Robbing Solar to Pay Power Retailers

The electricity pricing regulator in NSW has recently revealed that utilities are making windfall profits from the Solar Bonus Scheme. As the NSW government retrospectively robs one third of solar system owners’ promised entitlements, it is clear that electricity retailers are charging back to the customer at rates up to 40c/kWh of electricity that was freely generated from the sun.

The Independent Pricing and Regulatory Tribunal (IPART) recognise that utilities are making windfall profits from the Solar Bonus Scheme. “The Solar Bonus Scheme is currently structured so that [electricity] retailers receive a financial benefit,” IPART says. The organisation goes on to suggest that requiring the electricity retailers to pay back some of this financial benefit would reduce the “amount of funds … foregone by taxpayers”. This financial benefit arises because taxpayers fund the payments made to solar power generators, which means the solar electricity itself is provided to the retailers for free. The vast majority of the electrons generated by the solar power system then flow back into the house, only after electricity retailers record them, and charge the customer up to 40c/kWh.

The Australian PV Association (APVA) has revealed that IPART’s indented electricity price rises would deliver a further windfall profit to the utilities. IPART’s draft decision would allow electricity retailers to pass-on the cost of complying with the Small-scale Renewable Energy Scheme at a rate of $40 per certificate. However, Small-scale Technology Certificates can currently be purchased at $25 – a price low enough to enable vast windfall profits to accumulate in retailers’ pockets.

In its presentation to the Solar Summit, the NSW Office of Resources and Energy acknowledged utilities’ windfall profits and suggested that electricity retailers contribute to the costs of the Solar Bonus Scheme. Instead, the NSW government is attempting to short-change pensioners, baby boomers, and low-income households, while continuing the practise of serving up profits to electricity retailers at taxpayers’ and consumers’ expense.

Analysis by the University of NSW showed that most owners of solar power systems had household income of less than $70,000, and that the majority of recipients were over 60 years of age. Over 120,000 NSW households now own a solar power system, most of whom made an investment decision upon the basis of seven years of legislated entitlement of 60c/kWh for generated solar electricity. The government now seeks to cut by 40c/kWh entitlements of those most impacted by electricity price rises, while allowing electricity retailers to make windfall profits from taxpayer and electricity consumer alike.

Unfortunately, the flow-on effects of this action don’t stop there. By reneging on legislation, the government will undermine the public’s confidence in making any future purchase of a solar power system. This sets a dangerous precedent that will reverberate nationwide, and seriously threaten the ability of the solar power industry to home-deliver clean energy and protection from electricity price hikes. It also puts thousands of jobs at stake.

More broadly, this action undermines trust in governments nationally, especially as the lip service they pay the environment is underdone, and then undone. As Nigel Morris of Solar Business Services ponders, “Is every piece of legislation able to be thrown out on a whim? Will I potentially have to give my First Home Owners Grant back?”

It is no longer ironic that the NSW government threatens the entire solar power industry over a $41 annual impact upon electricity bills when it ignores windfall profits to utilities and subsidises the coal industry by $1 billion each year. It’s an outrage.

NSW Solar Chart

The figures above show the uptake of solar power systems in NSW by age group and household income level. They are taken from Bruce, A. W. (2009). Who Buys PV Systems? A survey of NSW PV Rebate recipients. Proceedings of Solar 09. Townsville: Australian and New Zealand Solar Energy Society.

NSW Chart

The figure above relates postcode-level installation data provided in mid 2010 to the Solar Bonus Scheme Statutory Review, correlated against individual taxable income levels at the 2006 census. It demonstrates that uptake has predominantly been in low-income areas.

This article first appeared at Climate Spectator.