Solar Bonus Scheme

A NSW Auditor General’s Report has found that the NSW Government and its agencies grossly underestimated the cost and number of people that would install systems under the Solar Bonus Scheme.

By October 2010, the estimated cost of the Scheme, if it continued the way it was going, would have reached $3.988 billion. More than ten times the original estimate of $362 million. In response to the increased cost, the gross tariff for new applicants was reduced from 60 to 20 cents reducing the estimated cost to $1.954 billion.

It was a statutory requirement that when 50 mega watts of installed capacity was reached, the Government would review the Scheme. By the time the review was completed the installed capacity had reached 101 mega watts.

‘The Scheme lacked the most elementary operational controls, had no overall plan and risks were poorly managed,’ said Mr Achterstraat.

The latest Government projection for the total tariffs to be paid over the life of the Scheme is $1.75 billion.

‘I anticipate that the total tariffs to be paid under the Scheme will be between $1.05 billion and $1.75 billion,’ Mr Achterstraat said. ‘The most probable range will be between $1.25 billion and $1.44 billion, significantly more than the original $362 million estimate', he added.

There are many variables that make it difficult to be certain about the cost of the Solar Bonus Scheme: Changing weather patterns, the orientation of the solar cells to the sun, shading, and the quality of products and their installation all affect performance.

‘The New South Wales Scheme was far more generous than other States and contributed to many more people joining the Scheme than were expected,’ said Mr Achterstraat. 'Under the scheme, people could effectively sell electricity to the government one day and buy the same amount back the next day at half the price'.

Mr Achterstraat identified major deficiencies in the way the Scheme was handled.

‘The Scheme had three broadly stated objectives with no specific targets to measure progress. These objectives did not include reducing emissions or obtaining value for money'.

‘No cost-benefit analysis was undertaken before the Government’s decision to introduce a scheme'.

‘Little was done early enough to identify and reduce relevant risks. I found no contingency planning, analysis and assessment of options and exit strategies to address potential high risk situations'.

‘There was no budget for dollars or the number of connections and consequently very little control over the cost of the Solar Bonus Scheme'.

Mr Achterstraat recommended that:

• such Schemes should be assessed in a similar fashion to major Government infrastructure expenditure

• the performance of such schemes needs to be monitored more closely

Further Information

Contact Barry Underwood, Executive Officer, on 9275 7220 or 0403 073 664.