While the national focus has been on a carbon tax, piecemeal Federal and State Government policies encouraging households to take up renewable energy have been overcooking parts of a cake that had only started to bake.
Two very different segments of the solar energy sector are now experiencing extreme turbulence because of well-meaning but flawed efforts by policymakers to push households into a greener future.
The household renewable energy industry is in flux. Over-generous State feed-in tariffs, an unstable rebate platform and the Federal Government’s “one size fits all” renewable energy certificate trading scheme are culprits.
There are important differences between renewable energy technologies like photovoltaic (PV) energy, or rooftop panels that feed into the grid, and solar hot water systems. Policy-makers did everyone a disservice by lumping them together.
PV panels can’t convert produce energy efficiently without lots of sunlight, and nor can the output be efficiently stored at the point of generation.
On the other hand, solar hot water systems store their output in an insulated tank for later use with little, if any, electricity drawn from the grid to move it around. Hot water typically makes up 25 percent of a household’s energy bill so there are attractions in systems that reduce electricity use efficiently.
Until recently, the fledgling solar hot water industry had been growing rapidly with a 61 percent increase in just three years.
A winding back of various rebates – including a Federal scheme seemingly because policymakers had bizarrely linked it to the disastrous home insulation scheme – has caused sales to fall by 40 percent.
Rebates that reward householders for feeding electricity back into the grid have also been reduced but the PV sector continues to boom.
State governments clearly made those feed-in tariffs overly generous and an unaffordable drain on the public purse. The most glaring example was the NSW scheme recently axed by the incoming O’Farrell government.
The ultimate intention of rebates was to abate CO2 production. PV does this - but not very efficiently.
The Grattan Institute think tank says the net cost of offsetting a tonne of carbon using PV is $200-300 per tonne. Solar hot water comes in at $30 a tonne or better.
The real acceleration in solar take-up was driven by the establishment of a trading market in renewable energy certificates (RECs) - and here’s where the real lesson lies.
RECs are created by a national regulator, using a multiplier tied to the efficiency of the system being installed. Householders generally allocate RECs to installers in return for discounts or extended payment terms.
Installers then assume the risk - and headaches - of trading RECs on a heavily regulated and bureaucratic market.
Last year, the Federal Government moved to annually set both a starting price for RECs and a target for how many would be created. It wanted to provide certainty to the industry but succeeded in one goal only: stimulating PV sales.
It set in train a cycle where, as the price of RECs increased, the cost of installations fell and sales soared. When the number of RECs available grew too fast, their value on the market fell.
The Government price for RECs this year was $40. Last time I looked, RECs for solar hot water were trading at $25.
The Government has stepped in to change these settings, and the Federal Budget signalled a winding down of the scheme. For many in the industry, however, it will be too little too late.
I’m hearing horror stories of PV installers finding themselves in a trading system that’s inflexible and bureaucratic to the point that it’s hard, if not impossible, to hedge against fluctuations in certificate values.
All this will change radically, if and when a carbon tax is introduced. Householders may be given cash or tax breaks to compensate their energy costs and persuade them to switch to renewable energy. Politics permitting, we will open an emissions trading market.
Before the Government throws out the baby with the solar-heated policy bathwater it needs to take a deep breath and more broadly consult people who get their hands dirty helping Australians go green.
Facebook Recommendations
Read all about it
Punch live
Up to the minute Twitter chatter
In my sports column on The Punch tomorrow: why Eurovision was easily the best game on the weekend. Mummy bloggers, you'll like this one!
Recent posts
The latest and greatest
Abbott’s crass logic: trash the Parliament in order save it
An email was sent to almost every politician in Australia this week saying that someone should cut off…
Our special forces don’t always need special treatment
We admire them, but we’re not entirely sure why. We allow them to operate in the shadows; we rarely…
A good holiday is about unrest, not rest
Like a fat full-stop, it lay in my hand. A small orange – not exactly fresh, but purchased anyway…
Nosebleed Section
choice ringside rantings
From: They must pay for one’s bitter disappointments
Michael S says:
"A teacher at Geelong Grammar had criticised her for using words that were too long, which had left her confused and had made her doubt her ability to write essays. She became ''quite distressed'' when her English marks began to fall." I can sympathise. My scholastic mentors conveyed to me a causal relationship… [read more]From: Welfare for breeders is a bonus for everyone
Change Up! says:
I have no problem paying my taxes. As a single, childless person on a very decent income, I can afford it and not have my life severely altered. Plus I understand that my taxes paying for things like schools, childcare and infrastructure is ultimately a good thing. A better community is better for me… [read more]Gentle jabs to the ribs
They must pay for one’s bitter disappointments
A private school girl’s family is sueing her elite, extremely expensive private school for not… Read more
Most commented