Introduction

On Friday 8 May 2015 the Industry Minister, Ian MacFarlane, announced that the Abbott Government had agreed with the Federal Opposition to set the Large Scale Renewable Energy Target (LRET) at 33,000 GWh by the year 2020.

The announcement was confirmed this week and follows almost nine months of political and industry negotiation since the Renewable Energy Target Scheme – Report of the Expert Panel (Non-Statutory Review) was released in August 2014. We have previously provided legal updates on the terms of reference and the findings of the Non-Statutory Review.

While this compromise still needs to pass through the Senate, it offers hope that the uncertainty that has plagued Australia’s renewable energy industry in recent years will finally be over.

Compromise on the LRET

The Renewable Energy (Electricity) Act 2000 (Cth) (REE Act) currently includes a legislated target of 41,000 GWh of large scale generation by 2020 – supported by incrementally increasing annual targets to this date. The REE Act also currently provides for biennial statutory reviews of the targets by the Climate Change Authority (CCA).

Since December 2012, the CCA has conducted two statutory reviews of the RET in December 2012 and December 2014 and recommended on both occasions that the LRET be maintained at 41,000 GWh. However in August 2014 the Non-Statutory Review recommended a significant decrease to the LRET, to 26,000 GWh and the negotiations that have followed have resulted in a reduction in 8,000 GWh from the current legislated LRET.

The return of some certainty

The announcement of the compromise has been met with qualified support from the renewables industry, which has suffered from the policy uncertainty in recent years. If the reduction in the LRET is legislated, it is likely to result in the immediate re-establishment of a number of current large scale wind projects – many of which have planning approval but were awaiting confirmation of the LRET figure.

Conversely however, proponents of large scale solar and new wind projects have expressed disappointment in the 8,000 GWh reduction, as it is expected that there may not be room within the 33,000 GWh target for these (currently more costly) projects.

A stumbling block in the past few weeks has been the Abbott Government’s position of preserving the biennial reviews, with the next review due to be undertaken by the CCA in 2016. The CCA’s 2012 RET Review recommended that the reviews be undertaken every four years to increase investor confidence, however this change has not previously been implemented by respective governments. The prospect of another review in 2016 – which would be the fourth in four years – has been strongly opposed by the Opposition and clean energy industry, on the basis that the recent compromise will only continue the uncertainty at a lower target. However, yesterday's announcement has seen the Government back down from this position.

An additional further issue of disagreement is the Abbott Government’s proposal that wood waste be included in the targets. The inclusion of the burning of wood waste as renewable energy was an Abbott Government election commitment in 2013 and was supported by the Non-Statutory Review, however it has not been within the CCA’s terms of reference for review and has limited political and industry support.

The legislation that implements the compromised position will still need to be passed by the Senate, which is likely to consider the amendments before the winter recess.

Recent State government announcements

In the past fortnight, since negotiations again stalled on the issue of the biennial review:

  • The Queensland Government announced its commitment to a renewable energy target of 50% by 2030; and
  • A Victorian Government spokeswoman has said that the state target would seek to lift renewable energy from about 13% to about 20% in 2020. However, a definitive goal would be set in consultation with industry.

Despite the RET being a Commonwealth Government scheme, these announcements may see Queensland and Victoria joining the ACT (90% renewable energy target by 2020) and South Australia (50% renewable energy target by 2025) in having their own targets.

In 2013 the NSW Government released the NSW Renewable Energy Action Plan to guide NSW's renewable energy development and to support the national target of 20% renewable energy by 2020, while in 2013, renewables made up 93% of electricity generated in Tasmania.

Western Australia and Northern Territory do not currently have renewable energy targets.