The dumb logic surrounding the renewables debate

Both sides of the debate over the Renewable Energy Target (RET) and indeed energy and carbon reduction policy more generally, can be guilty of running arguments containing contradictory elements.

In the end there’s an extent to which a factual proposition can be a two-edged sword. It might help your argument for a particular policy change, but also means other lines of argument you might like to use are therefore untrue.

Still, this doesn’t seem to stop the lobbyists on both sides of the debate using a combination of factual propositions that can’t all be true at the same time.

On one side you have opponents of the RET who claim the target must be reduced or abolished because they believe there is a significant and near permanent drop away in electricity consumption. They argue this requires the RET to be adjusted downwards because it is now adding excess generating supply that is distorting the electricity market, undermining the viability of past generation investments, and will lead to renewables substantially exceeding the original 20 per cent market share target, possibly even representing 27 per cent of demand.

Now that might be true. But if the RET is leading to a large and long term oversupply of generating capacity which is hurting returns of existing generators, then you can’t at the same time argue that it won’t also be noticeably depressing wholesale electricity prices for an extended period either. 

Many lobbyists representing fossil fuel energy suppliers seem rather keen to argue about the RET driving a major oversupply of generation. But then they want to also claim that the RET is adding a huge cost on energy consumers without acknowledging the counterbalancing offsetting effect it is having through reducing wholesale electricity prices.

On the counter side, renewables advocates that are happy to claim the RET will substantially reduce wholesale electricity prices may need to recognise that if wholesale prices go down too low, then large renewable energy projects won’t earn enough revenue to be viable even with renewable energy certificates. And if that’s the case then you might as well reduce the target because not enough renewable energy projects will get built to meet the target anyway.   

Renewables advocates are also keen on arguing the renewables target provides a fantastic hedge against rising gas prices, because by supplanting gas power it avoids what would otherwise be major power price increases.

Again this might be true, but it also suggests that the RET is, at least partly, only avoiding the greenhouse gas emissions associated with a gas generator rather than coal. Ideally, a policy aimed at reducing Australia’s carbon emissions should be displacing coal rather than gas.  

Now the gas industry is rather fond of this argument to suggest the RET is an ineffective carbon reduction policy. But if that’s the case, then they also need to accept that the cost of the RET should not be assessed relative to existing costs in the wholesale market, but rather the cost of gas-fired generation – which is likely to be two to three times as expensive.

Also, it kinda doesn’t make sense to suggest that an emissions trading scheme would be a vastly better way to reduce emissions than the RET, while at the same time cheering and encouraging the government to abolish … an emissions trading scheme.

Now the Business Council of Australia and the Australian Chamber of Commerce and Industry seem keen to suggest the Coalition’s Direct Action abatement auction mechanism is all that’s required to reach the 5 per cent reduction target and vastly more efficient and akin to an open market than the RET.

So if that’s the case, then they should also be perfectly comfortable with, and indeed demanding that the government remove its planned abatement purchasing price cap and budgetary constraints on that scheme. Instead, the government should just announce the volume of abatement it needs to purchase at each auction to meet the target and let the market rip. After all you wouldn’t want the government interfering and distorting the outcomes of the abatement auction market’s ability to meet the emission reduction target, would you?

Indeed, if you’re so confident that Direct Action is a more efficient mechanism for reducing carbon emissions than the Renewable Energy Target, then why not have an auction price cap per tonne of abatement set at a similar level to RET’s cost of abatement. Because, after all, you must have little fear it would ever get close to that price?

The BCA is also now arguing that support for solar should be withdrawn because it has achieved such remarkable cost reductions that it is now cost-competitive with conventional alternatives. But if that’s the case shouldn’t they also stop suggesting that renewable energy deployment programs – which brought these remarkable cost reductions – are an ineffective policy mechanism?

And on the other side of the fence, if you are so convinced that renewables are already cheaper than fossil fuels, or will be very shortly, then why do they need any government support?

The sharper policy analysts and lobbyists are very conscious of these contradictions and take great care to avoid them or tone down their claims. They chose one line of logically consistent argument and stick with it, accepting they must concede some points to the other side. 

At Climate Spectator we'd like to shine a spot light on those submissions to the Renewable Energy Target Review that contain errors of logic, dodgy accounting, and such glaring inconsistencies that they should be labelled as a contribution to comedy rather than policy. To help us we'd like readers to to put forward their nominations for the biggest clangers and funniest examples of inconsistency they've seen in the submissions to the RET Review and wider lobbying efforts surrounding the scheme. We'll then take some of the best nominations and share them on Climate Spectator. To make your nominations send them through to editorial.climatespectator@gmail.com .