Solar Power Subsidies Squandered, Australian Study Concludes

Published November 29, 2010

Solar power subsidies are under attack from an unexpected source, as the Australian National University’s Centre for Climate Law and Policy released a November 15 report criticizing the government’s efforts to subsidize solar energy.

In its report prepared for the activist Australia Institute, titled The Australian Government’s solar PV rebate program: An evaluation of its cost-effectiveness and fairness, the likewise left-leaning CCLP documents more than a billion dollars wasted on costly power systems that economically benefit wealthy consumers while producing few if any environmental benefits.

Out-of-Control Subsidies
The report notes the Australian government between January 2000 and June 2009 administered a program that provided rebates to households and owners of community-use buildings who acquired solar photovoltaic (PV) energy systems. Originally called the Photovoltaic Rebate Program (PVRP), it was rebranded to the Solar Homes and Communities Program (SHCP) after a change in government in November 2007. It was discontinued in June 2009.

SHCP provided rebates of up to $8,000 Australian ($8 per watt up to 1kW) to homeowners for the installation of solar PV systems on their principal place of residence, and rebates to community organizations that installed PV power systems for educational purposes.

By the end of May 2010, the PRVP-SHCP had supported the installation of 107,752 PV systems across Australia with a combined installed capacity of 128MW, the vast majority of which were for residential users.

PVRP-SHCP was a modest-sized program through 2007, but in its final 18 months it experienced exponential growth that led to a blowout in costs that bankrupted the program.

Little Return on Investment
Even though CCLP did not question the asserted scientific justification for reducing carbon dioxide emissions, CCLP criticized the fairness of the distribution of the rebates; the limited extent to which the program increased the use of renewable energy; the modest emissions reductions achieved by the program; the high cost accrued per unit of emissions reduced; and the extent to which the program assisted the development of Australia’s renewable power industry.

CCLP’s report directed its sharpest criticism at the program’s high costs and limited emissions reductions. According to the report, the program by 2008 had reduced the nation’s carbon dioxide emissions by only 0.015 percent, at an average social abatement cost of $257 Australian to $301 Australian per ton of reduced carbon dioxide emissions. CCLP noted if a primary object of PVRP-SHCP was to increase public awareness and acceptance of renewable energy, it could have been obtained at a fraction of the cost through other strategies.

Dr Alan Moran, director of the Deregulation Unit at Australia’s leading free-market think tank, the Institute of Public Affairs (IPA), explained how money was wasted in the program.

“Victorian energy retailers have to pay households … tenfold its worth. Other state governments require even greater payments. In New South Wales that price must be paid even for the electricity the consumer uses in their own house,” Moran said. “The costs of this are paid for in the electricity bills of consumers without solar panels.”

‘Parasitic, Selfish, Silly’
Joanne Nova, a former associate lecturer at the Australian National University who helped develop the university’s graduate diploma in science communication, said governments should learn from the failure of solar power and the subsidies in Australia.

“There is no sunnier first-world country than Australia. If solar was going to be a raging success anywhere, surely it would be in the ‘Sunburnt Country.’ Instead the Australian government has poured in more than a billion dollars to install solar panels on the rooftops of private homes. It’s a textbook case of misdirected spending,” said Nova.

“In the end, the government drew money from the population at large to help develop Chinese solar panel manufacturers and provide ‘cheap’ electricity to 107,000 households in mostly medium-high-wealth areas. It reduced Australia’s emissions by a piddling 0.015 percent, at an exorbitant carbon price of $300/ton,” Nova explained.

“Having a solar panel on the roof used to be a badge of pride for the green-minded. But as people realize the panels took money from the poor to give cheap electricity to the wealthy, and achieved almost nothing for the Australian environment or economy, surely they will become seen as the mark of the parasitic, the selfish, or at best, the silly,” said Nova.

D. Brady Nelson ([email protected]) is a Milwaukee-based freelance economist who has lived and worked in the United Kingdom and Australia.