Solar blow-out may cost $600m in electricity rises

Sydney Morning Herald
Friday 5/11/2010 Page: 5

ENERGYAUSTRALIA has warned of a $600 million blow-out in power bills next year, claiming the federal government has underestimated the number of certificates it will issue as an incentive for installing small scale solar power systems on homes and businesses. The NSW government-owned power company warns in a submission to the federal government that the estimate upon which the Renewable Energy Certificate scheme was based "is likely to prove far too modest".

The financial impact of this for our industry may be an additional cost in excess of $600 million in 2011 and is likely to have a serious impact on electricity consumers", it says. The small-scale renewable energy scheme will begin on January 1, Renewable Energy Certificates, known as Small-scale Technology Certificates, worth $40 each, will be issued to encourage the installation of photovoltaic cells and solar hot water systems. Original modelling showed that up to 11 million of these certificates would be issued next year.

But EnergyAustralia, backed by other business and industry groups, claims this will blow out to about 30 million because the take-up rate of solar power will be greater than anticipated. Under the scheme, electricity retailers are required to buy back all the certificates issued. If, for example, a power company produces 10% of the nation's electricity, it will have to buy back 10% of all the certificates issued.

EnergyAustralia says the cost blow-out, caused by having to buy back more certificates than anticipated, will be passed on to customers using conventionally generated power. The energy company AGL Energy warned in October of a 3% increase in power bills because of the anticipated blow-out. The paper and packaging company Amcor has submitted that the number of certificates should be capped or the price halved to $20.

Power prices are a hot political issue at state and federal levels. Last week the Premier, Kristina Keneally, slashed the feed in tariff that the state government paid to those with solar power systems from 600 to 200/kW of energy fed back into the grid. The move was motivated by a higher-than-expected take-up of the government's solar bonus scheme, which was putting extra pressure on already-soaring power bills.

This week the chairman of the NSW Independent Pricing and Regulatory Tribunal, Rod Sims, a member of the government's multi-party committee on climate change, told the Herald a carbon price should allow federal and state governments to phase out more expensive greenhouse gas abatement programs such as solar feed-in tariffs and the renewable energy target to take pressure off household power prices.

The federal government's small-scale renewable energy scheme was a consequence of the revamped Renewable Energy Target, which aims to have 20% of power generated from renewable sources by 2020. That scheme was split in two small- and large-scale this year after big companies like AGL Energy complained that so many certificates were being handed out that they were dwindling in value.