Monday, 16 May 2011

Cuts to solar subsidies to be sped up

5 May 2011, Page: 2

THE government is set to accelerate cuts to subsidies for household solar panels from July under changes to be announced today. Climate Change Minister Greg Combet is expected to announce the changes in response to soaring electricity prices and an overheating renewable energy market. The cuts to solar subsidies are expected to save households up to $35 a year on their power bills.

The changes mean federal subsidies for rooftop solar panels will end in mid 2013, a year earlier than previously promised. Households and businesses who install solar systems will also get fewer extra credits than expected from July this year, with the extra credits phasing out over the next two years. These credits are sold on the renewable energy market. It is the second time in six months Mr Combet has reduced extra credits on offer for solar panels.

"Strong demand for solar panels has continued, fuelled by declining system costs, the strong Australian dollar and economy, as well as incentives such as solar credits and the state and Territory feed in tariff schemes", Mr Combet will say. Some energy market experts, including government climate change adviser Rod Sims, have blamed rising power bills on the massive increase in rooftop solar panel installations. The sale of solar panels in effect floods the power market with extra renewable energy credits, which has an inflationary effect on electricity bills.

Under the current federal subsidy households are getting five times more renewable energy credits than they otherwise would have been entitled to for the power generated by their solar systems, with the number of extra credits reducing over a number of years. Under the today's changes, from July 1 extra credits will reduce to three times what would have been offered, rather than a reduction to four times more as previously promised. In July next year the extra credits will be reduced to two times what they would have otherwise. The extra credits will then end in July 2013.