Australia's disturbing solar precedent

Existing owners of solar systems have had the value of their investments slashed by a decision of the WA government to prematurely cut the level of the feed-in tariff they receive. The move creates a concerning precedent for investors across the country in renewable energy.

Back in 2010, the Barnett WA government announced that households who invested in a new solar system would receive a 40 cent feed-in tariff for 10 years for any power they exported to the grid. After a surge in uptake of solar, this offer was then closed to new applicants.

But Treasurer Troy Buswell flagged in yesterday’s state budget a reduction to the feed-in tariff to 30 cents per kilowatt-hour in October from 40 cents. This will be further cut to 20 cents on July 1 next year. 

For those who’d bought systems under this 40 cent arrangement they now face a tariff which has been halved with more than five years still to run on their feed-in tariff agreement.

The critical issue here is one of trust, with such a move likely to set back the WA solar sector – one of the country’s best performers – a couple of years.

These homeowners were sold a story of how they could cut their energy bills and help the planet – both of which remain true, but the first part now to a significantly lesser extent.

“This provides a genuine incentive for homeowners to install renewable energy systems, which not only has a positive impact on the environment but it will also help householders manage their electricity bills,” energy minister Peter Collier said at the time.

But now Buswell argues the 40 cents on offer was “exceedingly generous.” And he is right, provided it was on offer to new solar customers right now. It isn’t, however, with those impacted being the homeowners who bought when the price of solar was a lot higher than it is today.

Indeed, if you bought a solar PV system on June 30, 2011 you had every right to believe that you would receive the 40 cent tariff through to June 30, 2021. Just three years later, however, you will be on a 20 cent rate.

The news will send shockwaves across solar owners around the country, with eyes turning to other state governments to see if they follow suit with retroactive moves.

It seems the WA government is more than happy to scream about sovereign risk when it comes to the mining tax, but they seem to apply a different rule to clean energy.