Both Origin Energy and AGL Energy want subsidies for small scale solar removed. In submissions to the review of the Renewable Energy Target being conducted by the Climate Change Authority, both argue along with the Electricity Supply Association, and the Energy Networks Association that the costs of the technology have fallen enough to justify the removal of the upfront payments under the small scale technology component of the Renewable Energy Target (RET).
Household solar PV now no longer requires subsidies to be an attractive proposition for households, AGL Energy says in its submission filed last week. It says the small scale solar target has already exceeded its original policy intent of 4,000 GWh.
Origin Energy says solar PV is forecast to more than treble by 2020 to more than 13,000 GWh. It says that even this estimate may be conservative, considering the attractiveness of solar to businesses, particularly with the rollout of leasing models.
Origin Energy says the case for upfront subsidies is mitigated by its declining cost. It wants changes to the price cap, and the deeming period both of which can be done by regulation rather than legislation. And it wants the system size reduced to a maximum 10 kW from 100 kW.
The push by Origin Energy and AGL Energy comes as both companies prepare to launch major marketing pushes into the household leasing market.
Origin Energy has flagged its intentions to one columnist, although it is yet to expand on these plans to shareholders and other media, and AGL is also said to be assembling a 150-strong team in Melbourne to attack the solar leasing market. About 30 people are already believed to have been hired. It has labelled solar tariffs as a scam. Meanwhile, green groups put Australias total fossil fuel subsidies at $47 billion over the next four years.
Both retailers see the push to leasing models as a way of locking in their customers for the long term. All energy retailers lose between one fifth and one quarter of their customers each year, as people look for better deals, and the push to distributed energy, the emergence of new energy management programs, and the arrival of new business models is threatening to upset their business models.
The state of South Australia’s network operator said this week it could see no future for centralized generation, or for retailers, the two components that gentailers such as Origin and AGL combine.
Europes biggest utility, E.ON decided last month to split its business in two, arguing that its old centralized generators could not work hand in hand with the new distributed model based around renewables, storage and smart grids.
By using their balance sheet to offer zero down leasing models, Origin Energy and AGL Energy hope to capture a much bigger share of the solar market. Their position would be helped if the subsidies could be removed.
Origin was once the biggest installer of solar in Australia, although AGL never matched its output despite the purchase of a small specialist solar company.
The CCA is due to present its findings to the government on Friday, but there is no word yet on when the report will be released. It is not clear what, if any, weight the government will give to its report.
The Abbott federal government earlier this year bypassed the CCA and appointed its own review panel headed by the pro-nuclear climate science denier Dick Warburton.
That review recommended scrapping or scaling back the RET dramatically, even though it found maintaining the current target, or expanding it to 2030, would provide the most benefit to consumers.
The Federal Government is determined to slash the large scale scheme to around 26,000GWh from its current target of 41,000GWh although it has said there will be no change to rooftop solar for households.
It has, however, remained vague about the fate of systems from 10 kW to 100 kW, which provide a similar upfront benefit for businesses.
The Federal Government is also being pushed to fold the small scale scheme into the large scale scheme which would not impact the household sector very much, but would result in less large scale generation being built.
The CCA in 2012 said there was a case for cutting the small scale target from 100kW to 10kW, although it stopped short of actually recommending that action.
The Clean Energy Council says that the extra costs for a small business to deal with the large scale renewable target in upfront metering and other costs would amount to more than $10,000.