Cost of household solar has outweighed benefits

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May 25, 2015

Report on solar power puts the capital cost of household systems at $18 billion, with benefits of $9 billion.

The cost of installing and maintaining more than one million household solar power systems has outweighed their benefit by more than $9 billion, a new report has found.

And by the time generous federal and state government subsidies run out, households without solar will have subsidised those that have made the switch to the tune of $14 billion.

The Grattan Institute report, to be published Monday, says government incentives and rebates that have encouraged the uptake of household solar have “created a policy mess that should never be repeated”.

It argues Australia could have reduced greenhouse gas emissions for much less money if governments had focused more on commercial and large-scale solar power, instead of household subsidies.

“We’ve got the highest percentage of households in the world [with solar PV] because we’ve targeted our subsidies at households whereas other countries targeted the commercial sector,” Grattan Institute energy program chief Tony Wood said.

“We’d be better off if that was where we were going.”

The report calculates that the capital cost of installing and maintaining household solar systems since 2009 has been $18 billion, while their benefit in terms of greenhouse gas abatement and reduced conventional electricity generation has been $9 billion.

The institute says Australia’s 1.4 million solar systems have achieved less than 10 per cent of the abatement required to meet Australia’s 2020 emissions reduction target of 5 per cent on 2000 levels.

The report finds that households that have installed rooftop solar have still benefited greatly in financial terms “because the incentives offered by state and federal governments have made an uneconomic decision financially viable.”

It predicts it will soon become viable for households to install solar without government subsidies as the cost of panels falls and battery storage from companies like Tesla becomes more widely available in future.

Households with solar have also benefited from the fixed structure of electricity tariffs the report says, which has resulted in homes that don’t have solar power effectively subsidising network use by those that do.

It recommends an overhaul of electricity tariffs to a system that includes demand-based pricing – meaning customers would pay more at peak times.

Likewise, it suggests a similar “cost-reflective” system for feed-in tariffs paid to households with solar for energy they export to the grid.

Mr Wood says the institute’s review did not mean the Abbott government should move to scale back the small scale solar scheme – which it has promised to preserve after its review of Australia’s renewable energy target.

“We’ve got it now and we should just let it run through to its completion,” he said.

“Don’t continue it beyond 2020. Don’t replace it with anything else.”

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