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Remaining solar rebates and subsidies under threat

Draft recommendations from the Productivity Commission put Big Energy inadequacies and gold-plating of electricity infrastructure in the cross-hairs; but also remaining solar subsidies too. It wants those phased out as quickly as possible.

Some 25 per cent of retail electricity bills are required to meet around 40 hours of critical peak demand each year says the Commission. While wholesale electricity costs have decreased due in part to the influence of solar power uptake’s impact on merit order, electricity prices for end consumers have risen on average by more than 50 per cent in real terms over the past five years.

The Commission says spiralling network costs, not renewable energy, are the main contributor to these increases.

However, while the Commission has issued a fistful of draft recommendations to address the network cost aspect, it’s also taken aim at support for home solar power systems.

The draft Electricity Network Regulatory Frameworks report claims:

“The take-up of rooftop photovoltaic units has produced minimal network savings, as existing non time varying tariffs do not encourage householders to orient units to the west to maximise generation in periods of peak demand late in the afternoon.”

The Commission says given a price on carbon is now in place, rooftop solar now “plays a redundant (and inefficient) role as a measure for reducing emissions”.

The Commission recommends:

“Governments should therefore phase out as quickly as practicable subsidies for rooftop photovoltaic units, other forms of distributed generation delivered via feed-in tariffs, and the small-scale component of the Renewable Energy Targets Scheme.”

While the Solar Credits subsidy (commonly referred to as a solar rebate) will be non-existent from July 1 next year under the existing phase-out timetable; households considering installing solar panels should perhaps do so very soon in case the Federal government takes heed of this recommendation prior to that time.

In relation to feed in tariffs, the Commission recommends:

“State and territory governments should change the feed-in tariffs for any uncontracted small-scale distributed generators exporting power into the grid, so that their tariffs reflect the market wholesale prices at the time of energy production, and the (net) value to network businesses from reducing loads on their equipment at critical peak periods.”

This recommendation is particularly interesting given wholesale electricity prices over summer can reach as high as $12,500 per megawatt hour - or $12.50 per kilowatt hour. This is largely attributable to the massive load air-conditioners place on the grid and its effect on supply and demand.

The prospect of receiving up to $12.50 per kilowatt hour for surplus electricity generated by solar panels may have prospective system owners thinking “ka-ching” - but periods where wholesale electricity attains a value in the thousands of dollars per megawatt hour can be brief.

According to an earlier Productivity Commission report, peak average National Electricity Market wholesale prices in Australia during the period January 2011 to April 2011 were $29 per megawatt hour in Tasmania at the low end, reaching up to $98 per megawatt hour in New South Wales (2.9c - 9.8c a kilowatt hour). Given these figures and the great unknown as to how a final arrangement would look, current programs still accessible in some states may be more attractive.

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