Australia: Solar bonus scheme suspended in NSW

The coalition government that was elected to power on March 26 this year has put a two-month hold on the scheme, which has been plagued by risings costs and, consequently, higher electricity prices and a growing budget deficit.

"Applications to the NSW Solar Bonus Scheme have been placed on hold," said the government-run Energy website today. "No new applications to the Scheme will be considered from midnight 28 April 2011."

New Energy Minister Chris Hartcher has said that the cost of the former Labor government’s scheme has blown out from AUD$335 million (€276 million) to over AUD$1.9 billion (€1.4 billion). He believes the scheme would add an estimated $651 million (€480 million) to the budget deficit over the four years to 2014-15.

Through this scheme the Government had seen over 50 megawatts of photovoltaic capacity installed, which meant that NSW had the largest amount of installed small scale photovoltaic systems in the country.

"The cost of this scheme is, in fact, a cost that has been transferred to every one of us as taxpayers," Hartcher told reporters in Sydney. "The black hole simply has to be plugged."

The scheme paid households for all energy generated by residential solar setups, including both energy used for in the house as well as what they fed into the grid. The program’s future is due to be discussed next Friday, May 6 at the Solar Summit the party promised as part of its election campaign.

Households that had already signed up to be part of the scheme will have their contracts honored, however those with pending applications might not.

The scheme came into effect on January 1, 2010, and was expected to run until 2016. Overwhelming popularity already forced the then government to drop the feed-in tariff from 60 to 20 cents per kilowatt-hour for new applicants, as well as to introduce a 300 megawatt capacity cap for the scheme.

The former government was intending to cover the extra cost from its Climate Change fund, but on Wednesday Premier Barry O’Farrell announced that arrangement had already fallen short by $759 million (€559 million).

Hartcher would not rule out further reductions to fees paid to households that feed electricity back to the energy grid.

"How the existing scheme operates and runs will be determined through the summit process," he said, adding that producing cost savings would be a summit top priority. "If it’s possible to eliminate or drive down cost drivers, we will."

The move has angered the former government, which maintains that the coalition had completely supported the scheme when it was put through parliament. Others have come out to attack the decision, saying it may hold negative consequences for the local photovoltaic market.

Tim Ayers, NSW Secretary of the Australian Manufacturing Workers’ Union (AMWU), said inefficiencies in the scheme would cost jobs and shrink the local market of Australian manufacturers.

"They need to look at the solar tariff rate and they’ve got to make sure that it’s got a relationship to local jobs," he told the Australian Associated Press today.

NSW Greens MP John Kaye also said that the government had to tread very carefully with any legislation as it could bring irreversible issues for the industry in Australia saying that the boom-bust cycle may turn away potential investors in the sector.

Next Friday’s Solar Summit will include representatives from the consumer sector, energy market and solar manufacturing industry.