As of 12 am on 27 October, remuneration for new subscribers to the NSW Solar Bonus Scheme dropped from 60 cents per kilowatt hour (kWh) to 20 cents per kWh. This reduced the NSW solar feed-in tariff from one of the most generous in the nation to one of the most parsimonious.

The decision to abate the feed-in tariff emerged out of a review of the NSW Solar Bonus Scheme that was scheduled for 2012, or when the amount fed into the grid reached 50megawatts (MW). By mid 2010, much earlier than the NSW Government anticipated, the 50 MW point was reached, thus prompting the review. The review concluded that maintaining the 60 cent per kWh tariff until the Scheme’s planned cessation in 2016 would cost the NSW Government as much as $4 billion. Evidently a price too high to bare.

As to be expected, to NSW solar community has been significantly impacted by the decision to cut the feed-in tariff. Now, with less financial incentive for householders to install solar systems, there are concerns that demand for solar products and services will dry up, and businesses will flounder.

These concerns were aired publicaly at a rally in Sydney to protest the tariff cut.

Orchestrated by the Australian Solar Energy Society (AuSES), lead by John Grimes – CEO of AuSES – the rally was attended by solar suppliers and installers who voiced concern at job losses and financial crisis. The rally, which received wide media coverage, was part of a larger media campaign by AuSES designed to reverse the NSW Government’s decision to reduce the tariff by such a large extent.

Rather than aiming for the reinstatement of the original 60 cents per kWh tariff, AuSES proposes a compromise, stipulating that 45 cents per kWh would be the most reasonable remuneration sum to offer domestic contributors to the grid.

“This decision by the NSW Government has underestimated the impact on the solar industry. They have swung the tax too hard and jobs will be slashed and businesses ruined,” Mr Grimes said shortly after the announcement of the reduced tariff.

“Businesses are reporting that they have lost 80 to 90 per cent of their work, and people have already been laid off,” Mr Grimes continued.

As well as AuSES, other leading renewable energy organisations have also communicated umbrage at the announced tariff cut.

The Alternative Energy Association (ATA) considered the announcement a ‘knee-jerk reaction’ by the NSW Government to pare the Solar Bonus Scheme so dramatically. The ATA’s condemnation of the decision focused mainly on the failings of the State Government in the application and maintenance of the Solar Bonus Scheme.

“The real reason behind the significant reduction in the feed-in tariff rate is to do with the poor design and implementation of the scheme from the outset,” said Damien Moyse, ATA’s Energy Policy and Projects Manager.

“A feed-in tariff is the most highly effective and efficient long-term structural mechanism to drive investment in alternative technologies. The NSW scheme was designed with too short a timeframe and was managed to allow too high an uptake from the outset, such that a drastic change in policy direction has now been required,” Mr Moyse continued.

Mr Moyse also pointed out that slashing the NSW feed-in tariff will provide little relief to households with respect to rising electricity prices.

“The clear majority of electricity cost increases in all states, and particularly in NSW, is attributable to the increasing expense of the electricity transmission and distribution infrastructure, that is the poles and wires that deliver energy to our homes,” said Mr Moyse.

The Clean Energy Council (CEC) was also highly critical of the NSW Government’s solar feed-in tariff abatement. The CEC said that the decision will devastate the State’s solar energy industry, costing jobs, and damaging confidence. Also critical of the State Government’s handling of the Solar Bonus Scheme in general, the CEC highlighted the fact that the Government was advised against setting the tariff rebate so high: “A year ago we welcomed the NSW Solar Bonus Scheme, but warned the government it was too generous,” said Matthew Warren, CEC Chief Executive.

“More recently we advised the best way to fix this was to ease the scheme down and provide more long term certainty. Instead they have compounded their first problem with an even bigger problem,” Mr Warren added.

Like AuSES, the CEC recommends a middle ground, suggesting that a 45 cent per kWh feed-in tariff sum would be a more amenable solution. Additionally, the CEC recommends that this sum be paid out over a longer period of time than the five years remaining of the Scheme. This, the CEC says, would generate more certainty for solar consumers and to installers.

At the time of writing this article, there was no overt indication that the NSW Government is reconsidering the 20 cents per kWh tariff sum. Recent State Government announcements explain that the decision was imperative owing to a substantial fall in the cost of solar systems over the past 12 months. The NSW Government are also iterating that remuneration of 20 cents per kWh fed into the state grid is reasonable, and attractive.

Since the rally, AuSES has been in discussion with the New South Wales Opposition, who have now established a consultation process to ensure that future policy that will impact the solar industry is developed in a way that will provide certainty.