New South Wales subsidy cuts: The state bites back

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In an attempt to defend the harsh feed-in tariff decision made at the tail-end of last week, New South Wales Premier Barry O’Farrell has today claimed that residents would have faced an increase of AUD$170 on their power bills over the lifetime of the scheme had things been left as they were. And, although this seems to justify the fact that more than 110,000 solar panels owners will lose out on a large slice of the subsidy pie, it hasn’t stopped the huge amount of backlash which has come in thick and fast since this policy revelation on Friday 13.

As I reported on Tuesday, the NSW Government has closed the feed-in tariff scheme to new applicants, and has reduced the incentive payments for existing solar residents from AUD$0.60 to AUD$0.40/kWh.

Just days after the announcement was made, solar supporters gathered together to fight back against the decision, with protesters placing solar panels on Minister Combet's rooftop, rolling out banners stating “Make Polluters Pay, Fund Renewable Energy!”
Activists refused to come down from the building until they received a commitment that a price on pollution will see some of the resulting funds go to renewable energy. I haven’t had an update, but I’m guessing they’ve probably gone home by now.

As terrifying as they probably were, the angry roof climbers were really only the beginning of O’Farrell’s problems, as just a few days later Liberal MP and former coalition environment spokeswoman Catherine Cusack accused Government of betrayal over the decision. In a scathing letter to the Premier, Cusack outlines that the legislation was “unprecedented and repugnant” and went back on a pre-election commitment to honour the scheme.

Yet O’Farrell fought back with the claim that if drastic action was not taken, NSW residents would have been lumped with a large commitment of their own. “The fact is that if we allow this to happen it will add $170 to the bills of families and other energy users across this state, that is unacceptable; that's why we've taken the action we have, an action that seek to limit the rebates but still allows a fair rate of return, but seeks to avoid the extra cost to taxpayers,” he told reporters in Sydney.

But for those who voted for him, this just isn’t good enough.

Many argue that the problem should have been picked up sooner, so that the blow wouldn’t have had to be so harsh. But, in scenes eerily reminiscent of the current situation in the UK, O’Farrell blamed the former Labour Government for not calculating the cost of the scheme. According to the original math, the feed-in tariff was to cost the state a total of AUD$355 million, but it now transpires the bill will be more than AUD$1.9 billion.

“Somebody has to pay for [the increase]. What we've made is a decision that reduces the rebates, but still allows a return on investment, but does so in a way that avoids excessive costs for other energy users.”

But by making the residents pay for its mistake isn’t Government actually damaging the bank balances of those it’s trying to save?

Many residents in NSW who already have solar installed got their system fitted against the promise that they would be able to pay for it using the feed-in tariff payments. Banks all over Australia have provided loans to customers because the repayments are held up by a Government-backed scheme. This news means that many will be left short as they make up the AUD$0.20 loss they will feel for every kilowatt hour they generate.

In total, around 1,500 solar business and owners rallied in Sydney's CBD yesterday against the changes. O'Farrell has also admitted his own electorate office had been flooded with complaints about the decision.

However, while it may seem that all is now lost, it needs to be said that this decision is not yet set in stone. With both Labor and the Greens opposed to retrospective changes to the solar scheme, O'Farrell will need the support of both the Christian Democrats and Shooters and Fishers Party to get the legislation through the Upper House. Let’s hope optimism shines through and a more considered approach is taken to level out the amount of pressure the feed-in tariff can place on tax payer bills with the amount of solar power the state of NSW can really utilize.

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