Does the National Energy Guarantee mean the end of solar subsidies?

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The federal and state governments will come together this week in Canberra to discuss the National Energy Guarantee (NEG). For those who aren’t in the loop, the NEG is essentially the federal government’s solution to rising power prices and grid instability, while also meeting Australia’s international emission obligations.

But here’s the catch – the NEG is designed to be “technological neutral”. In other words, energy generation technologies will “compete on their merits” with no subsidies awarded that favour one particular technology over another.

Renewable energy subsidies in the firing line

Solar panels and home storage unit installations are currently subsidised through the federal government’s small-scale technology certificate (STC) scheme. Essentially, renewable energy purchasers are awarded a certain number of certificates depending on the size and location of the installation.

These certificates are then redeemable for cash and usually take off a few thousand dollars from the cost of solar. Under the NEG, however, new subsidies for the renewable energy would end. This will also apply to large-scale generation such as wind power, which is currently heavily subsidised.

The Energy Minister, Josh Frydenberg, told the National Press Club last week that the lower cost of renewables, particularly solar panels and storage units, is driving uptake, and that these technologies are now able to “stand on their own”, declaring “the time for new subsidies is over”.  Mr Frydenberg continued by stating that there would be no new subsidies for coal generation either, insuring an “even playing field”.

Politics aside, the removal of subsidies will most likely create a spike in the price of solar. While solar seems to get cheaper by the week, it potentially means that now could be the best time to install solar within the near future.

What’s next for the NEG?

There is some animosity between the federal and certain state governments regarding aspects of the NEG. The ACT, for example, has said it won’t sign up to the NEG if it compromises its efforts to deliver 100% renewable energy by 2020. NEG negotiations begin Monday and it’s unclear exactly what the policy will look like by the end of the week, but the federal government is likely to hold its position on removing all subsidies.

Customers receiving a solar feed-in tariff for their exported electricity should rest-assured that the NEG is unlikely to impact their FiT rate in any substantial way, as these are state policies and not within the federal jurisdiction.

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