Green tech innovation could die post carbon tax

Green tech innovation could die post carbon tax

Renewable energy projects will be hard to finance without a carbon price, says Bloomberg New Energy Finance

The future of green technology innovation isn't looking so bright following the repeal of the carbon tax, says Bloomberg New Energy Finance’s head of Australia, Kobad Bhavnagri.

Speaking at Clean Energy Week in Sydney, Bhavnagri said without a carbon price, renewable energy projects will be hard to finance and it will be difficult to get investors to sign off on deals.

The carbon tax was repealed by the government on 17 July. The tax was to charge coal polluting companies a high premium for the emissions they produce, which they would likely pass onto their customers, making green companies or startups look relatively cheaper in the market.

Coal companies would eventually have to consider going green to reduce their costs in the long term or remain uncompetitive in the market.

Bhavnagri showed a scenario of a wind farm that looks at costs versus revenue to 2030.

“Under a carbon price, the projections are that the wholesale prices would surge and therefore the revenue for a plant would outweigh the costs over the lifetime [which] makes a great business.

“When you take the carbon price out, you all of a sudden have a very big gap post 2030. In this scenario, we’ve actually modeled LGC [large-scale generation certificate] prices persisting at the ceiling around $93 tax effective.

"And even in that very foolish scenario – you would expect there to be policy change – you can see that a project looking to get up in 2020 has about a 15-year gap in revenue, with no foresight in revenue.”

Australia is also experiencing the worse period of investment since the first half of 2001 for large scale clean energy, with an investment of only $40 million this year, according to Bloomberg New Energy Finance research. This is compared to China having invested $19.3 billion and the US $10.6 billion in Q2 2014.

Also, Israel, which is known as a tech startup nation, was recently ranked number one in the Global Cleantech Innovation Index by WWF (World Fund for Nature), with Australia as one of the lowest ranking countries.

“Basically private sector funding … stopped and that’s largely due to the government’s Renewable Energy Target review,” Bhavnagri said.

The EU Commission also announced in April that it will phase out its subsidies for renewable energy model by 2017 as it was resulting in higher electricity prices for consumers.

Colin Liebmann, acting VP for Australasia at Recurrent Energy - who also spoke at Clean Energy Week - has examined the strong market for green tech in the US. Recurrent Energy is a main solar developer in North America with 600 mega-watt under construction and another 400MW contracted.

Read more: SAP’s global data centres to be 100 per cent green

Liebmann said no doubt that long-term, stable policy allows for growth and innovation and is key to growing green tech startups in Australia.

“It has led to significant industry capability across the value chain of [developing] projects [in the US],” he said.

“Also, there are regulatory tests on the actual costs of the renewable subsidy, which is allowed to be passed onto consumers.

"So what that tends to do is put continual pressure on developers to reduce their costs because they are benchmarked against other developers.

"So you don’t get the situation where utilities, for example, exercise monopoly power to develop their in-house projects and capture super profits from their own projects because they are being benchmarked against independent developers.”

Bhavnagri said companies need to short circuit the “political circus” and sell more directly to consumers, instead of looking for government support.

“I haven’t seen an advertising campaign from the clean energy industry that shows mums and dads saying ‘a dollar a week for clean energy, I’ll pay that’.

“We are not going to consumers, we are asking the government ‘can you help us get it to them?'”

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