House debates

Thursday, 20 September 2018

Adjournment

Energy

4:54 pm

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | Hansard source

Solar photovoltaic is an amazing technology. To be able to use silicon, glass sheets, metal frames and wire to create electricity is something that in previous ages would be ascribed to the gods and magicians. So it's no surprise that many of the advocates of solar PV today have an almost religious zeal. However, we cannot be blinded by the ideology and we can't overlook the economic realities, nor the costs. Just because something is popular doesn't mean that we can ignore those basic factors. That's why I support recommendation No. 24 of the ACCC's report titled Restoring electricity affordability and Australia's competitive advantage. Recommendation No. 24 calls for the Small-scale Renewable Energy Scheme to be wound down and abolished by 2021 rather than 2030.

To explain the scheme: if someone were to install solar PV on their roof today, a calculation would be made about how much electricity that would generate on their roofs out to the year 2030. For that, they would get a subsidy, a handout, of about $40 for every megawatt hour. For a five-kilowatt installation in New South Wales, which averages about 20 solar panels on someone's roof, the handout is $3,340 this year—the average across New South Wales. But that handout does not come from the government or the taxpayer. It gets loaded up on the price of electricity which every single person pays. It makes our electricity dearer. The Grattan Institute have commented on this system of subsidies in their report Sundown, sunrise. They concluded:

… lavish government subsidies plus the structure of electricity network tariffs means that the cost of solar PV take-up has outweighed the benefits by almost $10 billion.

By the time the subsidies finally run out, households and businesses that have not installed solar PV will have spent more than $14 billion subsidising households that have.

This is a $14 billion reverse Robin Hood. The Grattan report concluded:

Governments have created a policy mess that should never be repeated.

Look at what this does for the efficiency of the nation to see how the costs and the economics of continuing these subsidies simply don't stack up.

The Australian Energy Council, in their Solar report of January 2018, estimated the levelised cost of electricity generated from rooftop solar, and they did so using a central estimate of a 6.53 per cent discount rate. They calculated the subsidised cost of a five-kilowatt system as producing at 12c per kilowatt hour or the equivalent of $120 per megawatt hour. But, when you put the subsidies that they get back in and you calculate the true cost to the economy, we are looking at something like $180 to $190 per megawatt hour. So we are spending billions of dollars in this nation to create new electricity generation that costs at least $180 a megawatt hour to displace our existing coal-fired generators that produce electricity in black coal for around $35 a megawatt hour and in brown coal for a cost of $15 to $20. Anyone who makes anything and has one factory that produces things for $15 to $30 and who builds another factory that produces virtually the same goods, even though it may be intermittently, at $180—four, five and six time the price—will eventually go broke. That's why we need to look at this with calm, rational heads.

The ACCC's recommendation is right. It is difficult policy. It is very difficult for government to take things away that they have given. But I call on all members of the House to support those ACCC recommendations.

House adjourned at 16:59

The DEPUTY SPEAKER (Ms Vamvakinou) took the chair at 10:00.

Comments

Tibor Majlath
Posted on 21 Sep 2018 3:44 pm (Report this comment)

Is it really to do with silly claims of religious zealotry? Most PV users are more likely to be trying to save on electricity costs.

If only the member had read further along in the overview section of the Grattan Institute's report he would have seen that things "will change if tariffs that better reflect the cost of running the network come into force which will remove a second subsidy to solar PV owners. In all states, it will no longer be profitable to put panels on the roof."

The report suggests that "The falling cost of solar coupled with progress in battery storage technology will transform the century old, centralised grid. Households will have a renewed incentive to install solar. They will store the electricity they generate during the day and use it in the evening when electricity costs are high."

Of course all this assumes that government will have sensible energy policies and will "drive the tariff reform to ensure that this new model of distributed power generation is both effective and fair."

Something that has been sadly lacking so far amid the usual name calling and bickering.

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