Australia's Renewable Energy Target is failing to achieve positive outcomes

Negotiations between the federal Liberal and Labor parties regarding the Renewable Energy Target (RET) have been quite public over the last few days, and a decision seems imminent. Originally, a 41,000 gigawatt hours (GWh) large-scale target, and a 4,000 GWh small-scale target was expected to achieve 20% of wholesale electricity being derived from renewable energy sources such as wind and solar by 2020. However, falling demand has resulted in this target now expected to be closer to 27%.

The Liberal Party currently wishes to reduce the large-scale RET to 32,000 GWh, whereas the Labor Party is attempting to compromise by offering to support 33,000 GWh as of Monday the 4^th of May.

Both parties talk about jobs and emissions, but unlike the small-scale RET which isn't been discussed, the large-scale RET causes job losses, and increases global emissions.

The problem with large-scale renewable projects is that they are extremely efficient. To use an example, the infamous Hazelwood power plant employs between 6 to 8 times more people compared to the same output from wind or solar. Victoria's Macarthur Wind Farm, the largest windfarm in the southern hemisphere, employs only 20 ongoing staff, whereas the largest photovoltaics (PV) solar plant in Australia employs only 5 ongoing staff. Increasing capacity when demand has fallen has resulted in electricity generation from coal declining year on year since 2008/09. Coal power plants closing or cutting production forces more workers out of coal plants than wind and solar can replace.

Investment in renewables also prevents investment in other areas of the economy that would create more jobs. A government review of the RET stated "This investment [in the RET] comes at the expense of investment elsewhere in the economy and the additional generation capacity is not required to meet the demand for electricity." It is evident from this statement, and electricity supply reports that Australia does not have a shortage of electricity capacity. As previously mentioned large-scale projects (opposed to small scale projects) do not create more jobs. The only reason to keep the large-scale RET would be emission reduction.

Electricity from coal has fallen in Australia since 2008/09. Meanwhile, coal exports have grown above trend since 2008/09. Falling domestic demand for coal has contributed to increased coal exports, and ultimately it can only be presumed that coal that would have otherwise been used in Australia is shipped to and used in foreign power plants - it just isn't count to Australia's emissions. Australia looks like it is decreasing its emissions whereas China and other countries are blamed for their coal dependence and higher emissions.

However, the real devil is in the economic theory of supply and demand. Australia exposes the international marketplace to more coal, and this places downward pressure on international coal prices. As a consequence coal power plants become more viable when compared to renewable alternatives. Coal plants become attractive to governments that have budget constraints and a rapid growth in demand for electricity. This reduces the number of renewable projects from being built in the international marketplace as governments will be more likely to favour building coal power plants instead.

So what is Australia to do? It has a moral obligation to do more than simply cut the large-scale RET completely. However if it does, this will free up at least $1 billion in federal funds each year that are intended to finance large-scale renewable projects. This money could help to increase the small-scale RET which contributes to almost all of the 21,000 renewable jobs. It would also likely fill future demand for electricity.

The remaining funds could be used to build renewables in developing countries such as China. In fact, according to Ernst & Young China is considered the most attractive country in the world for commercial investment. Australia achieved tenth spot in the same ranking, falling behind Brazil. It may be more profitable for Australian funds to be invested in China, rather than Australia.

As an added advantage, China can build wind farms for around a third of the cost compared to building them in Australia. Even if half of the $1 billion in freed up federal funds were committed to improving small-scale RET incentives, the remaining $500 million could be spent in China that would be equivalent to spending around $1.5 billion on renewable projects domestically.

This article has intended to challenge an emission policy for failing to meet a desired outcome. The limited funds Australia spends on reducing emissions need to be spent as efficiently as possible to obtain the greatest reduction in global emissions.