Environment Minister Greg Hunt and Industry Minister Ian Macfarlane will meet opposition environment spokesman Mark Butler in Melbourne today to clinch an agreement that should see changes to the RET passed by parliament within weeks.
The deal has the potential to unleash a new wave of investment in renewables and will safeguard the jobs of workers in energy-intensive industries.
The Australian understands the Prime Minister met with Mr Hunt and Mr Macfarlane on Thursday night and suggested dropping the demand for a review of the scheme every two years until 2020 as part of a compromise with the ALP.
Labor, backed by the Clean Energy Council that represents the renewables industry, had declared the review a “deal-breaker’’ because it would have policy-perpetuated uncertainty that has seen investment in the industry brought to a standstill.
The government had decided to insist on the reviews because of a concern the targets would not be met and penalty clauses would be triggered, roughly doubling the cost of the scheme to consumers.
Under the compromise, the Clean Energy Regulator will instead publish progress towards the RET targets and price impacts on the electricity market so that the government can keep track of it.
The Australian has been told the government decided to drop the demand for a review every two years after research from the Clean Energy Regulator suggested more than 80 per cent of renewable energy was the subject of long-term contracts. This means the spot market for Renewable Energy Certificates, which energy users must buy to satisfy their RET target, was less significant and potentially less of a problem if penalty clauses were enacted for failing to reach the target.
The Australian understands the CEC will back the compromise, which will see the large-scale RET target cut from 41,000GWh to 33,000GWh by 2020. This means about 23.5 per cent of all electricity generated in Australia will be from renewable sources by 2020.
A deal means legislation will be introduced as early as next week and passed by the Senate before parliament breaks for winter recess on June 25. Energy-intensive industries such as aluminium will be fully exempt from the RET under the deal, which will produce an annual saving of $80m for the aluminium industry.
Under the deal, the target will be altered to soak up an excess in RECs created by the rapid increase of solar rooftop panels under the Rudd government. In its initial shape in 2008, the RET scheme had 41,000GWh of large-scale solar and 4000GWh of small-scale solar, but the explosion of solar panels and generous feed-in tariffs caused a glut of RECs and their price collapsed.
Today’s deal follows pressure on the government from the Clean Energy Council, Australian Industry Group, Australian Chamber of Commerce and Industry and the Australian Solar Council for the two-yearly reviews to be dropped.
The government and Labor will not agree today on burning wood waste, which will be added to the scheme under the Coalition’s proposed legislation. Labor will continue to oppose this but it is not expected to scuttle the overall deal.