Cloud over future funding of solar power

But the reality is the boom in solar photovoltaic (or PV) panels has come thanks in no small part to state and federal government subsidies.

And as solar panel prices come down and carbon prices approach, some serious policy questions are being asked.

One key policy that's driven the boom is the state-based “feed-in tariff” that pays householders for unused clean energy their systems feed into the electricity grid.

Queensland's FiT is credited with creating jobs and for modest cuts in greenhouse gas emissions.

But now federal environment minister Greg Combet has said the tariffs are sometimes unfair and too costly, and he wants to discuss them with his state counterparts.

The federal government's proposed carbon price was “the most efficient, lowest cost way of reducing pollution”, he told the National Press Club last week.

But it appears Mr Combet could have a fight on his hands to convince the Queensland government to scrap its scheme.

According to the Productivity Commission, in 2010 the various state government FiTs cost $96 million across Australia, with a $21 million share for Queensland.

The other main solar subsidy is the federal credit – part of the Renewable Energy Target legislation - which householders get to help pay the up-front cost of the panels.

The commission said if the policies were taken as a way of cutting carbon emissions (which isn't their sole purpose), then each tonne of carbon cut cost between $431 and $1043.

Queensland's FiT pays householders 44c for every surplus kilowatt-hour they feed into the electricity grid – almost double the current retail price for electricity. Those payments are guaranteed under legislation to last until 2028.

Energy Minister Stephen Robertson told brisbanetimes.com.au that he was “open to discussions” but Queensland's scheme had helped put more than 100,000 solar systems on people's roofs.

When the scheme started in July 2008, Queensland had just 1,200 solar PV systems and 78 accredited installers. Now, the state has more than 107,000 systems and about 1000 installers.

While the scheme had cut 315,270 tonnes of CO2, Mr Robertson said it “does a lot more than just help reduce carbon emissions”.

“Queensland's Solar Bonus Scheme is the most successful scheme of its type in Australia," he said.

“It provides Queenslanders with affordable access to solar energy, helping them save money on their electricity bills. It is also helping develop the solar industry in Queensland and create green jobs.”

A planned Gold Coast solar panel factory would employ 244 staff, he added.

A review of Queensland's scheme has already been carried out but there were no changes that affected everyday customers.

But other states haven't had the same stable policy.

In New South Wales, what turned out to be a generous FiT that paid 60c per kWh was scaled back and then, after a failed attempt to retrospectively cut the rate, it was stopped early. An unsustainable boom was followed by an almost overnight crash. The ACT's FiT has also closed.

Last night, renewable industry advocates in Victoria warned hundreds of jobs could go after the state government announced it was scaling back its FiT.

But even as Mr Robertson defended Queensland's scheme, there were plenty of solar industry advocates who said the days of government subsidies for solar panels were numbered.

This was because, they said, the subsidies were close to achieving their main purpose of making the technology cheaper by encouraging demand.

In Brisbane, Rob Farago, co-founder of the not-for-profit solar power company Local Power, says up-front costs have tumbled. In 2008, the unsubsidised cost of the panels to customers was at $9.50 per watt for a 1.5kW system. Now, the price is about $4.

“It's getting cheaper every year and although it's not the cheapest way to cut carbon, it could be in years to come. That's why it is worth supporting the industry.”

Alternative Technology Association energy policy manager Damien Moyse said FiTs were “absolutely the best mechanism” for encouraging investment in solar technology.

One argument against the tariffs, was that other electricity users who don't have solar panels end up paying the subsidy through electricity price rises.

Mr Moyse said in NSW, at one point the FiT was adding about $100 a year to average electricity bills. In Queensland and Victoria though, he said the figure was under a dollar a month.

“But the broader context is that before the end of this decade the cost of a megawatt hour of electricity from PV will match what it costs from the grid. At that point, you don't really need a feed-in-tariff anymore.”

This point at which solar power costs the same as power from the grid, currently dominated by fossil fuels, is known as price parity.

Russell Marsh, policy director at the Clean Energy Council, said solar PV should reach this point by the end of the decade, if not earlier.

But as well as depending on economies of scale that are bringing down costs, price parity will also depend on the strength of the Australian dollar against the Yuan in China, where most panels are currently being made.

So is it time to pull the plug on the subsidies? Not yet, according to Mr Marsh.

“We probably need another five to six years of support,” he said. “That will get us down this gentle glide path to where PV can support itself.”

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