Chapter 3
Planning for the future
Rebates
3.1
The Coalition believes that rebates play an important role in developing
industry capacity. The rebate of $8 per watt under the Howard government
clearly achieved this objective by encouraging PV uptake among Australians,
resulting in strong growth:
The increase in
the solar rebate to a maximum of $8000 per household... in the 2007 Federal
Budget saw the domestic solar industry literally take off in
spectacular
fashion. For the first time, along with an increased and growing public
awareness of the environmental virtues of solar electricity, it allowed many
more households to access solar for as little as a $5000 outlay, not much more
than a credit card payment for most.[1]
3.2
The availability of a maximum $8000 rebate has not only sparked growth
in consumer interest in the installation of PV systems and begun building a
larger industry with greater capacity to deliver environmental outcomes for
Australia, but has also helped to reduce the price of PV units and sparked a
new interest in bulk purchases to install units for a smaller cost. For
example, the Queensland Government recently tendered to solar installers to
supply 1000 1kW PV systems for $8185 – a total cost of $185 to households
qualifying for the rebate.[2]
3.3
The Queensland Government Scheme, along with other bulk purchases,
provides a stark example of why the introduction of the means test was the
worst possible policy that the Rudd Government could have introduced. The means
test limits the market to households with smaller incomes who install the
smallest system available for the maximum rebate, resulting in 'less bang for
the buck'. As a direct result of the means test taxpayers are now paying more
per watt of renewable energy generated than was previously the case.
3.4
The Committee received evidence from numerous households with a taxable
income of over $100,000 who were prepared to install bigger systems using the
$8000 rebate as an offset to costs, rather than simply using the rebate to pay
for a system in its entirety:
The initial cost of $8500 less rebate meant a cost to me of
$500, and also being an electrician, this offer was too good to refuse. So we
drew on our mortgage and paid in full for a 1.5kW solar system.
(emphasis added)[3]
I was prepared to spend $15,000 to install the PV cells on my
house but without the rebate this will blow out to $23,000, which when added to
a mortgage with an interest rate of nearly 10%... is now not feasible.[4]
3.5
Numerous witnesses to the inquiry suggested alternatives, such as a higher
means test, a tapering of the means test or a restructure or the rate of rebate
to encourage the installation of larger systems. All witnesses, except the
government, opposed the means test in its current form.
3.6
The Coalition opposes the means test outright. It confuses a policy
directed at achieving environmental outcomes with a social justice policy. If
there were to be any change to the rebate system it should be one that
encourages the generation of more renewable energy, not less. Those with strong
environmental concerns who are willing contribute more money to reduce their
carbon footprint should be encouraged, not punished.
3.7
For example, Mr Andrew Bailey, who does not qualify for the rebate,
noted that when he would have been prepared to contribute more of his own funds
towards PV - 'I would have looked at 50 per cent of the rebate cost. I would
have gone to $4000'.[5]
With no access to a rebate, Mr Bailey will not proceed with the installation of
PV at his residence.
3.8
The provision of the rebate also requires longer term certainty. The
Howard Government guaranteed the solar industry five years of funding for the
$8000 rebate (free of any means test) and with a Prime Ministerial assurance
that more funds would be made available to meet any increased demand. The Rudd
Government has not only introduced a means test, but wound the five year
program back to three and has even failed to give industry a clear assurance
that all applications received this year will be funded. Their actions have
sparked panic in the market and extreme uncertainty in the solar industry.
Recommendation 2
3.9
Coalition Senators recommend the Rudd Government reverse the means test
and provide certainty to industry with ongoing funding of the rebate for the
next five years.
Renewable Energy Certificates
3.10
Renewable Energy Certificates or RECs provide additional support to the
installation of photovoltaic systems as well as solar water heaters. RECs are
provided as part of the Mandatory Renewable Energy Target and are usually sold
to offset the cost of installation. The Committee heard evidence about the
importance of RECs for both PV systems and solar hot water:
Primarily I can speak from a hot water perspective, if we did
not have the RECs I would say I would be out of business in a minute.
Obviously, particularly for those people who do not qualify for rebates, the
RECs are the only contribution they get. A typical (hot water) system is about
$4,000 and RECs generally provide another $1,000 back, so it reduces the cost
by about 25 per cent.[6]
3.11
RECs generated by PV systems, especially larger systems, are of even
greater value, providing another means to offset the high upfront cost of
installation. Coalition Senators and the solar industry were concerned to learn
during the course of the inquiry that the future application of RECs to this
sector was also at risk:
Treatment of solar water heaters under the expanded national RET
scheme will have implications for the cost of the scheme, the liquidity of the
RECs market, the technology mix and the amount of electricity generated by
renewables in 2020. Stakeholders views are sought on the treatment of renewable
energy sources and technologies, including the treatment of biomass and solar
water heaters.[7]
3.12
The shadow cast over the future application of RECs to the solar
industry, coming on top of the means testing of the rebate, has caused further
anxiety and unnecessary business uncertainty. Coalition Senators urge the
Government to remove this uncertainty immediately and confirm the continued
availability of RECs for solar water heaters and photovoltaic systems.
Feed-in-Tariffs[8]
3.13
The Coalition recognises the potential of gross feed-in-tariffs to
provide a medium term payback period that encourages private sector investment
in PV systems and, therefore, certainty for the solar industry over the medium
term.
3.14
A gross feed-in-tariff system has received expert support from witnesses
to this inquiry, with many citing the German feed-in-tariff model[9]
and others as ideals for Australia to strive towards because 'they provide long
term certainty'.[10]
3.15
Professor Andrew Blakers, Director, Centre for Sustainable Energy
Systems believes that Australia has the potential to match Germany's growth
rates in solar PV and he notes that 'it would be a substantial method of meeting
the government's 20 per cent renewable energy target by 2020'[11].
Professor Blakers also described to the Committee the support that the
photovoltaic industry receives in Europe, California and Singapore where 'there
is support for solar commercialisations at every level – from the local
council, the state government, the federal government...'[12].
3.16
The Coalition is committed to ensuring the growth of Australia's solar
industry and believes that a national feed-in tariff regime is the logical next
step in supporting the advancement and development of this important industry.
However, there can and should be no 'gap' period in support for the solar
industry. Rebates to support the upfront cost of PV systems must be either
maintained in some form that is complementary to feed-in tariffs or phased out
in a smooth, well planned transition from rebates to feed-in tariffs.
Recommendation 3
3.17
Coalition Senators recommend the Rudd Government strongly consider a
national feed-in tariff system and immediately begin consultation with the
solar industry and experts to establish the most cost effective mix of tariffs
and rebates to maximise environmental outcomes.
Carbon pricing
3.18
The Coalition notes and shares the hopes of manufacturers, installers
and environmental commentators that the effective pricing of carbon in the long
term, combined with a reduction in costs associated with PV technology, will
allow the equal competition of PV in the energy market.
3.19
These hopes are balanced against great concern about the capacity of the
Rudd Government to effectively deliver such a system of carbon pricing. The
failure to consider any of the negative impacts on the market, the solar
industry or the production of renewable energy prior to introducing this means
test leaves Coalition Senators with grave concerns about the capacity of the
Rudd Government to introduce an emissions trading scheme (ETS) without again
causing severe negative consequences. Rushed and ill-considered policy in an
area as simple as solar rebates has caused chaos for this part of the renewable
energy sector. The consequences of similarly rushing the introduction of an ETS
are unthinkable.
3.20
The Coalition urges the development of a long term strategy for the
solar industry to build the capacity and the sustainable market needed to
achieve their goal of being an equal competitor in the energy market. This
begins with the abolition of Kevin Rudd's means test on solar rebates.
Senator Simon
Birmingham Senator Stephen
Parry
LP, South Australia LP,
Tasmania
Senator John
Williams Senator the Hon
Ian Macdonald
NP, New South Wales LP,
Queensland
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