Making solar subsidies fit
Monday, 12 September 2011 09:34
While the current task of the Independent Pricing & Regulatory Tribunal is solely for the use of the New South Wales government, it is going to be of interest to all other jurisdictions when the report is published.
IPART has embarked on a study of solar feed-in tariffs (FITs) to provide an opinion on setting a fair and reasonable value for electricity generated by small-scale photovoltaic units.
The NSW policy experience with rooftop solar power can fairly be described as notorious, starting with a far-too-generous “solar bonus scheme” under the Keneally government.
That government then slashed its subsidies in the face of runaway interest from consumers who knew a good thing when they saw it.
Even so the incoming O’Farrell government has been left with a large residual cost as it has struggled to shelter the rest of the consumer base from the FiT fall-out and also with a considerable amount of political flak over its attempts to resolve the policy problems.
The government has given IPART the task of unknotting the mess, with a draft report due at the end of November and a final report in April next year.
With other governments from Western Australia to Queensland also struggling with the issue, including the Federal Government, which has support for small-scale solar built in to its renewable energy target, the reports will be read with interest far and wide.
In recent weeks, the Victorian government has closed its predecessors’ “Premium FiT” scheme to new applicants and the WA government has suspended the State’s FiT scheme for new connections.
The first step for IPART has been to publish an issues paper.
As the paper notes, generous subsidies have strongly encouraged the rooftop solar power sector, but they have also resulted in much higher than anticipated costs to both electricity retailers and governments, leading to increased end-user prices and a burden for taxpayers.
In NSW, the latest government estimate is that the total cost of the scheme over its life will be about $1.44 billion. The State government, as one of its election pledges, is meeting the 2011-12 bill, but next year and beyond the cost will fall on either end-users or taxpayers.
As is so often the case with schemes launched for political purposes, the “unintended consequences” are causing lots of trouble.
Clare Petrie, the NSW Energy & Water Ombudsman, in a submission to IPART, says the scheme has resulted in a “high volume” of customer complaints to her agency. Some consumers, for example, were unaware when they signed up that the subsidy ceases when there is a change in tenancy of the house.
Petrie also raises one of the criticisms of solar FiT schemes that has been raised around the country: the benefits accrue to those in the community who are home-owners able to afford the installation costs, but this excludes most customers living in apartments or renting accommodation plus low income households. However, the cost of the subsidy is then met by increasing all other end-users’ bills.
The IPART inquiry is likely to see many submissions in the weeks ahead and still more once its interim opinion becomes public later this year.