The solar photovoltaic feed-in tariff scheme in New South Wales, Australia

Abstract

Solar Photovoltaic (PV) electricity systems are part of Australia's energy supply matrix. In the case of New South Wales (NSW), the state government has had to deal with a complex policy problem. In order to play its role in the federal Small-scale Renewable Energy Scheme, the NSW government initiated the 7 year Solar Bonus Scheme in 2010. However, in attempting to maximise community investment in small-scale solar PV systems, it relied on faulty financial modelling that applied a generous Feed-in Tariff (FiT) and underestimated the level of investor participation and installed capacity. Consequently, the scheme has resulted in very high public costs that will require policy changes that bring investors and energy retailers into conflict, and unpopular electricity retail price adjustments. This paper uses a structured case and stakeholder analysis to critically analyse the FiT policy, while also highlighting important lessons for policymakers engaging in FiT design.