Editorial: Green power worthy but has too few incentives

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Photo / Thinkstock
Photo / Thinkstock

The installation of rooftop solar panels has increased sharply over the past few years, notably in countries such as Germany, Italy and Britain. The boom has been fuelled by large subsidies spurred by governments' wish to source more of their electricity from renewable energy. But the generous incentives have prompted consequences that have necessitated their reining in. A significant plus in the Green Party's just-released solar energy scheme is that it avoids this mistake. The outcome, however, is a plan so devoid of carrots that it is unlikely to attract the predicted 30,000 installations in the first three years.

At the moment, only about 600 solar installations are completed each year. The Greens' scheme to transform that situation would allow householders to borrow up to $15,000 from the government to install photovoltaic panels and pay it back via their council rates over 15 years. The interest rate on the loan would be the same as Crown borrowing - currently just 4.1 per cent - and the Greens say the panels, typically, would save households $100 a year.

The plan would, they say, create 1000 jobs and make the technology cheaper by expanding the market.

Part of the attraction of solar panels in many countries, especially Germany, was that power companies were required to pay generous subsidies to householders who pumped their surplus power into the grid. The cost of buying this power at higher than the market rate was passed on to customers, resulting in rising prices. Eventually, in the interests of all consumers and the companies' profitability, these subsidies have had to be scaled back and the rapid growth of solar power slowed.

The Greens have avoided this scenario by saying that the single buyer envisaged by their joint policy with Labour would offer a "fair price" for any excess power generation. That provides some degree of certainty to people who have previously been deterred from solar power by the absence of a guarantee of such a price. But the lack of any German-style subsidies also suggests little of the $100 saving would come from exports to the grid.

That figure becomes the more puzzling when, as Energy Minister Simon Bridges was quick to note, solar power is far more expensive than grid-scale generation from wind, hydro or geothermal power stations. The abundance of the latter makes New Zealand much more fortunate than the countries that have had to offer generous carrots to entice people to install solar panels.

Mr Bridges also made much of the fact that the scheme involved a lower interest rate and, therefore, a government subsidy. But that rate advantage is so small that it hardly constitutes a significant incentive. Indeed, Mr Bridges' description of the Greens making "magic money" seemed excessive given the modest nature of the scheme and the Greens' care to avoid other countries' pitfalls. More appropriately, he might have suggested while well-intentioned, the proposal would contribute only a little towards the Government's target of 90 per cent renewable energy by 2025.

All in all, the Greens' scheme will appeal mainly to those who crave energy independence. These are not likely to number anything like the 10,000 people a year the party predicts will install solar panels.

Perhaps the Greens are star-struck by statistics like the half a million British homes with solar panels on their roofs and industry claims there that this could reach a million as soon as 2015.

But they at least deserve credit for coming up with a scheme that is more appropriate for this country's circumstances. The only drawback is this has seriously limited its appeal.

Debate on this article is now closed.

- NZ Herald

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