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An analysis of Australia's large scale renewable energy target: Restoring market confidence

Tim Nelson (), James Nelson, Jude Ariyaratnam and Simon Camroux

Energy Policy, 2013, vol. 62, issue C, 386-400

Abstract: In 2001, Australia introduced legislation requiring investment in new renewable electricity generating capacity. The legislation was significantly expanded in 2009 to give effect to a 20% Renewable Energy Target (RET). Importantly, the policy was introduced with bipartisan support and is consistent with global policy trends. In this article, we examine the history of the policy and establish that the ‘stop/start’ nature of renewable policy development has resulted in investors withholding new capital until greater certainty is provided. We utilise the methodology from Simshauser and Nelson (2012) to examine whether capital market efficiency losses would occur under certain policy scenarios. The results show that electricity costs would increase by between $51 million and $119 million if the large-scale RET is abandoned even after accounting for avoided renewable costs. Our conclusions are clear: we find that policymakers should be guided by a high level public policy principle in relation to large-scale renewable energy policy: constant review is not reform.

Keywords: Policy uncertainty; Renewable energy; Electricity policy (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1016/j.enpol.2013.07.096

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