En Passant

Here in Canberra the Independent Competition and Regulatory Commission has exposed the ACT Government’s subsidies to solar roof panel owners as both regressive and extremely costly. In a draft report the ICRC recommends reducing the present bloated subsidy from 50.5 cents per kWh generated to 37 cents.

Even at this reduced price, the subsidy is still almost three times the normal purchase rate.

In analysing the benefits the report says that ‘the payback period for an investor in a 1.5 kW system at the current premium rate is currently around seven years, and the overall nominal rate of return on the investment is 13% per annum.’

If the Tax Office holds to its incorrect view that the amounts received are not income then the real rate of return before tax is over 20 percent (assuming an effective marginal tax rate of 40 per cent).

On top of that the value if any the solar panels add to a person’s home will be free of capital gains tax.

The ICRC also points out that on the Stanhope Labor Government’s own figures the cost of abatement if the scheme is extended to larger businesses will between $195 and $434 per tonne. It notes that the Federal Government’s Carbon Pollution Reduction Scheme is based on a cost of $23 per tone.

To show you what a rort this scheme is the Commission says that it would be cheaper to buy Green Energy from the suppliers because their abatement cost is only about $70 per tonne.

One worst case scenario, according to The Canberra Times, from the Government’s own figures, is that electricity bills could rise $300 to cover the feed-in-tariff.

In a report in the Australian Financial Review (‘Solar panel benefit is largely hot air’ February 6-7  page 5) John Breusch quotes Muriel Watt, the head of the Australian PV Association as stating that ‘it now costs 20c to 40c a kilowatt hour to produce electricity using solar panels, compared to 5c to 10 c for wind turbines.’ So we are subsidising a type of renewable energy that is up to four times more expensive than wind power.  Go figure.

Who benefits from these costly subsidies?

Individuals and small businesses who can afford to pay $10,000 to $15,000 for solar panels for up to 1.5 kWs. 

The scheme currently allows for subsidies to go to installations of up to 30 kWs. The cost of these is beyond the average purchaser and roof size and the rates of return are small at this stage.

However the ACT Government  is considering extending the scheme to subsidise larger businesses who do put panels on their roofs.

Given the large start up costs and the low rate of return to businesses as a consequence at the moment – somewhere around 3 percent according to the ICRC – the pressure will be on the local Government to increase the subsidy, not reduce it as the ICRC has recommended.

The New South Wales’ Government scheme is more generous at 60 cents per kWh generated and I suspect that the Minister, Simon Corbell, will be tempted to throw more of our money down the drain (this time to big business) by increasing the subsidy, not reducing it. 

The current feed-in-tariff arrangements are based on two bourgeois ‘principles’ evident in all of the debates on climate change - profit is sacrosanct and workers, not bosses, should pay for climate change.

The feed-in tariff is an individualistic warm middle class inner glow response to a systemic problem. It won’t work.

It is regressive. It is extremely costly, and the cost is borne by working people.

Instead of rewarding the well-off and playing the politics of sanctimony, Mr Corbell should come up with a scheme that penalises the real polluters – those businesses who make profit out of polluting – and is a collective response to climate change.  

Taxing the rich in the ACT to fund large scale renewable energy projects and to buy green energy instead of slugging ordinary workers would be a good first step.