Schemes that pay households to produce power using rooftop solar panels are costing about 25 times as much to cut greenhouse gases as a nationwide ETS.
The warning comes from electricity generators who say the schemes will lead to soaring energy bills.
In a confidential submission obtained by The Australian, the National Generators Forum has told the NSW government that its scheme is costing between $520 and $640 to reduce each tonne of carbon dioxide - compared with the $23 per tonne proposed in the emissions trading scheme shelved by Kevin Rudd.
The submission states that although the scheme will create green jobs, each job created will cost between $130,000 and $700,000. “The cost of the scheme is borne by all energy customers but hidden,” the submission states. “There is a widespread community view that solar generation is good for the environment. However, there is little public understanding of the cost of delivering those perceived benefits.”
NSW supplier EnergyAustralia recently applied to the Australian Energy Regulator to pass through $75.9 million in extra costs between 2009 and 2014 associated with the scheme. The developments will escalate the pressure on Julia Gillard to put a price on carbon.
In the absence of a carbon price, state governments in Victoria, Queensland, South Australia and Western Australia have introduced a raft of greenhouse gas reduction policies including schemes under which consumers with solar energy panels are paid to export energy to the grid.
But the solar schemes lead to higher prices because households with solar panels or wind turbines are paid vastly more than power stations on the electricity grid; in NSW for instance, people are paid $600 per megawatt hour for producing power using solar panels, which compares with prices on the wholesale energy market of about $52 per megawatt hour.
Last week, the Greens reintroduced legislation to the Senate that would create a national “feed-in tariff” scheme, under which consumers would be paid to generate power using a wide range of renewable technologies.
The Greens’ plan is akin to the NSW Solar Bonus scheme - considered the most generous in Australia and currently being reviewed - in that it would pay consumers the tariff on everything they generated even if they used that power themselves.
The South Australian and Victorian schemes pay consumers only for the energy they export, but the Greens say this is a “particularly weak” approach.
Energy Supply Association of Australia chief executive Brad Page said that under the Greens’ proposal consumers would “pay massively more for electricity” than they needed to for at least the next two decades. He added that the proposal was a “regressive form of taxation”; grants were a better way to commercialise nascent technologies.
Another industry source said the Greens’ move had led to “primal screams” within the $7 billion-a-year power generation sector over a policy that was “economically ignorant” and would mean that, in Sydney, “Bankstown electricity users pay for Point Piper users”.
The federal government’s Renewable Energy Target of 20 per cent renewable energy by 2020 issues multiple Renewable Energy Certificates to owners of small-scale solar, wind and hydro-electric systems, which they generally transfer back to their energy supplier in return for a cash payment or cheaper bill. But this has caused the National Generators Forum to question the need for further state-based subsidies for such technologies. The carbon price under the federal scheme, which is not a feed-in tariff, is about $38.50 a tonne.
Mr Page said the schemes represented a “rapidly growing impost on the economy” as the tariffs were not budget-funded but were “smeared across the community”.
Energy Users Association of Australia executive director Roman Domanski described the schemes as “middle-class welfare” and said they lacked the compensation big industrial users expected under emissions trading.
The Australian Council of Social Service’s senior policy officer of energy and climate change, Tony Westmore, feared “a serious increase” in power bills and said “those people who have the cash to be able to put the panels on their roof will be subsidised by people who can’t afford their current bills”.
Mr Westmore said the NSW model - known as a “gross” feed-in tariff because it pays people for everything their panel generates - was “likely to prove grossly inequitable”.
Other states tended to use “net” schemes that paid people for power that was superfluous to their own needs and went into the grid; these were “possibly inequitable”.
“On the one hand, we are supportive of the deployment of renewable energy and the jobs it brings, but it really ought to be done strategically,” Mr Westmore said.
National Electrical and Communications Association chief executive James Tinslay was concerned about unlicensed people installing panels because some state electrical regulators did not consider this electrical work.
“Potentially, I think we are going to find a lot of problems with these,” Mr Tinslay said. “There are a huge amount of these things going in and there’s an issue that’s going to come back to bite us in the future about poor-quality installs.”
In NSW, the government said it would review the scheme when it reached 500 megawatts capacity. This happened just over six months into the scheme, triggering a review.
The office of NSW Energy Minister Paul Lynch said submissions were being considered.
Schemes in other states are set to last between 10 and 20 years.
The NGF’s figure of $23 per tonne was based on Treasury modelling in the federal government’s ETS white paper that priced carbon at that level for 2010, with a cap of $40. The forecasts have varied as the government later revised its plans to secure opposition support for emissions trading.
