Perth Solar Energy

Too generous? The NSW Solar Bonus Scheme takes a dive

A disappointing result for NSW and solar renewable energy but was the writing on the wall? The NSW gross feed tariff in was higher than Western Australia’s net feed tariff which does beg questions as to how long it could last. The sad answer is not very long and all. Whats worse is how the pendulum has shifted from what extreme to the other which could cause what the media have named a boom bust cycle within the renewable energy sector. In the short them there is likely to be some bitterness towards those that managed to lock into the scheme from people who just missed out. The potential result is to place blame on solar and maybe even some bitterness towards renewable energy in general. What is really suggests is there needs to be communication between state government and a long overdue plan for renewable energy into the future for Australia.


CLIMATE SPECTATOR: What really killed NSW solar?

It seems that the massive take-up of rooftop solar under the excessively generous NSW feed-in tariff was not the middle class indulgence that it was thought to be.

The review into the Solar Bonus Scheme prepared for the Keneally government by the Department of Industry and Investment dismisses the perception that solar panels were a privilege reserved for affluent homeowners in Sydney’s northern and eastern suburbs and the inner west.

It turns out that the greatest demand in Sydney for solar PV under the scheme came from the western and south-western “Aussie battler” suburbs of Prospect, Seven Hills, Mt Druitt and Liverpool.

And the highest numbers per locality were recorded in country areas – Including Lismore, Coffs Harbour, Taree, Port Macquarie, Ballina and Gosford in the north, Bega in the south, Armidale and Wagga Wagga further inland, and in numerous localities in the central coast. The country areas had particularly large appetites, ordering systems of an average size of 2.8kW, compared to 1.9kW in the city.

And while some social service groups had complained about the inequality of the scheme, the report noted that the cost of solar panels had come down so quickly in the last 12 months – from $12,600 per kilowatt to $6,000/kW (they had been $17,000/kW in 2001) – that installations had been offered for zero up front cost by some retailers. Clearly, the battlers in the mortgage belt were quicker to seize a bargain that the toffs in the inner suburbs.

The report also reveals that the Keneally government appears to have ignored the report’s advice that a low cap on rooftop solar would cause the state’s solar industry to come to a shuddering halt.

The report recommended a cap to keep a lid on costs, but warned that placing too low a cap would create a boom-bust scenario, and a heavy loss of jobs.

The Keneally government chose a cap of 300MW – allowing just 100MW of new solar rooftop to be installed at the drastically reduced tariff – a target that its own bullish forecasts predict could be met within 12-15 months.

The report prepared suggested the government take one of two options – cut the gross feed-in tariff of 60c/kwh to either 30c/kWh or 20c/kWh.

The reason for this was that the higher than expected take-up would likely see the capacity surge to nearly 1000MW of rooftop solar connected to nearly half a million homes by 2016, and estimated accumulated costs of $4 billion to energy consumers over the seven-year period.

Surprisingly, the report included estimates from consulting group AECOM that said cutting the tariff to 30c/kWh would still generate demand from more than 400,000 homes for 843MW of rooftop solar, at a reduced cost of $2.5 billion, while a 20c/kWh tariff would still generate more than 777MW of rooftop solar demand from some 350,000 homes at a cost of $1.9 billion over the seven years. The solar industry finds those estimates to be remarkably bullish.

Nevertheless, these were the figures that the government used to decide on the lowest recommended tariff and a 300MW cap. Meaning that, for the sake of saving $470 million over six years, it sacrificed – according to the calculations it was presented with – some 477MW of installed solar capacity and up to 20,000 if future jobs.

By the report’s own estimates, the 50MW that had been installed by June, 2010, had created 2,500 jobs, with 10 jobs created for every 1MW in manufacturing, 33 in installation, 3-4 in sales and marketing, and 1-2 in research. On those figures, the Keneally government’s decision to place a cap of 300MW would cost 15,000 in future installation jobs alone.

Given the upcoming election, the demographics of the scheme, the identified job sacrifices, and the fact that the NSW Labor government must now explain why new owners will now pay more for coal fired power than they will receive for emissions-free solar, this may have been a more heroic decision than was first realised.

Intriguingly, the report appears have placed great store in the submission from the Energy Supply Association of Australia, particularly its comments that case studies of solar PV indicated a cost of abatement of greenhouse gases ranged from $484 a tonne to $1,500 a tonne, which the ESAA compared unfavourably to prices of around $17 a tonne for CO2 in the Kyoto protocol’s Clean Development Mechanism and the prices of $3 and $15 in the NSW Greenhouse Gas Reduction Scheme.

Even if you accept the PV abatement cost, which most have put at around $400/tonne, it is, by any measure, an extraordinarily disingenuous comparison. The price of carbon in a market is usually dictated by the ambition and breadth of the scheme, and the CDM currently has few participants and an uncertain future. A better comparison would have been feed-in tariffs in the 50 or so other countries that have them.

And, as the report indentified, reducing emissions is not the primary goal of a feed-in tariff. If it was, you wouldn’t do it. It has broader purposes, including creating jobs, supporting those who want to generate renewable energy as a response to climate change, and to increase the exposure to renewable energy technology in order to encourage the whole community to respond to climate change.

Wind developers were also opposed. The UK group RES Australia said the flood of solar PV had caused large-scale renewable projects to be deferred or abandoned and job losses in other renewable energy sectors.

But other companies were supportive. Indeed, the report said building group CSR wanted the scheme extended to 30 years, citing the need to provide a nurturing environment for emerging technologies in the renewable energy industry.

The retailer, Woolworths, said it had already had reinforced roof structures on its distribution centres at Laverton and Erskine Park which could accommodate solar PV arrays of 1MW, but it had been unable to go ahead because commercial installations were excluded from the FiT.

It suggested a 20-year scheme rather than a seven-year scheme to enable businesses to achieve an acceptable financial return, and suggested specific FiT arrangements with a sliding scale that increased with installed capacity.

Predictably, this was resisted by network operators, who raised concerns about the impacts of large-scale systems on the integrity of the network. Country Energy conceded, though, that there were potential network benefits from small-scale generation, particularly in peak demand reduction and the deferral of investment.

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