Equity and effectiveness of Australian small-scale solar schemes

Abstract

Two major subsidy schemes for small-scale solar panels in Australia, namely feed-in tariffs (FiTs) and the Small-scale Renewable Energy Scheme (SRES), have substantial inequity implications. Higher household wealth is associated with larger subsidy receipts for both schemes. Using household-level data up to 2018, we find that the top wealth decile had higher subsidy receipts than any of the bottom seven wealth deciles in respect of both subsidy schemes. There is also evidence of inequality between lower-wealth deciles for feed-in tariffs but not the SRES. For effectiveness of the SRES, we show a positive relationship between the SRES subsidy factor and solar panel uptake, but no significant association with size decisions of solar adopters. In contrast, wealth is positively related with both uptake and size decisions of solar adopters. Equity of the SRES could be improved by targeting subsidies to low-wealth households, while efficiency could be enhanced by equalising subsidies across system sizes.