The subsidisation of home solar systems in Australia has been a “policy mess” according to a new report, with capital costs outpacing benefits by in excess of $9 billion.
A new report claims that large-scale government subsidization of household solar systems has come at immense cost to taxpayers and vastly outweighed any benefits.
According to the report by the Grattan Institute the total cost involved in the creation of over one million home solar installations around the country has been $9 billion greater than any benefits accrued.
The Grattan Institute calculates that the capital cost for the installation and maintenance of home solar systems has been $18 billion since 2009, as compared to $9 billion in benefits from GHG reductions and diminished use of conventional power sources.
The authors of the report contend that Australia should have followed the lead of other countries in directing subsidies towards commercial and large-scale solar instead of home installations.
Their calculations indicate that the 1.4 million solar systems installed around Australia have achieved a reduction in greenhouse gas emissions than is less than 10 per cent of that needed for Australia to meet its 2020 reduction target of 5 per cent as compared to 2000 levels.
“Australia could have reduced emissions for much less money,” Grattan said. “Governments have created a policy mess that should never be repeated.”
The report said that government policy has distorted the economics of rooftop solar installation, with individual households reaping the rewards of incentives that “have made an uneconomic decision financially viable.”
The rigid nature of electricity distribution charges has also meant that the benefits enjoyed by households equipped with solar systems comes at the expense of those that do not, with the later essentially subsidising usage of the network by the former to the tune of more than $14 billion.
Distribution costs are levied based on the average power usage of a household, so solar homes pay lower network fees because they use less electricity from the grid. They actually place just as much stress on the network at night, however, when photovoltaic panels cannot harvest energy.
The report further notes that it will soon become economically viable for homeowners to install solar power systems even in the absence of subsidies from the government, due to ongoing declines in the cost of photovoltaic panels and energy storage technologies.
Despite its scathing assessment the institute does not advocate annulling the small-scale solar scheme prior to its scheduled conclusion.
“We’ve got it now and we should just let it run through to its completion,” said Tony Wood, energy program chief, Grattan Institute. “Don’t continue it beyond 2020. Don’t replace it with anything else.”