Labor and the Coalition have signalled they are prepared to consider reining in the 20 per cent renewable energy target under pressure from industry leaders, who warn it will eventually drive up electricity prices more than the carbon tax.
Origin Energy managing director Grant King said the target, also known as the RET, will be the main driver of electricity price rises by 2020 because it locks in increasing reliance on more expensive sources of electricity, such as solar panels and wind turbines.
Mr King’s views on the contentious issue have split the industry, part of which is more worried that changing the target would damage prospects for investment after numerous modifications to green schemes at both federal and state levels.
“Given current forecasts for energy demand in 2020, the RET scheme in its current hard-wired form will deliver a lot more than 20 per cent,” Mr King told The Australian Financial Review.
“The community signed on for 20 per cent by 2020. If it is 25 or 30 per cent then it will mean more costs.”
The carbon floor price, which kicks in from 2015, is also being re-negotiated by Labor and the Greens to iron out implementation details.
Several factors, including softer demand for electricity and the popularity of rooftop solar panels, means renewable energy is likely to comprise about 26 per cent of electricity by the end of the decade compared with a legislated target of 20 per cent from now-outdated forecasts of electricity demand.
Given the subsidies needed for renewable power, this means unnecessary increases in power bills just as the carbon price and investment in transmission networks are driving up retail electricity prices and triggering a political backlash.