A report to be published today by Andrew Macintosh, for the Australia Institute, provides a damning indictment of the federal government’s support scheme for residential solar PV and highlights the chaos and the huge costs created by multiple, badly co-ordinated and poorly conceived support schemes.
The scheme — known under the Howard government as the Photovoltaic Rebate Program but rebranded by Labor as the Solar Homes and Communities Program — was introduced in 2000 and finally closed, with less than 24 hours notice, in early 2009 when the costs got out of control.
Macintosh, associate director for the ANU Centre for Climate Law and Policy, notes that for most of the time under the Howard government, the rebate was regularly scaled back at the first sign of extra demand. While this kept costs under control, it also stifled investment and it didn’t appear to achieve any of its stated goals, which were to reduce emissions, support a local industry, engage the community and promote renewables.
Under Labor, rebranded and with the rebate doubled thanks to a Howard government budget initiative carried through by Labor, the scheme took off. Combined with the introduction of state-based feed-in tariffs, and even some local government incentives, it caused a “perfect storm” that, Macintosh says, magnified its flaws and created a massive cost over-run of more than $1 billion within 18 months.
Macintosh questions why the residential market should be targeted for such subsidies in the first place, apart from political point scoring. He argues that if the government wants to achieve scale, then it’s probably better to target commercial and large-scale installations.
“The question is, should they do these things? There is private benefit in residential PV subsidies, but I can’t see a lot of public benefit,” Macintosh says.
“If you are trying to reduce industry costs, then residential is not the way to go, and it’s not the way to create an industry. If we are going to do it, let’s do it at scale and subsidise some decent projects.”
MacIntosh says the federal scheme was a classic case of bad policy development and design. He says it was a major driver of a six-fold increase in PV generation, but this was from a very low base, and its share of the Australian electricity market in still just 0.1%.
He say the average abatement cost was between $257/tCO2-e and $301/tCO2-e, although in some sun-deprived areas such as Tasmania the cost of abatement went above $1,000/tCO2-e. And he says that most of the industry benefits flowed through to foreign manufacturers (although this might skip over the fact that the BP solar manufacturing facility in Sydney closed because the industry wasn’t big enough to support it).
Finally, he says, if the goal was marketing, then it could have been done at considerably reduced cost using conventional methods.
Macintosh estimates that 128MW of solar PV was installed as a result of the scheme, although the NSW Solar Bonus Scheme appears to have now driven demand in that state to more than 200MW before its gross feed-in tariff of 60c/kwh was slashed to 20c — another example of the boom-bust scenarios engendered by Australian policy making.
“The Australian experience with the PRVP-SHCP highlights how care needs to be taken to ensure that renewable energy programs are designed and administered to generate public benefit outcomes,” Macintosh says.
“Low- and zero-emission energy is required to address climate change and there is a need for government programs that help lower the cost of these technologies and promote their deployment. However, when poorly targeted and designed, these programs can be wasteful and produce predominantly private rather than public benefits.”
This article originally appeared in Climate Spectator.