Rooftop solar is not the preserve of the wealthy, so why tax it?

A new report has challenged the concept that rooftop solar is the preserve of the wealthy, in a bid to skewer one of the key arguments use to push for households to be charged for exporting solar to the grid.

The Victoria Energy Policy Centre report, by Bruce Mountain and Kelly Burns, comes ahead of the Australian Energy Market Commission’s (AEMC) final determination on rules to allow distribution network service providers to charge rooftop solar owners to inject electricity into their networks.

As RenewEconomy has reported, the rule changes were originally requested by four organisations – SA Power Networks, St Vincent de Paul Society Victoria, and the Australian Council of Social Services (ACOSS) jointly with the Total Environment Centre (TEC).

Among other things, the requests – but particularly that from St Vincent de Paul – argued that the current market structure meant that the costs to network companies of exporting an increasing amount of rooftop solar power to the grid were being built into the cost of power that all users paid.

And they argued that giving rooftop solar owners a choice between paying to export their excess generation, or not to export at all, would mean low-income customers who couldn’t afford to invest in DER themselves, and who didn’t use a “two-way” system, would no longer have to pay for it.

The VEPC report, titled “Is rooftop solar a play-thing of the well-to-do? A critique of the argument and evidence,” disagrees with argument, and the notion that the proposed rule changes would act as some sort of great leveller, and would correct a market from which those with lower incomes are locked out.

Mountain and Burns argue that analysis of the relationship between net worth and solar installation has failed to account for true barriers that affect solar uptake in rentals and apartments, and thus falsely attribute the effect of wealth to any inequity in the distribution of rooftop solar installation.

“It would be correct to observe that across all homes, solar uptake is lower in the lowest wealth deciles than in the higher,” the report says.

“But this fails to account for the fact although households that rent are generally much less wealthy than households that own their own homes, renters do not install solar, (not) because they lack the wealth to do so, but because property rights, transaction costs and building form typically make it difficult or impossible.”

And ditto for multi-unit apartment dwellers. The analysis of owned homes, meanwhile, actually reveals that less well-off homes install solar at a similar or greater rate than more well-off households – particularly in Victoria, where there is a means-tested rooftop solar rebate. And this is not the first time this has been shown.

Rather, the VEPC argues that export charges will wind up disproportionately affecting those solar households that are less well-off, by effectively “taxing” the energy they send to the grid and removing one of the key drivers of lower bills.

But Mark Byrne, energy market advocate for the TEC, says the argument his organisation put forward (alongside ACOSS) for pricing DER exports was never influenced by whether or not solar owners were wealthier than non-solar owners, but rather on the causer/beneficiary pays principle.

That is, whoever causes or is the beneficiary of a cost should, wherever possible, pay that cost. Conversely, whoever creates a saving should benefit from that saving.

“So if, say, solar or battery owners create benefits to all consumers, then any related costs incurred by networks should be recovered from all consumers,” Byrne told RE in an emailed response.

“And they should have the opportunity to benefit financially: eg, through rebates for batteries discharged into the local network during the evening peaks.

“But if solar or battery owners create costs to networks which are greater than the benefits to all consumers, then they should pay those extra costs. Anything else is fundamentally unfair, since it amounts to demanding that solar and battery owners should be subsidised by other consumers who do not own these technologies.”

As it happens, Mountain and VEPC disagree on this point, too, that rooftop solar is being subsidised by non-solar households.

“Concerns about possible network expenditure cross-subsidies associated with distributed energy integration merits attention when there is evidence that these expenditures are material or are likely to become material,” the report says.

“In our research and commentary, we have pointed to the evidence that the expenditure in question is small – typically around 1-3% of distributors’ capital outlays. Ausnet Services, Victoria’s largest distributor, suggests that recovery of this expenditure will cost households 72 cents per year,” the report says.

“For these reasons, we conclude that ACOSS and St Vincent de Paul’s proposals are not well-founded. If implemented as the AEMC has set out in the Draft Determination, they will be regressive.

“If the Draft Determination stands, export charges will disproportionately affect those that are less well-off. The AEMC’s Chair has correctly raised the importance of equity in the AEMC’s final determination. This must mean reversing the decision in the Draft Determination to avoid its regressive effects,” it concludes.