Solar panels and inequity
Posted by John, January 17th, 2010 - under Australian Tax Office, Carbon Pollution Reduction Scheme, Carbon tax, Climate change, Equity, Income tax, Solar panels.
Subsidies for individual solar panel electricity generation are a dumb idea. High feed in tariffs actually impose a burden on poor and working class electricity users and benefit those well enough off to pay $23,000 or thereabouts for solar panels on their roofs.
In addition the Rudd Labor Government’s former rebate scheme reimbursed the solar panel owners up to $8000 for their initial set up costs.
The State and Territory Governments in Australia are rushing to purchase electricity generated from these solar panels at exorbitant rates.
In Canberra the rate for example is about four times the normal purchase price.
These feed in tariffs encourages the well off to invest in solar panels. Surely that is a good thing?
Not really. Who pays for this subsidy?
In Canberra, and other States, it will be electricity consumers through higher prices. No matter how much compensation is given to poor consumers it won’t address the price increase needed to pay the well off four times the normal rate for the electricity their panels generate.
And for the vast majority of middle income earners, there will be no compensation for the price increase to cover the subsidy.
This largesse for the well off comes at a time when the ACT Labor Government is trying to limit their own public servants to a 1.5 percent pay increase. The increased electricity charges alone will most likely eat up that pitiful amount.
Not only does the subsidised electricity purchase price make the poor and working class pay for climate change rather than the polluters, it individualises the response to climate change.
It is based on the idea that consumption, not production, is the problem and that individual electricity producers can be part of the solution. Yet solar panels on our roofs are inefficient compared to large scale solar farms.
Governments serious about addressing climate change would re-direct the subsidy, plus much more money, into large scale renewable energy now – solar, wind, tidal, geothermal.
They don’t do that in any significant way because, despite all the protestations to the contrary, neoliberalism and the ideology of the market have captured them.
The subsidised price for solar panel electricity is but the flip side of that other market subsidy system, the Rudd Labor Government’s Carbon Pollution Reduction Scheme. The CPRS gives billions in subsidies to the polluters.
The tax system can sometimes be some sort of mechanism for income redistribution under capitalism (although it doesn’t address the fundamental inequity – the fact that workers create wealth and the bosses expropriate it.)
Thus a carbon tax on the polluters, with rigorous price controls to prevent price increases based on the impact of the tax, could be one component of action to address climate change. The revenue could fund a visionary and realistic renewable energy program.
Of course that won’t happen because it is a direct attack on the profits of the polluters, something neither Labor nor the Liberals are prepared to do. In their world view profit is sacrosanct.
So how does our income tax system in all its equitable magnificence treat the payments for solar panel generated income? Here surely is some sort of claw back of the massive benefits going to those who can afford solar panels on their roofs.
As a former tax officer, any payment immediately raises my interest.
Such payment is in my view clearly income. You invest $23,000 and get a guaranteed price over the next 20 years in the ACT, a price which when paid for electricity your panels generate is income.
It’s a bit like buying a rental property or plonking the money in the bank. The rent or interest are income. So too are the returns on your solar panel investment. They should be taxed accordingly.
Yet in some private rulings the Australian Tax Office has evidently said that because the solar panel owner has not intention to make a profit the receipt is not income.
This is wrong. Intention is irrelevant in income from property.
Otherwise rental income wouldn’t be taxable and most importantly negative gearing (where the interest and other costs outweigh the rent and so produce a tax loss) wouldn’t be allowed.
At the moment well off solar panel owners are getting benefits from two sources – a subsidy from State and Territory governments paid for by working Australians and the non-taxation of those benefits through incorrect administrative practice by the ATO. (I’ll leave aside possible capital gains tax concessions.)
The States and Territories will continue their high feed in tariff practices. The ATO however can change its incorrect administrative practices and tax the solar panel electricity payments.
Whatever happens, you can be sure the bosses and their governments will try to force the working class to pay for their pollution system.
Readers might also like to look at Stop work to stop the bosses’ war on the environment.
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Comments
Comment from John
Time January 17, 2010 at 8:54 pm
Dave, the ACT scheme is based on payments for the gross amount of electricity generated, not the nett amount after substracting consumption.
I understand the NSW scheme from 1 January is similar. Net schemes put pressure on consumers, reinforcing the idea that CO2 emissions are their fault. They are also less effective in promoting panel use.
In any event, I would have thought a solar panel or panels gives the landlord the opportunity to increase the rent and recoup the capital costs and possibly the net benefit flowing to tenants.
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Time January 17, 2010 at 9:11 pm
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Comment from Auntie Rhoberta
Time January 18, 2010 at 7:29 am
One small point — solar farms are only one ‘efficient’ alternative; the state might also supply solar panels (or maybe passive solar retrofits) for individual buildings (domestic, industrial, commercial or whatever), planned & funded centrally.
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Comment from Michael Cranny
Time January 18, 2010 at 12:00 pm
Blacktown City in Western Sydney has had a high take up of Solar Panels by the City battlers. Lower income households have been quick to realise the benefit of a gross feed in tarrif will largely eliminate the huge price hikes planned for electricity charges in 2010.
Solar panel technology is moving ahead very fast thanks to the support for the industry, producing better cost benefit for government and allowing less generous subsidy support in future.
Of course massive support is also required for geothermal, solar thermal and wind to give a kick start up to achieve a national replacement of coal generation.
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Comment from makofski
Time January 18, 2010 at 6:40 pm
Some issues are bigger than Marxist ideology – climate change is certainly one. If every home roof was in fact its own little power station (and there are a lot of roofs in Australia absorbing a lot of rays from the sun) we would be well on the way to reducing carbon emissions. As far as who pays? Ultimately we will all pay if climate change makes life less sustainable and more costly in every respect. I suggest that a wider view is the only view. We need every available solar generator – small and large. And of course roof top solar panels are empowering – rather than relying on government we can all make a contribution.
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Comment from Ben Courtice
Time January 19, 2010 at 9:45 am
Your comments are very sharp. However, your first sentence is probably a bit off the mark: some individual solar panel capacity is a good idea. It’s at the point of use, there’s no loss of power in distance transmission, etc. But the issues surrounding equity are worth bearing in mind. More importantly, as you touch on, this scheme lets rich Green-thinking voters placate their climate fears by installing a panel on their roof, which may make them feel better but is pretty pointless without large scale renewable energy generation e.g. wind and solar thermal. And as I have pointed out at http://bccwords.blogspot.com/2009/11/rudds-policy-not-delivering-renewables.html the current government policy is undermining plans for large-scale solar and wind plants. However, not all feed-in tarriffs need hit the poor or subsidise individualism: an industrial scale tarriff, while still a capitalist measure, would at least allow some larger scale renewables to go ahead. I don’t want to pretend that this fixes everything (they have it in Germany, yet still burn coal); but it seems a reform worth supporting if the policy is designed in such a way that low income households are protected or subsidised for the higher cost that will fall on energy bills. Interested to know what you think.
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Comment from John
Time January 19, 2010 at 8:51 pm
Ben, my understanding is that the electricity is actually fed back into the system, through an inverter. So there are transmission issues (but not great distances), and also possible system problems if the inverter is not adequate or deteriorates.
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Time January 20, 2010 at 8:52 am
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Comment from John
Time January 21, 2010 at 10:48 pm
Ben, thanks for your comments. I was thinking some more about the ACT scheme. It evidently gives the benefits to the occupants, not the owner.
So students in a rental property with solar panels will get the money. (I have to check this).
But if as I argue this is income, what does it do to their Youth Allowance entitlement?
Similarly with pensioners, and if the Public Housing people put panels on their roofs, Centrelink money trouble. On top of that the landlord will increase the rent to cover the expenditure and lost revenue stream. Double trouble.
Comment from Dave Bath
Time January 17, 2010 at 7:54 pm
While for owner-occupiers there would be some incentive of a decent pricing structure for net electricity fed back into the grid (Germany has a achieved a lot here), it may be justifiable to subsidize installation of solar panels by landlords, which would decrease the net energy expenses of renters, providing those solar panels were large and efficient enough to make a reasonable difference to the energy costs of renters.
Similar considerations would apply to energy/water efficiency improvements to rental accomodation.