Solar rebate plan too successful for own good

Feature

Last week, the Federal Government announced the early and sudden termination of solar rebates under its incredibly successful Solar Homes and Communities Plan. “Unprecedented growth has resulted in early closure of this program,” reads the Department of the Environment, Water, Heritage and the Arts website.

The plan, which offered rebates of up to $8,000 on the installation of solar power systems, became so popular (and such a drain on Government coffers) that it was closed without warning on June 9, prompting an angry response from solar energy system suppliers.

Charts showing systems installed under the plan each month between January 2007 and May 2009 illustrate the dramatic increase in uptake in 2009 (the $8,000 subsidy was first introduced in November 2007).

The Government clearly did not anticipate the spike in demand that prompted it to prematurely terminate direct rebates. Installed solar systems in May alone could have cost taxpayers up to $45 million in subsidies, almost a third of the original budget allocated for five years of the program.

That doesn’t account for applications. More than 60,000 further pre-approved installations will be completed over the next 12 months. Installed capacity of just over 40 megawatts achieved under the Solar Homes plan by May 2009, can be expected to roughly triple when outstanding installations are completed.

Over the course of what will eventually become a ten-year plus program, the total actual watts of solar power generation capacity installed will only match about 35% of the power a single modern coal-fired power plant is capable of generating.

On a watt-for-dollar basis, rough estimates of the Government’s maximum subsidy liability do not compare all that favourably with the cost of construction of a coal-fired power plant either. However, the gap between these figures isn’t too big and the value of installed solar systems that continue to provide free and clean energy into the future shouldn’t be underestimated.

What the Government can’t recoup financially from this investment (as it might through profits from the construction of centralized renewable power generation facilities by charging for electricity), it must hope to make up for in carbon emissions reduction benefits and stimulus to the renewable energy industry.

As a carbon pollution reduction measure, the Solar Homes rebates have proven too expensive in the short term and, in the case of industry stimulus, their sudden termination could have the opposite effect - disrupting the solar industry’s growth - if critics among the Greens, Opposition and industry are proven right.

Flat rebates have now been replaced with a scheme that promises a “Solar Credits” discount, the value of which will be determined under new Renewable Energy Target legislation. The Solar Credits discounts could still be substantial (as explained in the Government’s fact sheet), but may not provide the same immediate incentive to purchase.

While solar energy system providers will continue to be busy with installations this year, they may have to brace for a slump in new business as everyone trys to understand a more complicated subsidy system and the price of Renewable Energy Certificates is established.

posted by seamas on June 15, 2009 at 9:35 pm · filed under