Draft energy White Paper targets domestic feed-in tariffs

The Federal Government will pressure state and territory governments to moderate schemes and payments for roof-top solar panel generated electricity so strongly embraced by many seniors.

The Productivity Commission previously found that costs associated with the administration of feed-in tariffs unfairly penalised electricity consumers who could not afford solar panels.

The high cost associated with the panels far exceeded the cost of other carbon dioxide abatement methods. The costs of delivering feed-in tariffs and other jurisdictional schemes is 6 per cent.

With regard to feed-in tariffs, the White Paper said :

The introduction of a range of policies – such as the bipartisan expanded Renewable Energy Target, state-based feed-in tariffs and white certificate or similar energy efficiency schemes – are impacting Australia’s energy markets and (by design) affecting decisions about investment in new generation capacity.

Australian Government will work to accelerate clean energy outcomes by working with other jurisdictions to identify opportunities to harmonise micro-generation feed-in tariffs, so that they do not impose an unjustifiable burden on electricity consumers, either through cross-subsidy mechanisms or their impact on the Small-scale Renewable Energy Scheme

The Australian Government believes that the design fundamentals of the national electricity and gas markets are sound and that these markets have delivered well against their stated objectives.

That said, there have been a range of significant developments since the last market review (by the Energy Reform Implementation Group in 2007) that are introducing fresh challenges and opportunities for market operation. These include additional clean energy interventions in the form of the expanded Renewable Energy Target, carbon pricing and feed-in tariffs

These developments are at various stages – some are well advanced and some have yet to mature. Yet they are all changing the dynamics in electricity and gas markets.

A range of state and territory based feed-in-tariff schemes support deployment of small-scale solar photovoltaic and certain small-scale distributed generation.

Recent analyses by the Productivity Commission and the New South Wales Independent Pricing and Regulatory Tribunal have noted that these schemes represent very high cost abatement relative to the carbon pricing mechanism and are introducing additional and inefficient costs for electricity consumers.

The Australian Government will work with state and territory governments to ensure that such measures are consistent with the agreed Council of Australian Governments principles for complementarity of climate change mitigation measures and do not impose an unjustifiable burden on consumers either through cross-subsidy mechanisms or their impact on the Small-scale Renewable Energy Scheme.

Uncertainty in other components of the policy framework can also affect investment decisions in clean energy generation, including existing arrangements such as the Renewable Energy Target and funding programs.

Unexpected policy changes undermine investor confidence by creating uncertainty about the economics of projects. It is important that the design and application of policies and measures consider their economic or social sustainability. For example, some measures such as feed-in tariffs (which place open-ended and increasing cross-subsidies on a range of consumers who do not receive the material benefit of the subsidy) are less likely to prove durable than other more efficient and equitable approaches.

The Australian today produced an article on the subject titled Crackdown over roof-top solar scheme blowouts.  

13 December 2011.