Image for Tas government slashes solar feed-in tariff. Milne’s power plan

The Tasmanian government has announced that it will slash the solar electricity feed in tariff for new customers by over two-thirds and is refusing to provide any price guarantees for Tasmania’s existing 12,500 solar households beyond New Year’s Day 2019.

Deputy Premier Bryan Green announced that for households which install new solar electric systems between September 1 and December will only receive 8 cents a kilowatt hour compared to the current rate of 27.785 cents a kilowatt hour. (Notably, Green’s media release omitted any mention that the current feed-in rate is over 27 cents.)

In a further setback for potential solar households the feed-in rate after January 1 has not been set but will instead be determined by the Tasmanian Economic Regulator.

A 1.5 kilowatt system – which could generate approximately 1900 kilowatt hours a year in Hobart – would currently cost approximately $3,240. Under the current scheme a system of this size would recoup its cash costs in a little over 6 years. However, under the government’s new scheme it would take 9.5 years or more to recover the investment. Systems installed even just a few years ago were well over double current costs.

Green also announced that the existing 1:1 feed in tariff would only be available to households which have connection applications submitted by August 31. In other states, such as Queensland, government moves to slash feed in tariffs resulted in a surge of new applications. However, the two week window before the current scheme closes is likely to substantially limit the number of new customers.

In his announcement Green sought to portray the new policy as ensuring existing solar suppliers were “treated fairly” and claimed that the government had “got the balance right” between “people who have invested in solar energy and not penalising those who cannot afford it by forcing them to pay higher electricity prices to subsidise the scheme.”

Save Solar Tasmania, a group representing solar owners and some installers, rejects the claim that Tasmania’s current 1:1 feed-in tariff represents a subsidy, arguing that Tasmanian consumers have never been paid higher than the retail rate, unlike feed in tariffs in some other states.

In a scathing joint submission to the government, Save Solar Tasmania and the Alternative Technology Association accused the government’s issues paper on the feed in tariff of “overstating the costs and problems of current FiT arrangement and understating the benefits.”

They rejected the claim that the feed-in tariff adversely affected lower income consumers. In their submission the groups argued that an analysis of the data on solar installations and income data from the Australian Bureau of Statistics indicated that “there is no significant correlation between income and the uptake of solar PV, if anything the trend line is slightly downwards (ie wealthier areas are slightly less likely to install solar PV).”

“Many pensioners, retirees and other low income households in Tasmania have invested in solar with the deliberate purpose of making their electricity bills more affordable, and receiving a reasonable payback. These lower income households will be disadvantaged by a reduction in the feed-in tariff,” they stated in their submission.

The government have conceded that those joining the new lower value scheme will be allowed to use electricity generated from solar panels for both their general power circuit for lights and appliances and their hot water system. Currently, Aurora requires solar systems to be wired so that they are connected only to the general power and light circuit. The original proposed feed in tariff scheme would have resulted in solar electricity customers being paid only 8 cents per kilowatt hour for electricity surplus to their power and light circuit but have to buy it back at a higher price for their hot water system.

The Tasmanian Greens welcomed the government’s new policy on the grounds that it was “an improvement on the original proposal” and incorporated “key elements of the Greens’ proposed model”. The Greens welcomed that the Tasmanian Economic Regulator could “take into account social, environmental and economic factors when determining the price of power for solar customers.”

Major electricity utilities have been lobbying for the restructuring of both feed-in tariffs and the Renewable Energy Target, both of which combine to encourage households to instal solar electricity and undermine coal and gas-fired generation. Last week, a public backlash forced the West Australian government to backdown on proposed retrospective cuts to the solar feed-in tariff.

While governments seek to justify cuts to feed-in tariffs claim they are motivated by a desire to keep power costs low, power generators complain that renewable electricity and energy efficiency are combining to lower wholesale costs and undermine their profits. EnergyAustralia, a major generator and retailer in eastern Australia, reported to investors last week that in the first half of 2013 it had recorded another loss and stated that the rapid growth in solar electricity was one of the causes. EnergyAustralia, which is owned by the Chinese company CLP, complained that the increase in solar electricity, gains from energy efficiency and major renewable electricity projects such as wind “have more than offset any increase in demand from population growth” and “suppressed wholesale electricity prices.” Lower demand undermines the need for investments in expensive new power generation and transmission while lower wholesale prices suppresses retail power prices.

While the solar sector is currently a relatively small generator in Tasmania, the prospect of expanded household solar electricity generation – along with reduced demand due to increased solar hot water heating and energy efficiency – are factors that are likely to result in lower bid prices in the privatisation of Aurora Energy.

Bob Burton is a Hobart-based researcher, website editor and freelance journalist. He is a contributing editor of CoalSwarm, a wiki-based database on coal issues. The house he lives in has solar panels which were installed in 2009.

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