May 25, 2011

NSW solar scandal … a million roofs forgotten

For Barry O'Farrell to just throw the local NSW solar industry under the bus is a public policy meltdown, writes Simon Mansfield from SolarDaily.com.

The NSW solar scandal just gets worse by the day. On Tuesday, the NSW government announced a new "support package" to help solar households in "hardship" as part of its decision to retrospectively slash the gross feed-in tariff by a third from 60 cents per kilowatt hour to 40 cents. The latest twist to the O'Farrell government’s mismanagement of the solar industry will anger many households as they have to deal with a welfare management approach to their good-faith investment in solar energy. And this is a Liberal government that was meant to fix things -- not make them worse. Retrospective commercial legislation that will seek to define a hardship loss for breach of contract will aim to avoid any exposure to traditional commercial compensation obligations, which are usually the case when a government -- retrospectively -- takes away a clearly defined asset and or its income producing potential. There's even a specific section in the Australian Constitution that describes this obligation on governments. Not content with slugging it out with solar householders -- O'Farrell has moved onto attacking small businesses that sell and install solar systems. Many of these businesses are start-ups by local electricians hoping to gear up for the carbon reform and the economic revolution that is meant to flow from that reform. Was it ever actually bad public policy?. We now turn off our low-watt light bulbs,  computers, walls of LEDs from the TV, DVD and game machines -- instead of leaving them in standby. That's called skin in the game -- and a key market force that is dampening demand growth in NSW and helping to save power companies billions of dollars by delaying the need for new power stations. Most of the time, the power we make on our rooftop goes straight into our house -- or the neighbour's house next door or across the street -- those electrons don't get far before a local electrical load grabs them from the power grid. Line loss is as close as you can practically get. And the distributed network of solar homes is helping to harmonise the grid. Yes it can cause problems if there are too many large systems in the one street in Western Sydney -- but that's a technical issue that the power industry is having to learn about and manage. NSW and the other states along with the federal government have invested a significant amount of resources into building a solar economy -- local installers, testers, certifiers and supply chains that cover the nation and reach out to Asia, Europe and America. It takes years to build power plants -- be they coal or nuclear -- or install a million rooftops with solar panels. But now the NSW government is working overtime to flush that investment in developing the solar industry down the drain. None of the other states -- as they progress current schemes to new ones that are based on today's solar prices -- are retrospectively breaking commercial agreements that are based on system prices set in in 2009 and 2010. And any remaining installations in NSW are already at the new rate of 20 cents -- reflecting the fast decline in solar panel costs as the global industry reaches scale. Solar in Australia will be at 1:1 home/grid by 2015. That means it will be the same price for householders and businesses to make power on their rooftops as it does to buy it out of the grid. Connection service fees will cover the cost of providing the grid as the battery. Which is what grid tied is all about. But most importantly -- it will take years to retrofit the rooftops of Australia. And thousands of Australians have moved into the solar and wind industry ---and for Barry O'Farrell to just throw the local NSW industry under the bus is a public policy meltdown that most governments take far more than 100 days to achieve. Barry looks like he did it in 50 days.

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26 thoughts on “NSW solar scandal … a million roofs forgotten

  1. Gavin Moodie

    The change to the feed in tariff will be prospective, not retrospective: it was announced in May to take affect on 1 July.

    There is no ‘specific section in the Australian Constitution’ that ‘describes’ an obligation on governments to compensate people for the government ‘taking away’ ‘a clearly defined asset and or its income producing potential’.

    Section 51 (xxxi) gives the Commonwealth the power to acquire ‘property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws’.

    Furthermore, paragraph 179A 1A(d) of the NSW Electricity Supply Act 1995 specifically provides that no compensation is payable for changing the feed in tariff.

  2. Chris Sanderson

    Yes, well Australians need to experience consequences like this of allowing powerful corporates to control politicians through lobbyists and donations to their party.

    This trend, facilitated by Howard (who is infatuated with the US Republican extreme right), will only get worse here.

    US journalists and witers such as Chris Hedges articulate the results of US democracy after 25 years of such corruption. Search for Chris Hedges – ‘Empire of Illusion’ on YouTube.com And we aren’t that far behind them.

    Until we reclaim our democracy from corporates, who by definition can only be focussed on their profits and ‘The-hell-with-climate-change’, etc, we will see much more evidence of this type of fascist behaviour from our various govts – regardless of which party is in power.

    Naomi Oreskes book ‘Merchants of Doubt’ (Sydney Writers Festival) provides great insights into just how deeply this cancer is embedded in the US current version of democracy.

    Perhaps now that 120,000 NSW voters, like me, have had a taste of such personal and financial loss from political betrayal, we will be able to remember it at the next election.

  3. Tim nash

    Here are some facts that some people out there NEED to pay attention too.
    Reduction in tariff or not, the people with solar panels pay less or nothing at all on there electricity bill. This will eventually pay off there solar panels and then put money in their pockets.
    Isn’t that the best feed in? Why do you need afeed in tariff at all?

  4. crosleyq

    Good one Gavin, its legal eagles such as yourself which make it possible for government’s to renege on promises and break contracts as done here, a real service to Australia mate, you should be proud.

    Tim, the tariff exists as an offset of the cost in actually investing into solar electricity rather than simply talking about it. You spend $10,000 on panels, chances are you borrowed money to do that based upon an agreement between yourself and the government on a set price which was to be fixed for a duration of 5-6 years, when you take into account interest payments, payment of the actual principle and increasing costs of electricity generation suddenly this is not looking so secure. All these people who took the initiative based on the sound reasoning that the government would act in good will in maintaining the fixed price have been lied to.

    Taken from Hansard on 27 October 2010, Pru Goward said:

    It is a shocking mismanagement, but we all accept and understand that the 60¢ [feed-in] tariff must be halted for new applicants. We also understand that all existing participants must have their existing agreements honoured. This side of politics particularly understands the importance of retrospectivity. I want to be very clear on this point: A future O’Farrell-Stoner Government, a Liberal-Nationals Government, will also honour those agreements… We do not oppose the bill.

    Now given what is happening with the WA royalties fiasco, and the Federal government stepping in for the big boys to cover their cost, in spite of knowing such an increase was inevitable a year ago when the legislation was being drafted, can the solar generators of NSW expect the same?

  5. crosleyq

    Stupid apostrophe.

  6. Gavin Moodie

    I’m not sure that the feed in tariff is provided in a contract. It is more likely a payment pursuant to a statutory scheme.

    Lawyers help enforce contracts as well as ensure that governments comply with their own laws and act in accordance with the law.

    I suggest opponents are concerned about the change in policy and that their case is put strongest in those terms. Attempting to raise spurious legal points weakens the argument and diverts attention from the substantive issue.

  7. crosleyq

    You are right, not a contract, possibly not even a promise.

    Just an act of bad faith, supported by law.

  8. Simon Mansfield

    Gavin I agree it’s probably a spurious argument. But civil and commercial law is fall of spurious arguments that are often trite and without foundation – but as a tactic it is used by lawyers everyday in a tit for tat game to force the other party to compromise.

    What I don’t understand is that if the govt has the law on its side why is it planning to pass new legislation to specifically protect it from being sued and or otherwise paying compensation. Is that not a retrospective action.

    Moreover, that the NSW Govt is moving to “help” via way of monetary compensation in hardship cases is an acknowledgement that it has a potential problem and I would expect a lawyer would use such to argue that the government has a broader obligation.

    Your reading of the legal situation adds further wait to my argument that the govt is throwing the industry under the bus as they will be the ones having to answer for what is effectively becomes deceptive and misleading conduct for not telling customers that the tariff was not worth the paper it’s written. However, did the government in setting up the scheme make that clear to companies selling the product.

    All up the process is going to damage the industry for years and lead to costly litigation. All so Barry can look like he’s a big man who can take the tough decisions.

  9. Gavin Moodie

    Yes, it is one of the things we teach first years: law and justice are different and often separate things.

    I’m not sure why the Government believes it needs new legislation since I haven’t been following the issue that closely.

    All legislation (and indeed many court decisions) change current rights or rights that have accrued. So legislation is not considered retrospective unless it is retroactive. For example, a law that changed the feed in tariff payable before the law was passed would be retrospective.

    Governments change entitlements to payments almost every budget. They change tax rates, tax deductions and rebates, pensions and other benefits, etc. Some of these changes are grandfathered in the way that Goward proposed on 27 October 2010 but many are not because to grandfather every change would make the society too slow to change.

    Perhaps I should add that I have no view on whether the feed in tariff should be changed for existing customers: I am just interested in a rational and informed debate.

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