Solar bonus blowout to sit on budget bottom line

Brian Robins
April 28, 2011

The state government has put the final cost of the solar bonus scheme as high as $1.9 billion and decided that all future costs of the scheme will be funded through the state budget, rather than adding more pressure to electricity prices.

In the four years to 2014-15, the solar bonus scheme alone will add at least $651 million to the budget deficit. The cost could be higher once the final cost of the scheme is known, the government said yesterday.

This is on top of the existing cost of the scheme, which is financed through the Climate Change Fund.

Despite the blowout in cost, the government is yet to close the scheme. Rather, the Minister for Resources and Energy, Chris Hartcher, said yesterday the government is waiting for recommendations from a planned 'solar summit'.

As a result of the decision to pay for all further costs through the budget, the forecast surplus of $204 million for 2011-12 has been wiped out, with the government now expecting a deficit of $79 million.

The scheme will add a further $145 million to the deficit in 2012-13, before declining over subsequent years, the government said yesterday.

During the election campaign, the Coalition said it would offset the cost of the solar bonus scheme against uncommitted funds in the Climate Change Fund 'to ensure that [electricity] prices do not have to rise to cover the cost of this scheme', a spokeswoman for Mr Hartcher said.

'We are also committed to holding a solar summit within our first 100 days in office, which has as one of its terms of reference to determine the true cost of Labor's bungled solar bonus scheme and identify any opportunities to limit the cost blowouts.'

Yesterday Mr O'Farrell blamed the former energy minister and now Opposition Leader, John Robertson, and his successor, Paul Lynch, for the 'cost blowout' of the solar scheme, which they 'failed to close quickly enough [which then led to] a scheme that could cost anything between $1.6 and $1.9 billion'.

'An additional $759 million has to be found outside of what the [Climate Change] fund has got available, in order to pay for that blowout.'

'We are not going to take steps that push up electricity prices where they can be avoided. So this is a cross that's going to have to be worn through the budget.'

Money in the Climate Change Fund is primarily raised via a levy imposed on state-owned electricity distributors, which is passed on to industrial and commercial electricity users.

'We have committed to offsetting the cost of the solar bonus scheme against uncommitted funds in the Climate Change Fund,' the NSW Treasurer, Mike Baird, said yesterday. 'The shortfall identified today will be funded through the budget.'

Due to the blowout in the cost of the scheme, late last year the former government said it would halt new applicants from accessing the 60¢ a kilowatt hour payment, cutting new applicants to 20¢ a kilowatt hour.

The government disclosed it would have to spend $651 million between now and 2014-15 on the scheme, to be funded through the budget.

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