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Solar Madness in Australia?: Solar PV and Public Policy

August 18, 2010

Conventionally it is the moon which is pseudoscientifically associated with madness and hysterical visions, known as Transylvanian Hypothesis in scholarly literature.  Think ‘lunacy’.

Now one might accurately refer to an Australian Solar Hypothesis when discussing the apparent solar-induced madness in Australia – from a public policy perspective.

Australian Governments continue to throw money down the bottomless well of solar photovoltaic (PV) deployment. 

Subsidies to solar PV include rebates and other direct grants; as well as market-based mechanisms including Renewable Energy Certificates from the small system (read: solar PV) carve-out within the Enhanced Renewable Energy Target, and Solar Feed-in-Tariffs.  All have been, or are, Australian Federal or State incentive programmes.

Subsidies for domestic application of solar PV systems are poor public policy for a number of reasons:

  • Regressive:  only relatively well-off householders will have capital, education, and home-ownership sufficient to take advantage of applying subsidised solar.  Subsidies are then provided to that individual, yet sourced from the community at large through general taxation or increased electricity prices.
  • Inefficient 1:  A large part of the justification for solar would appear to be greenhouse gas emissions abatement.  Solar PV is widely documented as being one of the most expensive ways of reducing greenhouse gas emissions.
  • Inefficient 2:  Spending on deployment of PV is justified in order to support local jobs, and Australia-generated PV technology.  In fact, solar PV manufacturing is dominated by China, Taiwan, Japan, US and Europe.  Australia’s relatively small market and high production costs and strong dollar mean that no major international manufacturer will establish R&D and manufacturing operations here.  Australian tax-payer money would be much better off sponsoring early (R&D) phase of the commercialisation process, with a view to IP licensing as the industry basis.  Solar deployment and operation is not labour-intensive, nor high value-add.
  • Expensive:  Solar PV is one of the most expensive forms of power generation.  Electricity generated by PV is about five times more expensive than that generated by wind on a levelised cost basis.

A recent exchange of letters in the Sydney Morning Herald touches on these issues:

SMH Letters

August 18, 2010

Meredith Ryan boasts a 22.3 per cent return on her household solar voltaic units – with “huge environmental benefits”. I enjoy a similar attractive return; it’s a good personal investment. But it is not an efficient way to reduce carbon emissions. Personal financial benefits go to household solar voltaic systems because of large government subsidies. The carbon reduction of solar voltaics has been costed at $70 a tonne of carbon dioxide compared with the $10 a tonne abatement we could be having under an emissions trading scheme. But with no scheme, we have no base carbon price. So governments continue with wasteful and more costly piecemeal schemes.

Harley Wright Roseville

SMH Letters

August 17, 2010

Power of sun

Lucy Macken needs an update on the benefits of installing household solar voltaic units (”It’s still not easy to be green”, August 14-15). Our 10 kva system, installed in June, has earned us $745 in electricity sent to the grid in 47 winter days. It will give us a 22.3 per cent return on capital investment and will be paid for in 4.4 years.

Environmental benefits – huge.

Meredith Ryan Brombin

Source: Harley Wright

Subsidies for Solar PV deployment in Australia continue remorselessly. 

Solar companies are reaping tidy profits, while not necessarily passing on technology cost improvement savings to the end-user.  

At least half of the Solar PV deployment installed cost is effectively directed from the Australian tax-payer, to the off-shore manufacturer of the solar PV cells.

Australia is subsidising international solar companies but would be much better off by largely free-riding, and reaping the benefits once the oft-promised installed costs decline to cost-competitive levels.

Political parties seem to have few painless policy options when confronted with a need to address climate change. 

Support for solar PV, however, receives persistent polling support (based on ignorance I would vouch) as the benefits are reaped by a few while the costs are spread across many.  Solar PV systems act as big visible roof-top banners for politicians seeking to tout green credentials, while giving a relatively few well-off voters a fuzzy green feeling and more money in their pockets.  John Howard recognised this characteristic in the 2004 election when his stated ambition was to ‘pass the pub test’ on climate change.  It would therefore seem a fortunate miracle that neither Federal party has promised yet further expenditure on solar deployment during this election.

When Australia’s interest in solar PV is so clearly not in deployment but instead in R&D, how does the madness of solar PV subsidies persist? A recent story of pulled solar R&D support for Australia’s world-leading UNSW solar research institute underlines the continuing public policy sleep-walking.

More to come on the subject of the Australian Solar Hypothesis.

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