Bleak Day For Solar in NSW

Friday the 13th of May 2011 will go down in history as the Australian solar industry’s bleakest hour.

The NSW Government’s announcement to retrospectively change legislation guaranteeing $0.60c/kWh for PV system owners (to $0.40c/kWh) has sent chills down the spine of the solar industry.

There is only one other similar case that I know of; the Czech Republic’s decision to retrospectively tax solar system owners, which created a landslide of legal challenges in December 2010.

Will other State Governments overturn their PV legislation too? Is every piece of legislation able to be thrown out on a whim? Will I potentially have to give my First Home Owners Grant back? My personal electricity bill will increase by $331 per year from now, just in lost revenue alone.

These are questions that every Australian should ask themselves, and it’s the question that international organisations will now consider, when they consider investing in Australia. This gravity of this decision reaches far beyond just the solar industry.

The fact that the scheme was abruptly put on hold was bad enough. But by effectively tearing up the contracts made by around 5000 NSW solar installers, they have placed these well intentioned business people and their customers in a most precarious predicament.

And as for the 200,000 or so system owners in NSW who thought they were getting $0.60c for seven years; well they flooded the hotlines at the Government’s call centre to be told, “nope, its $0.40c in a few weeks’ time”. The government’s web site fact sheet describes most, if not all the details – but there are numerous unanswered questions, such as how to manage the many time-of-use PV customers.

Unfortunately, The Government has not released up to date data on how many people will be connected at what rate but here’s an order of magnitude for you: If we assume 300MW got through at $0.60c it would have cost the State Government about $1.7B (not $2.9B as often reported) – if they all connected on day one, which they didn’t.

If we re-cast the numbers assuming $0.60c for the first year and $0.40c for the remaining 6 years, the State Government just took back, retrospectively, around $497M from around 200,000 voting solar owners. This $497M is future revenue that solar system owners banked on to justify their purchase decision. They borrowed or paid for their systems (with some Federal Government support) out of their own pockets, in some cases spent tens of thousands of dollars.

Certainty for investment in any industry is key. Certainty for consumers is desirable. No-one would argue that the NSW Solar Bonus Scheme overheated – in fact the industry warned against such a scheme and the potential for an unplanned consequence. Our previous Government failed to monitor and react quickly enough and our new Government has now over–reacted.

It’s fair to say the industry has and is learning to accept support with gratitude. It will deploy as much solar electricity as consumers will buy and understands rapid change is part of the deal. But retrospective change for such a small proportion of all electricity price increases is the opposite of certainty.

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