RET Review; roadblock or opportunity?

22 Apr, 2014

Sometimes I wish I had decided to sell solar systems instead of research and advice.

From the outside, it often seem’s like you guys are all making the big money and I’m just fiddling round the edges, but then I look at the volatility and complexity that you face and think I made the right decision.

The RET review is a classic example.  Politically motivated. Completely unwarranted.  Driven by vested interests. An outcome (almost) predetermined by the panel and terms of reference, and so on.

I wan’t going to make a submission in this initial phase which calls for feedback on the modelling assumptions because I’m busy and it seemed like an exercise in futility, but I couldn’t help myself.

The success of the RET in achieving its intended objectives is obvious to anyone who looks at what it has achieved, in my view. Tens of billions of dollars investments in energy infrastructure, thousands of direct jobs and tens of thousands of indirect employment have resulted and no matter how you skin the cat, almost 4GW of PV does reduce  emissions, which was the point of the thing. Its elegant and it works.

As I was writing my submission one thing became very clear to me; you can either take a glass is half full or half empty view on the process. Call me naive, but I think there is hidden, massive opportunity which become the thrust of my submission.

In simple terms, the review should, if it’s doing its job right, take the opportunity to look at what new circumstances exist to evaluate the costs and benefits of the RET in its current an/or revised form. In other words, the review panel needs to open its’s eyes and look at not only what it has achieved, but also what it could achieve if the latest data and examples were taken into account. To fail to do so would not only be a travesty but would recognize the opportunity that the review presents, for every single Australian.

The rationale behind the review is that “market conditions have changed” and I couldn’t agree more.

One example is around the issue of how the value of PV is calculated. Looking at it simplistically, we can calculate what the LCOE is and compare it the LCOE of conventional energy. However, this completely overlooks the wider benefits which provide value to the community. But we don’t have to re-invent the wheel because models exist which we could be using here to calculate a true value.

Another example is the issue of whether PV needs support. One the one hand we are condemned for being an expensive form of generation and on the other, we are condemned because we are so cheap we are undermining the very survival of existing electricity assets. The reality is that PV cost rises and falls dramatically and how competitive we are varies by geography; and both change over time. What is needed is a measured, dynamic mechanism that offers consistent and reasonable support and both recognises and extracts maximum value for the community.

If I could sum up my wishlist for this first phase of the RET review (they have asked for feedback on the data assumptions) in a single statement it would look like this “Almost every historic PV policy has been flawed because they failed to predict how fast change would occur. If the RET review must take place, then it has the opportunity to avoid this mistake by building in dynamic adjustment mechanisms, as many other countries have done. If uptake slows, more incentive is added or programs are extended. Conversely, if the market starts to overheat, incentives can be reduced. A planned calendar and range of potential adjustments could be set to provide a degree of predictability, whilst allowing organic growth to rise and fall with a myriad of factors that cannot reliably be predicted.”

In a nutshell, the input data assumptions have to be recognised for what they truly are – a snapshot in time. If the RET Review Panel were really genuine, they would acknowledge this and create a more sophisticated model going forward which avoids the mistakes of the past.

Maybe we need a Haynes manual?

 

Post expires at 6:13pm on Friday April 17th, 2015

About the author

Nigel Morris
Nigel Morris

Nigel is the Director of SolarBusinessServices. After almost 20 years working for other companies SbS Director Nigel Morris, established the company in 2009 with a view to providing other organisations with the benefits of his wide experience in the renewable energy industry.

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7 Comments

  1. April 22, 2014

    Nigel.. agree 100% with you. Well written, every little bit helps.

  2. April 22, 2014

    Ah the word ‘incentives’. One persons incentive is another persons subsidy for exactly the same thing. It annoys me that people still opine that small scale solar PV is subsidised. Bringing forward the benefits that might consolidate the externalities into a one time contribution benefit, is this a subsidy, an incentive, or just a facilitating market mechanism recognising the public good?

    You can see the same thing occurring in the dramatically high sales of EVs in Norway and Holland, countries that penalise car buyers with a series of taxes and fees. People ask in blogs what the incentives are to cause these stunning results. Is, not having these charges for EVs an incentive, subsidy, or instead a mechanism to facilitate community good by removing punitive measures?

    Glad to see your argument of wider benefit and self regulating model measured against clear quantitative outcomes.

    The RET might also collect and redistribute the wider benefits of stored renewable energy, whether centralised, distribution network based, or widely distributed home systems.

    I can’t help but think the same might be modelled for EVs that reflects the wider benefit of displacing imported oil/petrol/diesel by locally manufactured and increasingly renewable electricity. And then we could also going to the savings from global supply chains to support wars and misadventures, and the terrible toll in causalities and post war trauma/suicides in our midst.

  3. April 23, 2014

    Thanks for a great article.

    What has been wrong with all the FIT schemes is that they didn’t work around the initial capital outlay for systems.

    If electricity retailers had been told to devise schemes that ensured investors had a return of their capital outlay in say seven years so many arguments could have been avoided as returns would have reflected declining costs of systems.

    I paid about $11k for a 3 KW system that a friend had paid $21k for, two year before. The same system, three years later, would cost perhaps $5k.

    It seems FIT schemes were set up fail, one way or the other. They either paid too much or pay too little because they were not tied to the initial capital outlay and a “reasonable” rate of return.

    • Nigel Morris
      April 23, 2014

      Hi Howard

      Great point, couldn’t agree more.
      Id actually get one step further too – “yield” has never been given sufficient attention in Australia either. The scheme designs have valued lowest capital cost, with generic output calculations, rather than incentivising high quality systems with long term output guarantee’s.

      This has created a perfect storm for low quality systems with no ramifications for loss of performance or support over time.

  4. April 23, 2014

    Glad to hear you are writing a submission Nigel.

    It would be great to do a comparison on many of the ‘purchase or pay’ contracts in WA mini-grids that have locked in diesel generation for many electricity mini-grids which while initially providing a price advantage, now continues at a ridiculous costs compared to alternate solutions because the contracts were set up over such a long term and need to be fulfilled. Comparing this to this stupidity of developing further 25 to 50 year investments in fossil fuel generation which locks us in to the ever inflating prices of fossil fuels (such as 20% for gas this year and which is still well below the export value) would highlight the long term real costs of these technologies against the cheaper long term advantage of renewable energy over its 25-50 year life.

    Oh f*%# it lets just all chip in and buy a few bottles of Grange for the review panel.

  5. April 25, 2014

    Nigel
    Thanks again for a spot on submission to the ret review. I fear that with the committee members stacked with fossil fools we may be pissing in the wind.
    At least they will be inadvertantly contributing to the electricity death spiral as the utilities fail to respond to a changing market model.

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