WA’s solar shocker (take 2): Caution, Luddites at work

The Barnett Government’s budget announcement which aims to retrospectively cut FITs for 75,000 solar owners is a frightening example of Luddites at work.

Today we spent several hours reviewing the budget papers to put some context around the topic and I think it can be summed up very simply into two key issues.

Firstly, it’s the big picture of Western Australia’s budget. Clearly, they are (inexplicably) in a pickle and need to get their budgetary house in order. Just how and why the “centre of the resource boom world” managed to somehow blow the budget is beyond comprehension, but a pickle it is. So, on principle they need to fix it, and I’m all for that, as I’m sure is every other rational person.

In short, they have made cuts pretty typical of aggressive fiscal belt-tightening. Public sector cuts and faster tax collection, plus public transport fares, vehicle registrations and land taxes all increasing. They affect a varying number of voters, to varying degrees.

What is most interesting however is that the solar cuts (by our early analysis) personally impact one of the largest individual groups of voters, by the largest personal amount. These 75,000 homes invested around $450Million of their money on a Government backed promise. And they represent a minimum of 150,000 voting age, Western Australians. For the smallest gain of any of the State Government savings. (The quoted $51M saving is 0.75% of the total $6.8Billion dollar “Fiscal Action” plan.

Small gain, massive pain, I would suggest – if NSW experience on trying to force retrospective FIT cuts is anything to go by.

Secondly, on the issue of energy policy it’s no wonder that Western Australia’s far right leaning Energy Minister Dr Mike Nahan, has his head firmly stuck in the past. The former head of the notoriously anti-renewable conservative think tank, the Institute of Public Affairs, Nahan’s energy portfolio budget is like a script from a 1950′s parliamentary speech.

Unsurprisingly to anyone watching energy politics in Australia, Nahan has committed to the status quo in spades; in fact by axing the last vestige of progressive energy policy in the State, he’s taken WA back in time by shattering confidence. The State owned utilities will get an expenditure budget of a whopping $4.6 Billion dollars over the next four years; to build own and operate poles and wires and non-renewable generation. And they’ll be regulated to deliver a return to the State budget. How much? “The electricity corporations will pay a total of $283 million in dividends and tax equivalent payments to the Consolidated Account”

No room for meeting FIT payments in there.

No chance of supporting increasing solar uptake to reduce the expenditure in there.

A most telling example of what they think is important (ie increases energy consumption and delivers bigger returns) comes from a tiny statement; in the last financial year amongst other things the Western Australian government actually provided subsidies for air conditioners. That’s more like it; more load, more revenue.

The other issue that comes out is that the Government is intent on artificially distorting electricity price signals to the community. How much? “Net payment to the electricity sector from the Consolidated Account of $420 million paid to Synergy and Horizon Power for the ‘tariff adjustment payment”. In effect, the Government uses tax payer funds to subsidise the cost of electricity so that it is artificially low, almost devoid of price signals (or incentives to reduce or shift demand) in many cases, rather than supporting alternatives that can deliver lower cost and cleaner power. Why? Because they are married to the growth and asset return model.

This is gold plating on a platinum platter dressed up as social support.

Ironically (to rational forward thinking non-Luddites), the budget notes that Synergy is particular, is delivering substantially less revenue to Government “due to declining energy sales volumes and revisions to the cost-reflective tariff rates”.

And therein lies the problem.

Western Australia has just proven yet again, so much of what we talked about on our recent article on energy regulation and the distorting effect that politics are having on the massive opportunity we have before us.

This post first appeared at Solar Business Services. Reproduced with permission.