Solar scheme so successful that the plug will be pulled

Sydney Morning Herald
9 April 2011, Page: 4

THE Climate Change Minister, Greg Combet, is looking for new ways to slow the runaway demand for rooftop solar systems that has put pressure on electricity prices and made it harder to sell the government's proposed carbon price. Mr Combet is understood to be very concerned at the huge growth in rooftop solar, fuelled by generous state and federal subsidies, and is considering options to slow demand, including requiring households to buy bigger and more expensive systems to be eligible for a reduced federal government subsidy.

State governments have become increasingly alarmed at the pressure on electricity prices from the federal subsidy, which flows straight through to power bills because it requires electricity retailers to buy "solar credits" awarded for renewable power generated on household roofs. And federal Labor is worried the scheme is forcing increases in electricity bills just as it is struggling to sell its new carbon tax.

In December, when almost half of a 6% increase in a draft determination for increases in Queensland electricity prices was caused by the federal renewable energy target, the Queensland Premier, Anna Bligh, wrote to the Prime Minister, Julia Gillard, asking her to review the federal scheme. The NSW Premier, Barry O'Farrell, has promised a "solar summit" to determine the costs of the state government's feed in tariff, which the former Keneally government reduced from 60¢ to 20¢ a kW to try to rein in booming demand.

In December Mr Combet sped up the phase out of federal payments for rooftop solar photovoltaics, announcing that from July 1 the government would give out four, rather than five, tradeable solar credits for every MW of roof generated renewable electricity. The tradeable certificates dramatically reduce the upfront cost of a rooftop solar installation a benefit worth about $6000 for a system of 1.5 kilowatts, and are heavily marketed by solar companies.

The government is understood to be considering reducing the number of certificates further, from four to three. It is also looking at changing the subsidy to push buyers towards bigger and more efficient systems, perhaps up to 2 or 3 kilowatts. The scheme is due to be phased out by July 2014, but some industry groups argue the scheme should be scrapped altogether with the introduction of a carbon price.

Small scale photovoltaics reduce greenhouse emissions at a cost of about $200 or $300 a tonne of CO₂, compared with the expected starting price of a carbon tax of $20 to $30. The schemes also disadvantage poorer households who cannot afford the upfront costs of the solar installation, and in effect subsidise the households who can afford them, through higher power prices. Benefits are especially lucrative in NSW and the ACT, where the state feed in tariff pays households for all the electricity they generate. Other states only pay for the excess power fed back into the grid.