Political moves in Australia’s renewable energy landscape

25. March 2013 | Markets & Trends, Global PV markets | By:  Jonathan Gifford

A cabinet reshuffle in Australia results in the Department of Climate Change merging with Industry and a new Energy Minister. In the states of Queensland and Western Australia, electricity price policies remain a subject for debate.

The Australian Parliament house.

With high levels of residential photovoltaics, Australia is proving to be an interesting market in terms of electricity pricing.

With renewable energy becoming an increasingly contentious issue in Australian politics, former oil and gas industry advisor Gary Gray has been appointed Australia’s new Energy Minister in a cabinet reshuffle. As a part of the changes, the Climate Change Department will be merged with the Industry Department, however minister Greg Combet will remain in charge of the portfolio.

Australian green business website Climate Spectator observed earlier today that not bringing the energy and climate change portfolios together represented a missed opportunity. It also pointed out that new energy minister Gray has dubious credentials when it comes to climate change.

"Gary Gray was one of the founders of the Lavoisier Institute, a group that has probably done more than any to spread misinformation about the science of global warming in Australia. According to The Age (newspaper), in 1993 Gray said the evidence linking human activity to climate change was ‘pop science’."

News agency AAP has reported that Prime Minister Julia Gillard has defended the merging of the departments and has said that it doesn’t represent a watering down of the government’s climate objectives. Gillard told the press today that as a carbon price was now in effect, that the merger of the Climate Change Department with another, "made sense."

"It is inevitable, natural, logical that the number of people you need for the task has reduced," Ms Gillard told reporters today.

The government has shown support for renewables in other ways and last week it committed to maintaining its Renewable Energy Target (RET) for 2020, a move that was welcomed by the photovoltaic and renewable energy industries.

Electricity price debate

Political debate is also continuing in Australia regarding electricity prices and photovoltaics.

In the state of Queensland, where over 1 GW of photovoltaics is expected to have been installed when its FIT expires on July 10, a report into the electricity market has suggested new pricing structures for households installing a photovoltaic array.

Under the state government’s initial Solar Bonus Scheme, households installing a photovoltaic system received AUD0.44/kWh. After the FIT cutoff date, the government has committed to a tariff of AUD0.08/kWh. This commitment will expire in 2014.

The cost of the FIT scheme, estimated to be around AUD2.9 billion over 20 years, and falling electricity demand on the back of the new photovoltaic capacity were the financial dynamics that prompted the report into photovoltaic tariffs, released last Friday by the Queensland Competition Authority.

The report recommended that a price of AUD0.0755/kWh be paid for electricity fed back into the grid from photovoltaic arrays, in south east Queensland, in 2013/14. It also found that compulsory minimum FITs were not required, and left the possibility of "gross FITs" open. Gross FITs have been vigorously opposed by the solar and renewable energy industry as they essentially prevent the self-consumption of electricity from a rooftop array.

In areas outside of the major population centers in the state, the Competition Authority report recommends the monopoly utility pay between AUD0.08 – AUD0.14/kWh for solar electricity from households.

The report has been criticized by supporters of renewable energy, because it does not take into account the advantages and savings that additional photovoltaic capacity adds, but rather assesses it only as a cost. These advantages include the reduction of wholesale electricity prices – the "merit order effect" – and a reduction of demand in peak times.

The report was also illustrative of some of the potential obstacles the solar industry may face in the future in Australia. The Queensland Department of Energy Supply and Water proposed to the Competition Authority that a limit be introduced to the amount of electricity that could quality for a FIT from each household and even the right of utilities to refuse solar connections.

Debate over competitive pricing

In Western Australia, after political machinations of its own, the debate as to whether "cost reflective" electricity prices and more competition in the market should be introduced haa been re-sparked. At present, the state government subsidizes electricity prices as significant spending on infrastructure – largely to meet peak demand – has been made. The retail electricity market is also not a truly competitive one.

The Economic Regulation Authority and the state’s Chamber of Commerce and Industry (CCI) have made the call for a deregulated market. "The government's argument at the moment is because we don't have cost-reflective prices in electricity, it's unlikely that if they did open it up, then there would be new entrants," said the CCI’s Lyndon Rowe today. He said that the state is the only one in Australia where electricity tariffs for small business and residential consumers are set by the government.

The push for more competition in the West Australian electricity market comes on the back of the appointment of a new Energy Minister, and the deregulation of the state’s retail natural gas market. The new Energy Minister, Mike Nahan, is a former economist and supporter of free-market policies.

The state’s Sustainable Energy Association’s Kirsten Rose said that electricity market reforms would see a more widespread adoption of renewable energy, based on wind and solar’s increasing competitiveness. "One of our major policy points for the coming year is to reduce the barriers to commercial self-generation; in particular photovoltaics," Rose told pv magazine. "We've seen the Government cut red tape for the mining industry, and we would encourage Minister Nahan to follow suit with renewable energy."


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