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Solar tax debate futile unless we tackle the “original sin” of price regulation

When it comes to energy market regulation, few proposals elicit the type of reaction seen in response to the suggestion that networks should be allowed to charge customers for the solar power they export into the grid.

On one side of the debate, proponents argue there are equity issues at stake because non-solar customers are increasingly cross-subsidising solar customers.

The other side argues any such subsidies are dwarfed by the decarbonisation benefits and lower wholesale electricity prices resulting from solar exports. Sadly, the debate has become increasingly hostile and personal.

The Australian Energy Market Commission’s draft decision a few months ago failed to calm the debate, indeed, it inflamed it. My submission to the AEMC does not advocate for or against network export charges – rather, it identifies why the AEMC has failed to resolve the debate.

First, it is self-evident that network export services should be recognised in the rules. That’s the easy part. The hard part is identifying how those services should be priced and who should pay.

Unfortunately, the AEMC has completely sidestepped its responsibility to tackle these two difficult questions. Instead, it seeks refuge in an outdated regulatory framework, and kicks the can down the road to the Australian Energy Regulator.

And in reality, the effect of the AEMC’s approach will be to leave it up to monopolistic networks to decide these matters.

Really? Is that the best the AEMC can do on such a contested and vexed problem?

As my submission highlights, despite appearances, this is not a problem about solar exports. The real problem lies in how network sunk costs are recovered from consumers. The regulatory framework fails to address this problem. It has always failed to address this problem. My submission calls this “the original sin of price regulation”.

Solar exports have not created this failure. They have merely highlighted it.

Unless regulators and policy makers tackle the original sin of price regulation, any attempt to accommodate solar exports will be mired in indeterminable (and interminable) arguments. And who loses in these arguments? It’s always the same answer. Consumers.

Source: RenewEconomy