Tony Abbott has sparked a war with the renewable energy sector by claiming their product was driving up power prices “very significantly” and fostering Australia’s reputation as “the unaffordable energy capital of the world”.
The companies struck back at the Prime Minister, accusing him of grossly exaggerating the impact of renewable energy. They also warned that the government’s plans to exempt aluminium refineries from paying for renewable energy would create a sovereign risk by hitting both current and future investments in the sector.
The attacks came as Nobel laureate and Columbia University professor Joseph Stiglitz and former Reserve Bank board member Warwick McKibbin told the Crawford Australian Leadership Forum, co-sponsored by The Australian Financial Review, that Australia should have a carbon price.
The new Senate is set to abolish the carbon tax next week but the professors argued an emissions trading scheme would give the nation a long-term competitive economic advantage.
Renewable companies, including Infigen, Pacific Hydro and Senvion, as well as the Clean Energy Council, reacted angrily after Mr Abbott attacked the renewable energy target which mandates that 20 per cent of electricity must be generated from renewable sources by 2020.
“The RET is very significantly driving up power prices,” Mr Abbott said.
This, he said, posed a threat to domestic budgets and industry competitiveness, especially energy-intensive industries.
“We should be the affordable energy capital of the world, not the unaffordable energy capital of the world and that’s why the carbon tax must go and that’s why we’re reviewing the RET.”
The government will heed a campaign from its backbench to exempt aluminium refineries from paying for renewable energy under the RET. Already, most refineries receive a 90 per cent exemption.
The government argues that when the RET was conceived, it was estimated that the production of a 41,000 gigawatt hours of renewable energy would constitute 20 per cent of forecast electricity generation by 2020.
But with the collapse of the car industry and the loss of two aluminium plants, estimated power generation for 2020 has been lowered.
Exempting remaining aluminium refineries from using renewable energy would still ensure that 20 per cent of power used by 2020 was from renewable sources. But this would equate to producing about 26,000 gigawatt hours of renewable energy.
Clive Palmer will prevent the government from scrapping or scaling back the RET until after the 2016 election but its move to exempt aluminium enables it to weaken the sector while still adhering to a 20 per cent target.