Solar feed-in tariffs (FiT) in Queensland could face drastic cuts after a report from the Australian state’s competition authority, the QCA, claimed they are increasing electricity prices.

The QCA, commissioned last year by the Queensland government last year to set a “fair and reasonable” FiT level for the state, maintained that the solar bonus scheme had been set too high when it was first introduced in 2008.

As a result it said the FiT would “sharply” increase electricity prices over the next three years and would end up costing A$3.4 billion by the time it comes to an end in 2028.

“There is a large and growing subsidy from customers without solar panels to customers receiving the solar bonus scheme payments,” said QCA chairman Malcolm Roberts.

“In 2013-14, the typical customer will pay about A$70 to fund feed-in tariffs. By 2015-16, the QCA forecasts that this subsidy will be A$276.”

To bring these predicted costs under control the QCA said Queensland’s current FiT of 44c/kWh should be cut.

In the south east of the state, where electricity retail competition is “healthy”, the QCA said a “fair and reasonable” FiT would be 7.55c/kWh and that there was no need for the government to set a regulated price.

“Seven retailers are already offering competitive retailer‐funded feed‐in tariffs, with some offering a rate higher rate than 7.55c/kWh,” said Roberts.

Elsewhere in the state, particularly in more isolated areas where retail competition is weaker, Roberts said future FiT would vary and would need to be set by regulation.

“Unfortunately there is no simple solution to containing the costs of the scheme,” he said.

The Queensland government is also conducting its own review of the state’s FiT and is due to report back in the summer this year.