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grid parity for solar soon? « Previous | |Next »
June 10, 2011

The Productivity Commission's Carbon Emission Policies in Key Economies, which is a snapshot of a moment in time, undercuts the ground of the fossil fuel industry and its allies who are opposed to both a price on carbon and the emergence of the solar power industry.

The Report shows that Australia is lying in the middle of the cohort of countries the Commission was asked to compare; and that an emissions trading scheme was the most efficient way of achieving abatement.

LeakB Abbottaction.jpg

So the Gillard Government's position that a market-based carbon pricing system is the lowest cost way to decarbonise the economy has been vindicated. It stands on firm ground.

The Commission also found that the cost of the subsidies for renewables had a high abatement cost:

Emissions trading schemes were found to be relatively cost effective, while policies encouraging small-scale renewable generation and biofuels have generated little abatement for substantially higher cost.

Though some of the state tariffs for rooftop solar have been generous and badly coordinated, grid parity (without subsidy) is approaching as early as 2014-15, and so the cost of abatement from public policy for future systems will be zero.

In theory a carbon tax or emissions trading scheme raises the price of "dirtier" products, effectively subsidising "cleaner" alternatives. The key is that, in responding to this price signal, the multitude of consumers and businesses - that is, the market - makes its own assessments about the costs and benefits.

However, what we know is that the policy problem for the Gillard Government is that it cannot legislate a carbon price that's high enough to drive a major shift into non-carbon energy sources. So it will deliver a low carbon price of $20 to $30 a tonne and then try to drive a major shift into non-carbon energy sources through using tax dollars (subsidies in the form of feed-in tariffs and rebates) to bring down the price of renewable energy to levels that consumers find attractive.

The price of photovoltaics is falling rapidly because of technology improvements, economies of scale and, most importantly, the falling cost of polysilicon [the key raw material in solar cell manufacture].The boom in the global PV industry once grid paritywas achieved--and solar can stand on its own two feet---means that Australia could become a "significant player" in the industry because of its "world-class" research institutes.

Is encouraging the emergence of the sunrise industries a goal of the Gillard Government?

| Posted by Gary Sauer-Thompson at 2:07 PM | | Comments (8)


I wonder what the Australian Petroleum Production and Exploration Association will say. Or the Australian Coal Association. Or the Minerals Council of Australia

How are they going to spin their opposition to the Commissions findings that an emissions trading schemes was found to be relatively cost effective?

What the Productivity Commission said on p 30of the report:

Overall, key insights to emerge are that the European Union ETS has driven relatively low-cost abatement, where it has induced switching from coal to gas-fired electricity generation. Policies supporting renewable energy sources are more expensive, reflecting the higher costs of large-scale renewables production and particularly small-scale solar technology, which was found to be very expensive in all countries examined.

It showed was that direct action programs are a waste of taxpayers’ money compared to an ETS.

It argued that once an emissions trading scheme is established, supplementary policies such as a Mandatory Renewable Energy Target  become superfluous and costly add-ons. An effective emissions trading scheme with a high enough price should drive the transition to lower emissions-intensive electricity generation by itself.

So what's a high enough price? It sure ain't the $20, which is what Gillard and Co are

"I wonder what the Australian Petroleum Production and Exploration Association will say. Or the Australian Coal Association. Or the Minerals Council of Australia"

They may try and say that the PC didn't compare Australia to Brazil or Canada --our biggest mining competitors-- who are not acting on climate change. Therefore Australian competitiveness is reduced.

Would they be so silly? Well, Abbott is quoted as saying that:

In the end you can't do without coal and the carbon tax ultimately spells death for the coal industry, which is why other coal countries aren't having a carbon tax.

So why have his direct-action policy which would inflict an even greater burden on the economy.

The Australian's editorial advises the Gillard Government to uses the PC report to dismiss the Greens' demands for more investment in renewable energy projects. It should also scale back the Expanded National Renewable Energy Target, because it is an expensive and inefficient impost.

The Australian's tactic is to drive a wedge between the ALP and The Greens.

I got a bit puzzled by some of the numbers flying around with respect to the cost of solar PV panels and the statement by the PC that "particularly small-scale solar technology, which was found to be very expensive in all countries examined."

Not so sure of that.
More expensive than ...whatever maybe but dunno about 'very expensive' in isolation.
As I said a week or so ago we have just installed solar and according to my calculations it is just but barely economic when without subsidy of any sort but quite economic to the point of being significantly profitable with some subsidy.

So I checked out some 'old' [I'll reveal how old later]sites that I consulted some time ago when I first considered buying panels and found these numbers at a site I [still] consider authoritive.

Assuming no subsidies of any sort.
Installation costs including panels and inverter etc of a 1.0 kW system = $13,700.

Price of electricity at the time = 14 cents per kWh

Length of time for the purchase to become profitable....never.
Oh dear, not good.

But ...that was 2 years and 4 months ago.
Since then the price of a 1.5 kW system has dropped down enormously to, all inclusive with no subsidy, less than $10,000.
Bigger unit, lower cost.

Cost of electricity was then 14 cents per kWh and has risen now to a tad under 30 cents per kWh [different states may account for the price differential??].

We will be well ahead finacially from the purchase of the system taking into account minimal subsidy only.
That certainly does not deserve to be branded 'very expensive'.

I see that the Australian Industry Greenhouse Network (it represents industries responsible for more than 90 per cent of Australia's carbon emissions in mining, manufacturing and energy production) has dropped its mask and bared its teeth.

It has called for the immediate withdrawal of commonwealth and state renewable energy programs. It says that punitive action needs to be taken through a reduced distribution of Grants Commission funds or GST revenues to states that fail to make the required reforms to existing programs or continue to adopt new ones

The fossil fuel industry can have subsidies but not the solar power industry.

According to Paul Kelly in the Australian it is only The Greens, the solar industry and their "spin" merchants who addicted to high-cost solar and renewable-energy rorts. He adds:

if you believe in fiscal responsibility and consumer fairness you must wind back the long sanctified and hugely inefficient renewable-energy policies designed to milk votes via gesture politics.

Unlike the renewable industry special-interest subsidies there are no rorts or subsidies for the fossil fuel industry.

The Productivity Commission argued that the renewable energy incentives being demanded by the Greens are pushing up costs for little environmental gain.

(1) solar power on rooftops means less demand for electricity from the fossil fuel grid. Some households will be completely independent.

(2) electricity prices are going to increase by 20% or more to pay for new investment in plant and grid infrastructure.

(3) the cost of installing solar photovoltaic panels is reducing all the time.

(4) this means reduced power bills for those consumers who have installed solar photovoltaic panels.

(5) it means green jobs and a green industry.

I cannot see how this makes our streets dimmer as Barnaby Joyce claims.

Guy Rundle makes a good point in an article in the Sunday Age:

In Australia, where climate change scepticism - both honest and utterly corrupt - has flourished more than anywhere else outside the US, that is a tremendous achievement and a victory. In little more than a year or two, the Lord Moncktons, Barnaby Joyces and Ian Plimers have gone from being the official opposition in the debate to being a set of marginal eccentrics, part of the menagerie of irrationalism on the right, from creationism to anti-vaccination movements.

Barnaby Joyce has become a clown paid to get laughs from a regional populist audience.