Much has been made of the solar rebate scrapping yesterday, such as my article with the far more talented mind of Tim Colebatch Much has been made of the solar rebate scrapping yesterday, such as my article with the far more talented mind of Tim Colebatch here.
This is a very hard one to call. Many green fingers have been wagged at Garrett, but the announcement was made along side Wong and Swan (and in fact Garrett seems like he was a last minute add-in).
A friend of mine from the Environment Department reading of the scheme is that the $8000 was simply to costly for the government to continue. Our article outlined the huge uptake in the rebate, which, even after a means test of $100 000 was implemented in this year’s budget. The conventional wisdom, or joke, among Labor circles is that by implementing the means test it actually drew people’s attention to the rebate.
Our article shows there has also been a substantial council program in which they have been organising groups of house and small business and buying panels at bulk prices, then claiming the rebate, meaning households pay much less for solar.
It is a brilliantly clever scheme for the councils, good for houses and good for the environment (Garrett was yesterday boasting that in 18 months of Labor government solar panels on house have doubled from 30,000 to 60,000), but bad, very bad, for the government’s bottom line.
The problem is, as outlined by my department friend, is that politically it is a bad move to remove any type of rebate. The Government and Garrett took enough of a hit on the means test decision that it didn’t want to raise the ire of the solar industry, green groups and electorate again.
This is the middle road, a market based scheme (for more detail read our article) which taps into an already operating process in which electricity companies pay for Renewable energy certificates (or RECS) upfront from a consumer. RECs are given to a household with solar panels based on how much energy they generate per hour (which varies based on your geographical location).
The scheme creates a monetary value on green energy in the market, sort of like a feed-in-tariff but with a market determined price (the average cost of a REC is $26-46, with RECs in Melbourne being at $42). The price fluctuates on a general supply and demand principal, RECS two years ago bottomed out to $12.
What the government is doing is offering five times the RECS to households (which scales down to two in 2015).
Will a sudden influx of more RECs into the market mean the price crashes? That is the argument of the Greens/Alternative Technology Association and remains to be seen. It depends how highly green energy is valued in the market, and even with a compromised carbon trading scheme, it is likely green energy will rise in value at least in the medium-term.
Will increased RECs in the system create an artificial impression of how much renewable energy is being generate. Maybe, but it will only be short term as the multiplier tracks down by 2015 and the market should correct itself.
If you earn under $100,000 it is very true you will be much worse off buying solar panels, but those over $100,000 will now get some money, and those over $100,000 tend to be worse power consumers. In saying that the rebate means test has only been around since the budget, and before that it was available to all and sundry.
In the long term the extra money will be turned off as the multiplier decreases. The ultimate question, and this is the question of the solar industry, is that once that happens will solar be able to stack up with base power such as coal with the inducement to consumers?
This probably isn’t a bad first step, but there are many more harder ones that have to be taken along the road.
