Monday, February 17, 2014

A sensible policy

Over the weekend the Greens launched a new solar energy policy [PDF], which would see the government provide low-interest loans for home photovoltaic installations, while also ensuring fair sell-back to the grid. So how does it stack up? Very well indeed.

Firstly, the policy goal: more solar energy (and by implication, more distributed generation). Its a good goal, which both reduces greenhouse gas emissions and network upgrade costs, while adding some local survivability into the electricity grid. In Germany, the widespread introduction of photovoltaics (encouraged by a feed-in-tariff, which saw PV electricity paid according to its costs, not market rates) has been hugely successful at flattening the daily peak in demand, which reduces high spot prices, and therefore electricity costs. Its also contributed strongly to the reduction of Germany's energy-related greenhouse gas emissions. That's something worth doing, which will benefit kiwis.

Secondly, the policy instrument: government-backed, low-interest loans. This ought to be absolutely uncontentious; we already use such schemes all across New Zealand to fund the installation of insulation and heat-pumps. Those systems are run by local authorities, rather than the government, but the principle is no different. Its cost-neutral (apart from trivial administration costs, which could be loaded onto the loans in the form of an annual fee), well-understood, and unlikely to go wrong.

So why does the government hate it? Firstly, lower peak electricity demand is bad for big generators, who either see their thermal plants become uneconomic, or lose the daily profit peak from their greener assets. In Germany, this has been the biggest source of opposition to solar: it is putting Big Coal out of business. There's also no obvious big corporate winner from this sort of distributed economic activity, no-one who gets to make a lot of new money. So, no opportunity for patronage and cronyism - just a lot of people employed in small business doing installations, and lower wholesale prices for kiwi business. Bad for their allies, no obvious upside for them, and so its down to their natural hatred of change (National is the party of established economic interests, and therefore supports the status quo), and of their true ideological enemies, the Greens. Fortunately, Labour does see the benefits, so it looks to have a reasonable chance of happening if we get a change of government this year.