Solar electricity subsidies will pay off in the long run

Professor Eicke Weber, director of the Fraunhofer Institute, Germany's premier solar research institute states that with each doubling of the globally installed PV volume, the price comes down by about 20%. Dr Rob Gross, a director of the UK Energy Research Centre has likewise claimed that PV is one of the most promising technologies in terms of long run energy cost reductions.

Additional benefits of PV include avoided transmission losses, distributed generation, driving solar market growth, lower wholesale power prices due to the merit order effect, as well as avoiding other environmental damage from coal fired generation such as mercury pollution and toxic waste ash disposal problems.

PV does not just provide greenhouse gas abatement. It also provides particularly clean electricity, produced in peak at the daytime peak time of use, particularly in summer when air conditioners are in use.

Corporate interests in NSW seeking to insulate their profits against the possibility of a carbon price and the costs of updating and improving the electricity network have started a scare campaign about rising electricity prices supposedly being due to solar power.

However, the FIT in NSW is not responsible for anything other than a tiny proportion of electricity price rises. There is simply not enough solar PV installed yet to make any significant change to the total electricity price. The impact of feed-in tariffs on consumers will be very small (in NSW $7 per year, in Germany, 3E per month) compared to the cost of big investments in carbon capture and storage, nuclear power.

Other forms of energy market support will add billions per year to taxpayers bills, with little or no chance of being rendered cost-neutral. Nuclear waste alone would add more than $5 billion a year to its cost in Australia.

Certainly, after two years of dramatic falls in the price of solar panels, the NSW feed-in payment required some adjustment. However, instead of tweaking the feed-in tariff, the NSW government slashed it from 60c/KWh to 20c/KWh. This drastic application of the handbrake has led to layoffs and cancelled orders.

If Australia is to learn about feed-in tariffs it needs to review the German model, not using hard caps on installed capacity or slashing the rate of payments, but with a system of flexible, gradual and advertised degression of rates over time.

Microgeneration of electricity by cutting across the control that large corporates have over important areas of social policy will be an important step towards more community-oriented and more rational (less profit-focused) social and environmental policy.

Solar PV support circulates money in local communities, enhances public engagement (including greater energy awareness potentially leading to demand reduction), diversifies the energy mix, reduces dependence on (imported) fossil fuels; leads to greater energy security at the small scale, enhances business and employment opportunities in developing and deploying renewable energy technologies and avoids or reduces losses through transmission/distribution networks.

Over time in Australia, we will find that tax revenues from a growing solar energy industry will become higher than support payments to solar electricity generators. This point had already been reached in Germany by 2008. At that point direct and indirect tax revenues from the solar industry and their employees amounted to three billion euros, whilst payments to solar generators under the feed-in law (EEG) amounted to two billion euros.