Solar panels 37% dearer in Australia

AUSTRALIANS have been overcharged for solar panels compared with other countries because of generous subsidies pushing up prices, a leading clean energy industry analyst says.

Bloomberg New Energy Finance research found small photovoltaic solar systems cost 37 per cent more in Australia than in Germany and the US in the first half of 2011. The overseas price fell 29 per cent from 2010 to 2011 while Australian prices remained steady.

Bloomberg New Energy Finance lead clean energy analyst Kobad Bhavnagri said the data challenged suggestions the Victorian solar industry was likely to be badly affected by a Baillieu government decision to cut a solar incentive program.

The government last week announced the feed-in tariff rate for power generated at home and sent into the power grid would be reduced from 60¢ a kilowatt hour to 25¢.

Mr Bhavnagri said solar panel retailers should be able to absorb some of the lost subsidies by reducing profit margins.

''There is evidence to say that the margins here have been very high and there is room to move on prices,'' he said. ''I'd be surprised if the Victorian industry fell off a cliff.''

There was record demand for solar panels in Australia in the first half of this year, driven in part by what is now considered an overly generous New South Wales feed-in tariff and knowledge that a federal subsidy program would be reduced from July 1.

Mr Bhavnagri said the Victorian government had made a relatively sensible change to the solar tariff compared with NSW, which scrapped the scheme abruptly.

He said short-term evidence suggested demand for panels in other states had stayed strong when subsidies were cut. ''Although not all the evidence is in, the first half of 2011 almost suggests people just want [solar], even when out-of-pocket costs go up,'' he said.

Bloomberg New Energy Finance found the long-term outlook for rooftop solar power was strong, with more than five gigawatts - equivalent to two large coal-power plants - expected to be installed in Australia by 2020.

Its short-term forecast for Victoria is at odds with modelling for the Clean Energy Council, which found a 25¢ rate would trigger a large drop in demand for panels and put 1000 jobs at risk. It called for a 35¢-40¢ interim tariff for up to two years.

Clean Energy Council policy director Russell Marsh said it was clear subsidies had been overly generous and governments had been too slow to respond, but it was important the tariff change was smooth to prevent the industry collapsing.

He said a 25¢ tariff meant a family would no longer be able to pay off a solar system inside a decade - considered a key test for those looking to buy panels. The state government disputes this.

Federal Climate Change Minister Greg Combet has suggested solar tariffs could be phased out under a carbon price as they were an expensive and inequitable way to cut greenhouse gas emissions.