Feed-in tariff not the best way to win renewables

Many climate activists, along with The Greens and Electrical Trade Union, are starting to demand feed-in tariffs for renewable energy. Proponents say they are a market mechanism that gives certainty to business to invest in renewables.
A feed-in tariff is a guaranteed incentive payment to generators of renewable electricity, so that they get paid a higher rate for the power they produce than fossil fuel generators. Their effectiveness and fairness depends on design.

There are different types of feed-in tariff. The federal government’s flawed Mandatory Renewable Energy Target (MRET) is a complicated version, involving tradeable Renewable Energy Certificates.
Many states in Australia currently have small-scale tariffs, mostly for roof-top solar panels. These are the weakest kind. Solar panels on houses are the least efficient form of renewable energy. Large solar thermal power stations are much more efficient.
Like emissions trading schemes and carbon taxes, most feed-in tariffs are funded through increasing ordinary people’s power prices. The NSW feed-in tariff is expected to raise prices by up to $9 a year. The average cost for solar panels without rebates is around $12,000 for a 1 KW system, making them unaffordable for most. Working class electricity users subsidise those who can afford solar panels, through higher electricity prices.
This price rise may seem small, but like carbon pricing, raising feed-in tariffs to a level that could lead towards 100 per cent renewables would mean much high price rises.

Germany and Spain
Germany and Spain have adopted stronger tariffs. Spain’s in particular has encouraged the building of solar thermal power plants. But neither of them is strong enough to see renewables go beyond providing a third of their country’s energy needs. This will not close existing coal-fired power stations, and will not necessarily even reduce emissions. As a result of growth in energy needs, Spain’s emissions have risen about 20 per cent since 1990.
The large-scale German feed-in tariff has been a widely cited example. The German Ministry for Environment found that in 2008 the feed-in tariff led to price increases of up to €6 ($A9) per household per month, about 5 per cent of an average electricity bill. Some studies have argued that the impact of the tariff on bills will disappear over time, particularly as the price of wind power falls further. But this has not happened to date.
Germany’s feed-in tariff has stimulated the growth of renewable energy. Its share of German power grew from 6.3 per cent in 2000 to 16.1 per cent in 2009. But the rate of growth has slowed. Current plans are to reach 30 per cent renewables by 2020. This is not fast enough to deal with the climate emergency we face.
The tariff has not been strong enough to stop new coal power stations being built—in 2009 more new energy in Germany is estimated to have come from coal than renewables.
Spain’s feed-in tariff has led to large amounts of solar thermal power, but this has been partly by accident. According to the New York Times the tariff was set so high that much more solar power was installed than the government expected. About 3000MW of solar power was installed in 18 months, equivalent to three large coal-fired power stations. But the government panicked at higher than expected costs and cut the scheme—and the climate movement was not strong enough to stop them. This caused the loss of more than 20,000 jobs.
Unlike the German tariff, which is paid for by consumers, the Spanish tariff was better because it involved government subsidies and some regulation of electricity prices.

Campaign for a feed-in tariff
The recently launched 100 per cent renewable campaign is demanding a feed-in tariff for large-scale renewable energy in Australia.
This might see a few power stations built, but could never take us to 100 per cent renewable energy. The climate movement does need demands to help renewables, but a feed-in tariff is not a good one.
The mechanism is not easy to understand—and increasing its strength once introduced would mean big increases to power bills for consumers. Simply demanding a government plan for renewable energy, like the Beyond Zero Emissions plan for 12 large-scale solar thermal power stations, is much better.
If renewable energy should be subsidised, why not go all the way and demand government directly build it like they built all the coal-fired power stations in Australia?
A starting point should be a demand for all new power stations to be renewable—and for no new coal power.
Large-scale feed-in tariffs or the government’s MRET deserve support, but are only a second-best solution.

By Chris Breen


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  1. Chris, you write that “The NSW feed-in tariff is expected to raise prices by up to $9 a year.”
    Can you supply us with the source of that claim ?

  2. That is an official NSW government statistic, quoted in numerous places, that prices will rise somewhere between $2 and $9 for all households depending on the number of solar panels that take up the feed-in tariff
    Carmel Tebbutt, NSW Deputy Premier quoted it in a speech here http://www.parliament.nsw.gov.au/Prod/parlment/hansart.nsf/V3Key/LA20090623026
    Also quoted in last year’s NSW Auditor General’s report to Parliament http://www.audit.nsw.gov.au/publications/reports/financial/2009/vol3/pdf/06_electricity_industry_overview_volume_3_2009.pdf

  3. I should add one correction to my article, where it states

    “in 2009 more new energy in Germany is estimated to have come from coal than renewables.”

    I don’t know if that is true, but it should have read “as of 2009 more future new energy was planned to come from coal than renewable energy”

    This was changed in editing (my original sentence was not very clear).

    I have not been able to discover what has been built since then, but it is possible the economic crisis alongside plans to delay by decades (effectively stop) the phase out of nuclear power, may have put some new energy plans, whether coal, or renewables on hold.

    There have also been large protests over new coal in Germany.

    Coal currently makes up about half of Germanys power output.



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