The cost of subsidies for installing and maintaining residential solar power systems will cost Australia’s economy AUS$9.7 billion (US$7.5 billion), according to a new report, which has prompted a strong backlash from solar industry bodies, who said the findings were “cherry picking”.
Authors of the report ‘Sundown, sunrise: how Australia can finally get solar power right’ from independent think-tank Grattan Institute, urged the government to reject “expensive and unfair” subsidies, which have resulted in 1.4 million households installing solar panels – the highest proportion of any country, they claimed.
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Tony Wood, Grattan Institute energy programme director and report co-author, who spent 14 years working at electricity and gas company Origin Energy in senior executive roles and five years as programme director of clean energy projects at the Clinton Foundation, claimed that “lavish” feed-in tariffs will have cost the Australian economy AUS$9.7 billion by the time the last tariffs run out in 2028, despite state governments starting to scale back the schemes in 2012. Meanwhile, households and businesses that have not installed solar PV will have spent more than AUS$14 billion (US$10.8 billion) subsidising households that have.
The report said: “Governments have created a policy mess that should never be repeated.”
However, Clean Energy Council chief executive Kane Thornton said the majority of solar subsidies contained within the report have either been “eliminated” or are “gradually ramping down.” Every state or territory except for the Northern Territory has reduced solar feed-in tariffs for new customers.
He added: “It is important to recognise that the government support provided to solar power has leveraged billions of dollars in private investment to date, and will have delivered approximately AU$30 billion in total investment by 2028 – the same period examined by the Grattan Institute report.”
He said the support for solar created over 13,000 jobs, particularly in regional and rural parts of Australia where employment opportunities can be limited, and claimed the report ignored the value of these jobs.
Thornton also cited the many other subsidies across the energy market including for the fossil fuel sector.
In response, Wood said: “Only the premium feed-in tariffs instituted by state governments have been wound back, and even that subsidy continues for people who have already invested in solar. The fact that bad policies have been addressed doesn’t negate the case for calling them out and quantifying their impact. It helps reduce the prospect of future mistakes.”
Wood also said the report “explicitly recognized” the cost of investment in solar – adding: “We have calculated that the cost of this investment has outweighed the benefit by almost AU$10 billion. Investment that produces a negative economic gain can hardly be claimed as good.”
He said subsidies have reduced emissions and created jobs, but at a high price, claiming that there are cheaper ways to tackle climate change and generate jobs.
The report instead called on state governments to introduce new electricity tariffs that would encourage consumers to use less power in periods of peak demand. This would also remove a subsidy for PV owners making their panels less profitable in the short term.
Wood also said that as home batteries come on the market from as early as 2016, customers will be able to store power from their solar panels during the day then use it in the evening when demand on the network is greatest. This would reduce the load on the network, cutting power prices for everyone, but network businesses have difficult decisions ahead to ensure they remain profitable.
Australian Solar Council chief executive John Grimes said the report was “cherry picking” data by looking at feed-in tariffs in 2008-10 and projecting the costs forward to 2030 to calculate the AU$9 billion figure.
He said it failed to cite the benefits of the AUS$5 billion solar industry including cheaper electricity bills for five million Australians, and employment of thousands.
He added: “This is a selective report, designed to cast solar PV in the worst possible light.”
However, in response, Wood said: “The key message of our report is that solar in Australia has a great future in delivering cheaper, fairer and more sustainable energy, but we have to learn from the mistakes of the past and get the policy settings right to deliver that future.
“In the past, policy makers failed to properly address the challenges of distributed generation. Early adopters of solar PV understandably took advantage of the policy failure. But all consumers paid a high price. The rise of battery storage presents a new challenge. If we get it right this time, solar power in Australia will finally find its place in the sun.”
