The Renewable Energy Future of Australia in Jeopardy
In 2001, Australia’s Howard Coalition government introduced a Renewable Energy Target (RET) policy, designed to ensure that 20 percent of Australia’s electricity would come from renewable sources by 2020. The goal was to diversify the nation’s energy sources while also supporting growth and employment in the renewable energy sector. Industry leaders planned accordingly, securing investments and launching projects that would help the country reach its target.
During each stage of the RET policy, Parliament reported strong support from both of the major political parties, and the policy was expanded further in 2009. So it came as a surprise to many when the government announced in February of this year that they would be reviewing the RET policy and placed Dick Warburton—regarded by many as a climate change skeptic—at the helm of the RET Review Panel.
A Cause for Concern
The review caused panic in the industry and led a group of Australia’s leading clean energy investors to send an open letter to Parliament urging them to leave the RET unchanged. The letter also warned of the risks that changing the RET might cause—risks that could effect not only the industry and its investors, but also Australian citizens.
“If the 41,000GWh target is reduced, or moved out past 2020, existing wind farms, bagasse plants, hydropower and large-scale facilities will suffer financial distress and the potential for financial failure,” the letter, written by Clean Energy Council’s CEO Kane Thornton and co-signed by 17 major renewable energy companies said. “A significant reduction to the scheme would damage Australia’s reputation as a safe place to invest not only in clean energy, but in all forms of infrastructure.”
Supporters of the review propose to scale the RET back to 25,000GWh or 30,000GWh. Some even believe that the RET should be scrapped altogether, with incentives offered strictly to existing generators. The review, commissioned by Prime Minister Tony Abbott, was reportedly initiated due to concerns that the current policy would lead to increased power prices.
“We have to accept that in the changed circumstances of today, the renewable energy target is causing pretty significant price pressure in the system and we ought to be an affordable energy superpower… cheap energy ought to be one of our comparative advantages,” Abbott said in December.
However, those opposing the review are quick to cite modeling that challenges Abbott’s theory.
ACIL Allen Consultants, whom Abbott hired to conduct modeling for the review, found that the current target would increase the average Australian household bill by an average of $54 per year between now and 2020 but would reduce bills by a similar amount over the decade that followed when compared to what they might be if the RET were repealed. ACIL Allen’s modeling used notably bleak projections within their modeling, including working on the assumption that coal and gas prices would stagnate until 2040.
Separate modeling by Roam Consulting was also performed for the Clean Energy Council. The modeling, which employed more optimistic gas price projections, found that bills would be $50 lower per year by 2020 if the RET was left unchanged.
A Clean Energy Exodus?
Industry analysts have reported that Australia’s investment in renewable energy has plummeted over the course of the year, mainly due to the RET review. Kobad Bhanvnagri, head of Bloomberg New Energy Finance’s Australian unit, reported that between January and June of 2014, $40 million was invested in large-scale renewable energy—the lowest level since the first half of 2001. Last year’s investment totaled $2.691 billion, the second largest amount of flow to the sector in the nation’s history.
“Clean Energy investment in Australia fell sharply in the lead-up to the federal election and then fell further again after the Coalition took government with its promise to conduct a review of the RET,” Bhavnagri told Fairfax Media. “The investment environment for clean energy in Australia is currently very poor.”
Renewable energy companies throughout the country are likely to have suffered a significant drop in investment, and many are doing their part to make sure the RET remains unchanged. In addition to signing the letter to Parliament, some executives are publicly voicing their opposition to the review and warning that its repeal could have further consequences.
“Hopefully the government and the parliament more broadly would accept that you can’t leave the industry in limbo with legislative uncertainty for another two years. The industry would pretty much collapse if that happened,” Miles George, managing director of Infigen Energy told RenewEconomy. “Regulatory certainty is what we need. You can’t make a 20-year investment on the back of legislation that might change every two years.”
Upon the official announcement of the review, Australian Solar Council chief executive John Grimes launched a Save Solar campaign aimed at educating the public on the importance of upholding the RET.
“The big projects today in Australia are dead, and the only prospect of reviving them is to shift the federal government on this issue,” Grimes said in a statement.
A Future Uncertain
Abbott may face resistance in the Senate in regard to altering the RET. Clive Palmer has gone on record to say that any change in the RET would be a broken promise by Abbott, and his party will swiftly block any proposed changes. While the clean energy industry is encouraged by his support, Palmer’s words do little to buoy investments in the current market.
“Even if the Palmer United Party blocks any changes to the RET, if the government's intention is to change or remove the target, investment will be affected,” Bhavnagri said. “Investors are likely to hold off on making new investments until it is clear who will be in government next, and what their clean energy policy is.”
Until then, the industry may remain at a standstill.
FEATURE UPDATE: Since the writing of this story, the panel presented its findings on the RET and recommended it be scaled back dramatically. Click here for the most current news on the subject.
Technology revolution for water retailers
In April 2017, the UK’s water retail market in the world opened for business – the single biggest change to the water sector since privatisation. This development allowed businesses, charities and public sector organisations to shop around for the best deal.
However, like any industry, this change hasn’t been without its sticking points; here, Paul Williams, CTO at Everflow Tech (pictured far right), discusses how retailers can harness technology to their advantage
Quotations could take up to a week to produce, billing software had to be manually updated and brokers were unable to manage the complete customer journey in one place – all of which took time, cost money and allowed for human error.
The more complexity that was involved in billing or quoting, the more contact end customers needed to have with their retailers, pushing up the cost to serve for every SPID. This meant retailers – ourselves included – found themselves in a situation where profits were simply eaten up by service costs.
We also note that it can traditionally be hard for retailers to stay on top of balancing what they are charging their customers with what they are being charged by the market. To further exacerbate this, the longer a change goes unnoticed, the more trouble it can be to balance the issue.
It was these issues that Josh and his (at the time) small team wanted to ameliorate, creating their own technology in the absence of anything else.
This technology evolved into our award-winning retail sales, billing and customer management platform for the water retail market, and Everflow Tech was launched as a standalone venture in 2018, selling the software externally for other water retailers and their customers to benefit from.
What retailers want
As a relatively new entrant to the world of utilities competition, the water market could be seen to be lagging behind, particularly when it comes to innovation.
In fact, as recently as 2019, Ofwat said it expected the industry to be making technological advances and to be working with a culture of innovation, collaborating with companies both within and outside of the sector.
And with cost-savings for consumers traditionally lower than for other utilities, retailers need to be offering something more – whether that’s better support, energy-efficiency advice or more accurate data.
What’s more, consumers have had a taste of the power of technology, and they’ve come to expect nothing less from retailers across the board.
Another key issue – thrown into sharp relief during the past 12 months (and counting) of a pandemic – is rising levels of arrears, which are likely to increase bad debt beyond margins that retailers originally allowed for when the market was created.
In such a low-margin industry, there is a limit to the amount of debt retailers can take on, especially as recovering costs can be a very slow process. Ofwat has signalled that this issue could be addressed as early as this year, with a mechanism for recovering bad debt to be established during 2021/22.
The market needs simple solutions to better serve the end user, and we were perfectly placed to develop those solutions. At Everflow, our software is designed for the water retail market, by the water retail market.
As well as simple billing, clear-to-understand workflows, and a revenue assurance system to allow retailers to quickly compare market charges, Everflow has also introduced a complete debt solution, allowing missed payment dates to drive late payment charges and escalations automatically.
Retailers are able to design and put out their own bill and quotes, tailoring customer journey and overall experience – whatever the circumstances.
What does the future hold?
Automation is key to any industry; we’re heading into an age of driverless cars and smart homes, and this drive for tech will filter through to our industry, and we need to catch up.
The Internet of Things – a network of physical objects connected to each other – means human error (and effort) can effectively be removed from many everyday tasks, which goes for meter readings too. However, in the 21st century, the water market is still not leveraging previously emerged technology in the form of smart meters to provide accurate billing.
Consumers are also becoming more empowered, both to ask for information and change their preferences if they don’t like what they learn. Retailers need to be armed with this information, not next week, not tomorrow, but now – and, at Everflow Tech, we’re putting that information at their fingertips.
But the retailers themselves need to speak up too, and we will always work with them to get the best ideas on what needs to be developed and when.
Our strong bond with Everflow Water, along with other key customers, means we have a direct interest in making sure our systems serve the water market in the best way they can.
For us, the goal is to make sure retailers on our platform can grow as much as possible, leaving behind laborious daily processes to focus on their own strategic growth and, most importantly, helping their customers.