New South Wales solar industry faces uncertain future after severe feed-in tariff cuts

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The New South Wales (NSW), Australia state government has revealed that it will dramatically cut the incentive for installing solar power, admitting that the scheme could end up costing the state over AUD$4 billion, which is double the original estimate. This news comes after several other countries have also cut their feed-in tariff rates due to the falling cost of solar equipment and increase in uptake, reports the Sydney Morning Herald.

The government plans further on decreasing the multibillion-dollar capital spending plans of power companies, again in an effort to prevent escalating electricity prices before the state election in March 2011.

Customers ordering solar panels as of midnight on October 27 will now receive the reduced feed-in tariff rate of 20¢ (€0.1407) per kilowatt hour of renewable energy generated. That's a huge dip down from the 60¢ (€0.4221) being offered previously. This decision has of course caused uproar in the state.

As with other countries that have cut their FiT rates for similar reasons, existing customers will continue to receive the rate they signed up for, for 20 years.

''If we continue at this rate…we would generate about AUD$4 billion in costs,'' admitted premier, Kristina Keneally. ''We are slowing down the scheme to avoid AU$2.5 billion of costs being passed on to households.''

Solar panel installers pre-warned the NSW government that this decision would put many in a position of financial difficulty, while others will actually face bankruptcy. Several companies will now be left with warehouses full of unsellable panels while hundreds of installers will lose their jobs.

Since the generous FiT scheme came into effect in January 2010 the amount of solar installers in the state has increased from 462 to 766, said the Clean Energy Council of Australia, that's up from 246 in March 2009, before the scheme was implemented.

“This is a repeat of the boom-bust cycle the solar industry has been trying to avoid,” the energy council's chief executive, Matthew Warren, said in a statement.

The chief executive of Inspire Solar, Leo Li said, ''This drop to 20¢ is going to … take NSW from a leader in solar schemes to the bottom of the list.''

More than 35,000 rooftop units have been installed since the scheme began, resulting in more than 100MW of renewable electricity generation capacity. Applications are still being processed that will increase this figure to 193MW over the next few months, Keneally explained. The NSW government expected the scheme to introduce 300MW of new generation capacity over the six-year life of the scheme.

The Greens MP John Kaye said his party would seek to have the price paid for new solar panels set at 30¢ a kilowatt hour, rather than the 20¢ the government plans. “20¢ per kWh could drive the industry from boom into bust,'' he said. ''We're seeking 30¢, with a 12-month review.''

However, the Coalition's environment and climate change spokeswoman, Catherine Cusack, said, ''We will oppose 30¢,'' she said. ''What we need is a more reasoned approach. A future government will be handcuffed to this bungle for seven years and be constrained in any further cross subsidies for the energy sector.''

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