The state government under Premier Campbell Newman announced yesterday that the Queensland Solar Bonus Feed-in Tariff scheme is to be slashed from 10 July 2012. There has been a range of reactions from a number of prominent solar and renewable energy industry players about the longer-term implications of the change, but in the meantime the residential solar industry in the state is bracing for a massive rush of customers in the run-up to the application deadline.
Queensland’s Solar Bonus Feed-in Tariff cut: Not as bad as it could have been, but still a surprise nonetheless
The Queensland scheme is the proverbial ‘last domino’ to fall since Mr Newman assumed the Premiership and began taking the hatchet to the previous Labour government’s clean energy initiatives, sparing little. Apprehension that the tariff would be slashed was rife from well before the Queensland election, as the Liberals’ ousting of the incumbent Labour party was virtually a foregone conclusion. A glimmer of hope came immediately following the election, however, when the newly elected Liberals indicated that despite their plans to dismantle other climate and clean energy-related programs, the Solar Bonus Feed-in Tariff would be retained thanks to its relative cost-effectiveness and its benefits to the wider economy.
Although the government has technically kept this promise, the program will not continue in the form that most in the solar industry would have liked it to. In this way, Queensland’s Solar Bonus Scheme is also Australia’s last Solar Feed-in Tariff domino to fall–and to fall lower than that of any other state that still has a mandated rate. Instead of a more gradual reduction like those seen in Victoria and South Australia when their Solar Feed-in Tariff schemes were reduced (to 25c/kWh and approximately 23c/kWh respectively), Queensland will be cutting its scheme to less than a quarter of the current rate–really only a nominal ‘continuation’ of what was for the better part of a year the most generous scheme in the country.
The Australian solar power industry has become accustomed to the stop-start nature of incentive programs throughout the country, which are collectively and jokingly referred to as the ‘solar coaster’ thanks to the sudden and unexpected turns which characterise them. The Queensland Feed-in Tariff rate reduction, while sudden, unexpected, and widely seen as too harsh and soon, can also be perceived as a relatively soft landing for the successful scheme, especially in light of the fact that it is being implemented by a Liberal government. As industry analyst Warwick Johnston of SunWiz points out in an article on Climate Spectator, the fact that households have over 2 weeks to submit their paperwork and 12 months to have their system installed is not altogether bad news (when the NSW scheme was cut, the announcement came 12 hours before the deadline). Likewise, even under the government-mandated 8c/kWh rate that is to follow, some of those who install systems may actually be eligible to receive as much as 16c/kWh depending on whether their electricity retailer offers a voluntary contribution on top of the mandatory one. This is certainly a better proposition than the situation that currently exists in New South Wales, where there is no minimum mandatory Feed-in Tariff rate for electricity retailers.
The issue of undervalued solar power
That being said, there still remains the greater, underlying issue of how solar power is perceived and valued in Australia. At present, a number of states (SA, NSW, and Victoria) have determined that the ‘actual’ generation value of solar power fed into the grid sits at around 8-10 cents. SA and NSW say that this value will rise as time goes on and after the Carbon Price comes into effect. These values have been ascribed by independent government bodies which are required to determine the value of solar power within narrowly set parameters–usually excluding the network benefits of solar. Instead, they look only at the immediate value of solar from the viewpoint of the electricity distribution companies at the point of sale. Within these limited parameters, pricing tribunals such as NSW’s IPART and the Victorian Competition & Efficiency Commission have little option but to set the value far below retail electricity rates.
Moreover, electricity retailers in NSW can even get away with paying nothing for solar power that is fed into the grid, as there is no minimum mandated rate for solar if customers let them. As the Australian Solar Energy Society (AuSES), said in a response to the Queensland government’s announcement, “Utilities must start paying the same rate for solar that customers pay for grid electricity. Solar is poised to compete on cost with fossil fuel generated power, so it is time Governments priced solar power the same as fossil fuel power.”
Solar power’s value to the greater economy
In addition to the direct benefits of solar power to the grid, the industry also provides benefits to the broader economy. The Clean Energy Council has warned in a press release that up to 4500 solar jobs could be shed over the course of the next year in the fallout of the abrupt reduction.
Clean Energy Council acting Chief Executive Kane Thornton said the solar industry was “obviously disappointed” at such a rapid reduction in the Queensland Solar Bonus Scheme, which would put thousands of jobs at risk.
“The Solar Bonus Scheme has been very successful, with the solar industry now employing approximately 11,000 Queenslanders. The Solar Bonus Scheme itself has stimulated $2.37 billion worth of private investment,” said Mr Thornton.
“It is appropriate that the Queensland government reduces the level of its support scheme, given the great success of solar and the reduction in the cost of solar power systems in recent times.
“However, this kind of sudden drop could have a serious negative impact on an industry that has been delivering major economic benefits to the state,” he said.
Misconceptions: Solar schemes are not the main driver behind rising electricity prices
The network benefits of distributed solar PV and the need for better pricing of grid-fed solar power have been emphatically pointed out by RenewEconomy’s Giles Parkinson, as well as by Warwick Johnston in an article for Climate Spectator. The benefits of solar to the grid are also currently on full display in Germany, and solar PV has even been credited with playing a role in staving off the need to build more expensive generation infrastructure to meet peak demand here in Australia–a fact that even Federal Energy Minister Martin Ferguson recently had to admit. Renewable energy support schemes such as Solar Feed-in Tariffs, although they do drive up power bill costs slightly in the short term, only account for a small portion of the price rises, and will actually save electricity customers money in the long term.
This is a story that is being told and deserves to be heard, but still seems to be drowned out in the din of accusations surrounding ‘expensive’ renewable energy. One might excuse the Liberals for cutting the Queensland Solar Bonus Scheme rate–cutting support for renewables is just what they do–but Australia as a whole should recognise that renewable energy is, at least in the long-term, the more financially viable option when compared to fossil fuels. One would hope that, at least for the sake of ideological consistency, that the Liberals would also be seeking cuts to subsidies for fossil fuels alongside those for renewables. But it’s unlikely that anyone would hold their breath waiting for this to happen, so the pioneers and the stalwarts of the industry will continue to forge ahead even in the absence of government support.
© 2012 Solar Choice Pty Ltd
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