Monday, 19 March 2012
Questions on Notice
Climate Change and Energy Efficiency (Question No. 1220)
How much will the renewable energy target cost the Australian taxpayer by 2020, in terms of government investment, subsidies, grants and higher electricity costs.
The Renewable Energy Target (RET) scheme is not a grant or rebate scheme and does not involve government investment in renewable energy projects. As such, it does not impose a direct cost on taxpayers.
The RET creates a guaranteed market for additional renewable energy deployment using a mechanism of tradable certificates that are created by renewable energy generators and owners of small-scale renewable energy systems. Demand for certificates is created by placing a legal obligation on entities that buy wholesale electricity (mainly electricity retailers) to source and surrender these certificates to the Renewable Energy Regulator to demonstrate their compliance with annual obligations. Liable entities pass the costs associated with sourcing these certificates on to electricity users through higher retail electricity prices.
In helping to transform the electricity sector and support households who take action against climate change by using renewable energy, the RET scheme is expected to have a modest impact on electricity prices.
In terms of these costs, on 9 December 2011, the Standing Council on Energy and Resources released a report by the Australian Energy Market Commission, which modelled the Impact of the enhanced Renewable Energy Target on energy markets. Economic modelling of electricity markets depends on the methodology adopted as well as underlying assumptions. This report estimates that with a carbon price, the average impact of the enhanced RET on electricity prices in the National Electricity Market will vary within a range from 0.93 cents per kilowatt-hour (c/kWh) to 0.64c/kWh in nominal terms over the period 2011-12 to 2019-20. Based on a residential customer in New South Wales with annual consumption of 5,500 kWh, this would add around $0.70-$1 to the customer's weekly expenditure on electricity.
The report also makes clear that the RET would have a greater cost to electricity consumers in the absence of a carbon price. In particular, the report indicates that without a carbon price supporting renewable energy investment the Large-Scale RET could cost an additional $20 billion in the period to 2030 in 2010-11 dollars.
There are a number of factors affecting retail electricity prices, including the cost of generation, transmission, distribution and retail services. A large cause of recent rises in electricity prices is the high capital cost of the investment required in electricity networks to ensure adequate supply. The Government continues to monitor the impact of the RET, including on electricity prices.