Senator rides to Arena's rescue

The Australian government may have to return A$1.3bn ($1.22bn) to the Renewable Energy Association (Arena) after running into resistance from senator Ricky Muir and the Palmer United Party (PUP).

Muir, who represents the Australian Motoring Enthusiast Party in the country's upper house, had refused to back a motion repealing the carbon tax, even though he is aligned to the PUP, which wants to get rid of the tax.

He has proposed an amendment to the package to save Arena, after the government confirmed plans to scrap the organisation and its budget, leaving it for now with about A$900m in funding deals that have already been struck.

In a last-minute deal with billionaire mining magnate Clive Palmer, the amendment, which would have delayed the carbon tax repeal, was withdrawn in exchange for the support of Palmer's PUP in keeping Arena alive.

PUP senators have already promised to stop the government's plan to abolish the Clean Energy Finance Corporation and the existing renewable energy target (RET).

While awaiting the outcome of a review of the RET, Palmer, a member of the lower house of Parliament, announced that his senators would block any change until at least 2016, regardless of the review's results, as the PUP holds the balance of power in the Senate.

Any move by Prime Minister Tony Abbott's government to cut the target – which stipulates that 20% of the country's large-scale electricity should be sourced from renewable energies by 2020 – would put it on a collision course with Palmer's party.

The PUP is also said to be ready to vote against Abbott's bid to introduce his Direct Action Plan, which includes a A$2.55bn Emissions Reduction Fund that will encourage companies to cut greenhouse gases through taxpayer-funded grants.

However, Abbott says renewable energy significantly increases electricity bills, and he is considering reducing the target.

Australia's energy industry is at a "crossroad", says Clean Energy Council chief executive David Green, and the decisions made over the next few months will range from policy and politics through to financing and technical issues affecting the industry.

Abbott's claims are criticised by new reports and studies, presenting the benefits of wind and solar, submitted to the expert RET panel.

A graph provided by energy expert Hugh Saddler of consultancy Pitt&Sherry showed wind generating two thirds of South Australia's capacity and up to 91% of the state's demand in the last week of June.

Another study, by the University of Queensland's School of Economics, found that wind energy actually forced down wholesale power prices by more than A$3.2bn over six years. John Foster, one of the authors, says: "The [target] – and the stimulation of wind – has increased supply and flattened out the expensive peaks".

The study also found that once other costs, including the purchase of renewable-energy certificates, were taken out, the target delivered a net benefit of A$870m in 2007-12.

The findings were backed up by South Australia's electricity transmission network operator, ElectraNet, which also submitted a paper claiming that "wind energy has substantially reduced greenhouse gas emissions, and has not resulted in any added costs to the network".

The discussion papers were submitted, alongside those of concerned Australians in favour of the target, to the review panel of RET, which is due to report soon.