Queensland playing fast and loose on costs of rooftop solar

Queensland’s Minister for Energy and Water Supply, the Honourable Mark McArdle, has been playing fast and loose with the facts this week.

In his press release dated May 30th 2013″Green Costs driving up electricity prices” he took a huge and obviously politically motivated swipe at everything green, with the headline claim  that “green schemes and the carbon price are responsible for an 18,9% increase in electricity prices”.

McArdle particularly targeted the Solar Bonus Scheme in an almighty distortion of the message designed to confuse and inflate the real costs.

His statement “By 2015-16 the solar bonus scheme will increase to $276 on an average bill which could see the price of green schemes reach $621 on average per year if the Carbon Tax is not repealed.” is absolutely misleading to the average punter.

Why?

Well firstly, the current cost of the Solar Bonus Scheme (which he does mention) is $67 per year for the average customer which is actually 3.5% of the average bill of $1900. Thats a long way from the 18.9% headline.

But he fails to mention that and instead jumps forward and focuses  on the 2015-16 number (which has not been approved as a pass through amount by the Australian energy Regulator as yet) and focuses on a cost of $276.

It’s entirely hypothetical and fails to consider a myriad of issues such as degradation, shading and changes in home ownership which cancel your eligibility for the $0.44c FIT. Although I’m not aware of specific data about attrition rates, we know the average home ownership is around 6 years now; so we know attrition will happen, reducing the true scheme costs .

If we take NSW as an example, when the Government here attacked the NSW FIT and started throwing costs around it turned out they were wrong by around $1Billion dollars, and we proved it in our submissions, forcing them to re-adjust their headline seeking claims.

Secondly, he distorts the broad message. McArdle says: “The overly generous solar bonus scheme gave significant cash windfalls to those customers who installed solar PV on domestic roofs, but the scheme did not pass on the real costs to the electricity network, to support solar PV,” he said. “It is not right that the 80% of customers who do not have solar are expected to pay the full price of the 20% who have solar.”

Well for goodness sake Mr Mcardle it was a Government scheme, proudly promoted  by all and sundry in power while it suited. What utter hypocrisy. More importantly, I don’t quite know how 300,000 Queenslanders investing around $2 Billion dollars of their own money to buy solar systems could be considered a “windfall”. Sure they’ll get a return – a good return in some cases, but they made a significant  investment based on a Government developed scheme and will have to wait some years before their investments are paid off or deliver returns. Forgot to mention that, Mr McArdle?

Windfalls? Well there’s more. In NSW, IPART finally (after much pushing) acknowledged and agreed that the electricity industry was getting a  bunch of windfall  benefits from solar worth tens of millions of dollars each year, as summarised in our infographic at the time.

Speaking of the big picture, absolutely consistent with the the ESAA’s latest rounds of attacks on the solar industry, Minister McArdle also fails completely to mention consider or cost the benefits of hundreds of MW of solar capacity that is now on line in Queensland (with no fuel cost or new Government subsidised infrastructure required) which is benefitting all Queenslanders. No ports needed, no rail line subsidies and no new mines. Geez, we’ll just use the roofs and power lines that are already there.

This is where pricing, costs, benefits and electricity industry ownership starts to gets highly complex, so lets just take one single and very simple benefit; avoided losses.

The Australian Energy Market Operator said in its “Introduction to Australia’s National Electricity Market” presentation that “As electricity flows through the transmission and distribution networks, energy is lost due to electrical resistance, and the heating of conductors. The losses are equivalent to approximately 10 per centof the total electricity transported between power stations and market customers.” So what that means is the coal fired power stations have to generate 10% more electricity than is actually consumed and it is completely and utterly wasted, lost forever in the vast hub and spoke electricity networks we run.

In its submission to the Australian Energy Market Operator to have it’s pricing adjusted for the coming year, Energex qualified that its forecast energy demand for 2013/14 was expected to be 21,180,000,000 kWhs for the year. If we assume AEMO’s loss factors of 10% that implies that to deliver that demand, an additional 2,118,000,000 kWhs will have to be generated to get it to Mrs Jones’s house. The Productivity Commission reported that Queensland average cost of generation through the NEM (again referring to AEOMO as the source) was $0.05 kWh and the average peak price was $0.08 kWh in 2011.

So we have some data, but lets accept that some of its a little out of data and be conservative.

Lets assume the Loss factor is 7.5% not 10% And lets take the lower generation cost of $0.05 kWh. How much does this lost energy cost electricity consumers on Queensland each year? $79,425,000 (not accounting for the time value of money, weighted average cost of capital etc).

Is solar impacting on this? You betcha it is, as demonstrated by the ESAA’s recent claims that Distributors are losing money due to falling demand. How much? We ran the numbers and according to Energex’s submission, Queensland solar is forecast to generate 154,695,886 kwh for the year, which is equivalent to 9.7% of the lost energy or, $7, 704,225 dollars each year.

So, the $2B investment made by Queensland solar owners is saving the ENTIRE community something in the order of $7M dollars each and every year and thus reduces the real cost of the Solar Bonus Scheme by around 10% – if this benefit alone is taken into account.

This is just one, tiny, simple example of some of the benefits that solar provides and how McArdle and the other owners of electricity generators and networks are trying to distort the truth to protect their salaries and budgets. There are undoubtedly a whole lot more; jobs, payroll tax, GST, peak load avoidance, lower whoelsale costs through the merit order effect, less pollution etc etc etc.

I’ve said it before and I’ll say it again; theres nothing wrong with making an honest buck and the electricity industry is valuable and fundamental to our way of life. But lets stick to the truth eh?

The fact that so many entrenched interests are increasingly rolling out this trip just demonstrates how desperate they are; on the ropes perhaps?

Nigel Morris is director of SolarBusinessServices. Reproduced with permission.