Stock image of solar panels

Yesterday, The Australian reported that rebates given to solar panels would cost households across the country an additional $200 per year. The government’s Small-scale Renewable Energy Scheme (SRES) provides up-front rebates for consumers who install solar panels. The cost of these rebates are then carried by all electricity users.

But the claim that this scheme will place significant upward pressure on electricity bills is misleading, the product of an often confusing and heavily politicised debate on electricity prices in Australia. What’s going on here?

What is the impact of solar rebates?

There is considerable modelling which indicates that SRES has a relatively minor impact on electricity bills. A critical problem with The Australian’s figure is that it is based on the assumption that only households will bear the cost, when in fact, they will be shared by all electricity users, including businesses.

“One of the straight out errors is they’ve summed up the total gross costs of the scheme, and divided that by the number of households,” energy markets analyst Michael Manzergarb told Crikey. 

“What it doesn’t take into account is that these costs apply to all users, including commercial and industrial users.”

Residential users only consume about one third of Australia’s electricity, meaning the bulk of the costs generated by the SRERS are carried by commercial and industrial electricity users. A more accurate figure can be found in a recent report by the Australian Energy Market Commission.

The report found that the scheme costs $32 per household in 2018-2019, and will increase to $34 in 2019-2020, significantly less than The Australian’s figure of $195 per household. Another report, this time by the ACCC called for the scheme to be phased out, but also conceded that doing so would only save consumers between $15 and $30 per year.

Even Energy Minister Angus Taylor, hardly a champion of renewables, pointed out that the scheme only contributed about 3% of an average household electricity bill.

Later in the piece, The Australian quotes Origin Energy as saying that SRES and state-based subsidies accounted for up to 15% of all electricity bill costs. But once again, the AEMC report paints a more nuanced picture. Nationally, environmental policies contribute an average of 6% to electricity bills. Only the ACT, where environmental policies account for 14% of electricity costs, gets close to The Australian’s figure. The ACT is an outlier, due to its introduction of a 100% renewable energy target in 2016.

Importantly, these numbers are based on all environmental policies, not just the comparatively small SRES. Mazengarb believes this conflating of SRES with other, bigger schemes is “misleading”.

Has The Australian done this before?

This isn’t the first time The Australian has misrepresented the impact of renewable energy schemes on electricity prices, and as Crikey recently reported, the paper has a long history of hostility toward climate science.

Last year, they ran an almost identical piece, claiming solar rebates would cost consumers an extra $100 per household. Like this year’s piece, the article was based on analysis by Demand Manager, a renewables trader. Curiously, Demand Manager CEO Jeff Bye responded to criticism of the most recent piece by admitting that The Australian was “looking for a big figure”, so he gave one.

According to CSIRO communications adviser Ketan Joshi, these articles demonstrate an approach common in reporting on renewable energy, where big numbers and lump sums are employed to make the schemes appear big and scary.

Mazengarb agrees that The Australian often exaggerates the costs of renewable schemes, with the opinion section displaying particular alarmism.

“They calculate the absolute highest cost of these schemes, then they run these numbers to make it look like they’re billions of dollars, so [the schemes] get attacked without providing any context.”

What’s causing higher energy prices?

The debate about solar rebates comes against the backdrop of a protracted political fight over rising power prices in Australia. Conservative politicians frequently blame higher costs on renewable energy schemes, but the reality is far more nuanced.

If you point to something that’s 3-4% of the electricity bill and try to blame it on that, you miss the bigger picture,” Mazengarb said.

Price gouging by electricity companies, over-investment in network infrastructure, high gas prices, and policy uncertainty have all contributed to the current situation. Renewable energy could actually help reduce prices. According to Mazengarb, more investment in renewable energy could put downward pressure on wholesale (the cost of generating electricity) in the long-run, offsetting any increase in electricity bills.

“[Renewable power sources] cost more to build, but once they’re built, they don’t have any fuel costs, which puts downward pressure on prices in the long term.”

The Clean Energy Target, born out of a report by chief scientist Alan Finkel and subsequently dumped by Malcolm Turnbull, found that an increase in renewables could occur alongside lower energy prices.

What do you make of The Australian‘s reporting on this issue? Write to [email protected].