Hidden solar subsidies paid by gas consumers

Analysis released by the Energy Networks Association (ENA) finds gas bills for residential and commercial customers would be about $50 per year lower in 2034 than current levels if distortionary subsidies to solar technology paid for by energy customers were removed.

ENA CEO John Bradley said many of Australia’s 4.5 million household gas users and 120,000 business gas users would be surprised to learn government policy on solar technology is one of the key factors determining whether their prices will rise or fall in the future.

The analysis by Core Energy Group highlighted the risk government policy settings could unnecessarily distort the ability of gas to compete as a “fuel of choice” for consumers.

“Recent public debate about the Renewable Energy Target has focused on impacts for electricity users or the renewables sector – but there is a hidden cost for gas consumers,” Mr Bradley said.

“The Small Scale Renewable Energy Scheme (SRES) distorts energy appliance choices by subsidising solar hot water systems by up to 30 per cent based on greenhouse gas abatement with no recognition of the abatement achieved by gas hot water systems.

“Gas hot water appliances can achieve abatement equal to or greater than appliances subsidised by the SRES but will look comparatively more expensive to a consumer – meaning Australia is not achieving least cost emissions abatement.”

Mr Bradley said the SRES directly contributes to inflating retail gas prices by reducing gas volumes in the shared network, which pushes up the unit price of gas to consumers.

“It is absurd for Australians to keep subsidising a proven technology like solar panels at a cost of up to $200 per tonne of abatement but particularly if it adds $50 per year to gas consuming households already grappling with Australia’s transition to an internationally-linked wholesale price. It would be sensible public policy to level the playing field in the energy sector, either by abolishing the SRES or making it technology neutral, treating all appliances equally based on emissions abatement.”