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New South Wales

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. m.jefferies@gmail.com

    Still very bad policy!

  4. 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?

  5. 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?

  6. crosleyq

    Stupid apostrophe.

  7. 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.

  8. crosleyq

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

    Just an act of bad faith, supported by law.

  9. 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.

  10. 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.

  11. Simon Mansfield

    Ok -I get your point – but doesn’t the issue quickly move onto the huge exposure this places the businesses that sold the system under a scheme that they thought was good until 2016. These businesses are run by local tradesman who are trying to position themselves for future growth.

    They are not lawyers and acted in good faith in responding to a government initiative that said nowhere in the fine or large print – that we might change the rules for any customer you sell to. And you wear the liability on whatever we change in the future.

    I nearly went into the small scale wind business (1oKW) in 2009 but backed off as I did not have the deep pockets to manage the equipment warranty issues that any mechanical based business needs.

    In many regional places – farmers have put $50-80K into wind and solar installations and they are going to be seriously pissed off if this tariff cut stands – and will have no choice but to go after whoever they can in the legal chain.

    All I can say is thank god that ain’t me right now. I’ll just stick to journalism and publishing the ultimate profession for all care – but no responsibility.

  12. Stickey

    My view is we are heading for “brown outs” as the aged base power stations in Victoria and South Australia grind to a halt. The last three generations find a light switch turns the lights on after the loss of energy at the turbines and the loss of energy over the “wires”, especially as they become toaster filaments on hot days and act as resistors. Unless we complete plans to replace the base load machinery, brown outs will become de rigeur.

  13. Bill Parker

    The NSW debacle is just one more example of the hot:cold policy settings. Nothing much has changed since the days of the PVRP. It’s discretionary and it’s puffery. Build the political point score, drop the ball, move on.

    If you wanted to invest in the solar industry, what would be your main criterion if there was to be government involvement? Certainity. And that ain’t forthcoming and may never be.

    How stupid are our various governments that could not see what blind Freddie knew? That mum and dad are frustrated and want to make a contribution and/or they want to offest energy prices? And even the later is just another manifestation of government(s) incompetence.

  14. Tim nash

    My first point still stands, if you can generate enough electricty through solar to eliminate your bill then thats the end of the story.

    Rising electricty costs will actually benifit you, because your solar panels will now offset the cost of a coal fired electricity bill. If electricty costs keep increasing then solar with interest payments will still become a more viable alternative.

    The problem is looking longer term, short term profiteers will loose.

    The feed in tariff is welfare just like the home owners grant, take it away and ‘investment models’ collapse.

    You need to get panels because you believe in them.

  15. Simon Mansfield

    The NSW govt is allowing the NSW electricity sector to move back to the old regime where you basically got nothing for your excess power on a net basis let alone on a gross basis. The grid is the battery and there needs to a proper regime that takes account of that.

    Smart meters are another issue entirely and all to often are just a sly way for regulators to jack up rates while pretending otherwise.

    Australia is rapidly moving from having one of the most advanced electricity markets in the world to having a crappy market that pisses away two decades of regulatory reform for short term political fixes that ignore what has gone on.

    Crikey has published plenty of articles on privatization being good in one section of the newsletter and then banging on about how we have to save the world from climate change.

    Base load power is and should always be a highly regulated market and the idea that you can deal with climate change and decarbonizing the economy more cheaply via privately owned power utilities is voodoo economics.

    The big polluter is us – human beings – and the cheapest way of depolluting will be via government managed and owned power utilities who can make the huge investments at the lowest capital cost.

    Energy is first and foremost an economic enabler. Profits should be for reinvestment not for monopoly exploitation.

    Until recently power prices were kept as low as possible by governments and the only reason they have gone up in NSW was to make for an even playing field so private companies could invest in competition with governments.

    The tariffs today at around 20cents/kwh have achieved that and further increases will be largely just price gouging by private companies who are now free to do whatever they want under new regulations passed by NSW Labor with the support of Barry late last year.

    If Barry was serious about doing something about the price of power he would be tearing up the utility sell off – eating the compensation costs and moving on.

    But that’s too complicated for Barry and obviously not in the interest of his mates at MacBank and co. So instead he’s gone after the solar industry as cover for the fact that he intends to nothing about base load power and blame it on someone else when the lights go out in 2017. All we can hope is that solar panel prices continue to fall rapidly and that we can retrofit our roofs for a few thousand dollars in a few years time and tell bigpower to eat a lump of coal cause I got the power…

  16. Competitive Australia


    A contract is a contract. Just because Labor f*cked up, it does not means you can introduce retrospective legislation.

  17. Gavin Moodie

    There are 2 issues with businesses that install small solar or other renewable power systems for consumers. First, it is most unlikely that they would have any recourse against the government. The change in the government scheme is just a risk of doing business. That was the result of a prominent High Court case after WWII and I think that would be most unlikely to change.

    The second issue is whether any installer made any misleading or deceptive representation about the feed in tariff to any customer who bought a system based on that misrepresentation. If any did it may well be liable to the customer as well as being vulnerable to prosecution.

  18. David Hand

    The government’s retrospective legislation carries all the downsides put forward in this thread, such as loss of faith, impact on business, impact on the environment etc. But the’ve done it for a reason. No one here, including our correspondent from the Solardaily.com, has mentioned the absolutely f***ing huge financial millstone this stupid policy has placed around the neck of every NSW taxpayer. If we are going to turn this State around, the money has better applications.

  19. John Bennetts

    “Solar in Australia will be at 1:1 home/grid by 2015. ”
    Nice thought, but unfortunately far from probable.

    Certainly, the modules (the actual panels) are becoming cheaper, but the cost of the remainder of the system, which is about 60% of the completed installation, is not as easily whittled down [1]. The current average wholesale price of electricity on the NEM is about 6 cents per kWh.
    The module costs are about $2.50 per watt for the panel alone, before government handouts. Say, $4.00 per watt for the total installation, or for the 10kW system mentioned in the article, about $40k.

    Somewhere recently, I read that the average domestic electricity bill in NSW is $1300 per year (I might be wrong here, but let’s go with this figure anyway). The system doesn’t even pay for the $2800 per annum interest on the capital! If the interest rate is more than 3.25%, the investment is already under water!

    Looked at another way, the levellised cost of solar electricity in Australia in 2011 is above $300/MWh at present, predicted to come down to about half that by 2030 [2]. The current NEM wholesale market averages about $60/MWh. Even the highest tarrif on my last power bill was the equivalent of $230/MWh.

    Yet, the author of this piece of fantasy somehow thinks that solar is a good option. At those prices, we (NSW, that is) simply cannot afford such expensive power.

    PV, lovely as the concept is, is at the bottom of the list of options when it comes to affordability. It isn’t even kind to the planet, because of the huge quantity of materials and embedded energy in its manufacture. I have no ready citation for this, but it takes about 4 years just for the panels to yield the energy which went into them in the first place.

    Of course the Premier is keen to find a way out of this stupidity. It’s in his job description somewhere, that he should use his best endeavours to ensure that the people of NSW are not held to ransom by any industry or partisan cause.

    Others have commented about the legal aspects of this proposal and have made the point that it is not retrospective and is in fact perfectly normal business for the State to legislate and that this sometimes has cost implications for those who are affected. So, what’s new?

    The money we, the people of NSW and of Australia, spend on climate mitigation and CO2 reduction should be spent wisely and well.

    Domestic solar PV installations do not fit that description now or ever, so it should come as no surprise to anybody that the government is contemplating changes.

    1. “Renewable Energy Technology Cost Review”, Melbourne University, May 2011. Lead Authors:
    Patrick Hearps and Dylan McConnell. Figure 7 indicates that panels are about 40% of the total cost and provides detailed breakups of the cost structure of both the panels and the Balance of System, BoS.

    2. As above, Figure 14. Comparison of PV LCOE’s.

  20. Michael James

    @ John Bennetts, thank you for the best reasoned reply yet provided to this issue. For all the wailing of the solar industry, the Government in NSW has acted within its remit, to try and get the best outcome for all NSW taxpayers.

    Crikey has a massive double standard here, bitterly complaining about the actions of rent-seeking industrial sectors, while giving a free pass to certain, usually ‘green’, industrial sectors.

    The solar issue here in NSW is just one more in a series where Crikey seems to feel that rent-seeking is OK for certain favoured areas, but bad for everyone else.

    A little consistency would be fine, either its one-in all-in, or rent-seeking for none.

  21. John Bennetts

    @ Michael James.

    Thanks for your generous comment. As an aside, I never voted for the current Premier’s mob, but on this subject, he is correct to seek a cheaper solution and, if necessary, to use all of the tools available to him. What kind of Premier would we have if he committed to changing no legislation on any topic unless it left no person worse off.

    Democratic government must consider the greater good of all above the interests of the few, no matter how upset and noisy the few may be. I have been arguing since the inception of this suite of State and Federal schemes involving Renewable Energy Targets, Renewable Energy Certificates, Multiplied REC’s, Subsidies, Feed-in Tariffs and so on, that they are far too generous… and now we can all see that they indeed have been shown to be irresponsibly generous.

    They are also unfair. No member of our society who doesn’t own the roof over his head AND has a disposable income could take advantage of the schemes. Forget it is you are a renter, a pensioner, a unit-dweller, living at home with Mum and Dad, or living in the shadow of a building next door. This has been a gift for cashed-up home owners living in single occupancy dwellings in the suburbs, Howard’s Battlers, the Aspirationals, the Middle Class. Call them what you like – these schemes are no use at all to those I mentioned above and actually costs them all money through retail tariffs and taxes.

    Don’t weaken, Barry. There’s work to be done. On this issue, the millions of NSW voters who do not own rooftop SPV far outnumber the 120,000 or whatever who are on the gravy train.

  22. green-orange

    Well they voted for them – enjoy !

  23. Barry 09

    BARRY O” LAIR and the coal party.

  24. john2066

    Forcing everyone else to pay more for power so that some people in NSW with solar panels can be subsidized is not good policy.

    The idiotic solar cheer squad dont understand that they are pricing out cheaper greener alternatives like baseload solar or wind, by forcing everyone else to pay for their panels.

    This is a good decision by O’Farrell and he should be supported.

  25. john2066

    Also why on earth was this policy applied to people who already had panels installed? That was just a clear and absolute giveaway to the already rich.

  26. Frank Campbell

    But what a ridiculous ripoff domestic solar is…a direct transfer of wealth to the middle class, and all for what? A trickle of power…


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