The Conservative government in Western Australia has stunned solar households in the state and industry bodies after announcing that it would retrospectively slash the feed in tariff that it had introduced in 2010.
In another potential foretaste of the treatment of renewable energy sources by a federal Coalition government, WA said the 40c/kWh export tariff from around 75,000 households would be cut to 30c, and then to 20c next year. The decision was announced in a few lines of the state budget, delivered on Thursday afternoon.
Its decision to make a retrospective cut follows a similar move by the O’Farrell Coalition government in NSW in 2011. That decision was overturned after a huge backlash. It is yet to be seen whether solar households in WA will fight the decision with a similar determination.
However, while the NSW Coalition acted to correct what it saw as bad policy making by a Labor government predecessor, the WA Coalition’s position is all its own work. It was the LNP government that introduced the tariff in August, 2010, after entering a bidding war with Labor in the state election campaign.
The LNP was warned by industry bodies at the time that the tariff was too generous and a sliding scale would be more appropriate, but it ignored the advice and ploughed ahead anyway, and eventually lost control of the scheme before closing it to new applicants less than a year later after it had soared above the initial 150MW cap.
The decision raises fears that further retrospective policy action could be taken. Since the premium feed-in-tariff ended, another 65,000 households have added rooftop solar in the state, seeking to offset the soaring cost of grid electricity.
There has been speculation – so far denied – that the state government is considering a “bi-directional” tariff, which would mean that households would have to pay the grid operator to put solar back into the grid. A similar decision was taken by the cash-strapped government in Spain recently at the urging of its influential fossil fuel lobby.
Numerous industry bodies spoke of the “sovereign risk” that was created by the decision, be it for residential or even large scale developers, and the potential for further rule changes after an investment is made – and all for the sake of saving an estimated $50 million. The issue of sovereign risk is an important one for investors and developers, because the fear of sudden and retrospective policy changes, usually raises the cost of capital – adding to the cost of a project.
The state-owned network operators have been complaining about solar and its impact on the grid – there is currently 310MW of rooftop solar in the state – accounting for up to 10 per cent of generation at certain hours on sunny days.
But unlike Vector, the network operator in the New Zealand city of Auckland, which is encouraging customers to install solar and battery storage because it can reduce network costs and investments, the installation of battery storage in areas controlled by Western Power is not allowed.
WA’s newly appointed Energy Minister is Dr Mike Nahan, a former head of the notoriously anti-renewable conservative think tank, the Institute of Public Affairs. He recently expressed surprise at the rapid take-up of rooftop solar by the state’s households – and was quoted as saying that 2,000 households were applying to install solar each week (although official data suggests it is 2,500 a month)
He said recently solar PV is ”actually putting downward pressure on electricity costs” because people were using less power and generating electricity themselves, and causing less electricity to be generated from coal. But at the same time he warned of further tariff changes to try and recover some of those costs. He flagged a possible interest in fixed charges to households as one answer.
The LNP government has not been an enthusiastic adopter of renewable energy – particularly large scale. WA has made it clear that it believes it has enough fossil fuel capacity in the state and is not encouraging any new large scale wind or solar farm, despite the state’s excellent resources. On the opening of the Greenough River solar farm last year, the Premier said he hoped that the renewable energy target, which provides the primary incentive for such projects, would be removed.
That antipathy to large scale renewables is shared by the federal Coalition, which insists on holding yet another review of the national renewable energy target, but only after dismantling the Climate Change Authority, the independent institution that recommended in December that fixed 41,000GWh target should be retained.
Opposition to the renewable energy target is based around the same issue identified by Nahan with solar – it reduces the revenues and the profits of incumbent generators. The CCA concluded that scrapping or diluting the RET would deliver no cost savings to consumers. A report by the Climate Institute released on Friday underlined the importance that the RET would play in meeting abatement targets.
And while a federal Coalition government is not responsible for state-based feed in tariffs, it will be influential – along with the four state conservative governments – over the pace of reform of electricity markets which most experts say is needed to prevent further gold plating of networks, and to claw back the costs of over-investment in generators and poles and wires that have been passed on to consumers.
Condemnation of the WA decision was widespread: “Households were promised in writing that they would receive a set price for the electricity they exported for ten years. Now they will not even get a third of that. It’s a huge betrayal of public trust, and they have every right to be angry,” said Sustainable Energy Association chief executive Kirsten Rose.
Australian Solar Council CEO John Grimes also said it was a “gross breach of faith” with WA families that raises issues of sovereign risk, while the Clean Energy Council said the decision strikes at the heart of the mortgage belt, where most systems were installed.
Geoff Evans, campaigns manager for Solar Citizens, a grassroots campaign, said nearly $1 billion had been invested by WA families and businesses into rooftop solar. Much of this was done so because of the set tariff.
“The WA Government should be telling more people to make the move to solar, not betraying those who already have,” he said.
Meanwhile, the Greens expressed horror that state-owned generator Verve Energy had allocated $287 million for investment in fossil fuel generation over the next four years, and just $2.5 million in sustainable generation. This included another $200 million on the ageing Muja power station. The government has already spent $266 million trying to upgrade Muja’s A and B before deciding that it was a waste of money.
In 2013/14, Verve will spend $105 million on its fossil fuel generation plant, and just $130,000 on its sustainable energy portfolio, with a small upgrade to its four-turbine wind-diesel generation facility at the remote town of Denham, north of Shark Bay.
“This is a disaster – in the same week that the Australian Senate and the American Meteorological Society both released reports detailing the links between greenhouse gas emissions and extreme weather events, the Barnett government continues to sit on its hands and pretend it’s someone else’s problem,” Greens WA spokesperson Robin Chapple said. “This budget allocation flies in the face of common sense.”
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