NSW Gets It Wrong On Solar

Yesterday the NSW Government announced dramatic changes to the Solar Bonus Scheme. The payment rate for the program has been reduced by two thirds — from 60 cents per kilowatt hour to 20 cents per kilowatt hour. A total scheme cap of just 300 megawatts has been applied. The changes are effective immediately.

Premier Keneally declared (pdf) the changes necessary in order to "strike a better balance between keeping down electricity costs for consumers, while still supporting renewable energy generation".

The renewable energy industry doesn’t agree. The CEO of the Clean Energy Council, Matthew Warren said, "This is a repeat of the boom-bust cycle the solar industry has been trying to avoid. Damaging the solar industry in NSW won’t stop big electricity price increases but it will cost jobs and damage confidence in this important clean industry."

The outcomes of the Solar Bonus Review are in stark contrast to the results of the ACT’s review into its own scheme, announced in September.

Keneally stated yesterday that "NSW had the most generous tariff rate in Australia, followed by the ACT at $0.457" — but what she failed to mention was that last month the ACT chose to reduce its tariff by just $0.05 to $0.457 and expanded its scheme to cover medium and large sized installations.

The NSW Government still says that NSW’s total scheme cap of 300 megawatts is far more generous than that of the ACT. Actually, on a per capita basis, the ACT’s total scheme cap of 240 megawatts is equivalent to a 5000 megawatt cap in NSW. Even the ACT’s small installation cap of 15 megawatts is equivalent to 345 megawatts in NSW.

The Solar Bonus Scheme was a rather timid renewable energy feed-in tariff to begin with. It applies only to small electricity consumers, small scale ( less than 10 kilowatt) wind and solar PV installations and it was to lasted just seven years. At least it paid participants enough to encourage them to invest in renewable energy. Now it doesn’t even do that.

NSW legislators should have looked to Canada for inspiration about how to put in place a functional solar energy scheme. Ontario, Canada is in the midst of a renewable energy boom. One year after the region introduced North America’s most advanced renewable energy feed-in tariff (FiT), the region has 15,000 MW of renewable energy projects in the pipeline and is on its way to meeting its target (pdf) to create 50,000 renewable energy jobs in three years, and to phase out dirty coal fired power generation (7500 MW capacity before the orderly shutdown commenced) by the end of 2014.

In comparison, NSW has just 3800 MW of planned renewable energy projects compared with 12000 MW of planned coal and gas power plant projects.

So what are advanced renewable energy FiTs? They are not subsidies, but rather a powerful policy mechanism that places an obligation on electricity utilities to make payments per kilowatt-hour for all the electricity generated by a renewable resource. Advanced renewable energy FiTs are the most successful and egalitarian mechanism to encourage rapid development of renewable energy technologies.

When everything is working, FiTs provide home owners, farmers, community organisations, business, government, social housing organisations and public housing authorities with the transparency, certainty and return on investment needed to invest in renewable energy.

It’s not only in Ontario where this kind of scheme has been successful. Advanced renewable energy FiTs have also been implemented in France, Italy, Slovenia, South Africa, Croatia, Serbia, Portugal, Switzerland, Taiwan, Ukraine, Vermont, Washington State, Wisconsin, Brazil, Bulgaria, Germany, Spain and many other parts of the world.

Ontario’s FiT program covers large and small wind and solar, mini-hydro, landfill gas, biomass and biogas, and also includes bonus payments for community owned renewable energy projects.

Thousands of residents and organisations have already taken advantage of the scheme and due to the requirement for all wind and solar projects over 10 kilowatts to contain a minimum amount of goods and services from Ontario, thousands of jobs have already been generated across the region as solar manufacturers and wind farm developers set up operations in Ontario.

Back in NSW, an expansion of the Solar Bonus Scheme was needed to address the boom and bust element of the scheme’s short timeframe, Dr Mark Diesendorf of the Institute of Environment Studies, at the University of NSW said in a recent interview.

According to Diesendorf, the NSW Government "should have given a lower tariff for a longer period to ensure more stable growth of the industry".

Dr Diesendorf believes a payment of 40c a kilowatt hour over 15 years would have longer lasting benefits than the scheme just announced for the Australian renewable energy industry.

Despite the Solar Bonus Scheme’s limitations, it had been successful, with thousands of households installing solar PV (pdf) across the state — and not just in Point Piper as the scheme’s detractors would have you believe. Areas that have installed more solar PV include Mount Druitt, Blacktown, Gosford and Armidale.

Opponents of the Solar Bonus Scheme include the Energy Supply Association of Australia and well meaning, but ill-informed non government organisations such as the Australian Council of Social Services . They argue that FiTs are subsidies that must be reconsidered on cost and social equity grounds.

The NSW Liberals have been all over the place on the Solar Bonus Scheme. When the ALP first announced the scheme in 2009, the Liberals claimed that Labor had copied their policy — but then they called on the Keneally government to shut it down "to cap the cost blowout".

Yes, renewable energy feed-in tariffs increase electricity prices in the short term, but there is also a growing body of evidence (pdf) from Europe that renewable energy can reduce electricity prices . Not to mention the significant environmental and health costs from coal mining and power generation that renewable energy reduces.

In any case, FiTs do not increase electricity prices nearly as much as critics will have you believe, and not nearly as much as the increases that are already occurring.

The Clean Energy Council (CEC) Chief Executive Matthew Warren stated that, "the cost of improving the electricity network in NSW will be more than $14 billion over the next five years. By comparison, based on 100MW installed capacity, the cost of the solar bonus scheme is less than 8 per cent of this."

The Independent Pricing and Regulatory Tribunal has set electricity price increases in New South Wales at between seven to 13 per cent this year and they will increase cumulatively by 36 to 42 per cent over the next three years due to increases in network charges, the cost of purchasing wholesale electricity and the costs of operating the retail electricity businesses. (Others believe that the large price hikes are linked to the government’s electricity privatisation agenda. )

The highly successful German FiT (pdf) only contributes five per cent to the cost of the average German’s electricity bill (while allowing Germans to reduce their electricity costs through direct investment in renewable energy).

Low income earners should always shoulder less of the burden from increased costs of electricity, whether the costs are related to upgrading and maintaining a 20th century centralised electricity network, preparing the industry for privatization, building further dirty coal-fired power generation or increasing the supply of renewable energy. Social equity should not be selectively used as an excuse to weaken renewable energy policy — especially when advanced FiTs allow social housing providers to afford to invest in renewable energy on behalf of their low income tenants.

Compensation for low income earners could be funded through a reduction in the large subsidies that the highly profitable and highly polluting oil, coal, gas and aluminum industries receive.

A 2007 study (pdf) undertaken by Dr Chris Riedy of the Institute for Sustainable Futures, UTS examined subsidies to the Australian stationary energy and transport sectors, and found that total subsidies to these sectors were between $9.3 billion and $10.1 billion in 2005/06. A whopping 96 per cent of the subsidies provided support for fossil fuel production and consumption and only 4 per cent went to renewable energy and energy efficiency.

The review of the Solar Bonus Scheme presented New South Wales with an opportunity to lead Australia to a renewable energy future by following Ontario’s, (or even just the ACT’s) example, and creating a renewable energy jobs boom, while beginning to phase out our coal fired power stations.

Instead, the NSW renewable energy industry is shell-shocked by the Keneally Government’s decision — which has aided the expansion of up to 12000 Megawatts of new dirty coal and gas fired power stations to be built.

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