Sudden cut in Queensland FiT

© Rolf Disch

The solar industry in Queensland, Australia faces a shake-up this month. On 25 June Energy Minister Mark McArdle announced the government’s decision to slash the feed-in tariff (FiT) under its Solar Bonus Scheme by 80 per cent, to AUD $0.08 per kWh. The tariff is set to be reviewed on 1 July 2013 and 1 July 2014. Businesses and the public have been given ten business days’ notice before the new rate takes effect on 10 July 2012. Those already connected or who apply before the deadline will continue to receive the old rate.

This decision by Premier Campbell Newman, three months after  taking office, is seen by some as reneging on a pre-election commitment to “retain the solar feed-in tariff.” The reason cited by the government Office of Clean Energy is to “protect Queenslanders from significant power bill increases” due to “rising future costs”. McArdle claims models show that the previous FiT rate would impose a cost of $54 per household by 2014/2015.

There seems, however, to be disagreement on how much the former FiT scheme would have cost electricity consumers: Australian Energy Market Operator (AEMO) estimated last year that the FiT added only $0.00013 per kWh to consumers’ electricity bills. Furthermore, Australian Energy Market Commission (AEMC) forecast in November 2011 that the FiT would account for a mere 0.2 per cent of the electricity price increase from 2011 to 2014, or 0.85 per cent of the residential electricity price in 2013/2014.

Since the Solar Bonus Scheme began in 2008, over 100,000 new systems and 900 new installers have been introduced. Former Energy Minister Stephen Robertson said that the FiT has not only reduced CO2 emissions but also provided residents with affordable access to solar energy as well as created 11,000 green jobs.

For FiT schemes to succeed, predictability is required. The World Future Council recommends FiT law to include short-term, automatic revisions for reductions by a certain percentage every year for new renewable energy plants coming into the FIT system (so-called “tariff degression”). This way, efficiency gains of a given technology are anticipated and, at the same time, an additional incentive is provided for technology learning and cost reduction in the renewable electricity industry.

The Clean Energy Council cites an industry analysis estimate that 4,500 jobs would be lost as a result of this cut and fears “a serious negative impact on an industry that has been delivering major economic benefits to the state.” Queensland Greens says the decision will create “uncertainty and service delivery problems for small businesses installing solar panels.”

The success of a feed-in tariff depends on, among other things, a secure renewable energy investment environment which is created by clear government commitments to allow long-term planning by producers. Cuts in recent months in Germany have already had adverse effects on PV companies; for example, Q-cell has declared bankruptcy as a result. The importance of a stable environment for investment in solar and other renewable energies cannot be overstated. The decision by the Queensland state government to drastically and suddenly cut its FiT risks creating a volatile boom and bust cycle in the solar sector.

Wednesday, July 4th, 2012