Grattan, missing the point on solar

Chaotic solar PV policy is overshadowed by the positive impact of the technology on the Australian energy market, energy expert Alan Pears says.

Mr Pears’ comments were in response to the Grattan Institute’s Sundown, Sunrise: How Australia can finally get solar power right report, released on Sunday.

The report, written by Tony Wood and David Blowers, argued that expensive and unfair subsidies of solar PV had cost the economy $9 billion.

“Worse, people who chose not to install solar, or could not afford it, have paid for the schemes through a subsidy to solar PV owners worth $14 billion,” a Grattan Institute press release reads.

“The schemes have reduced emissions, but at a very high price.”

The report urges state and federal governments to “avoid the mistakes of the past” by “setting charges that reflect the true cost of providing electricity”.

The document has been criticised for its emphasis on the cost of solar PV versus the benefits and for seeking to protect the vested interests of coal-dependent energy retailers.

Mr Pears told The Fifth Estate on Tuesday that it was true PV subsidies had been “overdone” as states competed with each other to offer more generous feed-in tariffs.

However, he said, generous subsidies had functioned as incentives to provoke dramatic cost reductions through economies of scale, accelerated technological advance and increased public confidence in the technology.

“PV has also put a lot of pressure on the electricity industry to finally start to shift towards fairer and more modern approaches,” Mr Pears said.

“It has also fundamentally changed national energy policy in some very positive ways.

“The value of these benefits may well exceed the waste in the design and execution of PV policy.”

Mr Pears said the costs of “chaotic” PV policy compared to other energy policies was cheap considering the beneficial outcomes.

“It probably could have been as effective with a lot less money,” he said.

“That would have required a very different political and policy context, though.”

Given severe uncertainty across the energy industry, investing in any project that has more than a few years payback was getting pretty risky, Professor Pears said.

“I suspect that one of geothermal’s problems is that it requires a big lump of capital upfront and then has some years of delay before it has any cash flow,” he said.

“Wind, PV, energy efficiency, batteries etcetera can be rolled out flexibly, to match trends, while they can get some cash flow very soon after the project starts.”

Mr Pears said analysis that focused on measuring average costs and benefits (such as the Grattan Institute report) would be “increasingly exposed as naïve”.

“Innovation targets niches where benefits are greater or customers place higher value on benefits or avoided problems,” he said.

“For example, I have always paid a premium to buy laptop computers for their portability – that’s the market where efficient flat screen displays and advanced power management evolved.

“So fringe of grid, businesses where storage or load shifting brings benefits, consumers with very peaky profiles etcetera will be cost-effective way before ‘average’ loads.”

He gave an example of some New Zealand researchers who had worked with a firm with a large refrigerated warehouse.

“Thermal storage, not electricity storage, was economic under today’s conditions. And, once the storage was installed, it made a decision to install PV much more attractive, as grid electricity demand and exports could be managed to optimise outcomes.”

Grattan: “Enthusiastic” solar crowd has misunderstood report

Speaking with The Fifth Estate, Grattan Institute Energy program director and report writer Tony Wood said people who were enthusiastic about solar energy had misunderstood the report as being critical of solar PV.

Instead, Mr Wood said, the report was a criticism of “dumb government” poorly regulating the solar industry.

He said, from an overall economic perspective, not just individual consumers, the subsidies given as incentives to the public to buy solar had not benefited the economy.

“If you put PV on your roof, you get paid an amount of money for every unit of electricity that you produce,” he said.

“The government doesn’t provide that subsidy. The energy retailers pay it to you and that cost is spread across all the customers.”

Therefore, he said, those who do not have solar on their roof are paying for the ones that do.

The solution to this situation, Mr Wood said, was for government to create a policy that delivered low-cost reliable electricity.

“We’ve got to get those tariffs correct, and not repeat mistakes of the past by penalising one part of the community,” Mr Wood said.

“The way you do that is you attack that problem head on. This (federal) government is not yet addressing climate change in way it should, that’s absolutely clear.

“In getting the tariffs on electricity usage right, customers should be charged for electricity use on a volume basis. In otherwords electricity should be more expensive at peak use times.”

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  1. Working as an architect or just walking down my street I can tell the Grattan Institute that people are voting with their feet and putting up solar panels regardless of the cost. Because they know it is logical and do not trust the Federal government or the utilities on this issue. It has been shown many times that solar reduces infrastructure costs and results in a reduction in the real wholesale price of power. It is the utilities that have been benefiting from infrastructure subsidies above the real cost. Time for the think tanks to get their heads into the present and believe the logic of the actual market who want to buy solar power. Perhaps they know that and want to make sure who is doing the selling.

  2. Agree Alan, also, haven’t read the report, but it sounds as though, in criticising the energy retailers for subsidising solar Grattan may have also ignorred the infrastructure cost savings from reduced demand on the grid which I think should quite easily pay for any apparent subsidy – especially over time.

  3. Well if you don’t want something to happen. You would certainly miss the point

    We don’t need their permission. We can do it without them and that is what Urban Integration Working Group is doing.

  4. The report urges state and federal governments to “avoid the mistakes of the past” by “setting charges that reflect the true cost of providing electricity”
    What a good idea as long as we do it across the board…