Home > Economic policy, Environment > How I learned to stop worrying and love the RET

How I learned to stop worrying and love the RET

July 26th, 2015

That’s the title of a paper I wrote a while back about the Renewable Energy Target scheme. I was reminded of it when Labor announced its proposal to raise the RET to 50 per cent by 2030.

First, it’s striking to observe that no one has popped up to claim that the target is unachievable or that an electricity supply system with 50 per cent renewables will be unworkable. The strongest claim I could find in this article describing coal lobby responses is someone from the Minerals Council of Australia saying that the target is “technically questionable” which could mean anything. By contrast, until very recently, sites like Brave New Climate were full of amateur experts claiming to demonstrate the impossibility of such a goal.

Second, it’s clear that the economic impact will be minuscule. Owners of coal-fired power stations (if they are not compensated, as they should not be) will bear most of the costs. Electricity prices may rise a little compared to the current RET, but will probably be no higher than if we had stayed with a coal-based system. Perhaps this will help to convince those who think that decarbonization of the economy as a whole must have a massive cost impact, but, based on past experience, I can’t see this happening.

Third, as argued in the paper mentioned in the title, an expanded RET may not be the best way to achieve climate goals, but, if the carbon price is below the appropriate level ($50/tonne or more), a RET for the electricity sector is an appropriate policy. The main problem is that the RET doesn’t discriminate between different fossil fuels. A RET, combined with incentives to close down brown coal power stations, would have much the same effects as an adequate carbon price, and is politically much easier to do.

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  1. Newtownian
    July 26th, 2015 at 10:57 | #1

    The technical achievability of a 50% reduction in fossil energy use at least in Australia was probably never an issue especially through conservation/efficiencies – even before the great renewables revolution which still has a long way to go technically. But beyond that things get messy like…..

    1. In a capitalist system the great incentive is always to push more production and consumption to make more profit. That driver remains even if we are in a temporary hiatus in growth in resource use thanks to the blundering post 2008 economic policies more than deliberate restraint.

    2. The first 50% reduction as with all pollution is of course the most cost effective easy bit. But to stabilise climate change by 2100 you need globally something like a 95-97% reduction in per capita carbon emissions compared to Australia’s. To judge by the history of water and other air pollution this is going to be much more expensive and tougher. This makes sense intuitively because it means for example replacing liquid fuel linked emissions/technologies which in fact are greater than for coal globally.

    This is a vast technological transformation challenge. Its like going from Toyota Echos (no gas guzzler) to e-bikes. Its great for Gee-Whiz tech shows but seldom do you hear discussion of the infrastructure restructuring nightmares implied in an increasingly poorer world. Do you here serious discussion of EROIE yet?

    True there has been much improvement in biofuels and battery technologies but these variously have physical limitations, are more expensive, environmentally damaging and heavily subsidized by cheap fossil fuel energy.

    3. At the same time the globe is supposed to lifting the majority of nations out of poverty. The numbers just dont feel like they add up. Can Australia just put up walls when it comes to its ‘share’ of the world’s resources? I leave that one as a Dorothy Dixer.

    4. A 40 to 50% reduction in coal emissions sounds great but this would in fact only gets us back to the state of things in 1990 at least in total real emissions in the key problem sectors. A lot of people forget that the original Kyoto agreement let Australia keep growing its emissions by allowing (desirable) land use changes as an offset. As a result between 1990 and 2010 our electricity generation and transport emissions grew by 50%!!! – at least according to the devil in the detail (the Appendices, as ususal, in AUSTRALIAN GOVERMENT 2014. Reducing Australia’s Greenhouse Gas Emissions— Targets and Progress Review final Report February.) Supposedly land use changes have worked but the flip side is that there is no more offset to be claimed.

    ————————-

    Dont get me wrong. I long for a high efficiency low energy using unwasteful equitable global anarcho-social democratic future which seems to be the only viable endgame. And reduced land clearing and ecologically sound forest restoration is a sine qua non for ecotopia.

    But the hard decisions needed to potentiate this future have not been taken. In place we have seen a fudge or self congratulation of low hanging fruit pickers. The last 20 years its true have been useful for getting all the cards on the table and letting renewables mature and hopefully burying the cruder denialist movement.

    But now we face the real enemy, us and our limitless appetite for consumption, including sadly a youth who should know better as they have grown up with Wikipedia, but collectively are even less inspiring than us hippy trippy dreamers of old. The instincts I hear seem right on but joint action seems still inaccessible and low priority – meanwhile the “best and brightest” still vie for jobs in the grossly bloated and parasitic PR legal and finance sectors indicating they dont understand global ecosystems 101 or in their hearts dont give a stuff.

    Most importantly for me the economic system which is driving this unsustainable anthropocentric growth driven system has not been seriously questioned by its high priests, the economics profession – though some cracks may be emerging.

    Hopefully this will be the next great battle ground but the signs are still not good. A good current example is the ‘Circular Economy’, a reworking of Amory Lovins ideas of the last 30 years. The underlying beliefis still the the world and individual economies can just keep growing and decouple themselves long term from resource use while we keep a capitalist economy going driven by short term priorities.

  2. Andrew
    July 26th, 2015 at 13:09 | #2

    The other predictable ‘ what about base-load’ whinge arose on SKY. This is another poor but longstanding argument put by those opposing more renewables. Base load in the NEM is poorly defined, certainly much less than the 50% of thermal generation mooted. Old slow moving coal plant would be little use but gas generators would rejoice as the dinosaurs closed.

  3. iain
    July 26th, 2015 at 13:28 | #3

    Can someone give an example of a population of 10 million+ that runs at 50% without (easy) hydro or (easy) geo sources?

    newt – energy efficiency = Jevon’s Paradox over long term. Short term, lower energy use = misguided responses to pump up gdp. The really big energy savings are in house and city design, with the horse bolting on that one.

    jq – speaking of love – I’d love to see a scheme that stocktakes/audits solar at the household level and has recommended best practices to improve. Most existing household solar installations, older than 2-3 years, can be improved significantly with simple tweaks and improvement strategies. Yet most people are unaware here. This is the lowest of the fruit while waiting for Tesla’s unicorn factory and other such things to come online.

  4. Ernestine Gross
    July 26th, 2015 at 13:39 | #4

    It seems to me renewables provide a credible employment growth path for a wide range of professional, technical and manual workers and even accountants.

  5. John Quiggin
    July 26th, 2015 at 13:54 | #5

    @iain

    Lots of places are aiming for this by 2030 or thereabouts (including Oz if Labor wins), and all the expert evidence is that it’s feasible. Is your question meant as serious, or rhetorical?

  6. iain
    July 26th, 2015 at 13:59 | #6

    John, it was serious. Is your answer “no”? If so, can you give an example of 40%?

  7. John Quiggin
    July 26th, 2015 at 14:25 | #7

    Perhaps you could explain why you are asking? If it’s curiosity, I refer you to Google.

    Is the implication that it’s impossible/excessively costly? If so, you’re welcome to explain why you disagree with all the experts.

    If the point is that the shift to renewables is in its early days, and it will be a 10-15 years before we see 50 per cent renewables in most countries then sure, that’s the point of the post.

  8. Ernestine Gross
    July 26th, 2015 at 14:26 | #8

    What am I to make of people who sprout the benefits of entrepreneurship and demand nothing should be done unless it has worked in the past?

    This is a serious question.

    Answers such as these people suffer from ‘cognitive dissonance’ are not quite satisfactory.

  9. Ikonoclast
    July 26th, 2015 at 14:31 | #9

    @Ernestine Gross

    I agree. Our economy will need a complete refit and re-tooling. The entire economy will have to be changed from an 80% fossil fuels economy to 0% fossil fuels and 100% electrical powered basis. And changed from an energy wasting economy to an energy saving and true passive designs economy. This entire re-fit process will be a good provider of employment opportunities. Anyone not employed in that process and in other standard needs will be required for environmental remediation and social services for an ageing population. Any economic system which fails to generate full employment and fails to truly use resources efficiently and sustainably and also fails to minimise negative externalities will not make the cut.

    Corporate/oligarchic capitalism will fail to make this transition sustainably and in time. The system will have to be changed to make the transition.

  10. Donald Oats
    July 26th, 2015 at 15:25 | #10

    There are some fascinating developments with solar PV technologies, so the next couple of generations of solar PV could be a step-change from current efficiencies, productivity, etc. This current decade has finally made household solar PV a mass-produced item; now that it is so, there are large incentives for manufacturers to innovate (and they have the funds available), and with some good fortune, we should see some big improvements in the next decade.

    In the other direction, we need some way of closing down fossil fuel power stations as soon as possible. It would be perverse if that meant the government having to buy them out (after privatising them), but if that is what it takes, then so be it. At the least, the dirtiest of them should be shut down and decommissioned. This step would need the ALP to figure out that sometimes job losses in one business are necessary, rather than allowing people like Paul Howes to obstruct the process. No one wants to lose their job, but it can happen for the stupidest of reasons in any industry: if a planned shut down is managed properly, surely people could be assisted in finding work in another industry? It’s not like we didn’t see this day coming.

  11. Ken Fabian
    July 26th, 2015 at 15:35 | #11

    @Newtownian
    I think there is reasonable expectation of further big drops in PV costs from improvements to silicon technologies that are already being actively taken up by major manufacturers, from a well of innovation nowhere near gone dry yet. Energy storage is showing a similar remarkable propensity to get better and cheaper in the presence of actual demand for it. Various LiIon technologies are being commercialised, besides Tesla’s, some like Alevo’s aimed at large scale with very long working life as selling point, other’s, like 24M’s that looks like simplifying production and making them cheaper as well as safer. Then there are the flow battery technologies, some that offer endless recyclability like vanadium and variants or emerging ones like organic quinone that appear to be non toxic and rely on low cost materials. Then there are whole different approaches, like Isentropic’s Pumped Heat system that stores heat and cold in gravel and uses non-toxic Argon that is distilled from air as the working fluid – real scale demo plant under construction in UK.

    I don’t know that batteries or PV are heavily subsidised by fossil fuels except in the sense that many commercial manufacturers will be choosing higher cost electricity in an absence of pricing the costs of emissions. I don’t think we can expect them to be restricted to low emissions energy when the existing energy supply systems are not. It’s a real issue but to me that’s a structural problem with not properly pricing energy to include externalised costs. Personally I think the best things we can make from high emissions electricity are PV that delivers many times initial energy used and battery systems that can complement it.

    I don’t think it’s even possible make a clearly defined, through to zero emissions plan – especially one with up front costings; having that as a threshold requirement for commitment will only ensure we won’t make the necessary commitment. Incremental but still ambitious goals are needed short term, using what we know but we need flexibility about the steps beyond. We need to bet on innovation staying ahead of those steps beyond the known, even with the risks that the innovations will not come quick enough. We need to be doing what we can to see that the innovations do keep coming and that inadequate transitioning solutions – like gas as replacement for coal and backup to renewables – don’t get entrenched as permanent ones.

  12. Ken Fabian
    July 26th, 2015 at 15:44 | #12

    Typo in previous comment “… that not many commercial manufacturers…

  13. July 26th, 2015 at 17:42 | #13

    On the topic of how much additonal energy storage Australia requires to meet a 50% renewable electricity target, I would like to resemble a jellyfish. That is, I want to be very clear. The amount of additional energy storage Australia needs is none. This does not mean Australia will not acquire any additional storage, it just means it is not necessary. Without additional storage a small amount of electricity generation would be curtailed, but who cares? Seriously. Who cares if a small portion of electricity is wasted if it means we are working towards drowning fewer Thai children? Anyone whose sense of efficiency is offended more by the thought of wasting a couple percent of electrical generation than drowning children has a warped view of the value of a human life. (For one thing, they probably haven’t even considered the monetary value of a child on the US black market.)

    Australia does appear poised to lead the world in home and business energy storage, and this may, more or less, eliminate the need to curtail electricity production, but no additional storage is required to meet a Renewable Energy Target of 50%.

  14. David Allen
    July 26th, 2015 at 19:16 | #14

    Seriously, what is the point of trying anymore. Even if Labor wins the next election and introduces a 100% renewable energy target by 2020 and actually cracks on and makes good progress getting it underway it would all be cancelled by the Lib/Nat/Morons at the subsequent election. Good policy, by which I mean policy that the population actually wants, is next to impossible now. We have two parties, an insipid one and an ignorant one.

    Roll on the TPP and look forward to being sued for even advocating good policy in the first place.

    We are so screwed.

  15. john goss
    July 26th, 2015 at 19:24 | #15

    Are labor advocating a 50% RET for electricity by 2030, or are they saying their objective is 50% which could be achieved by a mixture of schemes one of which could be an increase in the RET scheme?

  16. John Quiggin
    July 26th, 2015 at 20:28 | #16

    @David Allen

    I don’t think we should assume a subsequent LNP government will be as tribalist/denialist as this one. Big business in particular won’t thank them for it.

    @john goss

    Only coherent version is that target is 50 per cent, but that other policies will be used to help achieve it. Can never be sure, but I think Labor is taking the coherent line.

  17. July 27th, 2015 at 00:11 | #17

    Announcements like this one have real-world consequences immediately. Mooted investments in coal, already dubious, look even worse if you factor in the probability of a Labour government introducing the higher target (say 40%), plus the lower probability of a successor to Abbott reversing course (say 10%). Similarly renewable entrepreneurs will be more inclined to ride out the current drought. These are no doubt small effects compared to the trends in the underlying costs.

  18. sjk
    July 27th, 2015 at 12:37 | #18

    @john goss ALP policy: The goal (the word “goal” is deliberate) is 50% renewables by 2030. Mix of policies to achieve this is the next discussion.

  19. derrida derider
    July 27th, 2015 at 12:42 | #19

    Unfortunately, James, this won’t affect the economics of coal investment in Australia much because we export most of it.

    Yes, if we don’t have a carbon price things like the RET (or the government’s Direct Action, if they were remotely fair dinkum about it) become the second-best policy. I doubt it will be quite as cheap as boosters claim though – I’m always suspicious of “the right technology is just around the corner – honestly” claims, whether in IT, nuclear power or anything else. Experience with new technology everywhere is that its effects are even more profound than predicted, but that they also take a lot longer to work than predicted.

    Certainly it won’t be as cheap a way of getting a given amount of carbon reduction as letting the market rip with appropriate carbon pricing.

  20. July 27th, 2015 at 23:20 | #20

    @derrida derider
    Coal investment includes replacing coal power stations.

  21. Ben
    August 1st, 2015 at 14:29 | #21

    @john goss

    The latter. It could include serious energy efficiency programs to bring the 50% target closer through demand reduction.

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