201206

Disappointing Rio summit

The United Nations Conference on Sustainable Development, also known as Rio 2012, was hosted from 20 to 22 June 2012 by Brazil in Rio de Janeiro. Rio 2012 was a 20-year follow-up to the historic 1992 United Nations Conference on Environment and Development also held in the same city. The conference was organized by the United Nations Department of Economic and Social Affairs.

The meeting was a huge disappointment.

Rio 2012 was never intended to reach a binding agreement on climate change, but the deal it did reach was so watered down that many were openly questioning whether it was worth the massive effort of bringing 45, 381 participants and almost 100 world leaders to Brazil.

The agreement committed to develop the new sustainable development goals for both developed and developing countries but was so denuded of any concrete commitments many observers labelled it meaningless.

The union of concerned scientists said Rio 2012 was so weak it gave the people of the world “no hope” for the future they really wanted.

In her set piece speech to the conference, US secretary of state Hillary Clinton conceded that “governments alone cannot solve all the problems we face” echoing the views of many environmentalists disappointed by the absence of global government action.

A new focus for campaigners will be to abandon efforts to get governments to agree on worldwide changes, and to instead focus on persuading financial institutions to change how they invest money.

The business director at the Australian think tank The Climate Institute, Julian Poulter, agrees. ”Governments are bodies with a lifespan of three to five years ? Institutional investors are the only people with an incentive to manage the long term financial risks of unsustainable investments,” he says.

There is a take-home message in the wake of the Rio 2012 meeting. It is not safe for any of us to sit back and expect Governments to solve the climate crisis on their own.
Policy Void

According to Minister for Resources and Energy Chris Hartcher (BDN 29/6/12) “IPART determined that once the significant costs of delivering a reliable and secure electricity supply and retail services to households are taken into account, the actual value of the [solar generated] electricity fed back to the grid is 5.2 to 10.3 cents per kilowatt hour.”

Whilst 5.2 to 10.3 cents per kilowatt-hour for solar generated electricity is well below the 1:1 Feed-in-Tariff the solar industry has asked for, it would be better than nothing.

I wonder if Mr Hartcher could clarify two points.

Firstly, my understanding is that IPART has this year announced that the buyback rate for solar power should be in the rate range of 7.7 to 12.9 cents per kilowatt-hour. It seems Mr Hartcher has provided us with out of date information. The relevant IPART press release is posted on the home page of the www.cleanenergyforeternity.net.au website.

Secondly, the O’Farrell government has not legislated for any buyback rate at all, leaving it up to the discretion of electricity retailers. If IPART says the 7.7 to 12.9 cent buyback rate is “fair and reasonable”, is a buyback rate of 0 cents (as offered by most retailers) unfair and unreasonable?

Minister Chris Hartcher asserts that “the [solar] industry is moving ahead without the need for taxpayer-funded subsidies”. The solar industry disputes that statement in view of widespread job losses and businesses closing down due to the uncertainty around the rooftop solar sector and the obvious lack of interest by the O’Farrell government in renewable energy investment.

A legislated buyback rate as recommended by IPART is hardly a taxpayer-funded subsidy. It would lead to market certainty, would lead to a thriving solar industry in NSW, and would not put significant pressure on electricity prices. The O’Farrell government seems determined to keep the solar industry in a policy void.

On a more positive note, China announced last week it intends to quadruple its target for solar PV; making their 2015 target 21GW.

To put that in perspective, it means in just 3 years time China will install roughly the same amount of solar PV in one year, as the entire world did in 2011. Or put in the local context it is equivalent to about 60% of all the stationary generation in Australia today.

Thank heavens someone sees a future in solar energy.
Matthew Nott

IPART Press Release

A FAIR AND REASONABLE SOLAR FEED-IN TARIFF FOR NSW
Wednesday 27 June 2012
IPART has today released a determination on a ?fair and reasonable? feed-in tariff from 1 July 2012. This feed-in tariff is for NSW consumers who have, or are thinking about installing solar electricity sources such as solar photovoltaic units (PV units) that feed electricity back into the electricity grid. The feed-in tariff is for those customers who are not eligible for the NSW Government?s subsidised Solar Bonus Scheme.
We have determined that a subsidy free feed-in tariff for 2012/13 is in the range from 7.7 to 12.9 cents per kilowatt hour (c/kWh) for electricity exported to the grid from PV customers.

This benchmark range is intended to provide a guide for customers as to the value of the electricity that their PV units export to the grid in 2012/13. However, retailers are not required to offer feed-in tariffs within this range. They are able to set their own feed-in tariffs. Retailers will publish their feed-in tariffs on the myenergyoffers.nsw.gov.au website so customers can shop around for the best offers.

The most important source of ongoing financial benefit for customers who install new PV units is savings on their retail electricity bills. A typical customer installing an average size (1.5 kW) PV unit would save around $330 per annum on their electricity bill. They would earn around $60 per annum from a subsidy free feed-in tariff.
The CEO of IPART, Jim Cox, said ?This benchmark range represents the fair and reasonable value of electricity exported to the grid by PV customers during 2012/13. The value of this electricity is higher than previously estimated by IPART for 2011/12 due to the introduction of a carbon price which increases the cost of wholesale electricity.? The range for 2011/12 was from 5.2 to 10.3 c/kWh.

The benchmark range of 7.7 to 12.9 c/kWh for 2012/13 is lower than the ?1-for-1? tariff that some of the solar industry has previously called for, where the customer would receive a payment equal to the full retail price. This is because electricity retailers still incur certain costs on the electricity exported to the grid by PV customers. For example, retailers are still required to pay network costs on that energy.

Mr Cox said ?As part of our Final Report which was released in March 2012 we considered the solar industry?s proposal carefully. While retailers are able to supply electricity generated by solar PV units to other customers, they incur costs in doing so. This includes charges for transportation across the networks and costs associated with meeting green scheme obligations. That is why our decision on the benchmark range for the feed-in tariff is less than the retail price?.

Mr Cox noted that ?setting a higher feed-in tariff than 7.7 to 12.9 c/kWh for 2012/13 would involve a subsidy, incurring costs that need to be recovered from higher electricity prices or the NSW budget.?

We have also determined that retailers must contribute 7.7 c/kWh in 2012/13 for each eligible kWh under the Solar Bonus Scheme. This contribution will commence on 1 July 2012. Consistent with the Terms of Reference we have determined this contribution using the same approach as that set out in our Final Report in March 2012.

Our recommendations do not affect the Government?s 60 c/kWh or 20 c/kWh feed-in tariffs for those customers who are eligible for the NSW Government?s Solar Bonus Scheme, which is now closed to new participants. However, it may affect the voluntary premiums that some retailers have been offering to Solar Bonus Scheme customers. We expect that retailers will reduce or eliminate these voluntary payments upon the introduction of the retailer contribution. We consider it reasonable that retailers should contribute towards the costs of the Solar Bonus Scheme in order to lessen price increases for all customers.

Opportunity

The Treasury forecasts that the carbon tax will cut economic growth by 0.1 per cent below what it would otherwise be. Economists describe that impact as imperceptible.

The Australian economy is in pretty good shape at present. The national accounts and the employment figures last week showed an economy in robust health. In the course of the 12 months to the end of March Australia?s economy expanded by 4.3 per cent. When the international business advisary firm Dean and Bradstreet released its Global Risk Indicator a few weeks ago, they said “Australia is one of the safest trade and foreign investment destinations globally. Australia’s rating also makes it the best ranked country in the Asia-Pacific region.” The Wall Street Journal last week said “Australia reported its economy was the fastest-growing in the developed world in the first three months of 2012, sweeping aside growing gloom.”

When the carbon tax is introduced next month there will inevitably be dislocation of jobs, and some distress, but will it be the economic “wrecking ball” Tony Abbott predicts?

I think the carbon tax will generate huge opportunity in regional areas like ours.

It’s going to be a very interesting 12 months.
Matthew Nott