Craig Kelly (Again) Applies Pressure To Slash Australia’s Solar Subsidy

Craig Kelly | Image: NSW Liberals

Energy Minister Josh Frydenberg is being pressured by NSW Liberal MP Craig Kelly to act on reducing Australia’s solar subsidy, which could be relatively easily done by tinkering with an important mechanism.

Australia’s “solar rebate” (not to be confused with feed in tariffs) is based on Small-scale Technology Certificates (STCs), the value of which fluctuates with market conditions. Currently, the value of these certificates is getting towards their maximum possible price of $40 each ¹

Even though Australia’s major solar subsidy is already being gradually phased out, a rebound in STC prices after they plummeted during a period last year has significantly reduced the out-of-pocket cost of installing solar power systems.

However, STC value can also be influenced by the Small-scale Technology Percentage (STP), which is meant to balance the supply of STCs by setting an equivalent demand each year. This percentage is set annually by the Energy Minister and must be announced by the end of March.

While Australia’s Clean Energy Regulator said late last year it expected the 2018 small-scale technology percentage to materially increase after Australia’s stellar year of small-scale rooftop solar installs, there is no guarantee Minister Frydenberg will make that call.

This decision can be made unilaterally by the Minister – it does not require a vote or changes to legislation. Minister Frydenberg can also choose not to announce a decision on the STP, in which case a standard formula would be applied by the Clean Energy Regulator.

Craig “Renewables Kill” Kelly, who is chairman of the Coalition backbench committee for energy and the environment, appears to have seized on the situation to apply pressure on Mr. Frydenberg to slash the subsidy, without outright stating so.

“It’s effectively a reverse Robin Hood scheme where we are ­increasing the electricity prices on the poor to reduce electricity ­prices for the rich,” he said in an article published on The Australian.

Nobody would deny that increasing electricity prices pose a terrible burden on low income households, but it has been repeatedly shown that “solar power is for the rich” is a furphy. Mr. Kelly’s focus on that aspect isn’t framing who benefits from solar accurately, as uptake of solar panels has been greatest in Australia’s “mortgage belt” areas.

For example, a study out of QUT published last year showed the highest uptake in solar PV systems in Queensland was not from the well-to-do.

“In fact, the highest uptake of solar PV systems is coming from families, those on low-incomes and with homes of three bedrooms or more,” said Dr Jeff Sommerfeld, lead author of the study.

As to electricity prices, even Josh Frydenberg has acknowledged the role that renewable energy, including small scale solar, will play in putting downwards pressure on electricity prices going forward.

Another party quoted in The Australian story was Jeff Bye, founder and owner of certificate trader Demand Manager in Sydney. Mr. Bye reportedly opined that STCs were currently overpriced and is concerned the situation will again lead to the rise of solar cowboys looking to cash in.

In Demand Manager’s 2018 Certificate Price Outlook published last month, it states that depending on the situation with the 2018 STP surrender target , the STC price could reduce to the $20’s to mid-low $30’s during the coming year. However, that assumes a target of below 25 million and 30 million certificates respectively – and it could be higher; sustaining current STC values.