Let's cut through the myths and spread the facts on solar!
MYTH: Subsidies for solar and ‘green schemes’ are why electricity bills are going up.
FACT: Electricity prices are set to fall thanks to increasing renewable energy generation and cuts to network costs [1].
Subsidies for domestic solar power have accounted for only around 7 per cent of the average household electricity bill and this is forecast to fall even lower now that the Renewable Energy Target has been met.
The cost of deploying renewables across Australia is just a small proportion of electricity bills. By far the largest component of electricity bills is network costs (40 to 50 percent of bills) – that is, upgrading transmission and distribution infrastructure such as poles and wires to handle rising peak demand and replace old equipment.
The growth in ‘peak demand’ – those few times a year when demand for electricity is the highest (usually the hottest few days in summer) is a major factor driving up costs. More houses with more air conditioners and other gadgets, all being used at the same time for just a few hours a year, puts enormous strain on the system. To avoid blackouts during these few hours we need to build extra power plants – at considerable cost. This is the real issue that Australia needs to confront if we want to stop power price rises.
The next largest component of electricity bills is the wholesale price of electricity (20 to 30 percent of bills). According to the Energy Security Board on a national basis, residential electricity prices and bills are expected to decrease by 7.1 % (or $97) over the period from 2018-19 to 2021-222 . This trend is primarily driven by wholesale costs reducing in most of the states and territories as new low cost renewable capacity enters the system.
[1] Australian Energy Market Commission (2019) Residential Electricity Price Trends Report
[2] Energy Security Board (2019). The Health of the National Electricity Market
MYTH: Solar panels are very expensive.
FACT: Solar panels are an increasingly affordable option that will save households money in the long run.
The cost of producing and installing solar power systems has fallen dramatically over recent years, and continues to fall. The solar panels installed on rooftops today are more than 500 times cheaper to produce than the first solar cells of the mid-1950s and costs are still coming down fast. Four years ago a solar system could cost as much as a small car; now it costs about the same as a big TV.
But how does solar compare to traditional energy, such as coal and gas?
Large-scale renewables energy sources, like solar and wind, are now the cheapest new-build generation. That's why, we're seeing clean energy farms coming rapidly online all around the country – because they make economic sense.
MYTH: Solar panels are often installed badly.
FACT: The solar industry is well regulated and safe.
Solar panels and inverters (the component that converts the power generated by the panels into a form compatible with the electricity system) have to comply with the relevant Australian Standards, and every solar installer must first be qualified as an electrician, and then undergo additional training and accreditation in solar systems.
The Clean Energy Council has a free consumer guide on its website to help people ask the right questions of their solar installer and get a quality product and installation.
MYTH: Solar systems drive the need for expensive grid upgrades.
FACT: The need for grid upgrades is driven by rising peak demand and insufficient investment in the electricity network over the last 20 years.
The single largest reason for rising power bills is the cost of upgrades to transmission and distribution infrastructure (for example, the poles and wires which in some cases are decades old). This makes up about 40 to 50 per cent of the average household power bill, and would exist with or without the addition of solar power systems.
The pressure on our electricity supplies at peak times during the day and year (for example, on really hot days when people come home from work and turn on their air conditioners) is a key driver of power price increases. This is known as ‘peak demand’ which is an increasing strain on the grid from hotter summers and the rising use of energy-hungry appliances. It is estimated that 25 per cent of retail electricity costs are created by peak events that occur over less than 40 hours per year. Meeting this demand requires enormous investment in infrastructure that is sometimes only turned on a few times a year.
On rare occasions in some remote places, network upgrades are needed to handle solar. But in most areas, solar can be connected to the grid without requiring network upgrades.
MYTH: Solar can only ever make a small contribution to our energy needs because it doesn't produce power at night.
FACT: Solar already makes a significant contribution.
Solar power and energy efficiency schemes are helping cut our overall demand for electricity. Data from the Australian Energy Market Operator (AEMO) shows that overall demand for electricity in Australia has actually fallen.
“The uptake of residential and commercial solar continues at record pace, which was largely responsible for new minimum operational demand records in Victoria, South Australia and Western Australia,” said AEMO Managing Director and CEO, Audrey Zibelman [1] has said.
The Federal Government’s Energy White Paper, released in November 2012, projects that by 2035 solar PV will provide 17 per cent of Australia’s energy and 29 per cent by 2050.
The National Electricity market has around 9980 MW of distributed solar, thats the solar on the rooftops and business, which collectively make up the largest generator in the NEM!
Already, over 2 and a half million Australian households have solar panels installed, a number that will continue to grow as prices become more and more competitive. This just goes to show that solar is already a mainstream part of Australia’s energy mix.
[1] Australian Energy Market Operator (2020) Record minimum demand levels across Australia
MYTH: Renewable energy can’t compete economically with burning coal for power.
FACT: The fossil fuel industry is heavily subsidised.
The energy market in Australia is not a level playing field. The fossil fuel-based electricity system we have today is built on government subsidies, and fossil fuels continue to enjoy government assistance. For example, the Tamberlin Inquiry in NSW revealed that the government-owned Cobbora coal mine sold coal to power stations ‘at cost price’ (roughly 30 per cent of the price paid by other generators on the open market), which meant that: ‘...State-owned generators and gentraders [had] access to coal at a lower price than would have been available to them had they had to source such coal through a tender process.’
This amounts to a subsidy of around $4 billion over the life of the contracts, and it is just one example of where taxpayers are footing the bill.
On top of that, fossil fuels have been subsidised by not having to pay for the greenhouse gases they produce, and for the other health and environmental impacts they cause.
Analysis published in the American Economic Review calculated that the economic damage caused by air pollutants from coal burning (in terms of health impacts and local pollution) exceeds the value of the electricity produced.
MYTH: All the solar panels are made in China so there are few Australian jobs in solar.
FACT: Thousands of Australians are employed in the solar industry
It is true that most of the solar panels in Australia are produced overseas. However, there are thousands of Australians employed in the local solar industry. It is estimated that there are 39 jobs directly supported in Australia for every 1 megawatt (MW) of solar installed. In 2011, 500MW were installed, taking the national total to over 1000MW. This equates to around 14,000 jobs.
MYTH: We need big breakthroughs in solar research and development to push the price down further, so government subsidies in Australia make no difference.
FACT: Government subsidies help build local economies of scale, not reduce technology cost.
While there have been some important technology breakthroughs over recent years, the primary driver for the recent cost reductions in solar has not been technical, it has been a result of competitive pressures and economies of scale.
An independent report from the University of Melbourne confirms this assessment: Photovoltaics (PV) and wind power have historically shown that a large proportion of cost reductions have come from the increased knowledge and economies of scale associated with large-scale global deployment – not just improvements in technical efficiency.
In other words, winding back or shutting down government assistance in Australia will not have much impact on the global price of solar panels, but it will have a substantial impact on the local installation costs by affecting the scale of the industry and therefore levels of competition in the market.
MYTH: Green schemes help the rich buy solar, subsidised by the poor.
FACT: Lower and fixed income households are driving the solar boom.
The suburbs with the highest percentage of solar installations are overwhelmingly low- to middle-income suburbs and places with a high proportion of retirees. These are the households that are the most concerned about rising electricity prices.
