Australia's "clean power" myth

Australia's clean power struggle

By Giles Parkinson

Climate Spectator

20 September 2011

The naming of AGL Energy CEO Michael Fraser as the new chairman of the Clean Energy Council caused barely a ripple of interest in the mainstream media last week, but it has created some anxiety in the local renewables industry.

The appointment of the boss of one of the sector's biggest players as chair of its peak body should not normally cause any controversy. Indeed, it would normally be considered to be entirely logical. But the fact that it has caused concern neatly captures the frustration, the suspicions and the rivalries that run through an industry still struggling to emerge in the mainstream.

The principal concern about Fraser's appointment does not lie with AGL's position as the largest developer of renewable energy projects in the country, or Fraser's own prominence as an outspoken supporter of a carbon price and of the renewable energy target, it comes from the fact that it is also one of the big three energy "gentailers" - along with Origin and TruEnergy - which already wield extraordinary power over the clean energy industry and effectively hold the power of veto over which projects and which technologies get funding.

The CEC says the appointment is a sign of the industry's maturity. "I can appreciate that there will be range of views as to who is the right person for the job," CEC CEO Matthew Warren told Climate Spectator. "It comes down to how you want the industry to be perceived. We think there is merit in it being perceived as what it is becoming - a serious player. I don't think it hurts us to be perceived in that way."

But many would dispute that the renewables industry is mature. Notwithstanding the 20 per cent renewable energy target that would supposedly guarantee a $30 billion investment over the decade from 2010-20, the industry remains in virtual suspension, and still accounts for less than 2 per cent of Australia's energy production, if you don't include long-established hydro. And in many new technologies, Australia is a laggard.

One of the weaknesses of the clean energy industry is that the emerging nature of their respective technologies and the fierce competition for funds and policy favours means that they rarely speak in unison. A solar company will diss the wind developer, the wind guy will do the same about geothermal, and don't ask what they think about solar. And round and round it goes.

One thing they do agree on is that the concentration of power in the hands of the gentailers is not good, and it is their influence, rather than bad policy, that is often blamed for blocking the rollout of renewables. They sign the power purchase agreements crucial to funding these projects that are needed to meet the MRET. [Mandatory Renewable Energy Resource Target],And because the market has been awash with renewable energy certificates in the past few years, it has been cheaper for the gentailers to spend a billion dollars on cheap RECs than on large-scale projects.

It's ironic that Fraser was elected - unanimously - by the CEC board last week to replace Rob Grant, the head of Pacific Hydro, Australia's largest "pure-play" renewable energy developer. Grant is stepping down because, in the absence of any PPAs being awarded in Australia, all of his company's developments are taking place in South America, and he is spending most of his time there supervising the rollout of wind and hydro electric projects.

The gentailers have also been at odds with the solar industry because of their opposition to feed-in tariffs, and their differing views on the value of rooftop PV. They are seen by many in the industry as one of the principal obstacles to the further rollout of solar PV, even though they have their own solar businesses.

And their pursuit of huge gas investments and the controversial development of coal-seam gas reserves has also earned the suspicion of the Greens and environmental groups, who fear they will favour these larger investments over renewables. Warren dismissed suggestions that CEC policy could be compromised by CSG interests as nonsense.

The differences also lie around the belief that the CEC should be a more pro-active advocate of alternative technologies. The organisation itself seems to see itself as a pragmatic broker and a facilitator between the industry players and government.

Dave Holland, the founder of the solar group Silex Systems, and now an industry consultant, was one of many who voiced concern about the appointment, but the only one to go on the record - probably because he was the only one unlikely to seek a PPA [power purchase agreement] anytime soon. He said that if the CEC wanted to demonstrate the maturity of the industry, then it should be chaired by a company that earned most of its income from the industry. This was a sentiment echoed by others, and across different technologies.

This will not be the first time that the peak body for the clean energy industry has been chaired by one of the big energy groups. A predecessor of Fraser's, the former AGL boss Paul Anthony, did so, as did Richard McIndoe, the head of TruEnergy, who is best known for predicting widespread blackouts if coal groups were not granted enough carbon compensation.

There are several theories about why Fraser was appointed, but the most likely is that he was viewed as the person most likely to open doors, and best placed to defend the MRET policies and other "complementary measures" considered essential to the industry and which have come under attack with the proposed introduction of a carbon price.

There is no doubt the CEC sees Fraser as a more impressive figure to present to government ministers and energy industry forum than, say, the head of a small or emerging solar or biomass group. As one source close to the CEC board told CS, criticism may well be based around AGL's fossil fuel portfolio and its preference of wind over other renewables - an accusation often thrown at the CEC. "But who else has the credibility and the grunt?"