Gillard is wrong on solar and efficiency

In the now almost famous speech Julia Gillard gave on electricity network gold-plating she made the following statement dying for a bit of evidence-based policy analysis:

“...While wealthier households can cut power costs through more efficient devices and solar panels, the poorest customers are exposed to the full cost of the increases.”

Such a statement could be interpreted in a myriad of ways. What exactly does wealthier households mean – wealthier than what precisely? Is this those households with incomes towards the top 20 per cent of Australian households? And in terms of the poorest customers – are we talking the bottom 10 per cent, bottom 5 per cent, or perhaps even the bottom half of the population?

The REC Agents Association, in its submission to the Climate Change Authority's Renewable Energy Target Review, has shed some evidence-based light on this incredibly vague statement. The chart below, taken from its submission, shows that the prime minister's speechwriter needs to do some more research before writing such sweeping statements.

The chart has a series of dots, each representing an Australian postcode area. These are then plotted according to:

1. On the vertical axis, the percentage of households in that postcode with solar PV installed (‘solar system penetration'), and;

2. On the horizontal axis, according to how high their incomes are relative to the rest of the population, with 100 per cent meaning that households within that postcode are the richest 1 per cent, and those next to 0 per cent are the poorest 1 per cent.

Essentially there is very little pattern between how rich households are in a postcode, and the popularity of solar PV. But with one notable exception that is contrary to Gillard's assertion. It appears that the very rich, the top 10 per cent of the population, have a dense cluster of dots around quite low levels of solar PV penetration.

It turns out that if you tend to live in rural or regional areas (the red and blue dots), you are more likely to install solar PV and these areas tend to have lower average incomes than urban areas. This is probably down to two reasons:

-- There is more detached housing with plenty of suitable, unshaded roofspace for solar PV; and

-- I suspect there is a higher rate of owner-occupied housing in rural and regional areas because land and housing is cheaper (but haven't got the evidence to confirm this). So you don't have to deal with a landlord who couldn't care less about their tenant's electricity bills. 

Just a few years ago, when solar PV systems used to cost $12,000 per kilowatt, it was true that solar PV was predominantly something only wealthier households could afford. But the dramatic drop in prices in recent years has meant it has reached a critical price threshold that is within the grasp of a very large proportion of Australian households. In addition, the availability of financing products including leasing allows households to get solar PV systems that are cash-flow positive from day 1.

Also there are a range of other measures for improving energy efficiency that involve relatively low upfront costs, including more efficient lighting, draught proofing, and standby power controllers (available for free in Victoria thanks to its energy efficiency target). Also the difference in price between an energy efficient and inefficient fridge is relatively small or even non-existent as shown in Climate Spectator on Friday.

But there is still most definitely a problem with rental properties. This extends well beyond solar PV to energy efficiency improvement of fixed equipment more generally.

Take my sister-in-law as an example. She and her partner live in a nice terrace house in inner urban Melbourne, but it is freezing in winter because it has no insulation (but an easily accessed attic). They've repeatedly asked the real-estate agent about getting roof insulation installed and would gladly pay a slightly higher rent that could pay for it.

What's happened? Not even the courtesy of a reply from the real estate agent or landlord on their request. However, because the house is in a good location and meets their needs in all other respects, plus finding another good rental is like a lottery, they've stayed there. ABS statistics suggest that this landlord-tenant problem on energy efficiency is widespread.

If Gillard really wants to fix this problem, she needs to do a whole lot more than make sweeping, poorly researched statements about who can and can't afford solar PV. She needs to start talking about the stick of regulation for landlords. She also needs to start kicking some state government heads on why we haven't implemented energy ratings on houses at sale or rent more than seven years after it was agreed.