David Leyonhjelm: Solar Subsidy not so Sunny

Government subsidies are driving a boom in the installation of rooftop solar panels, paid for by those without panels. That perennial beneficiary of government largesse, Elon Musk, is now proposing many more should be added to roofs in South Australia.

The incentives to install rooftop solar are significant. The main one is a generous installation subsidy, funded through the electricity bills of those who buy power from the grid. The subsidy is delivered via Small Technology Certificates. For a typical home solar installation the Government provides about 150 Small Technology Certificates, currently valued at $40 each. This reduces the installation cost from around $12,000 to $6,000. Electricity retailers are then required to purchase a certain number of Small Technology Certificates, the cost of which is added to consumer electricity bills.

Another incentive is that the new owner now uses less electricity from the grid, thus reducing their regular electricity bill. Of course, this also means they pay less of the cost of the installation subsidy from which they have benefitted.

And finally, the excess electricity produced by the household’s solar panels can be fed into the grid where it is purchased by the electricity companies, whether they need it or not. This is known as a feed-in tariff, and its cost is also added to the bills of all electricity consumers.

It is little wonder that almost one in four Australian homes now have solar panels. Nor should it surprise anyone that the three in four households which do not have solar panels are paying a hefty price for those that do.

In 2017 the subsidy cost of rooftop solar was nearly $500 million. At the current rate of increase, the expected cost in 2018 will be at least $1.2 billion. Any chance of reducing electricity bills through the introduction of the National Energy Guarantee (whatever that is) will be swamped by the impact this growing subsidy has on household bills.

This impact is avoidable. When the subsidy was introduced by the Gillard government it included a provision to allow the minister to reduce the value of Small Technology Certificates if the cost of subsidies topped $240 million in a year. No minister has used this provision to date.

This is now a matter of priority. Of the three in four households that do not have solar roof panels, large numbers are renters, apartment owners, pensioners and low income households who do not own the property in which they live or cannot afford the upfront capital cost despite the subsidy.

Lower income people are copping a double whammy. Not only do they pay for solar panels for higher income households through the cost of the subsidies included in their electricity bills, they are also part of a diminishing pool of electricity consumers, wholly reliant on the grid, who are paying higher prices to pay for the generous feed-in tariffs enjoyed by wealthier households with solar panels. They are trapped in a scheme that transfers wealth from lower to higher income households.

A report by the Grattan Institute concluded that by the time subsidies run out in 2030, households and businesses that have not gone solar will have spent more than $14 billion subsidising those that were able to afford solar installation. This is middle class welfare of the first order.

The history of governments regarding the cost of solar is devious. There has never been a requirement for electricity bills to show the subsidies that add to the total. Ministers never talk about the cost of solar and, when they talk about expected bill reductions from the National Energy Guarantee, they never mention the additional cost attributable to greater uptake of solar.

Even if there was once some justification for subsidising the cost of solar panels, that is certainly no longer the case. The cost of solar panels has fallen dramatically and uptake has gone through the roof. It’s time the subsidy was removed.

David Leyonhjelm is a Senator for the Liberal Democrats

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48 Responses to David Leyonhjelm: Solar Subsidy not so Sunny

  1. As I have frequently previously remarked, the only man with a brain and a conscience in the ACT.

  2. Roger

    Government subsidies are driving a boom in the installation of rooftop solar panels, paid for by those without panels.

    The poor subsidising the rich.

    So where are the social justice warriors?

  3. NuThink

    Roger. So where are the social justice warriors?

    Ripping off the poor. They are often in on the scam – never let a good scam go to waste.

  4. RobK

    Many early adopters are upgrading their systems after the lucrative ten year feed-in tariffs expire. The initial (and on going) system subsidy certificates are paid on the expectation of a 15 year life. Effectively these schemes potentially defraud the absurd CO2 conjecture.
    The uptake of solar over 10-15% of the local grid means more expenditure to stabilize the system. There are many bidden costs.

  5. EvilElvis

    Late to the party again but at least you’re airing the dirty undies, David.

  6. cohenite

    We waited years for a modern grid with reliable and cheap power; greenism is quickly killing it.

  7. duncanm

    So who is pushing to keep these subsidies rolling ?

    Its not the consumer — follow the money

  8. BoyfromTottenham

    Interesting, David, but This $500 million subsidy pales into insignificence compared to the LRET, which subsidises large scale intermittent generation(wind, solar, etc.) at $65/MWh, currently running at more than $2billion a year! With wholesale generation worth about the same, this is a 100% subsidy for worthless intermittent electrons. Focus on the big picture!!

  9. Singleton Engineer

    Cradle to grave costs of both wins and solar are far greater than simply the after-subsidy capital cost.

    This is one discussion that deserves wider currency.

    Thanks.

  10. Singleton Engineer

    Oops! wind, not wins in the above.

  11. Spring is coming

    Malcolm Turnbull, Malcolm Turnbull, riding through the glen
    Dum dum dum
    Steals from the poor and gives to the rich
    Stupid bitch

    (Ref Dennis Moore , monty python)

  12. Tom

    The political left hijacks and corrupts climate science and ransacks the national treasury via corrupt and/or gullible politicians with extortionate subsidies to fix a non-existent problem.

    Of all the idiocies the 2000-2030 era will be remembered for, the abdication of political leadership will be up there in lights. The Lucky Country has officially become the Stupid Country.

  13. 132andBush

    A question for Bruce of Newcastle/cohenite or others who may know:

    What is the effective life of the best quality solar panels and at what age do they really start losing efficiency?

    Was at a dinner last Thursday with a Tesla owner. He was very keen to let me know he had it but I killed the conversation when I bluntly said to his face “They are the biggest act of environmental vandalism going around”.
    He’s a very smart bloke too, just caught up in the hype and bright lights of new technology.

  14. cohenite

    What is the effective life of the best quality solar panels and at what age do they really start losing efficiency?

    Panels, batteries, inverters all lose efficacy from day 1; inverters about 10 years after which need to be replaced.

  15. Mater

    Everyone pays network charges for the ‘privilege’ of using the infrastructure to consume electricity. Why are those with solar panels not charged an additional network fee for the privilege of using it in reverse…to collect the feed-in tariff?

    Afterall, they are using a private company’s infrastructure to earn money. It’s equivalent to running a business without paying for the overheads. What a lurk!

  16. manalive

    Where utility supply is available solar panels are pointless on an energy return on invested basis.
    Not only are the relatively poor subsidising the better-off, those in apartments and in cloudy locations like southern Victoria or Tasmania are also disadvantaged.

  17. duncanm

    .. inverters all lose efficacy from day 1; inverters about 10 years after which need to be replaced.

    I call bull on the degradation.

    They should operate pretty much to spec until they die, if kept maintained*.

    (*) – I’ve no idea what’s in a modern wall-mount solar inverter in terms of local heatsinking, but that’d be where any losses are if it is allowed to clog up with dust and crap.

  18. John Constantine

    Chinese communist party needs a new dumping ground for godless commo solar panels now the Trumpnado has made it harder to dump them in America.

    Watch massive large scale solar panel farms dumped on Australia from now on.

    Dynamite coal power and buy chicom solar panels to substitute.

    The chicom brown paper bags give a massively profitable return on investment.

  19. herodotus

    The whole alternative energy scene is b/s and they are generating power that is fairly useless. The climate scam and the energy debacle are together the biggest failure of politics in our lifetime. This has come about by the combined efforts of leftists in the media and in too many institutions which were formerly trustworthy.
    Politicians are either part of the leftist disruptional force, or just plain ignorant. Many of them have been snowed, while those that aren’t are marginalised. Marginalisation comes via the complicit media or by their political colleagues.
    It’s scandalous and there’s no end in sight.

  20. Elizabeth (Lizzie) Beare

    Green policies often fight against each other. Surrounding our South Coast beach house with no solar panels were properties all with solar roof panels, sitting under trees that could not be touched (nor would the committed greenie owners desire to touch them). The trees sometimes shaded the panels, but more significantly, they filled them with leaf debris and branches. Occasional panels were struck and destroyed by larger falling branches. Greenies are notorious for not maintaining things because they are one, mean, and two, lazy.

    Duncann, it seems, is a green proponent of an unusual physics: there is no entropy in manufactures.

  21. herodotus

    A meaningful subsidy might be one to those who are prepared to be off grid and stay there!

  22. nerblnob

    You’re on a good thing here, David.

    Stuck to it.

    Hammer it.

    Until you’re sick of it, then hammer it some more.

  23. Defender of the faith

    David misses one important characteristic of power industry capital, being the incremental effect of capacity investment. If we look at the history of pricing the typical pattern is one of steady decline in real terms with a large jump at times of new capacity installation. Queensland at one time tried to avoid this by adopting load shedding at peaks which proved unpopular. Victoria had a period of regular switching as the power and gas utilities competed. Nsw consumers were hammered when new plant was built for subsidised aluminium plant who got a very friendly deal from Wran.
    The model of distributed capacity is already adopted by some Australian utilities so it’s no surprise that SA is is a test case as it has the biggest issue with a small demand and poor fuel sources.

  24. Caviar

    The poor subsidising the rich.

    That is no different than negative gearing or any other tax break that the working poor cannot afford.

  25. Habib

    I’m a big fan of efficiency, if we throw communists out of helicopters onto roofs fitted with solar panels we fix two problems for one fuel load.

  26. David Bidstrup

    I wrote this a couple of weeks ago in response to the announcement of another useless power solution.

    A report on 8 February told of a plan to build a 44 MW solar system “to deliver more reliable power to the grid”. The cost would be $90 million.
    I have done some research into solar systems, so thought I would look at this proposal from a state wide power consumption viewpoint.
    Using AEMO numbers the daily average power consumption in SA for 2017 was 31,600 MWh.
    Using a solar calculator that takes information from stations that record Typical Meteorological Year (TMY) data on solar insolation, cloudiness, temperature and whatever, the 44 MW solar system might generate 69,800 MWh in a year.
    Averages are misleading and do not reflect the reality that solar system output declines significantly throughout the year as the sun angle changes in the sky. When the output is shown as monthly figures the picture becomes a bit clearer.
    In summer, (December, January and February) average daily output is 252 MWh. In autumn, (March, April, and May) it is 168. In winter, (June, July and August) it is 123 MWh and in spring, (September, October and November) it is 224 MWh.
    The table below shows the comparison between daily average consumption and the contribution from the solar farm. ( Table does not travel well in translation but you will get the drift with a bit of effort)
    Season: State average daily consumption MWh: Solar contribution MWh: Solar contribution as % of daily consumption
    Summer 31,806 252 0.79%
    Autumn 31,740 168 0.53%
    Winter 35,043 123 0.35%
    Spring 27,983 224 0.80%

    The output never gets to 1% of the daily consumption and when we consider the times that output is delivered it gets worse.
    In January the system operates for about 11 hours but output does not become significant until around 9 a.m. and declines after 3 p.m. 90% of the daily output is between those hours but is not a constant amount ramping up from 10% at 9 a.m., reaching 13% at 12 noon and declining to 9% at 3 p.m.
    In June nothing happens until 8 a.m. when output is 8%. It ramps up to 20% at noon and then falls off the cliff at 2 p.m.
    How this contribution gives “more reliable power to the grid” is beyond me. The proponents also promise a “21 MW battery” which is a nonsense statement – how long will that battery be able to supply energy (MWh)? Probably 5 minutes.
    People often confuse power and energy and think that “adding 44 MW” to the system means something rather than looking at things in the context of the contribution to consumption, (MWh). In this case, that contribution is negligible, variable, and intermittent and of no real use except for the proponents to garner renewable energy subsidies, without which there would be no business case.

    All renewable subsidies should be removed and the “market” overhauled to get rid of the stupid 5 minute bidding system that lets generators screw everyone royally.

  27. Habib

    That is no different than negative gearing or any other tax break that the working poor cannot afford. Why would people who not only pay no net tax, but generally are net tax recipients, recieve a tax break?

    Fuck off back to the ABC for some beulga for smoko, Albascreechy.

  28. RobK

    “That is no different than negative gearing or any other tax break that the working poor cannot afford.
    It’s very different.
    Neg gearing is simply deducting costs incured to generate revenue, as is normal business practice.
    Solar subsidies are derivied from coalfired generators who then pass it on to consumers. Nothing to do with tax but everything to do with others paying for someones investment both upfront and then on an on going basis through feed-in tariffs which are higher than market value.

  29. Caviar

    Why would people who not only pay no net tax, but generally are net tax recipients, recieve a tax break?

    Are you retarded? The average wage in Aus is 80k. 80k isn’t enough to buy a property in our major cities so the poor bastard earning 80k is paying 15k tax. Meanwhile dipshits on 200k end up writing off most of their tax on an investment property which then makes them more money.

  30. Caviar

    >Neg gearing is simply deducting costs incured to generate revenue, as is normal business practice.

    No, negative gearing is poorer taxpayers subsiding richer people who are using money they should be paying in tax to buy investment properties to make them more money. No different than poorer taxpayers subsiding solar panels

  31. Habib

    We’ve got a live one, a real life commie. Troops on 80K could buy a property, however they’d be pretty dumb to do so as they’re inflated price-wise about 3-5 times their actual value. If they have a couple of curtain tuggers, they pay no net tax whatsoever. And why should it be the business of the productive to support the failure/laziness of the idle? Solar panel subsidies are a grotesque market distortion only available to the well-heeled virtue-signaler, usually in public employ and thus the natural enemy of a “conservative” government; they not only should pull the plug on the scheme, but make recovery of slings retrospective.

    And any costs/losses should be able to be offset against earnings, accounting 1.01 for anyone besides ABC economists.

  32. old bloke

    RobK
    #2641338, posted on February 19, 2018 at 10:49 pm

    The uptake of solar over 10-15% of the local grid means more expenditure to stabilize the system. There are many hidden costs.

    Regarding the hidden costs….

    All of the transformers on the distribution network, those boxes on street corners or on poles, had to be replaced because of roof-top solar panels. The older transformers were built to cater for a one-way energy flow, from a generator somewhere to a consumer somewhere else. With the advent of roof-top solar panels, the distribution network had to be modified to cater for energy coming from multiple directions.

    How many hundreds of millions of dollars (or billions) have been spent on network upgrades so that someone’s solar panels can occasionally dribble a few amps onto the grid?

    Insanity built on insanity.

  33. Habib

    BTW, WTF gives you the right to decide how altruistic someone should be? Give away any amount you wish of your own beer vouchers to the feckless, feral and flatulent, keep your palsied paws out of my kick.

  34. Habib

    And if an investment property is making money, it becomes “positive geared” and taxable. ABC hacks must do economics at Patrice Lumumba U in Moscow.

  35. RobK

    No, negative gearing is poorer taxpayers subsiding richer people who are using money they should be paying in tax to buy investment properties to make them more money. 
    Gearing is only negative if returns dont cover outlay. By implication this means the renter isn’t meeting costs. The investor carries the risk of tennancy and value when investment is realized upon which any profit is heavily taxed under Capital Gains Tax.

  36. RobK

    Where as solar subsidies are a government mandated giveaway to a select few with no risk to the recipient and no benefit (only more costs) to the outside contributors.

  37. truth

    AEMO is schizophrenic in its views and statements on rooftop solar.

    Zibelman came to Australia gung ho to run Australia as a great ‘experiment’ in using demand management via residential and commercial rooftop solar to more than double the emissions cuts the Australian people had voted for…and IMO she must have been given the go-ahead for that slap in the eye to democracy by the Green mole squatting in the PMship..the one who takes advice only from the GreenLeft in his PMO … the office of the LW Chief Scientist Finkel…and Hillary’s pick for her DEMOCRAT admin[ she hoped].

    Zibelman’s now apparently been given open slather in her mission to destroy Australia’s future via LW AEMO.

    Even energy expert to the LEFT… Danny Price of Frontier Economics… describes Zibelman’s AEMO’s ‘audacious, public grab for power’..to ‘empire-build’…wants AEMO abolished..the NEM ditched…

    http://www.frontier-economics.com.au/documents/2018/02/danny-price-speech-aares-symposium-6-feb-2018.pdf

    ….but to be replaced by NEM 2.0…run by the States! And he wants a carbon tax and EIS which would KILL COAL…bring more intermittents with associated subsidies….more grid damage…more CHAOS!
    So Zibelman wants ever more rooftop solar with the power plant ‘homes’ herded into collectives to be managed and ‘orchestrated’ by Zibelman and AEMO….and she’s trying to sideline and neuter AEMC to get her way.

    BUT AEMO has made it public that failure by AEMO to control all this rooftop solar ‘could see AEMO lose its grip on grid control, starting within just five years’…that they have to start that process …to gain control…‘RIGHT NOW’…the AEMO spokesperson said.. ..

    ‘We don’t even really understand certain components of how these systems will respond, and neither do manufacturers’.

    If they don’t find a way to ‘turn down rooftop solar’ when necessary….’we can no longer run the grid within secure limits’.

    In a word –CHAOS…but still AEMO wants the rooftop solar build stepped up.

    Is there any way possible that those who paid ~$20K for rooftop solar plus batteries… hoping to be independent in their power source…..are not going to be just components of bristling power plant collectives where once were homes… handled 24/7…herded…coerced and in the end mandated… CONTROLLD by Zibelman…MUSK[ counting his loot] & AGL’s Vesey et al.

    http://reneweconomy.com.au/rooftop-solar-australias-greatest-opportunity-greatest-risk-86420/

    And then there are the special cybersecurity risks that come with rooftop solar….an as yet unsolved problem.

    Prices going down is a con IMO …and warmist behemoth Goldman Sachs admits prices are CERTAIN to rise with the NEG.

    How can prices for consumers go down when all the indications are that the huge firming costs that useless weather-dependent intermittents require to make them dispatchable won’t be paid for by the carpetbaggers-wind farms like Turnbull’s son’s INFIGEN assets…solar assets like those of Garnaut and Hewson….but by all of us ….as the firming costs are to be ‘smeared’ across all generator sources…with reliable dispatchable demonized COAL still the major generator source…powering almost ALL of Australia’s electricity generation….and almost all of the world’s for that matter.

    We know who will pay in the end for that extra impost on generation…and it’s sure as eggs not AGL and all the other generators , retailers and network entities …many of them and much of the Australian grid ….now being in the hands of the Communist Chinese government.

  38. Peter S

    I have to admit to being a rent seeker here. I installed a 4KW solar system about 5 years ago. The total cost was around $12500 but the solar certificate rebate brought the cost back to approximately $7500. The feed-in tariff was $0.33 per kwh. My retailer attempted some claw back by moving me to a time of use tariff, peak, shoulder and off-peak.

    My home is reasonably energy efficient. For 4 years I actually made a small “profit”, not paying a single bill. At the beginning of 2017 the feed-in tariff was dropped to $0.113 per kwh. This, combined with increasing supply charges, means my bill is now averaging around $40 per month, but still much less than an equivalent dweling without solar.

    I installed the system because I could afford it, I understood the subsidies, and I was curious to find out how much of a rort the system is. I have had many arguments with various water melons who simply can’t comprehend that it is a rort.

    The other enormous rort is the way retailers advertise their prices. They advertise % discounts, not actual kwh charges. The discover the real cost means doing a lot of digging. I would love to see them forced to advertise their charges instead competing on the size of their discounts.

  39. RobK

    OB,
    “All of the transformers on the distribution network, those boxes on street corners or on poles, had to be replaced because of roof-top solar panels.”
    Transformers would need to be upgraded to carry the greatly increased surges caused by uptake of domestic solar. On some days cloud cover and bright sunlight alternates every few minutes causing devastation to grid stability because current and voltage fluctuate along with the phase sift between them(power factor, P.F. or reactive power) which severely impacts transmission losses and the fault current discrimination of circuit trips. It all means the grid needs to become more complex and less robust or resilient…..but more expensive.

  40. Diogenes

    The other enormous rort is the way retailers advertise their prices. They advertise % discounts, not actual kwh charges. The discover the real cost means doing a lot of digging. I would love to see them forced to advertise their charges instead competing on the size of their discounts.

    I tried the product comparison sites to see the best deal. All did a “just hang on a sec” and 30 seconds later the phone rings with a rep telling the best deal on the basis of the discount. THEN I spent an unpleasant afternoon just trying to find the kwh rates for the big 6 suppliers and plugged in my actual usage, only to discover my current provider has the best deal (sigh) for my usage. The top 3 were within $10 a bill. The rest were within a $50 band.

  41. Diogenes

    The other enormous rort is the way retailers advertise their prices. They advertise % discounts, not actual kwh charges. The discover the real cost means doing a lot of digging. I would love to see them forced to advertise their charges instead competing on the size of their discounts.

    I tried the product comparison sites to see the best deal. All did a “just hang on a sec” and 30 seconds later the phone rings with a rep telling the best deal on the basis of the discount. THEN I spent an unpleasant afternoon just trying to find the kwh rates for the big 6 suppliers and plugged in my actual usage, only to discover my current provider has the best deal (sigh) for my usage. The top 3 were within $10 a bill. The rest were within a $50 band.

  42. Kneel

    “I tried the product comparison sites to see the best deal.”

    As an aside, why can I ask for a “green” supplier for my energy, but not a “fossil” supplier?
    Why, if I ask for only “green” energy, do I pay more for it, when:
    1) it’s cheaper (allegedly)
    2) they wont guarentee that all my power comes from renewables all the time
    Smells like a scam to me.

  43. John Constantine

    Chicom solar panels are negatively geared electricity.

    Only financial because of the loopholes the chicoms have paid to have written into Australian law.

    What a brilliant idea Julie Bishop.

  44. RobK

    Chicom solar panels are negatively geared electricity.
    No, they are much worse than that whilst subsidies exist.

  45. 132andBush

    No, negative gearing is poorer taxpayers subsiding richer people who are using money they should be paying in tax to buy investment properties to make them more money. No different than poorer taxpayers subsiding solar panels

    The envy is strong in this one.

  46. DD

    But feed in tariffs are income and so taxable income against which can be offset a proportion of solar depreciation. Then of course your home becomes a partial commercial investment and so will need to be valued for CGT on disposal. Just like Air B&B.

  47. Habib

    But feed in tariffs are income and so taxable income against which can be offset a proportion of solar depreciation. Then of course your home becomes a partial commercial investment and so will need to be valued for CGT on disposal. Just like Air B&B.

    Bet the rent-seekers didn’t think of that when they were copping a sling, I hope it is ruthlessly enforced.

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