-case scenario they could concoct, the RET’s supposed cost to the average household is less than $1 per week. Independent models show that more renewables will ultimately lower retail electricity prices due to the merit-order effect. Contrary to industry claims, the main cause of rising retail electricity prices is overinvestment in poles and wires, not the RET or carbon tax.

Origin is aligned with Energy Australia in opposing the RET, while AGL opposes the small-scale component and claims the large-scale target cannot be met due to a lack of new projects. But the true reason why renewable energy suppliers are struggling to get onto the grid is because the gentailers are using the present oversupply of RECs as an excuse to refuse to sign new renewable power purchase agreements.

The gentailers do not speak for the majority of Australians. Polling shows 29% of Australians think the RET is too low, 36% believe it’s about right, and only 13% say it’s too high. In the previous RET review in 2012, 99% of submissions and 41% of individually written submissions called for it to be increased or otherwise strengthened.

Energy Australia’s own modelling shows its reduced “real 20%” RET would effectively halt Australian deployment of renewables from (guess when) 2016. In combination with the REC surplus, that would essentially stop any new renewables in Australia between now and 2020. As explained in the Australian Youth Climate Coalition’s submission to the same review, this will not only kill jobs in renewable energy but will also sabotage Australia’s (already far too weak) efforts to cut greenhouse gas emissions – the complete opposite of what the RET was originally intended to achieve. If electricity demand rebounds, it would also potentially allow for the building of new gas-fired generation with an intended lifetime of decades.

A new analysis from the Climate Institute shows reducing or abolishing the RET would benefit only the fossil fuel generators, boosting their profits by around $10 billion (including $2 billion for Energy Australia) while households would suffer a slight rise in electricity prices. Energy Australia and AGL are already boasting that the carbon tax repeal has improved the outlook for their coal-fired plants (ironically, AGL also complained their profits were hit by the “unseasonably warm” winter).

Unfortunately, Energy Australia is likely to get its way.

The anti-renewable government

The governing Liberal Party explicitly endorsed the existing form of the RET before their election last year. However, all indications suggest the Liberals will continue their frequent amnesia about election promises.

Even though the review has not yet reported, Prime Minister Tony Abbott has already said the RET will be changed, in a speech to the Australian Industry Group earlier this month. He also enthused about Environment Minister Greg Hunt’s rubber-stamping of fossil fuel mining projects worth over $800 billion (that’s 100 times the annual revenue collected by the recently repealed carbon tax). Abbott said: “We have massive reserves of coal; massive reserves of gas; let’s make the most of them.” This follows a speech to the Minerals Council of Australia in which Abbott said “I can think of few things more damaging to our future” than leaving coal in the ground. He also continues to claim the RET is “a very significant impact on higher power prices”.

Hunt and Industry Minister Ian Macfarlane are believed to support the gentailers’ proposal for a “real 20%”. Macfarlane has form – in 2004 leaked minutes exposed his involvement in a government conspiracy to sabotage an earlier version of the RET. Last month, 25 mostly anonymous government MPs signed a petition advocating another way to weaken the RET. But in today’s Liberal Party they are considered moderates. Reportedly most of the Cabinet want to abolish the RET entirely, in line with the Institute of Public Affairs which seems to be the driving force in Liberal policy. For example, Treasurer Joe Hockey has described wind turbines as an “utterly offensive… blight on the landscape”.

Meanwhile, Abbott’s chief business advisor Maurice Newman, who is being consulted on the RET, has written another opinion piece in The Australian which is even more divorced from reality than his previous ones, arguing that “Australians should deal with the prospect of global cooling”. His piece reads like something from The Onion, but he actually seems to be serious. He attributes “the last 50 years of peace, cheap energy, abundant food, global economic growth and population explosion” to solar warming, which in reality peaked 50 years ago and has since declined slightly. He laments that “in times of peace and when government debts and deficits are growing daily, it is hard to persuade voters to trade off immediate benefits for increased defence spending, let alone prepare them, after all the warming propaganda, that global cooling is a possibility”. And more pertinently: “Cheap electricity in a colder climate will be critical, yet distorted price signals caused by renewable energy policies are driving out reliable base load generators. This has inflicted serious damage on economies and diminished the West’s standing and effectiveness in world affairs.” (There’s now a petition to get this idiot sacked.)

In keeping with these inclinations, Abbott stacked the RET review panel with climate change deniers who are hostile to renewable energy: former Caltex chair Dick Warburton, fossil fuel industry economic consultant Brian Fisher, Verve Energy CEO Shirley In’t Veld, and Australian Energy Market Operator CEO Matt Zema. The review has reported directly to the Prime Minister’s office.

As I was writing this post, a government source quoted in the Australian Financial Review said Abbott had told Warburton to go back and look at it again, because he thinks the report isn’t anti-renewable enough. Reportedly the review recommended a real 20% target, and Abbott wants it to look at effectively abolishing the RET by closing it to new entrants. (However, Climate Spectator’s Tristan Edis suggests this could be an attempt to construct a “bad cop” so Abbott can portray himself as moderate by comparison.)

Abbott could struggle to get an anti-RET bill past Palmer United in the Senate, but renewable energy investment in Australia has ground to a halt anyway because of the aforementioned REC surplus and uncertainty. The Abbott government is not the only source of political uncertainty: Palmer has not guaranteed support for the RET beyond 2016, and the fossil fuel lobby will never give up their crusade against renewables. The solar section of the scheme can be adjusted without legislation.

And regardless of what happens at the federal level, Abbott’s colleagues in state governments continue to find ways to help kill renewables even after having abolished all their climate policies. The Queensland government has stealthily increased a meter-reading charge on business electricity bills from $42/day to $537/day, and this just happens to remove any financial incentive for large energy users to install solar panels or improve energy efficiency. Imagine the outcry if the carbon tax had been introduced this way!

What you can do

Several groups are running petitions to save the RET (some aimed at the government and others at the gentailers):
http://www.solarcitizens.org.au/protecttheret (this seems to be the biggest one, with 23,249 signatures)

The Australian Solar Council (ASC), having realised they won’t get anywhere by talking to the government, is starting a popular campaign to “Save Solar” in marginal seats. ASC leader John Grimes yesterday told ABC radio Abbott is personally trying to kill the renewable energy industry, has broken election promises to support renewables, and has overruled moderates like Hunt – which seems to me a pretty accurate description of the situation. Hunt has responded by publicly calling Grimes a “total failure of an industry leader” for being “utterly partisan”, insisting the government is “committed to the Renewable Energy Target”. According to Grimes, Hunt had privately warned he would launch such a personal attack if the Save Solar campaign went ahead.

And you can vote with your wallet. My household has switched to an online power company called Powershop, currently partnering with GetUp! in a pro-RET campaign.

Even if Energy Australia and the other gentailers were genuinely going renewable, the benefits would be outweighed by their political campaigning. Government policies are needed to ensure that all companies move away from fossil fuels.

1 comment

  1. John McKeon

    I could not read the email alert that I received from your site here – rather puzzling. However it is easy enough to read your article directly from the site. THANK YOU for keeping people informed!

    The campaign by the fossil fuel interests has been utterly corrupting of politics in this country. It is alarming.



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