30 March 2021

Solar panels tax proposal sends the wrong message

| Ian Bushnell
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Solar panels

Solar panels are popular and make money for owners but will the boom continue with a solar tax? Photo: Supplied.

A proposal for a solar tax or charge for solar panel owners to export the power they generate to the grid to prevent ”traffic jams” in supply seems again to cast a shadow over the take-up of renewable energy in this country.

Interest from potential panel owners is already falling and those with panels installed are talking about switching them off at strategic times.

The Australian Energy Market Commission, which made the recommendation, says that energy companies may have to refuse grid access to solar panels to maintain its stability without a change to the rules, which would cost them even more.

AEMC also argues that Australia needs a more equitable system so non-solar consumers are not subsidising panel owners and that overall bills would fall.

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Its modelling shows typical panel owners would only lose about $100 of their average $900 income.

It also says that the current arrangements were not established for a two-way system. A charge would allow networks to tailor their own pricing mechanisms to ensure investment in parts of the grid where needed.

Australia, and Canberra in particular, has one of the biggest take-ups of solar power in the world. AEMC says it wants to ensure more access to solar, not less.

“This is about creating tailored options, not blanket solutions,” AEMC chief executive Ben Barr said in a statement.

“We want to open the solar gateway so more Australians can join the 2.6 million small solar owners who have already led the way. But it’s important to do this fairly. We want to avoid a first-come, best dressed system because that limits the capacity for more solar into the grid.”

AEMC, which has been wanting such a charge for years, based its ruling on submissions from energy companies and welfare groups. But Victoria’s Total Environment Centre also argued that the current system did not provide any incentive for networks to accommodate higher solar and battery exports.

The charge does not seem a lot, although where it may end is unknown, and the inequities within the current structure create an energy divide.

But it reeks of cost-shifting by energy companies who have already reaped the benefits from gold-plating poles and wires, and one wonders why they should not be investing in necessary upgrades anyway.

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While a small fall in power bills would be welcome, it would do nothing to bridge the gap between homeowners who can afford to install solar and others, especially renters.

In fact, it would likely deter landlords who might consider installing them.

Commercial generators are not charged for access to the grid, so many panel owners also find the proposition hypocritical.

There are also doubts about the extent of the problems facing power networks, which have been accused of exaggerating their claims to boost arguments for charging solar panel owners.

The solar revolution has been underway for years now, and the issues of grid flow and stability have been well flagged, but instead of reforming the system to accommodate the increasing solar capacity, the response has been to wait until problems occur.

This seems more like tweaking the system than modernising it and looks like yet another example of putting up a barrier rather than opening the gateway to greening the grid.

Like the new road-user taxes on electric vehicles, it sends the wrong message to a community wanting to reduce greenhouse gas emissions.

Perhaps the privatisation of the electricity industry was not such a smart option.

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The injustice of making solar panel owners pay for network problems is profound.

In the last decade, across Australia, the big power generators have over-invested in towers and wires.

They are now stuck with networks they do not understand and can’t manage.

This is NOT the fault of those investing in solar panels on their own home or place of business.

The idea that we should be made to pay for the major power generator’s over-investment in the network – to the extent they do not know how to manage it – is deeply corrupt.

Capital Retro7:59 pm 01 Apr 21

More worrying than that is the fact that China has become an important source of electricity equipment supplies in Australia. In 2018 and 2019, 29 out of the 70 imported transformers to Australia come from China. In December 2012, the State Grid Corporation of China acquired the 41 percent of shares of ElectraNet from the Australian electricity provider Powerlink.

China is concurrently taking over ownership our grid infrastructure as well.

Timbo,
This has nothing to do with electricity companies, it is a problem solely caused by the solar owners themselves.

So why shouldn’t they pay for the problems they have caused and why do you think other customers should be responsible for subsidising them?

Electricity companies are just lobbying AEMC to protect their profits. Ie last year SA recorded a hour where 100% of the states power was supplied by household solar. That’s with only %40 of households with solar installed. They’ve had other days where the daytime electrical demand has been zero. That means no one is buying electricity and everyone is feeding cheap solar back into the grid for their neighbours to use.
An excess of electricity also forces the price down so everyone benefits but the electricity companies don’t want that. The operators of coal fired plants don’t want that, neither do gas pipeline operators. So what do big companies do when their profits are under threat? They hire lobbyists and create fake stories about “grid security”
Remember the mining, gas, oil and electricity industries are also subsidised in Australia through a series of tax exemptions etc to a tune 12 billion in 2018-2019 (productivity commission). They’ve also tendered out 90million dollars recently to come up with a program to subsidise gas powered electricity.
That’s a lot of cash to be protected so expect a lot more anti solar rhetoric in the years ahead. But there’s also over 2.66 million solar installs so you solar owners can pressure your local MPs to protect your investment too.

Yeah, what you just said has nothing to do with the problems caused by too much small scale solar connected to the grid.

Although your comment does give a good insight into the general public’s ignorance as to how our electricity grids work.

rationalobserver1:24 am 30 Mar 21

Do any of these households declare their $900 income, and has the ATO audited this?

The ATO has assessed the revenue from these types of systems (on your own home and not a business endeavour) as typically not income liable to be declared for tax purposes.

Capital Retro1:29 pm 30 Mar 21

What about property investors who set up solar on their residential investment properties and export all the production for themselves? They would have to treat this as assessable income because they would be writing off all the capital costs and depreciation against it.

Capital Retro,
Which is why I clarified as not doing it for a business endeavour, there are different rules applied for situations like you’re suggesting.

Capital Retro4:29 pm 30 Mar 21

Thanks for confirming that which was more to the benefit of other readers.

Actually, if homeowners did declare the solar rebate as income and wrote off all the costs they would have a neat little negative-gearing scheme. They would also realise what a loss making crock home solar is.

ACT Housing should be doing the same. As I understand it they give the rebate to the tenants instead of getting something back for the taxpayers who have funded the massive expenditure on setting up the solar systems.

its generally not assessable income for tax purposes – unless it is done in a business like way or is commercial in nature.

the ATO would probably classify this as assessable income. as far as I’m aware this has never been tested by a court.

Capital Retro11:03 am 02 Apr 21

Which has what has already been put forward.

HiddenDragon7:09 pm 29 Mar 21

This 2015 report from the Grattan Institute provides an interesting perspective –

https://grattan.edu.au/report/sundown-sunrise-how-australia-can-finally-get-solar-power-right/

From the overview section of the report –

“By the time the subsidies finally run out, households and businesses that have not installed solar PV will have spent more than $14 billion subsidising households that have. Australia could have reduced emissions for much less money. Governments have created a policy mess that should never be repeated.”

Had less public money been wasted by vote-buying, virtue-signalling politicians – who are far too selective about the “inconvenient truths” that they acknowledge – proposals like this tax might not have arisen.

Capital Retro4:40 pm 30 Mar 21

Hear, hear.

Energy companies claim that the grid can’t handle energy created by solar panels that is sent back to the grit. Their answer is tax home owners with solar panels. For years they have claimed there is a need to upgrade existing systems or build new power generators to replace outdated coal generators. Yet they have not made any commitment for this ir put aside profits to do so. Their solution is a tax on home owners with solar panels. If this tax is approxed will this also apply to State & Territory Government owned facilities? I think not! What it really is about maintaining profit margins without putting their hands in their own pocket. Smells just like they did originally when people started to install solar panels & that was to increase the cost of power to those families who couldn’t afford solar power and thereby retain profit margins

It’s really not about that at all.

The problem with a large amount of solar panels in a small area is that when they are producing their peak electricity output is not when the grid requires it, causing issues of voltages in the network and matching demand with supply.

So it isn’t about needing more generators, it’s about when they are needed. So why should other consumers subsidise upgrades to the grid so that wealthy solar producers can benefit? You are free to not pay any tax, simply install your own energy storages.

Capital Retro7:07 pm 29 Mar 21

Correct, and solar doesn’t work between dusk and dawn when it is needed and will be needed more to recharge EVs.

Like it or not we still need coal powered generators to maintain the standard of living we expect and guarantee industry reliable supplies.

We absolutely do not need coal powered generators in the medium to longer term – whether you like it or not, we are moving clearly to an energy grid that is based upon dynamic approaches to supply and demand, not just the old basic ‘x gwh needed now, must produce x gwh now’. The new world reality for generation is fundamentally different to the old world where coal was a dominant force – that time has past. Like the time of the horse and buggy, the canal barge etc etc, soon enough quite likely the internal combustion engine car.

The issue is simply one of transition. A lack of leadership and foresight from governments of all persuasions to deal with these issues upfront is causing these issues, given most have simply tried for as long as possible to kick the can down the road. A lot of these issues could have been avoided a decade ago if proper planning had been put into place to transition the network then, not as an afterthought now.

The end game is very clear, no matter how much the handful of coal hugging dinosaurs in parliament might try to resist (from both sides of politics). And while there is going to be plenty of teething problems along the way, there is no doubt the economic death knell for coal power production will be a huge net positive for society in time.

JS9,
Fully agree with you that coal is on the way out but that doesn’t stop there being serious implementation and equity issues around what is discussed in the article.

Capital Retro4:38 pm 30 Mar 21

Meanwhile China is building dozens of new coal-fired power stations. They obviously see through your idealistic concept of “dynamic approaches to supply and demand” because it doesn’t work in an industrialized world economy, one that Australia desperately needs to rejoin if we are going to avoid becoming a third world economy. You might be prepared to accept a lower standard of living but I am not.

Tell me where there is one solar powered pot-line smelter in the world.

Gerald Capone2:43 pm 29 Mar 21

lol. Make a problem with subsidies. Solve that problem with a tax.

Sums up everything wrong with Australia.

I think the AEMC knows much more about managing the electricity network that this writer. If the AEMC write an evidence based report pointing at problems in the grid, and how to address it, then we should pay attention.

This article just shows ignorance about how the electricity grid works and the serious problems now being caused by the large take up of small scale solar.

Small scale solar is nowhere near as efficient at providing renewables to the grid as other options and increasingly will require significant network upgrades to manage into the future. If you actually cared about greening the grid and dealing with climate change, these systems are not it.

And who should be paying for the network upgrades required to manage their proliferation? The solar owners who are causing the problems or should everybody else be subsidising those(mostly wealthy) owners?

And there already is a readily available option for solar owners to avoid any proposed tax if they dont like it. Install your own energy storages.

But of course that would actually require the beneficiaries to individually pay for that benefit, much better for everyone else to subsidise them instead right.

Capital Retro10:27 am 29 Mar 21

Well said chewy14.

Home storage batteries aren’t the panacea either. People should look at flywheels instead as batteries degrade and are expensive to replace. A flywheel will last forever.

I completely disagree. The energy providers are unable to manage a network of poles and wires they recently over-invested in. This is public knowledge But I bet you didn’t know that?

That the AEMC seem to support them, one wonders how long it takes an industry regulator to climb into its industry’s pocket.

We suppliers of solar and wind power did not create the energy network. Please explain to me the justice in what you wrote.

Timbo,
Bet I didn’t know what? A made up claim of gold plating?

There was no over investment, there was a measured infrastructure response to regulated requirements for energy companies to provide a robust and reliable electricity network for customers. The fact that some people now want to change the goalposts doesn’t change anything.

And regardless, my comment above is correct on this issue despite your thoughts on that completely separate issue.

Small scale solar suppliers want to be paid for providing electricity when it is not needed and actually harms the grid. How is that in any way reasonable?

You also didn’t address any of the points made. Who should pay for the required network upgrades? Why should small scale solar producers be subsidised by other users when the growing expansion of these systems is actually causing problems to the grid and is not anywhere near as efficient as other renewable generation technologies?

Capital Retro4:20 pm 29 Mar 21

The grid was designed to distribute electricity, not harvest it.

Capital Reto that claim is clearly untrue. To distribute you need to harvest. Only difference with solar is where you harvest from.

And the issues that people speak of re solar producing at times of otherwise low demand is quite true however the solution to that is dropping off generators, turning on load or storage. And storage can be as simple as using excess power to pump hydro water back up hill. Which is what they have been doing for years anyway.

Capital Retro8:43 am 30 Mar 21

I think you know what I was conveying namely the grid has always drawn core power from mainly coal fired generators and distributed it to millions of homes. Now there are hundreds of thousands of homes exporting solar power to the grid and the large coal generators are being closed down.

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