Australia: solar subsidy report draws industry's ire

Australian think-tank the Grattan Institute has attracted the opprobrium of the country’s solar industry after releasing a report this week claiming that solar subsidies will have cost more than AUS$9.7 billion by 2028.

The institute’s Sundown, sunrise: how Australia can finally get solar power right report urges the Australian government to "avoid the mistakes of the past" and reject solar subsidies that it claims are unfair, expensive and needlessly lavish.

By 2028, the report claims, state-backed support for solar will have cost the economy AUS$9 billion (US$7.5 billion) overall, with total subsidies to solar PV owners amounting to $14 billion.

However, solar supporters in Australia and beyond were quick to dismiss the report as blinkered and one-sided, with Giles Parkinson of RenewEconomy arguing that the report is predicated on a series of erroneous and conservative assumptions as to the efficiency and efficacy of solar technology.

Writing in the Guardian newspaper, Parkinson said: “Let’s start with that $9 billion figure. The first think the report gets wrong is to base its numbers on the assumption that solar systems only last for 15 years. Most solar systems are likely to last 25 or even 30 years – some even more.

"So right at the start, the report has underestimated the benefits in avoided grid costs and abatement by at least 40%," Parkinson said. "That’s a critical number that delivers an entirely different outcome."

In adding up the costs but not the benefits of solar, Parkinson argues, the report dismisses the fact that solar PV’s penetration has helped to lower wholesale electricity prices in Australia considerably. The report states that solar PV "does not constitute a net economic benefit to society".

However, Parkinson reveals that Queensland’s biggest coal generator, Stanwell Corp, exclusively blamed the growth of solar PV for its inability to register a profit during fiscal year 2013.

Data from the University of Melbourne calculates that rooftop solar PV could be responsible for a reduction of $2-$4/MWh in electricity price per 1 GW installed across Australia’s National Electricity Market (NEM). With around 4 GW installed in the NEM, this equates to a saving of $2 billion per year, which amounts to $30 billion over the course of the next 15 years.

Australian householders pay a cross subsidy that covers homes and business. For the average resident, bills are higher currently largely to offset the impact of discounts given to business, Parkinson states. Cheaper wholesale electricity costs major businesses in Australia just $0.08/kWh, which is one-quarter of the cost that normal householders pay, and is a pricing model that follows Germany, where big business pays some of the lowest electricity prices in the world – thanks to the proliferation of PV.

Solar a popular power source

Elsewhere, Kane Thornton of the Clean Energy Council (CEC) argued that the "vast majority" of the solar subsidies referred to in the Grattan report have either been eliminated or are "gradually ramping down", adding that there are many subsidies right across Australia’s energy sector, stating that it is unfair to single out solar for such scrutiny.

"This support, combined with the popularity of solar power over the past seven years, has been critical to driving down the costs of solar and making it much more affordable for all Australians," said Thornton. "As the cost of solar power continues to decline and the opportunity for battery storage grows, we expect solar power to go from strength to strength as Australians embrace it in ever-greater numbers."

That point, at least, was echoed by the Grattan Institute’s energy program director Tony Wood, who wrote that home batteries will enable people to store power from their solar panels, thereby reducing the load on the network and helping to cut energy prices for all consumers.

"The journey to a new electricity system has begun," Wood said. "If we manage the transformation poorly, consumers will pay again. If we do it well, everyone can benefit from a more efficient, sustainable and affordable system."

Solar investment in Australia will reach around $30 billion by 2028, with recent and current subsidies helping to create an industry that employs 13,000 people – often in rural parts of the country – argued the CEC.

The Australian Solar Council (ASC) also attacked the report, stating that it falsely put the issue of big business front-and-center in the solar debate. "Australian families", ASC’s CEO John Grimes argued, are at the heart of the country’s energy sector, and solar is the most family-friendly power source of them all.

"Solar PV is showing once again that the electricity business model in Australia is broken," Grimes said. "Either the big power companies change their world view, or technology and competition from solar PV and battery storage will. The truth is there has never been a better time to buy solar and storage."

A recent report by the Australian Renewable Energy Agency found that 77% of Australians agree that large-scale solar facilities can be a "significant source of energy" to meet the country’s needs. Further, 87% of those surveyed were "strongly in favor" of solar panels on homes.