Robbing solar to pay power retailers
The electricity pricing regulator in NSW has recently revealed that utilities are making windfall profits from the Solar Bonus Scheme. As the NSW government retrospectively robs one third of solar system owners’ promised entitlements, it is clear that electricity retailers are charging back to the customer at rates up to 40c/kWh of electricity that was freely generated from the sun.
The Independent Pricing and Regulatory Tribunal (IPART) recognise that utilities are making windfall profits from the Solar Bonus Scheme. “The Solar Bonus Scheme is currently structured so that [electricity] retailers receive a financial benefit,” IPART says. The organisation goes on to suggest that requiring the electricity retailers to pay back some of this financial benefit would reduce the “amount of funds … foregone by taxpayers”. This financial benefit arises because taxpayers fund the payments made to solar power generators, which means the solar electricity itself is provided to the retailers for free. The vast majority of the electrons generated by the solar power system then flow back into the house, only after electricity retailers record them, and charge the customer up to 40c/kWh.
The Australian PV Association (APVA) has revealed that IPART’s indented electricity price rises would deliver a further windfall profit to the utilities. IPART’s draft decision would allow electricity retailers to pass-on the cost of complying with the Small-scale Renewable Energy Scheme at a rate of $40 per certificate. However, Small-scale Technology Certificates can currently be purchased at $25 – a price low enough to enable vast windfall profits to accumulate in retailers' pockets.
In its presentation to the Solar Summit, the NSW Office of Resources and Energy acknowledged utilities’ windfall profits and suggested that electricity retailers contribute to the costs of the Solar Bonus Scheme. Instead, the NSW government is attempting to short-change pensioners, baby boomers, and low-income households, while continuing the practise of serving up profits to electricity retailers at taxpayers’ and consumers’ expense.
Analysis by the University of NSW showed that most owners of solar power systems had household income of less than $70,000, and that the majority of recipients were over 60 years of age. Over 120,000 NSW households now own a solar power system, most of whom made an investment decision upon the basis of seven years of legislated entitlement of 60c/kWh for generated solar electricity. The government now seeks to cut by 40c/kWh entitlements of those most impacted by electricity price rises, while allowing electricity retailers to make windfall profits from taxpayer and electricity consumer alike.
Unfortunately, the flow-on effects of this action don’t stop there. By reneging on legislation, the government will undermine the public’s confidence in making any future purchase of a solar power system. This sets a dangerous precedent that will reverberate nationwide, and seriously threaten the ability of the solar power industry to home-deliver clean energy and protection from electricity price hikes. It also puts thousands of jobs at stake.
More broadly, this action undermines trust in governments nationally, especially as the lip service they pay the environment is underdone, and then undone. As Nigel Morris of Solar Business Services ponders, “Is every piece of legislation able to be thrown out on a whim? Will I potentially have to give my First Home Owners Grant back?”
It is no longer ironic that the NSW government threatens the entire solar power industry over a $41 annual impact upon electricity bills when it ignores windfall profits to utilities and subsidises the coal industry by $1 billion each year. It’s an outrage.
The figures above show the uptake of solar power systems in NSW by age group and household income level. They are taken from Bruce, A. W. (2009). Who Buys PV Systems? A survey of NSW PV Rebate recipients. Proceedings of Solar 09. Townsville: Australian and New Zealand Solar Energy Society.
The figure above relates postcode-level installation data provided in mid 2010 to the Solar Bonus Scheme Statutory Review, correlated against individual taxable income levels at the 2006 census. It demonstrates that uptake has predominantly been in low-income areas.
Warwick Johnston is manager of SunWiz Consulting, an independent PV consultancy that provides services to the PV industry – warwick@sunwiz.com.au
Disclosure: the author owns a solar power system and works in the NSW solar industry. He is also helping to organise a rally to protest the changes to the state's solar scheme.
Comments on this article
ROD, How about you ask the
ROD, How about you ask the PM, Treasurer, Bob Brown and TONY ABBOTT what their vision statement for renewables is and you tell us which one you think has the most substance?
Labour, Greens support an ETS and this has never changed (Gillard had to change to form the minority gvt but the goal was always an ETS) - the coalition wanted an ETS but when Labour wanted an ETS the coailition wanted a tax then Turnbull wanted an ETS and now who knows what they want but based on the principles of their party and the summary given by Barnaby Joyce "Australians have a birth right to receive cheap electricity forever" (which is just plain stupid!) - so who is really shamming you ROD and whose fault really is it for this shambles? I will give you my opinion whose fault it is - OURS!
You can tell from the detailed discussion that it is a mess
Occum's Razor .. "the simplest explanation is most likely the correct one." In this the simplest explanation is that in the absence of a uniform and guiding vision for renewables, not just rooftop PV but all sorts of renewables, inequities and aberrations will be be the rule.
This whole area needs to be driven at a federal level, and the notion of carbon taxes, with complex compensation rules, that segues into an ETS (the details of which we will need to wait for), in a global market that is moving in "Every Direction" .. Guess what?
The costs of implementation in terms of "people employed to implement, arbitrate and execute" is likely to be a big enough sum of money to simply directly finance the targeted 20% renewables.
Not convinced .. ask the PM or Treasurer for a succinct renewables vision statement.
In fact ask the deputy coalition leader Bob Brown for one!
This is both a sham and a shambles!
Are retailers really benefiting from SBS?
Shame IPART (and the article's author) didn't check retailers' websites - they'd have found that most of the big retailers (e.g. Energy Australia, Tru, Origin, AGL) pay for the energy generated from rooftop PV as well as the SBS payment. They typically pay 6-8c/KWh, which is pretty consistent with what they'd pay buying centrally generated electricity from the pool and then hedging out the volatility.
As for the SRES trading at $25, well on the face of it, that's bizarre. If there's a processing backlog delaying payment out of the clearing house I can see the logic for a secondary market at a dollar or 2 discount to the official $40. But 15$? That suggests a lack of confidence that all these certs are going to be eligible, which if so, is surely the industry's issue to sort out. I'd be interested to hear other views on why this massive discount, and what is the logic for it being sustained through 2011-12 (because if it's just an outcome of the NSW glut, that'll surely unwind fairly soon, in which case retailers will be paying the full cost next year - which is the year the IPART decision relates to).
PV's aren't exactly Robin Hood
Interesting but cherry picking the facts. Here are a few points to consider;
- The PV owner received REC's/SRES for 15 years of production up-front at around 20c/kWh on top of the FiT.
-Retailers don't pocket the "free" solar electricity, it goes back into the distribution system lowering the effective losses from distribution offering a marginal benefit to all electricity consumers.
-The maximum tariff is about 40c that retailers charge but that is only a 6 hour block on weekdays under "Powersmart Home"...most tariffs are between 9 and 28c including the cost of transmission/distribution .
- The $25 certificates just show that this year's target is way oversupplied. Retailers may buy at that price but won't be able to match any revenue against those until future years...i.e. the cost of carry will erode much of that "profit"
- Pity the poor Tasmanians with limited opportunity for PV and their lower average income. Why do they have to pay for 14.8% of their energy by rooftop PV and subsidise the rest of Australia when they produce more renewable power than any other state?
-Also matching the average wage in a postcode against the number of installations there as shown in the last chart is misleading. i.e. you have no way of telling which households in a postcode are installing the systems from the data..it could be the rich in a high population postcode where the average wage is lower.
-It's possible that some retailers may be benefiting from the scheme but not to the extent that this article suggests.