Popular solar grants risk bubble

GENEROUS federal government subsidies for rooftop solar electricity systems could be wound back to avoid a home insulation scheme-style bubble.

GENEROUS federal government subsidies for rooftop solar electricity systems could be wound back to avoid a home insulation scheme-style bubble.

This may happen if runaway demand does not cool.

Climate Change Minister Greg Combet said yesterday the commonwealth incentive, which now contributed about $6000 to the $8500 cost of a rooftop solar system, was under constant review.

Leading business groups have called for the scheme to be reined in. In submissions on draft renewable energy target regulations, EnergyAustralia, Amcor and Australian Paper have warned the government that it faces a blowout in liabilities associated with the solar program.

They say consumers face an unexpected $600 million increase in their electricity bills next year because the federal government has grossly underestimated how many renewable energy certificates will be created from small-scale solar systems.

Demand for home solar electricity systems had ballooned from about 2000 units a month to 1000 units a day over 12 months.

Renewable energy regulator Andrew Livingston said the scheme was tightly regulated and would not be a repeat of the home insulation program. Aerial surveillance - including checking the number of panels on individual roofs using mapping photographs - was used to make sure panels that were claimed for had been installed.

Surging demand for rooftop solar systems has been driven by a combination of falling prices for solar panels; generous government subsidies, including high feed-in tariffs for households; and a step-up in telemarketing following the collapse of the home insulation scheme.

The federal government subsidises the cost of purchasing solar panels and each state has a different scheme under which households are paid for the electricity they generate and sell into the grid network.

Mr Combet said he would be guided by the impact of last week's decision by the NSW government to cut its own feed-in tariff (the rate households were paid for the solar electricity they generated) from 60c/kWh to 20c/kWh.

"There has been a very large take-up of the solar program, particularly with the strong character of the NSW feed-in tariff," Mr Combet said. "I am mindful of the strength of the federal program and how it feeds into the solar scheme. I am keeping a constant watch on it."

Amcor and Australian Paper have called on the government to cut the inflated rate that was set to subsidise purchases of solar panels when the rebate was formed. Amcor suggested "putting a realistic cap" on the number of small-scale technology certificates that could be created, allowing them to trade at a market-determined price or dropping the fixed price to $20. Australian Paper said the "dramatic" increase in certificate volumes meant there was "no valid reason" to continue with the inflated rate.

In its submission, Amcor said that for large energy users such as itself, "large cost increases of such magnitude damage the competitiveness of our operations, particularly with the increasing strength of the Australian dollar and its consequent effect on the manufacturing sector of cheaper imports and more costly exports".

Australian Paper said "with two months of the year to go, it is more than probable the total renewable generation figure for 2010 will exceed the target set for 2020".

"With such a dramatic and unexpected result there is no valid reason to continue with the solar credits multiplier," it said.

The federal government's payments, made under the renewable energy certificates system, were last reviewed by former climate change minister Penny Wong in June and put on to a reducing scale. The payments will be phased out in annual increments for the next five years but Mr Combet can act at any time after taking account of changes in the costs of solar panels; the extent to which panel owners contribute to the upfront costs of those systems; and the impact they were having on the electricity market, including on electricity prices.

The briefing to Mr Combet when he became minister warned that recent experience with a number of government programs, including home insulation, had damaged public confidence in the government's ability to deliver programs. "The major lessons from good and bad program experience include ensuring that programs have in-built means to manage demand to avoid budget overruns," the briefing said.

"Likewise, rebate programs which effectively provide a good service to households for free make it difficult to manage demand and to retain some buy-in by the householder."

NSW Premier Kristina Keneally said demand for the solar scheme had ballooned to one megawatt a day, adding tariff payments of about $3 million that were passed on to all electricity users. She said installed capacity under the scheme was forecast to grow from 25MW to nearly 1000MW by the end of 2016, taking payments to $4 billion.

The new scheme has been capped at 300MW.

Solar industry groups and unions held a demonstration in Sydney yesterday, calling for the NSW tariff to be increased from 20c/kWh to 30c/kWh, half its former rate.

Australian Solar Energy Association chief executive John Grimes predicted 2000 jobs would be lost because of the NSW changes.

Solar industry leaders said fears the rooftop solar scheme would become another home insulation-style disaster were unfounded. Clean Energy Council chief executive Matthew Warren said: "The difference is with solar there is an accreditation system in place. There are 100,000 of the units on people's roofs and working fine. They must be installed by an accredited person and electrician and ticked off by the power authority."