As an Australian who relocated to Californiato take advantage of the sunny outlook for the solar power business over here,I watch for movement in the Australian climate debate with an eye to cominghome when it finally makes sense to do so.
Sadly, the superficial rhetoric coming from both major parties makes mefear that the kinds of policies that could trigger my return, along with thatof other ‘ecopreneurs’, are a long way off. Howard and Rudd are both toying withclimate protection policies but failing to really sink their teeth in. Insteadof working out how to stop the pollution causing climate change, they are bothbusy working out how to trade it. A price on carbon would help but it is nosilver bullet, and it will take a suite of solutions to address a problem ofthis scale.
With the community consistently clamouring for solar in poll after poll,any party that delivers a policy for building the renewable energy industry tosupplant fossil fuel-based electricity sources should win widespread support. Thispolicy would need to go far beyond the pathetic mandatory renewable energytarget that the Howard government has overseen. Clearly it must not be anexcuse for further corporate welfare to the so-called ‘clean coal’ industry (adream nearly as fantastic as nuclear power being ‘too cheap to meter’) or the nuclearindustry, which has hopefully suffered its final credibility blow with recentnear misses in Australia andJapan.Renewable energy policy is 07’s election litmus test.
What should theydo?
The best market-based policy to put Australia back in the race todevelop a clean energy industry, especially for key technologies like wind andsolar, would be a ‘Feed In Tariff’, also known as a ‘renewables premium’ or ‘standardoffer contract’.
Where a feed in tariff is in place, electricity produced from solar,wind, minihydro or any other renewable energy technology, receives a premiumprice. In Germany,for example, solar PV gets four times the market rate for 20 years, guaranteed.Germanyhas spearheaded the uptake of solar and wind technologies with this scheme. Thefeed in tariff is becoming the preferred policy for increasing solar uptake,with 30+ countries using programs similar to the German model.
A premium price is obviously a huge incentive to install renewableenergy technologies, but it is not a subsidy. The cost is spread aroundelectricity users by mandating that generating companies charge all of them alittle extra. In Germanyit has added about 1 cent per kilowatt hour or an extra $1 – $2 per user permonth. It reduces the payback on the technologies to less than 10 years andoffers a Return on Investment of 8 – 9%. Moreover it creates the scale requiredfor industries to learn how to become more efficient and less expensive, andtherefore more accessible across the board. This policy has made Germanythe centre of excellence in solar businesses.
The results are incredible: Germany – a geographically small,northern European nation – has more than half the world’s installed solarelectric systems. It gets 2.5 gigawatts of electricity from photovoltaics (PV)– a fact that contradicts Prime Minister Howard’s oft-repeated lie that solarwon’t contribute significantly to our needs in the future. In actual fact, the12% of Germany’s electricityalready coming from a variety of clean energy sources would power much of Australia. Germanyhas created a quarter of a million new jobs in clean tech this decade (and acapital base financing people like myself) largely through the use of a feed intariff.
I asked an experienced economist at a solar consulting company in Sydney to explain how a feedin tariff might work in the Australian national energy market:
The regulatory agencies would establish a central renewable generatorfund. The generators would charge a tariff of less than 1% of the average bill(less than in Germany), which would be collected in the fund before beingdispensed to solar and other renewable energy generators at 50 cents per kilowatt-hourthat they produce. This would save ratepayers and taxpayers money because it wouldreduce the cost of upgrading grid infrastructure (since renewables are moredecentralized), and builds new generation capacity to meet peak demand (sincePV produces best when demand is highest, when the suburbs switch aircon tohigh).
To ensure that the tariff helps build a self-sufficient industry ratherthan one under permanent protection, the premium paid to solar producers wouldbe reduced over time, as in Germany.A 5% reduction per annum, for example, would track the learning curve and reallymake investors want to get in sooner rather than later.
Here are the sorts of benefits we could garner by 2020 with a properlyrun policy:
But therein lies the rub. The coal-loving leadership of both Labor and theCoalition continue to play out scripts from the 19th century steam engineeconomies. The one simple policy outlined above could have a very positive neteconomic impact on the Australian economy. It would reduce reliance on outmodedand brittle electricity grids. It would have economic benefits including jobsand technology investment nationwide. It would green our growing electricitysystem and diversify our supply in a low-cost way, as a hedge against the growingscarcity and cost of fossil fuels. It would give us an ‘in’ to an expandingglobal market – the solar industry grew 70% in 2005 and is expected to be a $40billion business by 2010. Last but not least it would significantly reduce ourCO2 emissions.
A feed in tariff would cost Australians only about the price of a cup ofcoffee each year that it remains in place. It would ensure a new globallycompetitive industry in little more than a decade, after which it will nolonger need the support of such a scheme. Yet it need not affect energyintensive industries if the powers-that-be want to continue to protect their petaluminium and other producers (as in Germany, key sectors of theAustralian economy can be exempted from the tariff). And it would engenderenergy security and price stability and lead the way into a low-carbon,climate-safe economy.
So for the market faithful on both sides of the Parliament it should bethe perfect solution. But I note on Hansard that when Greens Senator ChristineMilne asked a series of questions about such a policy in the Senate, it wasclear the Government had no idea and the Opposition was little better informed.It seems that the world’s preferred policy for supporting renewable energy hasbarely registered for Australia’smajor parties. Nonetheless I am still hoping someone introduces it before theelection. I’d vote for it!
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