Cut the spin on Victoria’s solar tariff chop

If you have never been to a traditional Australian woodchop, you should. Watching the big men annihilating an 8 inch log in seconds is breathtaking.

Although the reduction of the Victorian solar feed in tariff was not a surprise, the massive “kerrchuuunk” sound that these big cuts make always sends a shiver down the spine of the industry; and the smirk on of the Victorian Minister for Energy Michael O’Brien’s face made it all the more vindictive.

“When we stepped down the subsidies from 60 cents a kilowatt-hour last year, to 25 cents a kilowatt-hour this year, we actually saw demand increase by 33 per cent,” he claimed. Duh. That’s because everyone could see what was next and rushed in before the axes came out.

He even went as far as claiming ”the feed-in tariffs are not driving the growing popularity of solar energy.” Really? Really????

In this staggeringly ignorant-or-deceptive statement the Minister for Energy showed his true colours. Take a look at your own statistics, Minister O’Brien – and those of every other state back as far as history goes and look at what happens every time a subsidy is threatened or finishes. Sales plummet.

Yep, solar prices are falling. Yep, its getting more affordable. And yep, we’ll survive, but only after we got through the “valley of death” once again. I had previously been quite complimentary of the Victorian Government’s “measured” response to adjusting solar tariffs but this is weak-willed, ill conceived and a long, long way from a “fair and reasonable” price for solar.

Trying to claim some bizarre credit for increased solar sales as a result of previous cuts is so loaded with spin that the Minister for Energy would surely win a wood chop with the famous spin required to reef into the other side of the big 8 inch block.

Ironically, the Australian Bureau of Statistics only last week released new data showing that the majority of Victorians who take up solar are the most in need, often in regional areas who desperately need assistance with rising power bills.

According to Sydney’s University of Technology, the Australian electricity industry got around $1.8Billion in subsidies in 2006 in their 2008 report. The Victorian government’s failure to provide even $0.01c out of its own pocket is therefore a long way from equitable and puts the still emerging solar industry at a distinct disadvantage.

FWIW if each of Victoria’s 2.4 million electricity consumers were charged $0.50c a week to create a community funds pool for those who were prepared to put up their own cash to buy, own and operate a solar system, it would raise $67M p/a to pay for the scheme. Its really not that hard and the solar industry is equally deserving of support, if not more so.

No big surprise, but wholly disappointing – the Victorian Department of Primary Industry quietly changed its web page today to reflect the end of the Standard and Interim solar tariffs from around $0.25 c kWh to $0.08c kWh.

The changes take effect as of 31 December 2012. Application forms must be lodged with electricity retailers no later than 30 September 2012.

Nigel Morris is director of Solar Business Services

Comments

4 responses to “Cut the spin on Victoria’s solar tariff chop”

  1. Warwick Avatar
    Warwick

    What is the proposed $67m scheme actually meant to do? I think you’d to supply a bit more detail on this one.

    Also, the ABS data (46022DO001_201208) conflicts with the statement in the article that “the majority of Victorians who take up solar are the most in need, often in regional areas who desperately need assistance with rising power bills.”

    They ABS actually wrote “Households in Balance of Victoria were more likely to use solar as a source of energy compared to households in Melbourne. In Balance of Victoria 9% of households had solar hot water and 8% had solar photo-voltaic panels. In Melbourne 4% of households had solar hot water and 5% had solar photo voltaic-panels.” Maybe it’s because a greater percentage of dwellings outside of Melbourne are free-standing homes?

    If you look at the data on the ABS website data for PV installations across Victoria that is split by household income quintile, the number of installations in each group by increasing income is 10,700, 19,000, 20,000, 19,000, and 21,500. i.e. the raw statistics basically show that the poorest 20% of households install solar at half the rate of the remaining 80% of wealthier Victorian households.

  2. Photomofo Avatar
    Photomofo

    Say Warwick… I’ve been watching the German statistics lately. The data suggests there’s a push to install larger PV systems ahead of the FiT cut for these MW+ sized systems that was (I believe) extended to the end of this month. Fortunately, the data also shows that smaller systems are still getting installed at a good clip (~250 MW/month). I’ve communicated with a German fellow who closely monitors the market there and he’s confirmed that the interest in installing solar has not diminished despite the drop in the FiT.

    To my thinking, the goal is to have the FiT go away and be replaced by a value based contract. Once you get to a value based contract(8 cent/kWh is probably rather close) you have a much more sustainable market. This is effectively what Australia has done ahead of everyone else. I suspect PV installations will continue at a good clip because the FiT isn’t the primary driver of the market anymore – it’s the high retail electricity rates that are propelling PV. This is a SWAG of course.

    So… While I definitely think the FiT cuts should have been more gradually phased in there’s a decent chance that the market can absorb the change thanks to the high retail rates.

    Nigel… You seem to be missing something. When the FiTs drop they force the installers to be more competitive. There are many cases all around the world where we’ve seen FiT cuts immediately followed by drops in system prices. The larger the FiT cuts the larger the drop in system prices. I think it’s clear there actually is a relationship between FiT rates and system prices. Each market is certainly unique but the relationship is still there somewhere. And basic economics tells us that when you lower price you’re probably going to increase demand. So… I’m not saying you’re wrong about the last minute install effect but I’d argue that FiT cuts lead to dropping system prices which then do tend to increase demand. Maybe it’s a two steps backwards one step forward process but it’s there. Australia is really the world leader in this process and it’s too early to tell how things will play out. We’ll see…

    1. Jim James Avatar
      Jim James

      Say Photomofo. . . . “To my thinking, the goal is to have the FiT go away and be replaced by a value based contract.”
      Well Photomofo, perhaps if you go and have another talk with your German fellow, and ask him what the German goal was for their FiT. Remember they have had it since 2000 or so. They wanted to grow a renewable energy industry.

      Good features of a feed-in tariff by Hans-Josef Fell, German member of parliament:
      1. Privileged access. German law requires that renewable power have priority on the grid.
      Its in the interest of the grid operators to refuse access to the grid of some renewable energy.
      Generators should not have any say in who can or can’t add renewable energy to the grid. Done by law.

      2. The feed-in tariff must be sufficient (but not over generous) and is to be paid by the electricity rate. Not by subsidy from the tax payer.
      This stops any further government from changing the feed-in rate because of budgetary reasons. (My thoughts on an Australian rate may be around 35 to 40 cents KWh for a NET FiT but reduced over the longer term)

      3. No cap on the feed-in tariff. Investors to see a rate of turn over the long term with a market that goes on for many years.

      4. Have a good permit/building policy to allow new renewable projects (wind and solar) to be built. It should not be harder to build a wind farm than a nuclear plant or coal mine.

  3. Gary Avatar
    Gary

    It seems to me that the coal fired generators together with governments of both persuasions are building themselves into a corner, because when CPV hit’s its straps and when a cheap and convenient storage method is available, then people will turn to solar in droves, they will supply their own power and they will NOT feed their power back to the grid because they will have disconnected from it, why pay for a service that you no longer need?

    Cheap and high efficiency CPV and battery storage are coming, it may be a year or two away but they are coming make no mistake about that and they will be the obvious choice in the future, no longer will households be tied to ever increasing power bills where they pay for gold plated networks that are no longer needed.

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