Solar hopes up in smoke

• Melissa Fyfe
• Sunday Age, October 5, 2008
• http://www.theage.com.au/opinion/solar-hopes-up-in-smoke-20081004-4twd.html?page=-1

JOHN POPPINS has many investments, but his proudest sits on his roof. The retired engineer has $30,000 worth of solar panels on his Mount Waverley home, a personal power station that covers all his home energy needs and then some. He's not, he says, a guy who likes to "put his hand out". But it's people like Poppins who, you might think, deserve some payment for the excess clean electricity they feed back into the community.

Sadly, under the State Government's new solar plan, coming soon to Parliament, Poppins will get zip. The half-baked incentive will give nothing to people who have more than two kilowatts on their roof. This is an odd cut-off when you realise that it takes 2.5 to three kilowatts to cover the basic needs of an energy-efficient home.

Earlier this year, a group of 40 community and green groups, businesses, unions and councils thought they were on the brink of something special. They were lobbying Spring Street for a scheme under which people would be paid for the power produced by their solar panels. This happens in more than 40 nations and some Australian states, and it is called a feed-in tariff.

The basic premise is that, despite rebates and growing concern over global warming, solar panels largely remain the roof furnishings of the wealthy and extremely motivated planet-savers. For the industry to flourish, solar panels need to be an attractive long-term investment, not just a feel-good purchase.

If people were offered a guaranteed payment for their solar electricity — locked in, say, for 15 years — the numbers would start to look better. As more people buy solar panels, the price would come down, and more people would put them on their roofs. A vibrant solar industry in Victoria would start to take shape.

The upside doesn't end there. Victoria's electricity system is centralised. The brown-coal generators chug away in Gippsland and we get power in Melbourne through a series of expensive and inefficient poles and wires. Producing power closer to where it is used saves on structural costs and eases demand for more power stations. But one of the most attractive benefits of solar is that it produces the most electricity in the same period the state's energy supply is pushed to the brink: on hot summer days.

The group lobbying for a feed-in tariff argued that it should be a gross model: people would be paid for the spare power they exported to the grid and what they used in the home. The reason is that most systems are not big enough to cover the energy needs of the home and export to the grid, so just paying for the excess energy would provide little extra incentive. The gross model is also the most successful and common tariff paid internationally.

The lobbyists were getting good signals from the Government and thought their preferred version was over the line. What they didn't count on was State Energy Minister Peter Batchelor, who thought the scheme too generous and costly. In cabinet, Batchelor went head to head with Environment Minister Gavin Jennings and won.

Batchelor's version goes something like this: householders get 60 cents a kilowatt hour — which is generous compared with the 17 cents we pay on electricity bills — but only for the energy exported to the grid. This is called a net feed-in tariff. Batchelor also excluded community groups and businesses from the scheme and limited it to 2 kilowatts.

The Government argues this is "green and fair". They reject the gross model as too expensive for households because, and here's the big catch, other electricity users must pay more on their bills. One of Batchelor's advisers produced a spreadsheet of rough calculations that claimed the scheme would add $100 a year to the average bill.

But the Government failed to point out that the $100 figure, if true, would be at the height of the scheme — in 10 to 13 years' time — and is meaningless unless you also factor in the rise in average incomes over that time. The cost was also inflated because Batchelor's people exaggerated the solar capacity in Victoria and included none of the other benefits to the power system (admittedly these are difficult to calculate) or the retail value of the solar electricity itself.

The group lobbying for a gross feed-in tariff calculated that an ambitious scheme aiming for 250 megawatts of solar in 15 years' time — the Government's plan aims for 100 megawatts, Victoria now has 2.5 megawatts — would cost an average $9.43 a year (low-income families would be excluded). Perhaps the truth is somewhere in the middle.

The reality is that any bill increase from a solar tariff will continue to be dwarfed by energy price hikes: partly because of an emissions trading scheme and partly because of drought, peak capacity problems and planned infrastructure upgrades.

Another reason the Government rejects the gross model is because it believes paying people for their electricity use in the home will encourage them to use more power and not export it to the grid. But who would bother buying solar panels so they can run around their home guzzling energy with gay abandon? The Government also points to its renewable energy target as a better way to deliver cuts in greenhouse emissions, even though it knows solar competes poorly with wind power under the scheme.

The basic problem with the Government's plan is that you'll only make money on solar panels if you pack up the kids and go on holiday. A net feed-in tariff discriminates against those who use energy throughout the day: stay-at-home parents, the sick and the elderly. And the decision not to include business and community groups is bizarre. A net tariff would favour community buildings — surf clubs, scout groups — which are unoccupied for large periods of time. Why not share the love? Also, under a net scheme, the person selling you solar panels cannot tell you how many years it will take to pay them off: it depends on when you are home, its efficiency and your energy use. Under a gross model, the calculation is simple.

This is a great chance for a much-needed boost to John Brumby's green credentials. It wasn't his fault that the status quo-loving pointy heads in Batchelor's office and department provided him with advice that was overblown at best and dishonest at worst. With a truly generous and ambitious incentive, Victoria would be the solar hub of Australia within 15 years. Thousands of green jobs would be created. Our energy system would be less strained, more devolved, more secure. And, importantly, cleaner. Now that would be a shining legacy.

Melissa Fyfe is The Sunday Age's state politics reporter.