Julia Gillard is under pressure from the states to roll back generous subsidies for rooftop solar schemes amid predictions that escalating costs from the federal renewable energy scheme will add as much as $90 to yearly household power bills.
The jump in electricity prices is also expected to drive water bills up by raising the costs of treating and transporting water and to run energy-guzzling desalination plants.
Queensland Premier Anna Bligh has urged the Prime Minister to reconsider the subsidy for rooftop solar schemes, worth $6200 in most cities, to relieve the burden on household budgets from rising power prices.
The West Australian government says the subsidies “may require review” given the costs.
NSW Opposition Leader Barry O’Farrell says he will consider the matter at a solar summit he has pledged if he wins office as widely forecast on March 26.
Tasmanian Premier Lara Giddings says her government is concerned about the costs to households relating to the design of the federal renewables scheme in Tasmania as well as the solar policies of other states.
The situation could further complicate attempts by Ms Gillard to compensate families for the costs of her plan to put a price on carbon pollution from the middle of next year.
The Queensland pricing regulator has proposed a $26 rise to the average quarterly power bill of $440 from July 1. Half of this is related to changes to the federal renewable energy target system, which requires energy retailers to buy high-cost power pumped back into the grid by households with rooftop solar schemes and from bigger wind farms.
Energy retailers are required to buy increasing numbers of renewable energy certificates under the government’s RET scheme, which aims to have 20 per cent of the nation’s power generated by renewable sources by 2020.
AGL Energy, Origin Energy and EnergyAustralia say the proposed price rises do not go far enough and are demanding an even bigger price rise in the regulator’s final decision, due in late May.
Origin cites concern that the costs associated with the changes to federal Labor’s RET have not been fully recognised by the pricing regulator, while AGL says the situation could cause energy retailers to suffer a “significant loss”.
The renewables scheme is one of federal Labor’s key climate change policies but it has been adjusted several times.
The scheme was split into two parts from January 1 - one for small-scale generators such as rooftop solar panels and the other for commercial systems such as wind farms. But the costs of the small-scale scheme grew as householders took the government up on incentives for installing solar panels.
The federal government announced in December that it would scale back the subsidies for households and the Keneally government in NSW has cut its solar feed-in tariff.
But Origin says this has been offset by falling costs to buy solar panels and a strong solar industry.
On top of this, Origin says that the cost of large-scale renewable energy certificates has already risen about 25 per cent this year - from $29.50 in December to about $35.
In January the renewable energy regulator increased the number of certificates power retailers had to buy to deal with a glut caused by a flood of solar panel installations.
Tasmania’s Aurora Energy had expected annual bills to increase by $60 from July 1 to cover the costs of the renewable energy scheme but now expected the increased cost to it would be another $30 per customer - bringing the total rise related to the RET for 2011-12 to $90, spokesman Richard Wilson said.
That move would have to be passed by the independent Tasmanian Economic Regulator.
In NSW, prices were already set to rise on July 1, but EnergyAustralia has applied to the pricing regulator for a further $56-a-year increase related to the cost of the changes to the RET. The pricing regulator’s final decision is due after the NSW election.
The situation has prompted the states to call for further cuts to the federal solar credits multiplier, which gives householders a subsidy of about $6200 now but will be scaled back to $5000 from July 1. The multiplier will be phased out by July 1, 2014.
A spokesman for Queensland’s Energy and Water Utilities Minister Stephen Robertson said the state was calling on the commonwealth to reconsider the multiplier attached to the small-scale scheme. He said the government supported the RET but wanted it implemented in an equitable way.
Ms Bligh wrote to Ms Gillard after the regulator’s draft decision in December; Mr Robertson has highlighted the letter in recent submissions to the regulator.
Western Australia’s Energy Minister Peter Collier backed the push for a review. “The state government supports actions to encourage the installation of small-scale renewable energy systems but … the current subsidies may require review in light of recent changes to system costs,” he said.
A spokeswoman for Victorian Premier Ted Baillieu said commonwealth energy policy since Labor took office in 2007 had led to uncertainty “throughout the entire electricity industry, not just renewables”. “This is creating real pressure on electricity prices and hurting Victorian families,” she said.
Mr O’Farrell said the Coalition’s energy policy in NSW would include a solar summit “which will consider these issues”.
“I’m concerned about anything which puts upward pressure on electricity prices because families across NSW are already struggling to make ends meet after Labor’s 60 per cent increase in power bills over the last five years,” he said.
In Tasmania, Ms Giddings said her government was “a strong supporter of policies that directly assist in the development of renewable energy, however we are concerned about the costs to Tasmanian consumers as a result of the design of the RET scheme and solar policies of other states”.
The states are under increasing pressure over utilities inflation. They are spending $9 billion of taxpayer funds on desalination plants, with yearly water bills in Sydney to rise by $103 between 2008 to 2012 just to bankroll the Kurnell plant.
Water bills in Perth are rising by an average of $164 a year and those in Melbourne expected to at least double over the next five years. It emerged this week that even if no water is purchased from the owners of Victoria’s desalination plant, Aquasure, householders will still have to pay $19.37bn in service payments over three decades.
Labor governments have also signed contracts guaranteeing desalination plants in Sydney and Adelaide will run at or near full capacity for their first two years of operation.
“Water utilities use quite a bit of energy to transport and treat water,” said Water Services Association of Australia executive director Ross Young. “With electricity prices predicted to increase, there’s no doubt that the operating expenses of a water utility are also going to increase. That has to be passed on.”
