ACCC repeats call to scrap solar rebate as Taylor re-heats “big stick” policy

A new report from the Australian Competition and Consumer Commission has again called for the end of the Federal scheme providing financial support for rooftop solar, as the federal government sought to revive its controversial “big stick” energy policy that may prevent big utilities from closing down ageing coal generators.

The renewed push to kill solar rebates – even though they are being increased in Victoria and expanded to include batteries and rooftop solar in that and other states – came in a new ACCC report that also found that only a small proportion of consumers have benefited from lower electricity prices through the introduction of default market offers.

The report from the ACCC was heralded by the federal government as proof it was lowering electricity prices, despite its narrow impact, and came as Federal energy minister Angus Taylor flagged a revival of the Coalitions controversial and previously rejected ‘big stick’ energy reforms.

In its August report of the Inquiry into the National Electricity Market, the ACCC says the small-scale Renewable Energy Scheme (SRES), which provides a financial incentive for households and small businesses to install rooftop solar, should be wound down and abolished.

It’s a move that could have a disastrous impact on the rooftop solar sector, flies in the fact of moves elsewhere to ensure rooftop solar is more affordable for those who have not installed it yet, and does not take into account its impact on lowering wholesale electricity prices and delaying and narrowing periods of peak demand.

The SRES helps to reduce the upfront cost for rooftop solar installations, and the cost of the scheme is recovered through electricity prices. The scheme also underpins many of the safety measures that include the use of Clean Energy Council accredited installers and approved solar equipment, that are a condition for receiving the incentives.

“At the time the SRES was designed, the cost of small scale solar installations was much higher than it is today,” the report says.

“This along with the significant uptake by households in recent years and state-based schemes providing a further subsidy means that the support provided by the SRES is no longer required. Customers are likely to have a sufficient incentive to invest in small-scale solar technology to reduce their electricity bills.”

The analysis by the ACCC appears to take a simplistic approach to calculating the raw costs of the SRES, with no consideration to the benefits the scheme provides in supporting distributed energy generation that supplies electricity during the middle of the day.

The scheme reduces each year and is scheduled to phase out completely in 2030, an  approach has brought a degree of stability to an industry that has suffered from unpredictable policy changes over the past decade.

History has also repeatedly shown that an early cessation of a solar rebate would likely have a perverse effect, as households rush into the scheme out of fear of missing out, causing a surge in installations that leads to a devastating collapse. The recent experience in Victoria serves as the latest example of the harm caused by ill-considered solar policy.

The ACCC report also outlined the initial results of the introduction of Default Market Offers for electricity tariffs, finding that they have helped reduced prices for customers stuck on their retailer’s default tariffs.

While successive Coalition federal energy ministers have called on electricity customers to ‘shop around’ for cheaper electricity deals, the complexity of electricity tariff structures had led to an apathy that left many customers stuck paying electricity prices.

The default market offers, which came into effect on 1 July, were designed to provide a benchmarked comparison price for electricity and compel electricity retailers to provide a better deal for their customers. The ACCC has found that the re-regulation of electricity prices, through the introduction of default market offers and that customers have received lower prices following the new reforms.

However, it also estimates that just 12% of electricity customers had been receiving a default market offer and that an even smaller proportion of customers have received better tariffs.

“Average savings on standing offers since the electricity pricing reforms came into effect on 1 July 2019 amount to between $130 and $430 a year for households,” the ACCC said in its report.

The ACCC has however confirmed that wholesale electricity prices (33%) and network and distribution charges (42%) continue to overwhelmingly represent the two largest components of retail electricity prices.

While reductions in electricity costs for consumers is undoubtedly good news, federal energy minister Angus Taylor and his predecessor Treasurer Josh Frydenberg, have used it as an excuse to re-heat its ‘big stick’ energy policy, that could be used to force the breakup of the bigger energy companies.

The Coalition ministers revealed that the Government intends to re-introduce its big stick’ legislation to the Federal parliament as early as this week.

The legislation, formally known as the “Prohibiting Energy Market Misconduct” bill, will provide powers that the ACCC can use in response to energy market ‘misconduct’.

At their most extreme, could force the break up of electricity companies by requiring them to off-load certain assets.

It is strongly suspected that the ‘big stick’ energy policy is intended to provide the Coalition Government with the ability to ensure coal-fired power stations remain in operation and are taken out of the hands of energy companies that would rather see them decommissioned.

The Grattan Institute’s Tony Wood told ABC’s RN Breakfast that it is questionable whether the moves to re-introduce the ‘big stick’ reforms would lead to lower costs for electricity consumers, as there is no evidence that the big electricity companies had been undertaking the conduct targeted by the legislation.

“This is a very surprising and somewhat perplexing thing for the government to do and I am just failing to see actually what about this legislation will bring prices down,” Wood said.

“We’ve actually got a situation where these companies have not been doing these things, yet we are proposing to penalise them for doing it. It appears to be a very puzzling piece of legislation and I think its a complete distraction from getting on with the real world.”

An earlier iteration of the legislation would have allowed the ACCC to intervene in three types of circumstances where ‘prohibited conduct’ is observed.

“The prohibited conduct broadly relates to the possibility of taking advantage of small consumers, anti-competitive contracting behaviour, and conduct which undermines the effective operation of the wholesale market,” the legislation’s original explanatory memorandum says.

The Coalition Government abandoned the ‘big stick’ energy reforms earlier in the year when it could not guarantee its passage through parliament.

The Coalition ministers have also conveniently ignored the continued calls from the ACCC for the Federal government to commit to the National Energy Guarantee.

“The NEG seeks to provide a settled policy framework under which new investment is incentivised in a way that enables achievement of the objective of reducing carbon emissions at low-cost while promoting investment in a manner that ensures demand for energy is met,” the ACCC said in its report.

“The ACCC agrees that this is an important policy objective and, with the policy incorporating appropriate safeguards for competition in the contract market, recommends that governments commit to develop and implement the NEG.”

Following ongoing support for the National Energy Guarantee, as a means of providing some form of stable mechanism for supporting investment in lower emissions electricity generation from the business and community sectors, the Labor opposition and most State governments, the Federal Government the last remaining hold out on a policy that itself has designed.

“This Government needs to stop believing its own talking points and listen to Australian businesses, industry, government agencies, and state Liberal and Labor governments which are crying out for energy policy certainty through the National Energy Guarantee,” Federal Labor energy spokesperson Mark Butler said.

“What the ACCC have specifically called out is the Government’s lack of national energy policy which would reduce power prices, ensure reliability and bring down emissions, “The Australian Competition and Consumer Commission restates its support for the National Energy Guarantee as a settled policy framework.”

Taylor deflected questions during Parliamentary Question Time, saying that the Government had implemented the Retailer Reliability Obligation, and again reiterated that the Federal Government was on track to meet its 2030 emissions reduction targets, despite all evidence showing that this is not the case.