It may just be that Greg Hunt knows he’s never actually going to have to justify his policy ideas to Treasury or the Productivity Commission. But, at the moment, you’d swear he was the Greens environment spokesperson, not the Liberal Party’s. He’s proposing a whole raft of measures to promote the development of solar energy in Australia.
Of most direct short-term interest is the proposal for a national “feed-in tariff” scheme. To explain this, first some background. If you’ve got access to grid electricity, solar panels are currently financial lunacy. The solar system I’m currently being quoted on (thanks to commenter wilful for the tip) costs about $12,000, and generates about $225 worth of electricity every year. By contrast, if I left that $12,000 in the bank, I’d get at least double that after tax. If I put the money into a share fund, over the course of a decade I’d probably do much better again. I’d be able to pay for GreenPower from my electricity supplier, and have a considerable pile of money left over.
So why am I looking at solar cells? Because of the massive government rort known as the Photovoltaic Rebate Programme. Essentially, the government will pay $8000 towards the cost of my 1 kilowatt installation. I only have to pay somewhere around $4000, and it works out pretty close to cost effective.
This is, as previously stated, extremely silly policy. The same government money subsidising wind turbines, or, better still, energy efficiency in government buildings, would achieve far greater emission savings. Even if you want to specifically subsidize solar cell technology – and I fail to see why you would, given that there’s every likelihood that other forms of renewable energy will be far cheaper – it’s still dumb policy. Why? Because the rebate is limited to 1 kilowatt systems. It would make far more sense to build bigger solar arrays on factory roofs, because the cost of building one 100-kilowatt photovoltaic array is much smaller than the cost of 100 1-kilowatt arrays. But the subsidies don’t work that way.
So what are feed-in tariffs – the scheme Greg Hunt is advocating? The Queensland government’s scheme works like this:
The solar bonus of 44c/kWh will be paid for electricity fed into the grid at times when the solar system generates more electricity than the household or business is using at any instant.
The customer’s quarterly solar bonus payment for this excess electricity will be deducted from their total grid-connected electricity consumption charge on their electricity bill.
So whenever you’re generating more power with your solar array than you are using (typically, on a weekday when the house is empty) you get 44 cents per kilowatt hour for the surplus. At the moment, you only get whatever the retail cost of your electricity is – typically around 12-14 cents per kwh.
From the perspective of my personal finances, if I do go ahead with my solar system, it’d be great if a feed-in tariff scheme went national. Assuming that feed-in tariffs were available to both existing and new solar power systems (and that’s how the Queensland one works), the government would have paid for two-thirds the cost of my solar system; then, the other customers of my energy company would pay me triple the going rate for the surplus power I produce. I will have rorted the system twice – and the greenhouse gas savings will be minimal compared to what could have been obtained elsewhere. And investment in more promising renewable energy technology – hot rock geothermal, wind, solar thermal, and so on – goes begging.
Even if the scheme were to be restricted to new solar installations, thus not giving me two bites at the subsidy cherry, it’s still monumentally bad policy. On the upside, it potentially might get rid of the bias towards inefficient micro-power systems (though the Queensland scheme has size limits on the array which still rule out factory-size systems). On the downside, aside from the aforementioned stupidity of picking one overpriced renewable energy technology, it’s one of those pernicious distorting hidden subsidies the economists like to rant about. On equity grounds, most of the people installing solar panels are going to be comfortably middle class like myself, and the subsidy is going to come from all electricity consumers; the poor spend a greater proportion of their income on electricity than the rich do. At least with the photovoltaic rebate scheme the cost of the subsidy is transparently borne by taxpayers. Feed-in tariffs hide the cost in the wider cost of electricity, removing the direct pressure on governments to justify the expenditure.
Given that the Australian Greens aren’t great believers in untrammeled free markets, their support for feed-in tariffs is hardly inconsistent with their broader philosophical outlook. But given that free markets are supposedly what the Liberals do, the mind boggles as to what the economic dries in the party – even the ones who actually think greenhouse is a problem – think Hunt is up to.
It’ll be interesting to see whether, in the fullness of time, feed-in tariffs end up going national, through the Labor governments in the other states adopting this craptacular policy directly, or through a federal approach. From a policy wonk’s point of view, I sure hope not. But I’ll console myself by counting the second lump of cash the rest of you will be sending my way…
One last note: for those LP readers who live in SA or Queensland and own their own homes, I suggest you look very seriously at some solar panels. Exploiting bad government policy may be evil and wrong, but it can be awfully lucrative.
Update: on reflection, I should point out that I think it’s good news that the Liberals have gotten over their ostrich attitude to greenhouse. But just because Hunt has acknowledged something needs to be done, and that clean coal isn’t the one-and-only answer, doesn’t make this particular policy anything other than spectacularly dumb.
I have no intention of putting solar cells on the house I currently occupy, as I will probably only be there for another 3-4 years. However, on the as-yet-unbuilt house I plan to retire to, it will be cost-efective even without massive govt subsidies, as it could easily cost $30K or more to connect to the grid (depending on how many poles would have to go in).
As someone currently involved in a scheme to install just such a bank of
in Ballarat, I’m intrigued to see your policy-based viewpoint on the subject Robert.
My 1kW solar system will come for the princely sum of around $500, plus the connection, metre, etc. expenses. At this price, the system works financially for me at green power prices, even without feed-in tariffs – though apparently the Vic govt is considering this at the moment.
The reason this scheme exists is that some bright spark has decided he can make a buck by installing bucketloads of little systems, getting a discount on the volume, pocketing the $8000 rebate and selling the resultant REC’s. Good luck to him I say.
I take your point Robert about the high opportunity cost of favouring these small systems over other options but isn’t one of the advantages of this approach that the technology is available to be deployed right now? In Vic we’ve got the world’s worst coal-fired power and before we can wean ourselves off it, there needs to be viable alternatives in place. (Witness last year’s decision to extend the coal-production licence for Loy Yang for another 20 years).
One thing that can be said for this $8000 rebate is that it’s one of the few incentives for renewables that ever raised its head under Howard and, as such, its the best (or only) thing we’ve had on the table to promote the use of renewables.
Is a policy of putting PV on every roof really such a dead-end approach?
Aussie: firstly, there are other renewable opportunities available right now – wind power is the obvious one, but there’s also small hydro, biomass, solar hot water, etc. etc. etc.
And, even assuming you want to promote solar, it’d be a lot more cost effective to put solar panels on the roof of a large factory, and have one big voltage inverter, than have 100 or 1000 small ones. The tech is the same – only the scale changes. Have a look at the SolarBuzz solar power price index. Big photovoltaic installations are much, much cheaper per unit of energy than small ones.
Once we’ve got every large roof covered with photovoltaics, then talk to me about small roofs.
Very interesting post.
One interesting point I have is about the aforementioned inefficient micro power systems. I know this isn’t the focus or the point of the subsidies, but wouldn’t a widely distributed micro-generation grid (like solar panels and/or turbines on lots of houses) be more robust than our current ‘energy factory grid’ system?
Personally, I think that distributed power generation would be worth a bit of investment because it has value that isn’t well measured by the market. Although it doesn’t necessarily solve any problems to do with greenhouse gas emissions, like you mention…
Thanks for the response Robert. And particularly the pointer to the Solarbuzz site.
Yep, fair point.
Whilst I can’t disaggree with any of your arguments Robert, there is a little bit of me that is happy to see the government spend money on solar panel rebates. After all, there are a myraid of egregious ill conceived programs that suck up money and provide no discernible benefit (I’m thinking of baby bonuses and the porkbarelling that was so beloved by the coalition.
As someone who is contemplating building a house (in WA) these posts on solar panels are very helpful mind!
rf: this might be an appropriate time to plug Greenlivingpedia, something that I’ve been meaning to post on (maybe this weekend…)
…more robust…
Andos, my personal anecdotal experience has far more problems with domestic solar systems than power outages. I get one or two outages a year, mostly during the middle of the day when I’m at work, while people I know with off grid solar connections are regularly having to fiddle.
Solar hot water rebates make a lot more sense – however these systems make so much sense that it’s easier just to mandate them (or to mandate an efficiency standard). Almost kinda what Victoria has done with five star housing.
Hey, Aussie Oskar, do you have a link to the community action solar plan, in Ballarat, that you are talking about? I heard about it on radio and have been trying to track it down for personal interest only.
Cheers.
I subscribe to ‘Renew’ magazine and there’s some interesting resources on the website of their parent organisation – Alternative Technology Association. One of relevance to this topic is:
http://www.ata.org.au/projects-and-advocacy/feed-in-tariff-for-solar-systems
Wasn’t there a leaked document earlier in the year where someone in the Liberal Party had this plan of pushing Labor to go “too far” on IR to cause it political pain? Perhaps that is what Greg Hunt and the Liberals are up to on Climate Change.
Politicians like to sound as though they’re fixing a problem, rather than actually fix problems. A subsidy for PVs on industrial roofs would be certainly be much more effective policy, and of course properly pricing carbon would be far better again, but neither will win votes.
4 to 1 Feed in tarrifs have driven the market strongly in Germany. Choppers fly around looking for vacant roof space to lease from owners. No kidding! There’s a whole group of people who dont own the solar on their rooves.
if you want private solar to take off, this is the way to go. I understand Sth Australia has a 2-1 scheme on the offing/.
I see more political opportunism in this policy, which is really a hangover of the last 11 years where government had been spending small amounts on things that have very little hope of success so that they can be seen to be doing something while reserving the opportunity to say ” see how unworkable this solar stuff is!!”.
Everything is stuck in limbo at the moment with the geosequestration failure reality starting to strike home at the same time as the equally doomed to failure carbon trading structure, which depends heavily on geosequestration to work, is still being thought out. Meanwhile news such as http://news.bbc.co.uk/2/hi/science/nature/7363600.stm leaves the politicians looking like rabbits caught in the head lights. There are of course the remnants of the oil friendlys such as the the UN food programme guy blaming bio fuel production (based on the highly exaggerated and inefficient US corn ethanol production) for the rising world food prices. Food price rises that have been underway for many years and are really caused by increased food demand from Asia as the head of CNN pointed out the other day.
The clincher will be, I expect, the certain to skyrocket oil prices which will have the effect of shutting down the oil lobby as they realise that they can make more money than they ever dreamed possible selling far less oil at prices tha no-one ever thought possible just 8 years ago. Soon everyone’s energy compass will be pointing in the same skyward direction, and some really sensible energy policy will start to appear.
I take your point about factory roofs versus houses Robert, but I think there are good reasons to promote solar over wind and some of the alternatives. We need to be looking at not only which technologies are the cheapest ways of cutting Greenhouse now, but which have the most long term potential.
Assuming there are not enough good wind sites to keep expanding it forever (and presumably if there were there wouldn’t be the current battles over controversial sites. We need to support technologies that have the potential to be a bigger part of the system, even if they’re currently more expensive than wind.
Not so much picking winners, as picking potential winners, rather than just whoever happens to be cheapest at the time.
Lefty E: and every spare acre in Iowa is covered with corn being fed into ethanol plants. Doesn’t make corn ethanol anything other than a boondoggle to transfer money from Uncle Sam to Iowa corn farmers and, especially, Archer Daniels Midland.
To those arguing for solar, fine – though I still think the argument “we have plenty of sunlight, therefore we must use solar power” is incredibly superficial (and, like I said on another thread, something akin to “Australia has lots of coastline, let’s use desalination”). But solar thermal seems to offer far more potential for providing cost-competitive power at this point in time, and all these incentives don’t help it one jot.
Lefty E, the simple question is, do we want private solar to take off? based on the facts before us, the answer is no!
I’ll restate, solar hot water needs to be made virtually mandatory.
I’m happy for centralised/ mass solar power production to take off too, and on balance, would probably rather invest my money there, if I knew more about the options. I guess I do actually, since I buy greenpower.
Widespread roof solar, is, however, a good way to progressively reduce the baseload that needs to be replaced. It’s also insurance against central power shortages – who knows what drastic measures might need to be taken in 20 or 30 years.
I must confess to being a little underwhelmed by arguments about marginal costs per watt, give the disastrous price of inaction. And every time we revisit this, solar has become more efficient.
why must baseload be replaced, and why by roof-top solar?
Baseload coal-fired, sure, needs eventual eliminating, but there’s no particular reason for centralised power shortages. And the central argument remains that widespread roof solar is not a good way to progressively reduce baseload, and while domestic PV is becoming more efficient, so are other options.
We use solar power to dry our washing: thank you Hills Hoist.
Robert et al: I’m very keen on this feed-in tariff and live in Victoria. When may we expect nice Mr Brumby to announce it? In the forthcoming State budget?
Robert, an interesting post, but your critique of feed-ins per se only applies to the narrow view of rooftop PV feed-ins as SA has done, and the ACT, QLD and Hunt are talking about.
A more comprehensive feed-in law, such as that pioneered in Germany and what the Greens are campaigning for nationally (we have a draft Private Member’s Bill waiting for the Senate to change…), does not suffer from the same problem of pushing small, decentralised power to the potential detriment of larger scale renewables generation.
Our policy would provide targeted, time-bound support to the broadest possible range of renewable energy technologies, giving developers of any scale the kind of support they need in order to convince financiers to give them the money to build. The level of support would be based on a range of factors, such as level of technological maturity, current and projected generating cost, emissions reduction potential, etc, and would be set by an independend board possibly based on the existing Office of the Renewable Energy Regulator for the MRET. The support would last long enough before being scaled down to more or less guarantee investment payback but no more. After that, the technology / development will have to stand on its own feet.
By the way, a word of warning about Hunt’s feed-in promise – he noted at the Climate Action Network Australia conference the other day that his idea was to make the feed-in tariff apply only to ‘net’ metring, not to all the solar you feed to the grid. In other words, you only get the extra payments if you actually put more energy into the grid than you use over given time periods. This would essentially make the scheme useless, as most rooftop PV systems are geared to come close to matching the home’s demand, not provide more energy to the grid than is used. Virtually nobody would get paid…
And a final word – apologies for the long comment – your critique of rooftop PV misses out on the important factor that decentralised solar is really good for grid stability at peak demand. As such, it’s quite a cheap option – cheaper than more centralised peaking gas power plants.
Meant to post this link to a great site for detailed discussion of feed-ins and their benefit. Strongly pro the policy.
joe2,
the plan is organised by a crowd called Beyond Building and the Ballarat scheme was organised through a fantastic Ballarat community sustainability group, BREAZE
Sorry, not sure why the links didn’t work….
Beyond Building is http://www.beyondbuildingenergy.com and BREAZE is http://www.breaze.org.au
Interesting comments, Tim.
I remain unenthused about having “independent experts” deciding what the price of something should be, as distinct from a competitive market where one can be created. But we won’t go over that debate again here…
Glad you agree that feed-ins, as currently proposed, do have serious cost-effectiveness issues. As regards grid stability, is there really much difference in the effects of units at the 100 or even 500 kw size, and the micro-sized domestic units?
If Hunt’s plan really is to pay feed-ins for net metering, that’s going to be a massive subsidy for those with access to capital and large rooftops, paid for by those who don’t. Howard’s battlers contributing, yet again, to the Malcolm Turnbull retirement fund…
Robert, no, you’re right, there’s not likely to be much, if any, difference in the grid stability contributed by 100kW vs 1kW. The point is decentralised generation at point of use at time of peak demand.
Yes, Hunt’s plan will benefit those rich enough to be able to afford more generating capacity than they need, and will charge that back to everyone. Bad policy indeed.
Here’s a question for you which might provoke a whole new post when you get time to think about it. This is deliberately provocative and does not reflect Greens policy per se:
We agree that climate change is incredibly urgent and demands swift and radical action, I believe. You, like Lovelock, are willing to let that temper concerns about environmental and health risks, as I read your position, in terms of support for nuclear, for example (correct me if I am wrong here).
Given that, do you feel that there might be reason to pass over the most ‘elegant’ policy solutions if they may have a lower chance of effecting the kind of radical and swift changes we need to see? Is there perhpas a role for overkill, in elegant policy terms? A role for overlapping policies in order to achieve as much as possible fast? ETS, plus MRET, plus feed-in, plus regulation? Put a price on carbon, but also pay for interconnectors to new large-scale renewables generation capacity, for instance?
Tim: that is an interesting topic! Can’t promise, but will think about it over the next few days.
BTW, perhaps in your copious free time you could outline the Greens feed-in tariff plan at Greensblog.
WRT nuclear, I’d put in a further caveat to your characterisation on nuclear – my view is that the health and environmental effects are very much less than is commonly thought. But, again, that’s an argument for another day.
tim wrote: “By the way, a word of warning about Hunt’s feed-in promise – he noted at the Climate Action Network Australia conference the other day that his idea was to make the feed-in tariff apply only to ‘net’ metring, not to all the solar you feed to the grid.”
Bother!
That messes up all the arithmetic completely.
Feed-in tariff for all power fed in, sez I.
cheerio
Clearly the politicians are not prepared to use climate change ’sticks’ at this point in time, but are more than willing to throw a few ‘carrots’ around. Given that, I think something (just carrots, no sticks) is better than nothing, even though the sticks would be much more effective IMO.
However, I believe feebates for cars and appliances are very saleable, given the the ’stick’ side of the equation does not apply people’s existing costs (petrol, electricity, gas etc).
Ambigulous: In 2007, the Victorian governmentcommitted to a feed-in tariff:
No details yet, but if it’s the same as the Queensland or SA one I’ll be making out like a thief.
If they’re really going to do it this way, it remains craptacular policy, no matter which party is responsible.
Im wondering whether punters will still be eligible for the feed-in tariff if they’ve already flogged their Renewable Energy Certificate? Some installation deals come cheaper if you sell it to the supplier.
Lefty E, that depends on the design and legislation. Accredited Green Power schemes, for instance, cannot double dip with RECs – either you sell your renewable energy for RECs of for Green Power, but not for both. Same goes for the interaction between the NSW GGAS and RECs and Green Power, last time I heard.
I haven’t actually checked how SA’s Act and the ACT bill deal with this issue. Must go and do so…
Lefty E
I dunno, but one is installation, the other is operation – treated separately?
e.g. we got a Vic govt subsidy for installing a rainwater tank, but WE don’t get an ongoing rebate because we’re saving tapwater. But we save on water bills so that’s fine with us
Thanks Tim and Ambi. Let me know if you work it out! Could be relevant to decision making at Keating Towers.
Robert, off the point somewhat, but have you seen this Infinia company’s idea for small-ish thermal electric using Stirling engines?
If they live up to the hype (a big if maybe), it homes or apartment blocks could have one of these dishes on their roof or in their yard, at much better efficiency than PV. (Cost is undisclosed, though.)
Not much use in a Melbourne cloudy winter maybe, but should perform well in Brisbane’s clear sunny winters (and much of summer.)
I also like the look of them ‘cos I would like to see how fast you can roast a chicken in the focal point of that dish!
Let’s say that 1 kW of solar PV capacity installed on your roof costs about $12,000, based on the figure quoted above. With the $8000 rebate, that’s $4000 you need to pay.
Now, based on realistic capacity factors for such a PV system, 1 kW of nameplate capacity will generate about 5.1 kWh energy in total per day – The PV installation industry expresses this as “peak sun hours per day” for any given location. The 5.1 kWh is the actual figure quoted for Sydney, Australia.
Household electricity consumption in Australia is 7 MWh annually in Australia, according to EnergyAustralia. That’s 19 kWh per day.
A 1 kW solar PV installation is just not enough to completely offset your electricity bill and start making money off it.
At a feed-in rate of 44c per kWh, that’s $820 dollars per year offset from your electricity bill – so, the solar PV installation takes just under 5 years to pay off. If you’re selling the electricity at 14c per kWh, it’s over 15 years.
However, suppose you want to consider the case of installing enough capacity to completely satisfy your household electricity needs, so that you can be making money of it all together.
(This all assumes that you’re an “average household”, presumably with several family members in the household, and “average” levels of electricity efficiency)
You’re going to need a system with 4 kW of nameplate capacity.
How much will that cost – well, we might assume that it can be done for cheaper than $48,000 – I don’t know, really, so I’ll just guesstimate $45,000.
Less the $8000 rebate, and that’s $37,000.
Now, you’re generating 20.4 kWh per day, and and consuming 19 kWh, with 1.4 kWh sold back into the grid at 44 c per kWh.
You don’t have any electricity bill – so it’s a pure money source.
That’s $225 per year from selling the electricity, plus $971.5 saved from not having to buy the electricity that you use.
$37,000 / $1196.5 gives you a payback time of 31 years. In all likelihood, that will exceed the working lifetime of the photovoltaics.
With the government rebate of $8/kW capped at $8000, going over that amount gets a whole lot more expensive rather quickly.
Aussie Oskar, thankyou very much for the Beyond Building link. I could not get the BREAZE link happening, sadly. It would be great to hear more of how you all managed to get the critical number of 50 families to make that investment happen in Ballarat. Thanks again.
I would imagine that one point of strong agreement, from what i have read here, is that solar hot water systems are the way to go when ones present system needs replacing. At the very least.
Just to clarify a few small points (as I’m getting one of those 1 kw systems installed), Origin Energy will be paying me the ~14c/kWh that I pay them. The installation company (Braemac) will be keeping the RECs.
Our household usage is far below average (not really sure why, we only do the commonsense stuff, no A/C) so I think we’ll definitely generate just about break-even over the year, quite positive in summer.
joe2,
the BREAZE link is http://www.breaze.org.au. It worked for me…. If this one doesn’t work for you, I’m sure you can google it.
The thing that got the 100 families to sign up was the offer of a 1kW system for $500 out of pocket. Simple as that. They’ve since gone up to $900 and required that people put up the $8000 before they receive it back as a rebate. They had to do this because the demand was far bigger than the capital they had available.
Out of interest, BREAZE is also facilitating bulk orders of Solar Hot Water systems. Perhaps we’re on stronger efficiency ground there…..
Re #26:
Tim, this is a very important question. I think a role that overlapping policies have is that they provide redundancy, which can be a good thing. For example, while a well designed ETS with the right carbon price/cap may mean that an MRET is not needed. However, if the ETS is poorly designed or the cap is too timid, an MRET becomes more important. For example, an ETS with a weak cap may drive some replacement of brown coal with black coal or gas, but not renewables, which are a good investment if we want very deep cuts in the future. Another possibility is that a weak cap and free permits could lead to a collapse in the permit price, like what happened in Phase I of the EU ETS. Another possibility is that a government with a denialist treasurer could take power and decide that it wants to privatise electricity assets and that it would get a better price if it stops reducing the cap (I hear something similar happened in NSW with the GGAS scheme…). In any of these cases an MRET becomes very important.
While there are other reasons for an MRET, such as the role of learning curves and fossil fuel supply issues, I suspect that this issue of redundancy is the most important one.
I’m not sure how this applies to feed-in tariffs. I personally would rather spend public money on activities like sequestering CO2 with biodiversity plantings using locally indigenous species. In this case the emissions reductions are presently too difficult to measure to include in an ETS but the biodiversity cobenefits are huge.
tim – can you expand a little or hyperlink to bolster that proposition. It’s a killer line if true.
Sorry – forgot to add that Luke Weston can crunch numbers – but he forgets to say that these are all on today’s prices!
As we all know (awak), prices for CO2 based E are on the up & up.
C is the new black. (The bad black, you know.)
Petrol will soon enuff hit A$3.00/litre for eg and likewise the privilege to burn C will come at greater and greater cost – so will the relative cost of Solar come down & down.
Always keep in uppermost mind the special relativities specific to the terms of these debates!
wbb: I wouldn’t get too excited about $3/litre petrol in the short term.
As I understand it, oil production keeps going up, demand is flatlining everywhere except China (a big except, I know), and inventories are increasing.
That’s a recipe for a bust, in the short term at least.
The further question is what happens to the demand curve as petrol prices continue to rise. My guess is that well below $3/litre, the freeways of our capital cities will start to get clogged with cheap commuter motorcycles.
wbb,
not sure what tim will say, BUT if a big part of the wobbly peak were due to a/c thrashing their little hearts out on a sunny day, in those sunny hours decentralised PV would be working heroically to reduce total demand.
There was a bloke (in California?) I think on “4 Corners” last year, standing beside a massive array of PV, saying “these babies have peak output closely matching peak demand – a/c on sunny days – so their contribution is very valuable”.
Go for it tim: I’m not speaking for you, just guessing.
cheerio
wbb, ambigulous is on the right track, but there’s more to the story.
Can I say in advance that I’m at home fighting a flu, so this might not be as concise and well-presented argument as it might be… Apologies.
There are three connected points that, together, make the argument. The first, as ambigulous says, is that the solar power generation curve very neatly matches our demand curve – that is, solar tends to generate most power at the same time as we demand most, on hot afternoons.
Some good info on this can be found in this paper from UNSW and this one from Ausra, David Mills’s company, factoring in some storage.
The second important point is that peaking generation is expensive. Sometimes very expensive, when demand rises fast or supply problems arise (outages at coal fired power stations, or network failures, for instances). Check out this paper for instance. The price for retailers can rise from $35 to $10,000 for MWh very fast. This means it makes good economic sense for retailers to pay householders to install rooftop PV and pay them 4 times the base rate for the power they generate – that’ll still be far less than they would have to otherwise pay on the spot market of the National Energy Market.
Final point is that steep demand rises from a/c peaking and similar place an enormous amount of strain on the energy grid. The QLD govt has estimated that for every a/c unit sold, they need to spend $13,000 on poles and wires to stabilise the grid! So it makes great sense for that a/c demand to be met instead by solar generation at point of use. It flattens the spikes hugely and reduces strain on the network.
OK, I hope that makes sense. Apologies if my foggy mind it foggier than necessary.
“There was a bloke (in California?) I think on “4 Corners” last year, standing beside a massive array of PV, saying “these babies have peak output closely matching peak demand – a/c on sunny days – so their contribution is very valuable”.”
It just makes sense. When it gets very hot the air conditioners whirl away and that happily coincides with panels reaching peak performance. I always prepare for power outages on those days and curse the greedy bastards -old and infirm excluded-who place their comfort above the most basic right of household lighting. I believe there should be an up front cost on those who install air conditioners for alternative power infrastructure.
“I believe there should be an up front cost on those who install air conditioners for alternative power infrastructure.”
Perhaps more helpful would be a levy on new homes calculated on the number and area of north-facing windows without eaves. It’s freaking retarded.
The last time I looked, which was a while ago, a 700 by 1100 mm solar panel delivered 120 watts and cost around $1000. If anyone has more up to date information that would be useful. But keep the scale in mind. It takes a lot of roof space on a domestic dwelling to produce just 1 kilowatt (6 by 1.1 metres per kilowatt), let alone the 4.5 to 6.5 kilowatts that most households would need at peak (if they had intelligent appliances to manage power useage and they wanted to be able to be independent of the grid).
From an Australian domestic politics perspective, perhaps the easiest carbon levy to build support for would be a levy on exported coal only. Such a levy seems to be completely missed by Garnaut’s plan and is a major loophole which is extremely odd since it is such a politically attractive concept.
Such a levy will not in and of itself increase energy prices in Australia. As such this particular levy will have zero impact on the disadvantaged among us. This is a absolute gift politically speaking.
The coal export industry is wildly profitable these days and will remain so for some time with China down to 12 days reserves of coal and still building coal stations like mad. This levy only needs to be less than the difference between the price of coal now and what it was say 5 years ago and the coal industry will remain prosperous especially given its increasing export volumes as compared with 5 years ago. In the truth the levy would only need to be a fraction of that difference to make a huge impact.
Any rational investor in a coal company will have long priced in the risk of taxes on coal and so will not be harmed by the levy.
If this levy were say totally applied to David Mills solar thermal plants then carbon credits could be accrued and those credits simply given to the coal company in return for the levy. Those credits could be sold by the coal company on European exchanges (now that we are in the Kyoto gang). This means the coal company buys something of tradeable value in return for the levy minimising the impact on them and in reality making it possible to make the levy quite large.
This outcome of carbon credit revenues also creates the fascinating and hugely appealing outcome of effectively using foreign capital to assist in decarbonising our domestic stationary generation.
The fact is we know that much of our exported coal will be burnt without offsets. This creates a moral imperative on us to use some of the export proceeds to cause a net reduction in global emissions.
There is no reason such a levy can’t be used in conjunction with Garnaut’s plan for domestic trading since there is appears to be no overlap between them. This seems especially important if we believe that Garnaut’s apparent 60% reduction target by 2050 is not aggressive enough. Its a way to achieve more without creating additional hardship for the domestic economy.
That gets my vote Gilbert. I have long been amazed at the minimal return to Australia for its minerals. Does anyone have a scale of what Australia charges for its coal, iron ore, gold, bauxite, copper, lead, etc.? My impression is that it is free barring some administrative fees for a mining lisense and the selling price is the cost or scaping the minerals up and sticking it in a ship, plus profit. I imagine there is some duty but how much is it and how does that compare to $120 for a barrel of oil?
But the logic of applying a carbon duty has real substance especially as Australia’s coal exports are on our carbon balance sheet (or is that incorrect).
Guys, a levy on Austraila’s exported coal won’t work.
You’re assuming that there’s nowhere else you can ship coal from. That assumption is wrong. China and India have huge domestic reserves; Indonesia is a big exporter.
Slapping a carbon tax on exported coal would just divert customers from us to them without changing the amount of coal mined one iota.
Their coal is even dirtier than ours; hence, the side effect of such a move will be increased deaths from air pollution in China.
Australia may be a geographical island, but it is not an economic one.
Robert
You make the simple error of assuming that the levy will increase the cost of coal to the customer.
My proposal requires no increase in the cost of coal to the customer. It can simply be levied on the supplier after receipt of sale proceeds.
The suppliers happily solid metallurgical coal at $120/tonne. Today its at $300/tonne. They will happily continue to sell it at $280/tonne (to them after the levy) if the levy were $20/tonne.
This will not cause any shift in sourcing by foreign importers.
I think maybe you didn’t read the post.
When businesses face increased costs, they exhibit a tendency to increase prices.
China is a net importer these days and they have only 12 days reserves now at stations and they are still building more stations.
A simple supply and demand equation from economics 101 tells us that the if the threat of source substitution arises as you fear then the Australian exporter will simply drop their net received price to the level where this doesn’t occur if they can make a profit doing so. All evidence is they will continue make a massive profit in doing so. And if you read my post you will see they can accrue an item of saleable value in return for the levy offsetting at least in part any drop in revenue to what they otherwise might receive without the levy.
We need a better objection than that.
Bilb, thanks, the exported coal is not on our carbon balance sheet which is why Garnaut’s scheme misses it. But we know that the importers won’t offset it either. So we can catch it this way.
In my view the accrued credits should not be tradeable in Garnaut’s scheme (keeping that scheme’s integrity), but instead would be tradeable on say a European scheme. This ensures no overlap between the schemes. Since its exported coal then it makes sense that its derived credits would be sold through export also.
Surely you don’t imagine that the Australian coal export industry will completely shut down because their gross receipts (after levy) will only be say 120% more than last year and not 140% more than last year.
Thats just at the gross level.
The net profit analysis will be even more staggering. Lets say the cost of producing metallurgical coal to port is $70/tonne.
Do you seriously imagine they would not agree to export it (gross after levy) for $280 per tonne if holding to $300/tonne meant no sales?
If the export price of coal less the levy was below the COGS then you would have a point. But if you read my post you would see that I said the levy should be less than today’s price minus the price 5 years ago. That wasn’t a random statement I said that simply in order to ensure they remained profitable, thus anticipating and addressing the objection you raised. This is why I was so surprised to see your expectation of zero exports as a consequence.
Re #51:
Robert, while I agree that if we reduced coal exports here then there will be some increase in coal mined elsewhere, I believe that the extra coal mined will be significantly less than the reduction in coal exported (so the total amount of coal mined will decrease). I disagree with Gilbert that costs will not be passed on to customers, some of them will be. The key issue is instead the price-elasticity of demand for coal, and the price-elasticity of supply for coal. A sufficently high levy on coal exports would reduce the amount of coal exported and increase its price. For this increase in price to lead to an equivalent amount of coal mined elsewhere would require one of two possibilities: (1) coal supply is completely price-elastic (the price-elasticity of supply is infinite, or much greater than 1); or (2) coal demand is completely price-inelastic (the price-elasticity of demand is zero, or at least very close to zero, note that the price elasticity of most goods is negative).
I believe the crucial number is the ratio of amount of extra coal mined elsewhere to the reduction in the amount of coal exported. I don’t think this number is 0 or 1, but I think that if it is anything less than 0.9 then there is a strong case for a levy on coal exports.
Inelastic demand is associated with necessities, such as staple foods and so on. If there are substitutes, such as gas, then demand becomes more price-elastic. The price-elasticity of supply depends on factors such as spare-production capacity.
All of this is a bit of an oversimplification, because there are issues such as substitution with other types of coal. The elasticities of metallurgical coal are likely to be different to thermal coal as well.
Robert
The purpose of the levy as described isn’t to reduce coal exports, the most likely medium term future is increasing exports, constrained only by our port bottlenecks. Given enough red wine I might even wager that a 100% levy (conditional upon it buying the coal exporter carbon credits they could sell in Europe) would make no difference to Australian export volumes. To be absolutely clear though I don’t propose anything remotely this extreme
The purpose of the levy is instead to raise funds to decarbonise our domestic stationary generation. This purpose has merit for many reasons. Chiefly though its because Garnaut is inhibited from doing enough because of the domestic pain he would cause due to the constraints on his scheme.
However there is more to the story. In the event the levy were sufficient to eventually fund (along with Garnaut scheme) total domestic decarbonisation then its a reasonable bet that we would have by then developed a formidable skills base in the area of decarbonisation. At this point we should expect that the coal export levy will be earning more than ever since industry projects coal exports will be 50% higher by 2050.
So with the skills base in place and domestic decarbonisation achieved and the ever higher levy revenue we can then start phase II of the journey. We can deploy our well developed decarbonisation skills overseas and commence building clean plants in other countries all funded by the ongoing coal export levy.
Once we start building clean plants overseas this would for the first time directly attack the foreign demand for coal and at that point (and not before) we would expect the scheme to cause coal exports and levy earnings to slowly fall ultimately bringing the process to an end when coal revenues can no longer support a levy. That day is a long way away, my grandchildren likely won’t see it.
It is feasible we could continue to own the foreign plants we build and thus derive revenues from their subsequent ongoing sale of clean energy.
Of course this may not be such a good idea if you are committed to a nuclear future. In that case its best to do everything possible to dissuade any initiative (such as this) that might (for no domestic political penalty) fund solar thermal generation.
The more successful domestic solar thermal plants we build the weaker the case for domestic nuclear generation. I imagine a committed nuclear lobbyist would be building a strategy (using all the delightful tactics of the tobacco and coal lobbies without too much concern for the greater good) around thwarting David Mills and his ilk.
Peter
You must also need to keep non-price constraints in mind, like port bottlenecks. Such constraints can mean no matter what the international price (above a certain level), the Australian export volume will not change, meaning momentary prevailing elasticity is indeed zero.
We would not expect this to be the case forever (or even very long) of course. The elasticity will not be constant, it will vary as the constraints vary.
Yes, bottlenecks would decrease the price-elasticity of coal supply in the area that experiences the bottleneck.
I think that what I would like to see is slightly different to what Gilbert is proposing. I would like to see a price on coal exported that is sufficiently high that there is a reduction in production compared to baseline if the country that we export to does not have some sort of price on carbon. I think this price should eventually approach the expected social cost of carbon (which will cause reductions in production). A small coal export levy would still be a good start.
I should mention that hardly any of the coal we export goes to China, our biggest customer by far is Japan, consuming 44.2% of our exports, by comparison only 2.4% of our coal exports go to China. A summary of our coal exports are here.
The issue of elasticities I mentioned in my previous post also applies to other greenhouse-intensive commodities that we export such as beef and aluminium. If we reduce production of these quantities while attempting to reduce emissions, how much will production increase elsewhere, leading to increases in emissions?
I was thinking about this issue one weekend and playing with some partial derivatives and came up with an equation that may help answer this. My background is mainly in mathematics rather than economics, so if any economists (or anyone else) has any comments, then they would be appreciated. Maybe someone has done this stuff before, in which case I would love a reference
I am assuming ‘market clearance’, so the total quantity of the good supplied is equal to the total quantity demanded. I obtain:
R = Q_o E_s/( Q_t E_d – Q_o E_s)
where:
R is the ratio of the change in supply overseas to the change in supply exported;
Q_o is the quantity supplied from overseas;
Q_t is the total quantity;
E_s is the price-elasticity of supply;
E_d is the price-elasticity of demand.
The whole issue of spillovers and carbon leakage seems to relate to this stuff. If reducing coal exports decreases emissions overseas, then this may be an alternative to assistance to TEEIIs or border adjustments.
Robert, it’s one of Humphrey’s maxims of government (I know it’s the opposition, but still):
1. Something must be done.
2. THIS is something.
3. Therefore, THIS must be done.
Petrol will be A$3 per litre in four years time, Robert. Absolute production figures are up – but it’s production figures relative to demand that sets the price. Demand is increasing faster than drilling and refinery output.
Also, new oil is always more expensive to produce than the oil we used yesterday. The latest big oil strike is 6km under the sea in Brazil. That oil will come with a hefty premium attached by the time it gets to your local 7/11 in about ten years time.
The only cheap, geophysically speaking, oil left is in geopolitically very expensive places like Iraq.
(I saw on Dateline last night that Chavez is using the oil weapon in a most imaginative way! Donating it to New Yorkers who can’t afford to heat their tenements any more. Cheeky bugger.)
And thanks for the explanation, tim. Perfectly clear.
I am on board with Gilbert’s levy and all. And think that Peter Wood’s equation looks very sexy. If it’s mathematical content is as good as it looks then let’s decrease exports and have a levy. Do both.
Yes, it is good. Resilience from distributed production is a good thing. During the recent lengthy wind-related power failures in Melbourne, or house kept running as it failed over to use PVs and batteries [Link].
There would be a high total cost of Melbourne’s outage – and the cost to residents whose freezer contents all thawed out and went in the bin.
Also, do you realise that buying greenpower places no requirement on retailers to reduce their purchase/supply of coal-fired power by a corresponding amount, and they can’t actually do this as they don’t have real time feeds to know how much renewable power they are actually getting at any point in time?
[Link] Their energy purchase is based on forecasts from the previous day and other parameters such as day of the week, weather etc.
I think we have a prisoner’s dilemma.
I did a bit of googling and dug up some elasticity figures (see here and here). Estimates of the price elasticity of supply of coal were between 3 and 10; estimates of the price elasticity of demand for coal were between -0.1 and -0.4. World coal production is about 5340 Mt, Australia produces 308 Mt and exports 239 Mt (using figures from here).
Substituting into the equation in post #60 gives values of R between -0.87 and -0.99. This would suggest (if my equation is accurate) that if we reduce coal exports by 1 metric tonne, then between 870 kg and 990 kg would be mined elsewhere.
What to do in a prisoners dilemma depends on both ethical and strategic issues (although a cartel, reducing Q_o, would be nice!). Climate change is full of prisoners dilemmas (as has been discussed by people like Stern and Garnaut elsewhere). Needless to say, if no-one cooperates and reduces emissions (directly or indirectly) then the planet is pretty stuffed.
Peter
Your analysis appears consistent with what both Robert and I expect in comments above. That is reducing tonnes exported from Australia will make no appreciable difference to global export volumes in at least the medium term. Where Robert and I differ is I doubt his claim that a coal export levy (that ensures continued profitability) will make an appreciable difference to what we export. The result (insofar as global export volumes are concerned) is the close enough to being the same either way. In that regard all three of us essentially agree.
I agree with your point that a levy is most valid in cases where the customer does not offset. I disagree with your dismissal of China as an importer of our coal. It is not the immediate demand, it is the trajectory of demand, or more precisely the expected share of future volumes that counts. As a mathematician you should understand this. It also doesn’t matter who our present customers are exactly, what matters most is total expected future imports from each customer since it is an open market.
Where I appear to differ most critically from Robert is I believe that directing the export levy to domestic decarbonisation through funding clean energy generation has merit. Extra funds for clean generation will have the effect of reducing domestic emissions more than Garnaut will be able to. This seems important enough to pursue. Basically its a way of achieving more without more harm to the disadvantaged voters since a coal export levy in and of itself won’t inflate domestic electricity prices.
I see the biggest domestic political obstacle to decarbonisation is the perceived voting power of those expected to experience higher energy prices. Accordingly a strategy (like a coal export levy) that sidesteps that domestic obstacle increases the likelihood of domestic decarbonisation occuring.
I think that bloke was talking about concentrated solar power which is a high temperature power station process, rather than the photovoltaics used on home roof installations.
Here’s one story.
Gilbert,
One thing I forgot to add is that the price-elasticity of supply is much higher in the medium term than the short term, so in the short term the increase in volume mined elsewhere will be less than 90%, in the medium term greater than 90%. I guess the ‘medium term’ is how long it takes for countries to expand mining, transport and export facilities and so on. A levy like you propose would make a difference in terms of more money being spent on reducing emissions, which cannot be discounted. This would need to be in addition to a domestic carbon price signal. Political issues to do with a carbon price increasing costs could be easily addressed by returning some of these costs to consumers in a way that does not depend on consumption, like increasing the low income tax offset, for example.
I think that in the long term the game theoretic aspects become more important. An important question is should be reduce emissions by reducing emissions at the point of consumption, or point of consumption, where fossil fuels are dug up from the ground, or both? In 2002 coal is only responsible for 25% of CO2 emissions,so there is absolutely no way that an approach only based on production would work. I do think both approaches are important however, although the prisoners dilemma is not so bad when dealing with consumption as it is with production.
A tax or levy on coal that is exported to countries which do not apply a carbon price does increase the coverage of a carbon price signal globally. This would help resolve the prisoners dilemmas associated with reducing emissions at the point of consumption. I think that a commitment from Australia to tax or reduce the quantity of coal exports if other countries do the same also has merit. If you apply the above equation to a ‘cartel’ which reduces exports then Q_o (the quantity supplied from outside the ‘cartel’) becomes smaller, and R becomes smaller in magnitude.
On the subject of China, I don’t know what the coal import market will look like in the future, so I am using figures from the present. India imports 8.4% of the coal that we export, perhaps it will become a more important customer too. China produced 2482 Mt of coal in 2006, so it seems to be supplying most of its own consumption.
Peter
The article at this URL seems to give a handy picture of China’s immediate trajectory:
http://environment.newscientist.com/channel/earth/dn13765-china-down-to-12-days-of-coal-stocks.html
I agree the export levy should be an adjunct to a domestic price signal. The export levy gives us power to do more without adding an even greater number of distortions to protect the disadvantaged. It also looks like a no-brainer from an expected net voter response perspective. It should be easy to sell to the masses.
I agree that once markets reach long run equilibrium such that both supply and demand respond smoothly to price changes then the levy will have greatest power to alter global volumes. I suspect though that we are far from such an equilibrium at this juncture.
Aside from the merits of simply doing the right thing, I firmly believe that decarbonising our domestic energy generation makes us less vulnerable from a global political standpoint. Its about getting our house in order in advance of the storm.
The world will become increasingly intolerant of excess emitters, especially excess emitters with a population of a mere 20 million or so.
I can’t help but think that a lot of you are missing the point here, when you talk about the issue of cost and payback times etc etc. There’s so many benefits that solar power can provide, and the financial aspect is (to me) waaaaay down the list of factors that I consider.
People are going to the ends of the earth to conserve water in Victoria, because we are well aware that there is not much in the catchments. No one calculates the cost of a water tank, and compares the storage capacity to the cost of turning on a tap in the kitchen. Why do we think so differently about carbon emissions? Of course electricity produced from a coal fired power plant is cheaper than producing solar electricity, but for me it is not the point. We need to stop thinking about mains power as some bottomless well that can supply endless amounts of electricity, because global warming is a real issue.
Well, I do. And retrofitting water tanks are a massive waste of money, compared to replacing inefficient appliances, recycling sewage, or desalination, even renewable-powered desalination.
And that’s money that could have been better spent elsewhere.
You have to make the options accessible for your average suburban family. Renewable-powered desalination is not realistic for the average punter, and there is a lot more maintenance involved. Not to mention limitations on how long you can store the treated water (bacteria etc).
Why not pat people on the back for making a concerted effort to reduce their water consumption, instead of telling them they are wasting their money on the ‘wrong’ solution? It’s a matter of opinion.
Andy: because a lot of the effort that people put into making their activities “greener” actually makes SFA difference. They pat themselves on the back, thinking they’re doing their bit, and then they rack off to Peru for an eco-tour.
In the process, the CO2 released from the plane does far more damage than anything they will have done domestically to reduce their impact on the environment.
Robert,
you keep telling us that various suggestions are “a waste of money”, “will make SFA difference”, etc. Obviously you know all the figures & costs, but most folk don’t. So would you please either
i) show us where we can obtain reliable figures, or
ii) cite costs etc every time you dismiss or scorn a suggestion.
Because if you don’t do either, people reading your posts may just get into the habit of rejecting your comments, out of hand.
We want facts WITH opinions. Nothing wrong with opinions, Robert. It’s just that if you don’t give us any inkling of your reasoning,……. then your opinion really is just as ‘good’ as anyone else’s, cobber.
BTW, a few weeks ago, when discussing bicycles on Alexandra Parade (I think) you referred to “the wastelands of Ringwood”. Was that just an Inner City put-down? Do you really size up your fellow Australians, based on which suburb they live in? Just wondering….. Or were you joking?
Just for the record…
The Vic government have just announced a feed-in tariff of 60c/kWh net, that is, for power a home PV system owner doesn’t use in their home and exports to the grid. This will be small beer indeed for owners of 1kW systems like me as most of my PV-generated power will be used in my home. A payback of somewhere around $100/yr (above, of course, the price of the power I use) against a capital cost of $10-14k for the system before the $8k rebate.
I guess one of the effects of this figure – which is a fairly generous amount compared to other states – is that you’ll get far more out of the feed-in tariff the larger your system is. As per preceding discussion on this post, large PV systems on factory rooves, where the majority of the power generated is exported, would be the principal recipients of this feed-in tariff
The approach seems here to be keep the amount high (at 60c, it’s about 4 times the current price of 15c/kWh) but make it net so you maximise the amount available to the grid.
btw, Ambigulous, I reckon Robert has provided a bit of meat with his potatoes. There are plenty of facts available in links in the early comments of this post to back up his slightly bolshy tone….
As for water tank costs, you can try this study, commissioned by the Australian Conservation Foundation.
As to why I get so cranky about water tanks, the Peter Martin column sums it up nicely – the ACF spun the report in such a way as to completely distort the meaning.
As far as the comments on the outer suburbs, yes, I’m a proud inner suburbanite, and Ringwood is fairly low on my list of preferred places to live (if I’m going to live in the sticks, I’ll do a proper job of it and move out of Melbourne). Doesn’t mean that I think the citizens of Ringwood are inferior human beings, just that they value different things in their choice of preferred places to live. But, yes, in retrospect it wasn’t the most careful choice of words.
Thanks Robert, sorry I got a bit cranky. Thanks for the extra info.
cheerio
[no, I don't live in Ringwood!!]
]
[once in deepest Gippsland, now in shallower Gippsland
Aussie Oskar wrote: “Just for the record…
The Vic government have just announced a feed-in tariff of 60c/kWh net, that is, for power a home PV system owner doesn’t use in their home and exports to the grid. This will be small beer indeed for owners of 1kW systems like me as most of my PV-generated power will be used in my home. ”
bloody ripper.
So the feed-in is proportional to excess generation (rising with installed capacity) while the rebate is a FLAT $8,000.
This will make it attractive at BOTH ends of the wealth spectrum I think.
FLAT rebate encourages someone to install small system of say 1kW. Generous feed-in tariff may be an incentive for VERY LARGE rooftop installation (small business, small factory).
You star, John Brumby. Outdoes Greg Hunt within days. The advantage of incumbency!
cheerio
Has anybody managed to locate the press release with the details of the scheme?
Given my plans, I have a fairly direct financial interest in knowing…
Robert it all sounds like bad news for small scale solar generation as Aussie Oskar points out at 75. You only get very well paid for your excess. This is the best detailed link, so far. Just the leak.
http://www.theage.com.au/news/environment/solar-power-payment-scheme-comes-under-attack/2008/05/05/1209839553606.html
Things would get more interesting if this little baby, that has been touted around the blogosphere, were to come into the equation.
http://www.usatoday.com/tech/science/environment/2008-04-28-solar-power-sunrgi_N.htm
Thanks for the links Joe2 – and for the Peter Martin article on rainwater tanks. For me, PM’s article helped show why support for feed-in tariffs has persisted on this thread…. (again, I must plead guilty to economic stupidity here. I installed a tank for indoor use with a payback period of around 20-25 years at current prices – sometimes you just do things regardless….)
Ordinary householders can’t choose between extending Loy Yang and building a 50Mw wind farm any more than we can choose between pumping water long distances or buying rural water. We can only make decisions about our own back yard and incentives like feed-in tariffs turn completely uneconomic decisions into almost affordable ones so in we jump.
Inefficient as any particular scheme might be, the effect is that a latent desire among the punters to actually do something, whether it be about water or climate change, becomes much clearer to the pollys and hopefully, more effective policy will follow.
Of course it would be better for the right advice to make it into the ear of a particular minister in the first place but, for whatever reason, that’s not the way it generally goes. Politicians prefer to lead from behind and mass shows of support are the kinds of things that tend to jab them into action. If inefficient rebates help kickstart this process then they’re not as silly as they might seem on paper.
I think rainwater tanks are an excellent and effective option. Some data and our experience (nearly self sufficient in Melbourne’s Surrey Hills for 6 years) is here: [here]
I think the Victorian’s government “water grid” strategy is ill considered, climate change unfriendly, and has been announced with an air of panic. Detailed analysis here: [link]
Victorian Labor’s FIT is basically lame. Rebates are for 1kW solar systems so most people have 1kW solar, but most households need about a 3kW system to generate an excess. So they announce a feed in tariff paid only to excess power (net metering) generated knowing full well that this won’t stimulate an uptake of solar because you have to pay for the first $20K of the system on your own without any feed-in money.
And every watt generated by solar saves a watt generated by fossil fuel power. So it should be rewarded accordingly, as is the case in Europe, by FIT paid on gross metering.
“Its a setback for our country”.
PS: More information on feed-in tariffs is available here: [Link]
PeterC
I think a FIT on 1kW could still see some hoseholds being paid for an excess. Especially “working families” (!)
I expect that if my wife and I are away from the house for 5 days each week, working full-time, during hours that include noon, a 1kW set-up would generate quite an excess (esp if we remmber not to have appliances idling on standby while we’re out). As far as I can see, it’s only fridge & freezer (intermittent users) that run while we’re out working.
That’s about 230 days each year based on a 48 week working year with a few public holidays.
cheerio
No sorry, a rubbish policy is still a rubbish policy, even if it’s got a very high feel-good quotient, like this one does.
Here’s the facts on water tanks by the melbourne Water MD:
While keen to encourage enthusiasm for raintanks, some of Melbourne’s top water officials have grown weary of the popular belief that the city’s woes could be solved and desalination avoided by putting a tank in every home.
At a conference earlier this year, Melbourne Water managing director Rob Skinner broke down the numbers to debunk the myth.”
If everybody in Melbourne installed a 2.5 kilolitre rainwater tank and connected it by a pump to their garden and toilets then we would save an estimated 50 gigalitres per annum. That’s well short of the 240 gigalitres (from desal and the north-south pipeline etc),” he said.
Skinner estimated connection for such a plan would cost between $2 billion and $5 billion to set up, with annual operating costs of around $100 million, making it less viable than the Government’s existing $4.9 billion water plan. [link
of course, that said, I have a water tank and am about to get solar panels. With my 1 kw system I fully expect to generate excess electricity all summer long. Maybe your house needs to become more efficient, peterc?
I am a little bit amused, here, Ambigulous and wilful, at some of your collective advice to PeterC who has practical experience of the plans you are just contemplating.
I would imagine that your fridge and freezer would knock out your 1KW, pretty much by themselves, Ambigulous. And wilful, when you have lived with your solar system for around 4 years it might be the time to advise another, with a family, on energy efficiency.
For the record, i have a motley collection of water tanks and a system of tiny shed style solar lighting inside the house. That has helped me practically get my head and hands around the issues, just a little. I still have great sympathy for Aussie Oskars’ comment….
…. “If inefficient rebates help kickstart this process then they’re not as silly as they might seem on paper”.
Actually joe2, all I need is a year of power bills to work it out. I know that I am going to be a new generator in summer, and overall a small net consumer. The proposed feed-in tariffs will make it all about square. Which is nice for me. And yes I have a family, and no we don’t suffer privations, we’re just sensible. At home at the moment the only thing going is two clock radios and one 4.5 star fridge. Tonight we’ll have an hour or so of telly, an hour or so of laptop, a gas-heated dishwasher and a few CFL lights. Nice to be on gas of course, but really not difficult. Of course it’s officially also 100% offset green power, but I’m still suss on that.
The point is that all these ‘policies’ are expensive and highly inefficient, they are probably not the best way to allocate scarce energy efficiency/renewable energy generation dollars. because I’m affluent and switched on, I choose to make my decisions supported by government. Just like I like the baby bonus etc. Still doesn’t make it right.
net, not new
Wilful, that sounds frugal on a spectacular scale. Surely you cook your food and heat your water too, or do you live the life of an ascetic?
Gas, gas, gas (an ecstasy of fumbling).
I haven’t yet gone green gas however.
with a 5.5 star instantaneous gas hot water system like I’ve got the net carbon payback on converting to gas-boosted solar is practically zero.
Ambigulous @ 78,
I’m afraid they’ve thought of that and shut off the option. The tariff applies only to installation up to 2kW. It’s a clayton’s feed-in and obnoxious greenwashing in the extreme. Trying to find time to post on it at Greensblog.
Hmmm. More craptacular policy.
In any case, perhaps I should price an upgrade to 2kw for my proposed solar system?
Thanks tim at 3.56pm.
joe2: I wasn’t giving advice to anyone, cobber! I was thinking out aloud about my (imminent) decision to instal 1kW at home. Thanks for the tip: I’ll check how much power the fridge draws. I still expect to be a net generator on many days. Only while it’s an empty house, mind.
I’m reassured that Robert Merkel is now considering 2kW. He’s a gentleman who knows the figures backwards and sideways.
cheers
Detailed post now up at Greensblog here
Apology Ambigulous and good post tim.
I reckon Brumby and co have just embellished the Beach House Grant.
Eight grand for the panels from the feds plus another one or two if you shop carefully. No one lives there except for a weekend a month and you get money back on the power bill on that one watt arrangement.
People in Canberra may be interested in a public talk on solar energy feed-in tariffs by Hans-Josef Fell on Thursday May 15.
I was just looking at some statistics for German energy production. Germany is quite famous for its solar-energy feed-in tariff. Germany has 22.2 GW of wind capacity, 6 GW of solar thermal capacity, and 1.15 GW of solar photovoltaic capacity. A total of 4.4% of German electricity generation is due to wind, and 0.2% is from solar.
Feed-in tariffs may have a role to play as a technology policy by decreasing the price of photovoltaics by increasing production (learning curves are a good way of looking at this). However, their direct role in climate change mitigation is quite minimal.
Joe, the AGO/Dept Climate Change requires your drivers license imprint for proof of address to receive the $8k grant. And a rates notice. Doesn’t quite work for a beach house (but I like the idea)
Robert, I did the sums on a 2kW system (without any FIT, net or gross) and they were still attractive. But because the $8k pays for most of the 1st kW and none of the 2nd, it was an 11yr payoff for the 2kW vs 3yr payoff for 1kW.
And thanks Tim for the post on greensblog. I hadn’t seen the max. of 2kW for FIT. You were spot on with ‘good for a few press releases’ comment.
energymatters.com.au, regarding the Victorian budget announcement today:
It depends on whether it’s instantaneous excess, or net excess.
If they’re paying the feed-in rate for the instantaneous excess, most people will get some payment.
wilful @ 11:35 am
Our smallish house is 6 star with the most energy efficient appliances we could buy: [Link]. Happy for any specific suggestions from you on how we can make it more efficient. It is about twice as efficient as the average new home built under our current (deficient) five star standards. We get a small net metering payment on our bill from our 1.5kw array.
The point is that EVERY watt of green power generated should get the FIT paid – as is the case in Germany – and that is why they now have 4,000 times as much solar capacity as Australia. It is proven business model that works – and an almost total greenwash cop out by Vic, SA and QLD Labor.
If you think you will make money on a 1kw system you will have to turn off your fridge and only use CF lights. No electric heating or cooking, no iron, no electric jug etc. Most houses will generate a significant excess with an array >2 to 2.5kw, as per information provided by wbb, which is spot on. More info here: [Link]
Don’t forget that gas has signficant GHG emissions too, albeit lower than electricity. But when used for heating and hotwater, your total GHG emissions from gas would exceed those from electricity (with no solar).
Labor had a real chance to do something significant this time – they have blown it – largely due to Peter Batchelor’s intervention apparently: [Link]
This is a disgrace.
PS: Germany has 400 times Australia’s solar power capacity (and gets half the sun!), not 4,000 times (sorry about the typo).
The Brumby Govt’s cap on 2kw for the FIT is a Catch 22. You need about 2kW to produce enough to generate a reasonable net output to the grid, but arrays over 2Kw don’t get the FIT.
Typo? As I think ACDC once said – it’s a long way from the zero to the comma if you want to rock and/or roll.
Hey wilful@99 it was in todays “Age”. It must be true.
“Lobbyists argued the Government’s scheme would attract wealthy families with a holiday home by the beach but do little to win over people who spend more time at home.”
http://www.theage.com.au/news/national/row-led-to-watereddown-solar-plan/2008/05/07/1210131069596.html
And Peterc @103 thankyou for the great practical info. I could not get the first 2 links to open, unfortunately. Probably at my end, though.
feed-in tariff will be for net excess generation. so once net metering is installed (which all victorian households will have in a few years due to smart meter roll out) – you will gain somewhat from the tariff.
in the SA scheme they have found that with half hourly metering you could export up to 25% of the energy. if really sunny spot, perhaps up to 50%…
of course its not as good as gross for the owner, but i guess its a way of balancing a huge pay off to the upper classes but appeasing the likes of BP solar and green groups…
although the 2kW cap is a shame as schools and big business could have come on board.
I’m trying to understand how this FIT will work in practice, but haven’t been able to find the info. How is it calculated? Is it the net result per power billing period, per year, or something else? I have a 1kw grid connect order stalled at the moment (and I really feel for the companies caught up in this) as I can’t figure out how FIT will affect me. Essentially, I expect to be away from home for a couple of months at a time travelling, but that may not help much if it is an annual calculation. Anyone found an official explanation of this and can point me in the right direction?
Great to flick through and see the discussion. I’m about to go with a setup with Breamac in Preston Melbourne. Managed to get a small crew of people together and get a discount for all. Looked into the Beyond Building Energy idea but the upfront $9K was a bit much and seemed like a bit of a long wait to get something on the roof. I’m pretty excited about getting 1.2k system that should pretty much take care of my power. Might even turn the house off on holidays and get a financial reward on return. As far as payback it pretty much is a non issue. It will certainly be the first domestic object I’ve considered buying that has the ability to do something(make electricity) whilst paying for itself. My car just depreciated another percent as I write whilst needing a new bloody clutch #@*$#@$#4%$$$. You know I was considering off setting my car use etc the otherday with one of those schemes and realised putting solar on my roof will offset 2 cars a year. It just gets better. So for the price, and I know it is with the help of the large rebate go for it. Let you know how the install goes. Cheers Robbie
Hi all. Interesting post. My thoughts below:
Personally i feel that government support is what is driving the solar industry at the moment, and will need to continue for at least 20 years if it is to succeed to any real effect. Although the VIC scheme has the best rate, its 2kW limit is pathetic, and a complete waste of time. I feel the SA model (also taken on in QLD) is the better option. 44c with a 10KVa per phase limit. Without going too much into converting kva to kw this will allow any homes or small business with a 3 phase connection to have an installation around 25kW. Thats huge! even if you get your panels cheap it will still cost in excess of $230,000 for an installation of that size, and to be rewarded 44c/kWh for your excess is great! If a national scheme is to come into play, lets hope they follow SA’s lead.
On another note it is a real shame to see that Feed in Tarrifs (FiT’s) only apply to direct fed solar. No other technologies are included even though (as already pointed out) are much more cost effective.
What would be even better is having an australian approved “over unity magnetic motor”. Something like what Perendev developed overseas. $120,000 will get you a 300kW free power generator puchased, shiped, taxed, approved to australian standards and connected to the grid with a return period arround 5 years (with a wholesale buyback rate). Thats the way to go, but it will be a year or two before this takes off in Aus.
Untill new solar and other technologies are available and prices drop the only thing making it feasable (appart from the positive environmental effects) is the goverment rebate of $8000. Get in quick though. The 1kW system is the best bang for buck, but will not do a whole lot for you! At least it will add value to your home and sets an example for future generations.
Good thread guys! Interesting to read everyones views. I could ramble all day, but i better get back to work.
It looks like the Brumby government is proceeding with their “Claytons” feed-in tariff, despite the Federal Senate bill specifying gross metering, and ACT already having a gross tariff with a 10kW array cap.
Batchelor’s hissy fit has succeeded in crippling Victoria’s feed-in tariff. Why has he done this? Surely only the power companies benefit by Batchelor’s actions by having their monopoly on supply protected?
Batchelor’s only apparent justification is bullshit: any financial impact on low income households could be offset by a concession.
[link]
Have economic analyses of feed-in tariffs been conducted?
The Victorian Govt seems to have an ambiguous view of brown coal power. For example, to get a solar hot water system subsidy, you must use natural gas for your supplementary heating (not electricity), if gas is laid on in your street. And clearly that’s a lower CO2 method.
Yet they’re pushing “clean coal”. The power of the coal mining unions is still strong.
“Surely only the power companies benefit by Batchelor’s actions” … and the employees in those companies, and the unions representing those workers, and the companies and and businesses and tradies subbing to the power companies, and their employees etc etc … surely that’s one of the aspects of “going green” that scares the living daylights out of the decision makers, how many workforce eggs we have in the black basket.
If we were to “mine” the sun at scale, with our north facing roofscape resource, and maybe wallscape, as the “ore body”, it’s a decentralized operation, largely set and forget, remotely admin’d, it won’t require huge and continuing amounts of heavy machinery and their even heavier operators. The centralised part will be the manufacture, and that will be in china and india, and lest we forget, on a planetary scale, that’s where greening is most urgent, and fortunately, plausible, because they are capable of the necessary capital and skills aggregation. Australia’s, and especially Queensland’s, contribution will be to simply stop the heroin supply that is coal in an energy-junkie world.
To continue the metaphor, what do we do with Australia’s poppy farmers? Turn them all into Solar installers, and photonic energy transduction and storage mechanism researchers? I don’t think so.
Sacha, the economic analysis of feed-in tariffs that informed the Brumby Governemnt’s cabinet decision (biffo between Jennings and Batchelor; Batchelor won) on their proposed legislation is classified as “cabinent in confidence” – they are refusing to release it – I was informed of this by Batchelor’s office.
If the information is valid surely it should be available? To my mind, this means it is quite likely they have something to hide.
Danny, I think your are on the money. There are of course opportunties for embracing distributed local power generation (and water storage too) but our governments and industry cannot currently get their heads around this.
We need better leadership to get us moving towards a safe climate future.
I reckon they can get their heads around it all right, do stuff, they just don’t have the guts, for fear of upsetting the McMansion Dreaming.
‘frinstance on the demand side, in WA, where 90% of homes have aircon, and 30% have more than one, a trial was able to reduce peak power energy use by 27 percent by remotely switchng off the compressors for a few minutes occassionally, and staggering the intervention across the customer base. People didn’t even notice.
How many coalmines exist just for peak power provision purposes? Oh, and as I say, to provide employment to an otherwise difficult to employ demographic.