Key Takeaway: effective July 1 2012, the new scheme will impose a fixed carbon tax of A$23/ton on the country’s top 500 polluters, which will then be supplanted by a market-based cap and trade mechanism from July 2015 onward.
Australia’s parliament recently enacted landmark Clean Energy Act legislation designed to set a price on carbon emissions.
Australia boasts the most emissions-intensive developed economy, but sources less than 10% of electricity generation from renewables.
To date, Renewable Energy Certificate (REC) oversupply, low wholesale power prices, and carbon pricing uncertainty have constrained substantive RE adoption. Over the next several years, however, the government anticipates a 50% escalation in wholesale electricity prices (to A$45/MWh) and up to a 60% rebound in REC prices (to A$55−65/MWh).
Coupled with the carbon tax value (equivalent to roughly A$23/MWh), this will move renewable ventures into a more profitable realm. The Clean Energy Act also calls for an A$10 billion fund to facilitate utility-scale RE project execution from 2013–2014 onward. These combined elements strengthen the business case for RE investment.
Proposed Carbon Tax
To start on 1 July 2012 500 companies affected Agriculture, forestry and land are exempt Compensation for polluters Market-based trading scheme kicks in from 2015 Target to cut 159m tonnes of CO2 by 2020
That said, low power purchase agreement prices (falling below A$100/MWh) have recently frozen wind pipelines of leading IPPs (i.e. Acciona, Infigen). While utilities/retailers are currently better-positioned to capture Australian wind market share, few are able or willing to leverage balance sheet financing.
These trends suggest that prior to a REC price rebound and Clean Energy Fund disbursement (2013-2014), balance sheet/joint financing should drive most investment.