By Tristan Edis
As shown by analysis prepared for the Business Council of Australia, for some large energy consuming businesses ineligible for exemptions as emissions intensive and trade exposed companies, this cost would represent a substantial share of their overall power bill.
A number of energy market modelling exercises suggest that the impact of the RET on end-consumer prices would be moderate because the extra power supply it induces acts to displace high-cost generators, particularly the need for new-entrant gas power plants.
Furthermore, the industry continues to receive subsidies via the Australian Renewable Energy Agency and distorted residential electricity tariffs that smear the costs of providing reliable power during peak periods.
However, as the Australian Energy Market Operator and the Energy Users Association of Australia have noted, such price prediction exercises are fraught with uncertainty because a range of factors beyond underlying cost structures can influence market price outcomes.
Based on modelling by ACIL Allen, which explored a low demand sensitivity, keeping the RET at current levels would have very little effect in reducing wholesale electricity prices relative to reducing it to a real 20 per cent market share.
In addition, the cost of renewable energy has now declined to such a degree that it is beginning to compete on level terms with fossil fuels in some circumstances, as detailed by Bloomberg New Energy Finance.
For example, several of these energy market model exercises are predicated on assumptions of electricity demand growth forecasts made in 2013.
It is worth noting that the scheme has already reached a level of renewable energy production that is around twice the size of the original target set by the Howard Government.
Also, investments in existing renewable plants would be protected as they would continue to receive a premium renewable energy certificate payment for power that these plants produce.
Read more here: Business Spectator