Qld Solar Bonus Scheme shows how bad government policy can cost taxpayers for a long time

The Queensland Government yesterday directed its electricity network business Energy Queensland to remove the cost of the Solar Bonus Scheme from its charges until 2020, which will reduce Energy Queensland’s earnings and hence adversely impact the State Budget (see the media release). So, for the next three years, the huge cost of the Solar Bonus Scheme, introduced in 2008, will now be paid for by taxpayers, rather than being cross-subsidised by other electricity consumers without solar. Average electricity bills will be lower than otherwise, but, of course, there is a large overlap between taxpayers and electricity consumers, so there is a large degree of smoke and mirrors here.

The Government’s decision is expected to adversely affect the State Budget and hence taxpayers by $770 million over three years, as reported in the Brisbane Times:

Government steps in to reverse decision on power price hike

While electricity bills will be lower than otherwise, the adverse budgetary impact means Queenslanders will need to endure higher taxes and charges, either now or in the future, than otherwise.

The Solar Bonus Scheme’s overly generous 44 cent/kWh feed-in tariff, available to households which installed solar PV cells before July 2012, will last until 2028. This is much longer than households will have needed to recoup their investment in solar PV cells, delivering a “financial windfall” to many households, as the Queensland Productivity Commission found last year (as reported by Mark Ludlow in the AFR in February 2016).

Unfortunately, the Queensland Government rejected the QPC’s recommendation to abolish the Solar Bonus Scheme. This was disappointing. It is a highly inequitable policy adversely affecting lower-income households. Even though its impact has now been removed from electricity bills, meaning average annual regional electricity bills will go up only by $50 rather than $100, households without solar will still end up paying somehow, through higher taxes and charges, now or in the future, than otherwise, as noted earlier. The Bligh Government’s Solar Bonus Scheme, introduced nine years ago in 2008, is just another example of how poor policy decisions can have long-lasting adverse impacts.

Hat tip to Joe Branigan who alerted me to this announcement and prodded me to comment.

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11 Responses to Qld Solar Bonus Scheme shows how bad government policy can cost taxpayers for a long time

  1. Russell says:

    Gene, I had to laugh at this. It was always going to come back I to bite. I realised that the PV solar rebate and feed in tariffs were way too high so took it up in the early days because if not I would be paying for everyone else who did. I worked out a four year payback which was reasonably accurate. Since then electricity charges have gone up considerably. I believe at the time the cost of CO2 reduction through this scheme was quoted at about $160 per tonne. Compare that to the short lived carbon tax of just over $20. It was government insanity using our money and NSW started out worse at 60c per kWh of total production not just net.
    My reading of my contract with Energex is that there is a contracted arrangement of 44c per kWH until 2026. I would expect compensation if they attempt to break that as my decision was based on this.
    There is intelligent life out there, just not in recent governments making decisions regarding electricity generation.
    A blatantly political decision to move the cost so that the current government can look better at the next election.

    • Russell says:

      PS there is an ongoing cost of something tlike $500 for a replacement inverter every 5 years or so and the PV cells are only good for about 20 years. I guess people will replace equipment as the price is dropping.

    • Gene Tunny says:

      Thanks for the comment and interesting info Russell. I was meaning to look into what the cost of GHG abatement is with the scheme. I had a sense it would be much higher than the carbon price we had, as well as the one just recommended by Stiglitz and Stern (https://www.carbonpricingleadership.org/news/2017/5/25/leading-economists-a-strong-carbon-price-needed-to-drive-large-scale-climate-action). Yes, it is a blatantly political decision which reduces transparency and attempts to hide the cost of poor policy.

      • Russell Rogers says:

        Gene, thanks for your comments. I believe it may have been Bjorn Lomborg who says that it would be less expensive to simply deal with the impact of climate change than to try to stop it. Moving a few million people to higher ground or alternative countries in the case of Kiribati (112,000 people), higher insurance premiums for storm damage and so on. Attempting to reduce the amount of CO2 is leading to all sorts of untended consequences through poor decision making. Shrinking of the SA manufacturing economy will likely accelerate as more companies more to states with reliable and cheaper electricity. I don’t think Olympic Dam operation would have proceeded under today’s power risk or BHP would have built their own power station.
        A positive for QLD if we can manage that transition a whole lot more responsibly.

  2. Fabian Sparkle says:

    Great post Gene.
    Such a dishonest press release by the Qld Government and another great example of poor policy development in Queensland. The government media advisers must really think the electorate is thick to even attempt to try and shift blame elsewhere for this public policy nightmare. All the Qld Government is doing is shifting the cost of a Bligh Labor Government policy (the Solar Bonus Scheme) from electricity consumers to taxpayers in an attempt to hide what is for all intents and purposes a very expensive and poorly designed policy that should never have been implemented in the first place. Let us be crystal clear, the impact on electricity prices of the Solar Bonus Scheme has nothing to do with the previous LNP Government. As the Queensland Productivity Commission said, this “dog” needs to be put down in the community’s interest.

  3. Joe Branigan says:

    Geno, bad policy begets more bad policy and this embarrassing destructive disaster continues. Subsidising high cost electricity generation technology from outside the market has forced profitable low cost generators to shutdown. This has led to further market concentration and, surprise surprise, covfefe activity by the remaining generators, and now we have a wholesale spot price in Queensland approaching $200 MWh at the evening peak. Sooner or later, energy security will be the no.1 policy issue facing a future Queensland Government…

  4. Glen says:

    Gene, I don’t know why the state govt is reluctant to look further into a substantial lift in the access to network charges which would allow for a drop in consumption charges. This has been the preferred model in the water industry for some time now. A access fee of $1000 PA for every connected premise in Qld would allow for a substantial reduction in tariff. Further this would provide extra incentive for premises that have solar to invest in storage and become fully self sufficient and actually disconnect completely from the grid. It would allow the govt to honour its 44c solar tariff contract whilst recouping some of the costs associated with tramsmission for those on the scheme.

  5. Rob Campbell says:

    For years I have been making the argument, and have even got to the point of seeking a QC’s opinion, that the recovery of the Beattie Labor government’s ill conceived solar bonus scheme through a pass through charge on all electricity consumers was in fact ILLEGAL. I have written several articles on the subject on another platform but here is the reason.
    It was confirmed in the High Court some years ago that states were not constitutionally allowed to impose excise on goods and services, that was the realm of the federal government. As a result petrol taxes and liquor and tobacco excises had to be transferred to the Feds to be redistributed to the states.
    As the current solar bonus scheme has nothing at all with the the production and distribution of electricity, it is a straight hand out, it’s recovery via electricity bills is illegal. The change for the next three years should be permanent if it is to remain if it is to remain legal. What I cannot fathom is that both Labor and Liberal governments have failed to realize that the cost of this scheme can be substantially brought down without sovereign risk via a simple change to the act. I for one am a beneficiary of the scheme but it is way to generous.
    The government via the scheme has guaranteed a price of 44cents per kilowatt exported, this can be maintained, however the government should legislate that any value derived from the sale of the energy to the grid, ie. the extra 6-8 cents we are currently getting on top of the 44cents should be payable to the government, after all they have already purchased the power you have exported, why do you get to sell it twice..
    I think legally this might fly.

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