In brief

On 17 February 2014, the Australian Federal Government (the Federal Government) announced the composition of the panel tasked with reviewing the Renewable Energy Target (RET) scheme. Currently, the RET scheme requires that 20 per cent of Australia’s electricity be produced from renewable energy sources by 2020.

Terms of reference

The review will analyse the operation of the Renewable Energy (Electricity) Act 2000 (the Act)and the Renewable Energy (Electricity) Regulations 2001 (the Regulations), which are the legislative instruments that underpin and govern the RET scheme. This includes considering:

  • the economic, environmental and social impacts of the RET scheme, in particular the impacts on electricity prices, energy markets, the renewable energy sector, the manufacturing sector and Australian households,
  • the extent to which the formal objects of the Act and the Regulations are being met, and
  • the interaction of the RET scheme with other Commonwealth, State and Territory policies and regulations, including the Federal Government’s commitment to reduce business costs and cost of living pressures and cut red and green tape, and the ‘direct action’ policies under development.

In particular, the review panel has been asked to provide advice on:

  • whether the RET scheme’s objective to deliver 41,000 gigawatt hours of renewable electricity and small scale solar generation by 2020 is still appropriate,
  • the extent of the RET’s impact on electricity prices, and the range of options available to reduce any impact while managing sovereign risk,
  • the operation of the small-scale and large-scale components of the RET and their interaction;
  • implications of projected electricity demand for the 41,000 gigawatt hours target,
  • implementation arrangements for any proposed reforms to the RET, including how to manage transition issues, risks and any adjustment costs that may arise from policy changes to the RET, and
  • the Federal Government’s election commitment to reinstate native forest wood waste as an eligible renewable energy source.

The Review Panel

The panel will be headed by Dick Warburton, a former Reserve Bank board member who has previously advised the Federal Government on its ‘direct action policy.’

Warburton has previous experience in government consultation, having been appointed by former climate change minister Penny Wong to head the first Rudd government’s emissions-intensive trade-exposed (EITE) Expert Advisory Committee. This committee worked closely with the former Rudd government in formulating the EITE assistance program as part of that government’s Carbon Pollution Reduction Scheme.

The other members of the panel are:

  • Matt Zema, Chief Executive Officer and Managing Director of the Australian Energy Market Operator;
  • Dr. Brian Fisher, former Executive Director of the Australian Bureau of Agricultural and Resource Economics, and
  • Shirley In’t Veld, Independent Non-Executive Director of Asciano Limited and former Managing Director of Verve Energy, Western Australia’s biggest electricity generator.

Context of review

Previous reviews of the RET were conducted by the Climate Change Authority (the Authority) and generally focused on whether the RET was an appropriate and achievable target. The most recent of these reviews was completed in December 2012, and the Authority’s overall recommendation was to leave the RET in its current form in order to provide confidence to investors.

However the Federal Government is currently in the process of abolishing the Authority, and the scope of this review appears to be a wholesale examination of the ongoing viability and impact of the RET scheme as a whole rather than a consideration of whether the current RET is appropriate and achievable.

In outlining the rationale for this review of the RET scheme, Minister for Industry Ian Macfarlane noted that the review “upholds a clear commitment that the Coalition took to the election, to review the Renewable Energy Target to make sure it is working efficiently and effectively.” 

Minister for the Environment Greg Hunt also indicated that concerns over the price of electricity were a key consideration for the Federal Government in implementing the review, commenting “the review will advise the government on the progress of the Renewable Energy Target, the importance of investment certainty and any measures which can help ease pressure on electricity prices…the government is committed to easing the pressure of electricity prices for families and business.”

Review process

The panel is to undertake public consultations, seek submissions and provide a report to the Prime Minister, the Treasurer and the Ministers for Industry and the Environment by mid-2014. As yet, there is no indication as to when the panel will begin to seek submissions or undertake public consultations.

It is intended that the panel’s work will feed into the Federal Government’s energy white paper, which is due to be released in September 2014.