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Why were RET modellers instructed to ignore commercial reality?

By September 2, 2014In the News

The firm hired by the Abbott government to conduct the modelling for its controversial review of the Renewable Energy Target has admitted it was instructed to ignore commercial reality – particularly around coal-fired power generation.

Buried in its voluminous report, leading consultant firm ACIL Allen says it was instructed by the RET Review panel, headed by climate skeptic Dick Warburton, to ignore commercial realities around coal-fired generation.

ACIL Allen is one of the country’s leading modellers, providing analysis for many of the country’s biggest companies. Normally, it says, it would take into account the risk of a carbon price, financing issues and community views when assessing the prospects for coal-fired generation.

But in its notes to its report, it says is was instructed to ignore all those commercial realities when assessing the cost of coal generation – an equation that was crucial to gauging the costs and the benefits of the RET scheme.



This is how ACIL described the situation:

“ACIL Allen’s standard assumption when undertaking market outlook studies is to restrict conventional coal (i.e. coal-based technologies which do not employ carbon capture and storage) from entry. This is due to:

 Community views and corporate sustainability policies

 Potential difficulty obtaining generation licences from State and Territory governments

 Long-term risk of explicit carbon pricing being reintroduced

 Difficulty in securing financing on a commercial basis due to these risks.

As requested by the Expert Panel, conventional coal entry will be permitted in the policy scenarios based purely on the economics of the technology within the market. As ACIL Allen’s modelling assumes perfect foresight though, it ignores the risk of future carbon policies which may have a negative effect upon the commercial performance of such plant.”

Any analyst and financier will tell you that it would be impossible to finance or build a new coal-fired generator in this county, but the RET Review panel wanted the modelling of the RET costs to be done on the basis that coal generators could be built. This was a key component in their efforts to try to paint the RET scheme as costly and ineffective.

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