NSW Mulls Retrospective Solar Changes

by Giles Parkinson, Climate Spectator

The recently-elected New South Wales Coalition government is considering retrospective changes to the state’s feed-in tariffs as a means of reining in the cost of rooftop solar.

The controversial proposal was canvassed at a solar summit convened by the government on Friday to deal with the costs of the Solar Bonus scheme – which the government says is now $1.9 billion – and map out future policies.

According to those in attendance, Mark Duffy – the head of the NSW Department of Trade & Investment, Regional Infrastructure & Services – said one option was to try and “claw back“ the costs of the scheme by either trimming the 60c per megawatt hour feed in tariff that attracted so many customers, or reducing the length of the scheme from seven years to six-and-a-half, for example.

A final decision on retrospective changes is not expected for some weeks, and will likely come after a further summit to be held on June 7, which will further investigate future policy options, and will be closely watched by other state and territory governments also facing the end of their solar subsidy schemes.

However, of more immediate concern to the industry is the current policy gap caused by the abrupt suspension of the scheme a fortnight ago, which they say has brought the industry to a stop and could result in lay-offs as early as Monday unless the situation is resolved.

The industry is arguing for a “net metering” system to be announced as soon as possible as the default policy for new installations. It insists this is essential to protect the more than 5,000 rooftop solar jobs in NSW, and between $200 million and $500 million of stock currently sitting in ports and warehouses which cannot be refunded. “Virtually every company is affected,” said one industry representative. “And they will have to start laying off staff to deflect those costs.”

The net metering system is considered crucial by the industry as it allows the owners of rooftop solar to use the power they generate from the systems to fully deflect the rising costs of energy prices.

Some customers are paying 22/kWh for energy, and up to 39c/kWh for those with peak tariffing systems. Without a net metering system, new solar installations would likely attract a tariff of just 6c/kWh – roughly the same received by coal-fired power stations. The industry argues it should receive the retail tariff because it is putting electrons into the grid at the point of distribution.

The energy retailers argue that any further changes to tariffs would require “costly” changes to scripts at call centres. The solar industry charges that the retailers have done well out of the solar bonus scheme, because they have not had to pay for the energy provided by rooftop solar (that cost has been borne by all energy users) and have been able to sell the electrons back to customers at full tariff.

Network operators argue that distributed generation does add costs to the network. Others say that may be the case, but only where there are high penetration levels, and these are mostly quite low in Australia, and the quantum is uncertain. However, there is no doubt that a full analysis of the true value of rooftop solar is needed. “It’s a value discussion that is yet to play out,” said one observer at Friday’s meeting.

The first solar summit meeting on Friday ran for four hours, with Premier Barry O’Farrell opening the summit and energy minister Chris Hartcher in attendance for most of that time. Other people at the meeting included solar industry associations, representatives from energy retailers, and other experts. One described the meeting as “hostile”, another as “vigorous”. All agreed it was useful, and the industry felt it got a good hearing from government.

According to a memo sent to members by Peter Newman, the head of the Australian PV Association, only two speakers – John Pierce, the chairman of the Australian Energy Market Commission, and Rod Sims, the head of pricing regulator IPART, and newly appoint head of the ACCC – spoke against solar PV.

“The two speakers against PV tried to maintain the view that PV was, and always would be, an expensive option to produce electricity and reduce GHG emissions – despite clear evidence to the contrary,” Newman said in his emailed letter.

“Interestingly, Cameron O’Reilly (Energy Retailers Association of Australia), said that he expected electricity retailers to be moving more and more into the PV market as it allows them to retain customers and differentiate their offer.

Newman said that the impact of decisions made by the NSW government has implications beyond the state’s borders, because it could be source of major influence for other state and territory governments, which are also facing the end of their feed-in tariff schemes.

Newman said that Hartcher understood the need to support the PV industry into a “soft landing” at the same time as managing the exploding cost of the scheme. “(He gave every intention of dealing fairly with the complex issues involved. However, his final recommendation still needs to pass through Cabinet and be agreed to by the Premier.”

“The industry representatives attending the Solar Summit were consistent in their views on what should be done in the immediate future to preserve the rights of those people that already had applications in place prior to 20 October 2010 (and so should get the 60c FiT) and 28 April 2011 (and so should get the 20 FiT or net metering, whichever is greater).

“It was proposed by the solar industry that this action would occur in conjunction with an immediate net metering arrangement, as a default for future installations, until such time as a new program was implemented.”

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