Paul Simshauser

Australian residential solar feed-in tariffs: Industry stimulus or regressive form of taxation?

Feed-in Tariffs (FiT) for residential photovoltaic solar technologies are available in most Australian jurisdictions. Financial incentives under FiT are in addition to those provided by the Small-Scale Renewable Energy Scheme which forms part of the national 20% Renewable Energy Target. Little attention has been paid to the welfare impacts of FiT on retail electricity prices and social policy objectives. Our analysis indicates that current FiT are a regressive form of taxation. By providing estimates of household impact by income groupings, we conclude that wealthier households are beneficiaries and the effective taxation rate for low income households is three times higher than that paid by the wealthiest households.

Queensland Solar Feed-In Tariffs and the Merit-Order Effect: Economic Benefit, or Regressive Taxation and Wealth Transfers?

Premium residential solar feed-in tariffs have come under considerable scrutiny in Australia over the past 12 months following a sharp rise in the uptake of subsidised PV units and subsidy cost blow-outs. Using New South Wales data, Nelson, Simshauser and Kelley (2011) demonstrated that the inherent design of premium ‘gross’ feed-in tariffs are regressive in nature and required reform. Since the publication of that article in Economic Analysis & Policy (September 2011 edition), feed-in tariff policies have been substantially wound back in all Australian jurisdictions except Queensland. In this article, we examine the ‘net’ feed-in tariff in Queensland and similarly find it to be a regressive form of taxation. We also examine the so-called ‘merit order effect’ – a purported ‘economic benefit’ arising from premium feed-in tariffs. However, the evidence is clear that merit order effects must, by definition, be transient and above all, are not welfare enhancing.

From First Place to Last: The National Electricity Market's Policy-Induced ‘Energy Market Death Spiral’

Microeconomic reforms that established Australias National Electricity Market during the 1990s were extensive. State�?owned electricity commissions were vertically and horizontally restructured and many of the restructured businesses were privatised. A mandatory gross pool market was established to facilitate competition amongst generators and retailers and quickly became one of the best�?performing wholesale electricity markets in the world. Networks remain regulated under unresponsive 5�?year rate cases with flat�?rate tariffs persisting, while inflexible ‘subsidy schemes’ proliferated and forced generation plant entry into an already�?oversupplied market. End�?use electricity tariffs have since doubled. Misguided and overlapping policy failures are primary causes.

The Hidden Costs of Wind Generation in a Thermal Power System: What Cost?

New renewable energy generation in Australia is unambiguously more expensive than thermal plant, at least when comparing direct costs. The federal government claims the 20 per cent renewable energy target will increase electricity tariffs by 4 per cent. Apart from the direct costs, critics of renewables cite additional ‘hidden costs’ arising from the intermittency of wind and the subsequent causation of ‘back‐up plant’ for system security. South Australia, where winds market share now exceeds 17 per cent, provides a valuable case study to analyse ‘hidden costs’. The evidence is that hidden costs are trivial and the governments claim appears accurate.

Dynamic Pricing and the Peak Electricity Load Problem

Reforms to Australias 45,000 MW electricity market were met with remarkable success, but wholesale market gains have been largely exhausted. Above�?trend growth in investment in energy infrastructure is driving retail prices to levels that triggered the sectoral assault in the first place. This pressure should initiate the last piece of the reform puzzle - removing price regulation, installing smart meters and implementing dynamic pricing to halt the primary cause of the problem, rapidly rising peak demand. We find that such a change can lead to non�?trivial reductions in household peak demand, with our sample load factor improving by 9 percentage points.

The Entry Cost Shock and the Re‐rating of Power Prices in New South Wales, Australia

Australia has long been the beneficiary of low, stable power prices. A decade-long state of oversupply underpinned this result and while plant capital costs had been rising, the cost of capital had been declining. These offsetting effects locked the wholesale market into an average cost of

The Western Australian Power Dilemma

35–

The second‐round effects of carbon taxes on power project finance

40/MWh. However, from 2007, a simultaneous and sharp rise in new entrant plant capital costs and the cost of capital occurred. The combined effects crept up on the industry while it was in a state of oversupply. This ‘entry cost shock’ disrupted a 7 year long equilibrium price, with average power system cost rising to

The Gains From the Microeconomic Reform of the Power Generation Industry in East-coast Australia

60/MWh.

What is normal profit for power generation

From 1984 gas-fired power generation had been gradually increasing its share of the electricity market in Western Australia (WA) starting at 1 per cent and rising to about 50 per cent by 2008. Had it continued on this trajectory, the WA power system would have made great advances in terms of cost and environmental efficiencies given the looming commencement of the Carbon Pollution Reduction Scheme in Australia from 2011. However, more recently the cost of natural gas has increased from