WA Solar Feed-in Tariff scheme to go over budget

Western Australia’s Solar Feed-in Tariff scheme may exceed its budget by as much as 7 times original projections. The WA Government has been accused of having mismanaged the scheme: at the end of 2011 it was expected to cost $180m over 4 years. Estimates of the full cost of the 10-year scheme–$435 million–were not revealed until this week.

The situation in WA is not dissimilar to that of NSW, whose originally generous but now defunct Solar Bonus Feed-in Tariff scheme has been the subject of much contention and media attention for running significantly over budget. The big question asked in both cases is: who will end up footing the bill?

In the case of WA, the government has proposed to have government-owned electricity grid operator and retailer Synergy absorb $150 million of the expected increase. If smeared across the Synergy grid area (Perth and surrounds), this would lead to a slight rise in the cost of electricity for households and businesses. The rest of the expense would be covered by the state government. WA Opposition leader Mark McGowan has criticised Premier Colin Barnett’s handling of the scheme, saying that the budget blowout would result in higher prices for families.

Electricity prices are rising dramatically across Australia and in WA, and these rises are often blamed on Federal and State government renewable energy incentives–frequently state-based Solar Feed-in Tariffs. However, according to a report by the Australian Energy Market Commission (AEMC) published in November of 2011, the vast majority of these increases will be due to the cost of transmission, distribution, and the wholesale price of electricity (“poles and wires”). Federal government renewables schemes such as the Enhanced Renewable Energy Target are only expected to account for about 5% of these increases, and the carbon tax will add approximately 7%. PV Magazine also sites literature refuting claims that renewables are the prime driver for electricity price rises.

In Western Australia, Solar Feed-in Tariff was to contribute nothing (0%) to the rising cost of electricity in the state, according to the AEMC report. This is because the costs were to be taken on directly by the government. However, if Synergy is made to cover $150m of the cost of the scheme, as has been proposed, households could see an increase in their power bills.

Although the scheme has run over budget, it also resulted in massive uptake of solar power in the state–76,000 systems were installed under the scheme, giving the state’s solar installation industry a massive kickstart, according to WA Energy Minister Peter Collier. In this respect, the scheme was “phenomenally successful”, and that the industry has managed to remain relatively healthy even after the state’s Solar Feed-in Tariff closed to new applicants. The current rate of uptake is around 200 installations per day, according to Synergy figures–one of the highest in the country, per capita.

Distributed generation in the form of small-scale solar power systems is believed to have the potential to actually reduce electricity prices; once a system is installed, there is no additional cost to produce solar power. Renewable energy advocacy groups such as Beyond Zero Emissions and 100% Renewable Energy call for a rethink of the way that the electrical grid is organised and a greater focus on demand reduction and energy efficiency, which would reduce the need for expensive infrastructure upgrades.

© 2012 Solar Choice Pty Ltd

James Martin II