NSW Premier O’Farrell welches on Solar Bonus Scheme promise, screwing pensioners
Wednesday May 18th 2011, 10:48 am

Do you do business with or have contracts with the State of NSW? Do you own bonds in the NSW Government? Would you have done so if you knew the NSW Government would unilaterally rip up your contract or change the terms of your agreement without your consent? Barry O’Farrell has done just that with the Solar Bonus Scheme.

The NSW Solar Bonus Scheme worked like this: You invest a few thousand dollars out of pocket in a solar power generation system which is connected to the NSW AC mains power grid through an inverter, which converts the panels’ DC output into 240V AC power. The AC power your system feeds into the grid is bought by the State of NSW at the contractually agreed feed-in tariff rate of 60c per kilowatt-hour (kWh). If your system generates more power than you use in your home, your power bill is zero and the NSW Government sends you a cheque for the difference. If you use more kilowatt-hours than your solar panels feed into the grid, the value of the amount you generate is taken off of your electricity bill.

I’m a pensioner, which means I have next-to-no disposable income and certainly no savings. My savings account has a $0 balance twice each month, on the same day my pension payment is received, as it all goes out on bills and living expenses. You might say my budget is extremely tight- it’s calculated to the penny every month.

When former NSW Premier Kristina Keneally announced on 27 October 2010 that she was cutting the feed-in tariff on the Solar Bonus Scheme from 60c to 20c/kWh as of midnight on that date, I had to make a snap decision as to whether or not to participate. I searched around a bit and found that Origin Energy was offering a 1.5kW solar package for $2990 on a 2-year, interest-free basis with a $299 down payment and repayments of $112 per month. The 1.5kW system was described as producing an annualised average of 6kWh per day. At a feed-in tariff of 60c/kWh (and barring an excessive amount of cloudy weather), the system would produce about $108 worth of feed-in tariff (FiT) income per month, coming within $4/month of paying for itself. The cost of the feed-in tariff meter and installation would be $300, over and above the cost of the installed solar panels and inverter.

Given that I believed the NSW Government had a contractual obligation to maintain the 60c/kWh FiT rate for those who signed up  for installation before midnight on 27 October 2010, for the life of the scheme (until July 1 2016), I decided, in good faith, to bite the bullet and borrow money for the $299 down payment and $300 FiT meter and installation cost. The system’s estimated $108/month output would come very close to covering the 24 months worth of $112/month repayments to Origin. My $599 capital outlay would be covered by about 8-9 months of FiT income. Any FiT income thereafter would go towards offsetting my electricity costs, until the end of the scheme in 2016.

However, despite his explicit pre-election promise to honour all existing Solar Bonus Scheme contracts if elected, new Liberal NSW Premier Barry O’Farrell has now decided unilaterally to breach existing Solar Bonus Scheme contracts. O’Farrell plans to retrospectively cut the FiT rate to 40c/kWh, which means that my solar generation system can produce no more than $72/month worth of FiT income. Instead of being $4/month in the red ($108/mo FiT income, less $112/mo repayments to Origin), I’ll be $40/month in the red.

When your total monthly income as a pensioner is less than $1460- and it’s ALL committed, every single month- $40 less per month means something! What it means is $10/week less for groceries- and I only spend about $40/week on groceries now. BAM, 25% cut in my food budget! Would Mr O’Farrell have me supplant my now dented grocery budget from the local food bank? Perhaps sit with a tin cup and beg for coins in front of Roza Sage’s office? Dr Sage has already replied to a letter I emailed to her last evening, with her clear sentiment that she doesn’t give a damn about my problems and the present NSW Government is going to retrospectively screw anybody on the Solar Bonus Scheme, no matter how much they have invested and no matter their financial situation.

If bonds rating agencies are not considering revising the rating applied to NSW Government bond issues, they should be. Anyone who is party to a contract with the NSW Government should hedge their bets because the NSW Government is simply not trustworthy.

-weez


9 Comments so far
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Via Twitter:

@timashebrooke: Class action against NSW Govt Solar feed-in tariff. Call Slater & Gordon on 1800 555 777 to register your interest.

Comment by weez 05.18.11 @ 2:02 pm

Pru Goward in Hansard, 27 October 2010:

It is a shocking mismanagement, but we all accept and understand that the 60¢ [feed-in] tariff must be halted for new applicants. We also understand that all existing participants must have their existing agreements honoured. This side of politics particularly understands the importance of retrospectivity. I want to be very clear on this point: A future O’Farrell-Stoner Government, a Liberal-Nationals Government, will also honour those agreements. This fiasco is not the fault of the participants who looked at an unbelievably good thing, figured that it was too good to be true, and it was. But who can blame them for rushing in to join a scheme that was so generous that it would repay their investment in 2½ years? It is hard to find another investment in this post global financial crisis world that can do that. The fiasco is not their fault. They did what they were expected to do, which was respond to a price incentive. It is, in fact, the fault of the Keneally Labor Government, which should hang its head in shame. It is difficult to imagine a greater and more terrible mismanagement of other people’s money. We do not oppose the bill.

(bold emphasis mine. -Ed.)

Comment by weez 05.18.11 @ 2:21 pm

If the NSW solar feed-in tariff is cut from 60c/kWh to 40c/kWh from 1/7/11 to 1/7/16, this represents a loss of $2192 over those 5 years for owners of 1.5kW (6kWh/day average) solar generation systems.

Comment by weez 05.18.11 @ 7:42 pm

Be lucky you do not live in USA . Solar panels setup will cost around $21,000 us for a small 800 sq. ft. home in California .

And it would take 15 to 20 years to break even .

If i could buy a complete Solar instalation for Under $3,000 fully installed i would do it in a minuet as long as it produced all the Electricity that i will ever need in my small
home .

Comment by BILL D 05.18.11 @ 11:53 pm

My installation was subsidised by the transfer of Renewable Energy Credits (RECs) to the company that installed it. If I paid for the thing out of pocket, my 8 panels would have been about $925/ea ($7400) and the inverter about $1500, a total of about $8900.

This system is nowhere near big enough to run this household. We use about 21kWh/day for domestic power (aside from water heat). My system makes about 8kWh/day in summer, about 3.5kWh/day in winter, on ideal, cloudless days.

The system is useful really only for grid feed-in. There’s no batteries- and that’s a good thing. Batteries are consumables and very expensive to replace every few years.

However, if push comes to shove with our power prices (now close to 20c/kWh), it may be worthwhile to install batteries and a charger in place of the grid-connect inverter and install a suitable 3-4kW inverter for 240V mains power substitution.

Comment by weez 05.19.11 @ 12:13 am

I am a self funded retiree, not very rich but proud that I am able to live on my savings unlike many of my pension friends who believe it is their right to rip of the State. I am not saying the person in question is a rotter but, he certainly is quite astute in financial matters and he does not appear the type who is hard pressed to pay grocery bill.
I missed out on the 60 cents a unit Solar Bonus scheme (SBS), came to know about it only after it closed down in October last year after 10 months of inception. However, I am installing a 1.5 kW system at the new 20 cents a unit SBS (also terminated recentlty). The system cost me aan oulay of $2000 and will generate about 6kWH average a day which roughly works out to $400 worth of power. That is 20% return on investment which is quite good. It baffles me to hear the winching of so many that the new 40 cents a unit SBS is inadequate especially the ‘poor’ pensioners! I suspect there is a sinister profit motive in the original scheme which was too generous, a sham and to be funded by other electricity users (non solar). It is a pity that the whole scheme is withdrawn now, not even the 20 cents a unit SBS, which is not fair to those late comers who want to do a bit for the environment.

Comment by Mathew Kurian 05.20.11 @ 2:27 am

Mathew, you fail to grasp the point of the argument mounted by the people incensed by the O’Farrell State government’s announcement to alter the feed-in-tariff (FiT) from 60c to 40c per kilowatt-hour (kWh). We signed on to a contract assuring us of 60c and it was stated as an election promise! This is a breach of contract by the O’Farrell government, plain and simple. How would the government respond to me if I dropped the monthly amount I am paying back to them by one third?

Comment by Suki 05.20.11 @ 10:06 am

Mathew writes:

I am a self funded retiree, not very rich but proud that I am able to live on my savings unlike many of my pension friends who believe it is their right to rip of the State. I am not saying the person in question is a rotter but, he certainly is quite astute in financial matters and he does not appear the type who is hard pressed to pay grocery bill.

Mathew, where do I start with you? You’re prima facie not well educated judging from your poor spelling and grammar, but your failure to grasp a number of rather simple concepts as well as your ill-considered prejudices leads me inexorably to the conclusion that you’re a bit of a dolt. And you deign to give me advice? I am amused. Instead of commenting on blogs written by people with brains, perhaps you should stick to simple things you can understand fully, like Alan Jones, Ray Hadley and the odd bumper sticker with small words.

Let’s start from the start: I am a disabled pensioner because of complications from injuries sustained when I was hit by a drunk driver. I’m poor because I was not able to have a full working lifetime, through no fault of my own. Suffice it to say that ‘poor’ does not equal ‘stupid.’ I have two university degrees, neither of which were knocked out of my skull by the drunk. Yeah, I’m a smart cookie- and I am never going to apologise for having a big brain that works well. Sure, there’s people out there who like to advertise pride in their ignorance, but I’m not one of them.

I’m deeply offended by your defamatory insinuation that you believe that pensioners have a ‘right to rip off the state.’ Poverty is not a crime nor is it an indicator of a predisposition to criminal behaviour. I realise this is newsworthy to you, despite all your hard-earned education at Alan Jones University, but bear with me.

Australia is a wealthy country with an honourable social contract which places a value on supporting her citizens who become unable to work. There’s a good reason for that- and if I have to explain those reasons to you, I’d be wasting my breath on a person without the capacity to understand.

My under $1460/month income is well detailed on the Centrelink website, which I linked for your convenience in my post. Did you look? Yes- I DO have difficulty with grocery bills- and all the rest of them, for that matter.

Just as ‘poor’ does not always equal ‘stupid,’ ‘smart’ doesn’t always equal ‘wealthy.’

I missed out on the 60 cents a unit Solar Bonus scheme (SBS), came to know about it only after it closed down in October last year after 10 months of inception.

You clearly have access to the internet- can’t you be bothered to read the news? On 27 October 2010, when Keneally announced that the feed-in tariff was to be cut from 60c to 20c/kWh, I certainly did- and I acted quickly so that I could utilise the 60c/kWh offer while it lasted.

However, I am installing a 1.5 kW system at the new 20 cents a unit SBS (also terminated recentlty). The system cost me aan oulay of $2000 and will generate about 6kWH average a day which roughly works out to $400 worth of power. That is 20% return on investment which is quite good. It baffles me to hear the winching of so many that the new 40 cents a unit SBS is inadequate especially the ‘poor’ pensioners!

If you’re an investor, you’re certainly not a very good one. A system which produces an annualised average of 6kWh/day at 60c/kWh will produce $1314 per year in feed-in tariff income, repaying a $2000 investment in 1.52 years. At 20c/kWh, the FiT income is only $438 per year, stretching out the payback time to 4.56 years. If you borrowed money to install your system, the payback time is longer yet. Most banks are not going to lend you only $2000 if you require the repayments to be stretched out over 5 years.

As I said in my post, I have next to no disposable income. Anything I do must have a price tag suiting my income. The system I chose cost $2990 and was offered on a 2-year, interest-free loan basis, with repayments of $112 per month. If I was going to have a solar PV system, it had to pay for itself- or come very close to it. A 1.5kW system which can generate 6kWh/day, on a 60c/kWh tariff, will make $108/month worth of FiT income. Since the NSW Government was offering 60c/kWh and both sides of the aisle in the NSW Parliament agreed that the 60c rate should be guaranteed for the life of the scheme, through 2016, I believed it was safe to make this investment. I ponied up $299 for a down-payment and $300 for the gross FiT meter and installation.

I suspect there is a sinister profit motive in the original scheme which was too generous, a sham and to be funded by other electricity users (non solar).

Sinister profit motive? Who was profiting? I’m $4/month in the red at 60c/kWh. I’ll be $40/month in the red at 40c/kWh. And do you think that I am somehow responsible for the NSW Government offering 60c/kWh? I’m quite obviously not. I took advantage of the pricing incentive as offered by the government, no more, no less.

It was the NSW Government which decided that encouraging the installation of grid-connected solar PV was a political goal worth an investment on their part. All I did was take them up on their offer, which appeared to come with an ironclad, bipartisan guarantee.

While I think it’s nice that home rooftop PV systems will reduce some of the daytime demand on our coal-fired power stations, I’m definitely not wealthy enough to make financial sacrifices for the good of mankind. I’m doing it hard enough just trying to cover my ordinary living expenses.

It is a pity that the whole scheme is withdrawn now, not even the 20 cents a unit SBS, which is not fair to those late comers who want to do a bit for the environment.

20c/kWh is effectively a parity arrangement (domestic tariff is about 18.9c/kWh at this moment). If you’re wealthy and environmentally minded, you can still invest in a PV system and feel all good and gooey inside when the sun shines, while reducing your electricity costs somewhat.

I resent your insinuations that I’m somehow not poor, am greedy for an unearned profit, am a thief or that I believe anyone owes me a living. I’ll spare you my harsher language, but suffice it to say you had better leave your prejudices and ignorance behind if you come to my blog and try to cast aspersions, lay unfounded accusations or put your ignorance on display. You WILL be called out for it, Mathew- every single time.

Comment by weez 05.20.11 @ 11:39 am

Jeez, Weez,
I wish I had gotten you to compile my message to the MP’s

Comment by Jasper 06.01.11 @ 12:49 pm



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