Newman government to slash solar feed-in rebate

So the Newman government, in its latest attack on anything sensible, is slashing the feed-in rebate for solar power – from 44c a kilowatt/hour to a mere 8c kw/hr. This is an absolutely insane idea – crazy crazy crazy stuff.

Look – never mind global warming. Even if global warming wasn’t the single greatest existential threat to our society today, this would still be bad policy. One of the biggest challenges facing Queensland is the cost of population growth, and the need to build new infrastructure. Item one in that is water. Item two is electrical supply – for the last four years (at least!) the electrical companies have warned about the possibility of brownouts.

Let’s make this clear: this is not a tweak. This is practically dismantling the entire scheme – they’ve abolished 81% of the rebate. Technically, this isn’t a broken promise, as all they said was that they’d retain the rebate – but it’s a 81% broken promise for sure.

Decentralised solar generation is a very cheap (for the government) way to increase capacity. Reducing the feed-in rate to the point where you can be a net producer of power but still need to pay a large electricity bill is going to seriously discourage take up. Which, in turn, will increase costs to the government – and increase down-the-line costs.

They’ve stated that this will save $1.8 billion over 16 years. But what will be those cost of buying conventional power generation to replace the solar power that won’t be created.

Let’s compare that 8c/hr to commercial rates. Tariff 31 – which is only on at night at low demand periods (and may not be on at all if its a hot night with lots of air con demand!) is 9.26c a kilowatt/hour. The solar power rebate – which generates power during the highest-demand period of the day – won’t even cover that. Tariff 11 – the only one that caters for daytime power – is 22.76c a kilowatt/hour. But if you want fully-green power (which is the right apples-to-apples comparison), add another 5c/hour on.

But that’s how much it costs the consumer. That’s not what it costs the electrical providers. Electricity is covered by the Australian Energy Market Operator – an independent body that manages the wholesale market for the providers to trade with each other. And they publish prices. In Queensland, the wholesale market for power varies from as low as $14/MWh (1.4c kilowatt/hr) to as high as $1676.47/MWh – that’s $1.67 kw/hr, or 4 times the existing feed-in rebate. Solar power generates the most power on exactly the days where the wholesale market charges the most – it reduces the need for expensive peak-power generation.

Furthermore, solar power is more effective – being locally generated, it will get used nearby (probably by the house across the road that doesn’t have solar cells). As much as 99% of generated solar power will get used directly. By contrast, wholesale power needs to be transmitted over very long distances. As much as 15% of power generation is waste – lost in transmission to resistance. Most of that is in the “local loop” – long distance transmission is relatively efficient, but the lower voltages used from the substation to your hose can lose power badly, especially on hot days. So while you may only use, say, 1000 kw/h in a quarter, the electricity company had to supply up to 1150 kw/hr. And your bill of $227 (at 22.76c kw/hr) could have cost them between $14 and $1927!

Unfortunately, the AEMO doesn’t publish the prices of ‘green’ power. That’s because it isn’t traded – every producer keeps their green power for themselves. It’s reasonable to guess that green power costs a chunk more than that; retailers add on up to $55/MWhr for green power.

The electricity companies are happy to buy solar power from us at $440/MWh. Because it reduces by a lot the need to buy power at considerably more than that. Yes, they’ll be happier still to buy it at $80/MWh – but I strongly suspect they’d prefer to have more supply than cheaper. And that’s before the cost of the emissions trading scheme (the so-called “carbon tax”) kicks in next week, or the increase in power costs (predicted – without the carbon tax – to go up over 33% in the next five years)

Bad bad bad policy – policy that will cost Queenslanders more in the next five years, let alone the next 16.

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