Cost of green schemes exposed

Six years ago today The Australian warned that consumers on middle and lower incomes would pay a high price for renewable energy targets: “Poorer families would bear the brunt of the investment in transmission networks as wealthier households reaped generous subsidies for investing in solar panels,” we said. “As well as driving up power prices, the flaw of the mandatory RET is that in ‘picking winners’ among high-cost technologies it distorts the market and diverts investment from other lower-emission energy sources.” Those misgivings were prescient, unfortunately, for household budgets.

In the final report of its inquiry into retail electricity pricing released yesterday, the Australian Competition & Consumer Commission has quantified how much such technologies now add to consumers’ annual power bills. The effects range from $170 in South Australia, $155 in Tasmania and $109 in NSW to $93 in Victoria and $76 in Queensland, with the differences mainly related to the take-up rates of rooftop solar photovoltaic panels. As the ACCC identified, the subsidies received for installing wind and solar made the business case for doing so compelling in recent years. But they did so “in a way that was indifferent to the ability to provide energy to the market when demand requires it”.

In seeking a pragmatic set of policies to reduce the power bills crippling tens of thousands of households and small businesses in one of the world’s most resource-rich nations, the ACCC has proposed winding down and abolishing the federal Small-scale Renewable Energy Scheme by 2021 instead of 2030, when it was scheduled to end. The strategy makes sense in light of the dramatic reduction in solar PV installation costs. In 2007, the pre-subsidy cost of installing a 1.5-kilowatt system, typical for the time, was about $18,000. A similar system today costs about $5000 before any subsidy. During that period, the proportion of households with solar power has risen from 0.2 per cent in 2007-08 to more than 12 per cent.

The SRES has been one of the main subsidisers of solar rooftop panels, which have allowed householders who can afford the technology to benefit from generous solar feed-in tariffs. By reducing their consumption of grid electricity, the inquiry calculated, solar power users are paying, on average, $538 a year less in power costs than non-solar customers — underwritten by many other consumers who cannot afford to take advantage of the scheme. Scrapping the SRES, the ACCC found, would save domestic consumers between $15 and $30 a year, depending on which state they lived in. It would be a modest step in the right direction.

Should Malcolm Turnbull grasp it, the competition watchdog’s call for government to underwrite the construction of “firm” low-cost power generation has provided the Coalition with a useful means to calm divisions within its ranks over energy policy. Nationals MPs and others keen to see new baseload generation taking advantage of Australia’s vast resources of quality coal and high-efficiency technology will welcome the recommendation. As the Prime Minister said, the proposal “has the distinct advantage of being thoroughly technology agnostic and well-designed” and “should serve our goal of cheaper and reliable energy”. After almost 20 years in which planning for the nation’s energy needs has been overshadowed by hot air and more heat than light from the green lobby, the ACCC report has injected an important dose of realism into the equation.