The cost-effectiveness of household photovoltaic systems in reducing greenhouse gas emissions in Australia: Linking subsidies with emission reductions

Abstract

Abstract This paper examines the cost-effectiveness of subsidies (feed-in tariffs and renewable energy credits) paid for by electricity consumers to support the uptake of roof top photovoltaic (PV) systems by households in Australia. We estimate annual payback periods, and then regress these against the actual uptake of household PV and associated emission reductions, creating a relationship not apparent in other research. Sensitivity analysis reveals that the declining cost of PV panels had most impact on PV uptake followed by feed-in tariffs, renewable energy credits and the increasing cost of household electricity tariffs. Our modelling shows that feed-in tariffs were higher than necessary to achieve the resultant levels of PV uptake and that the low cost of PV panels and comparatively high electricity tariffs are likely to result in a continuing strong uptake of household PV in Australia. Our modelling shows that subsidies peaked in 2011 and 2012, with payback periods of three to four years, having since increased to five to six years. Emission reduction costs are expected to reduce from over AU$200 per t CO2e in 2013 to between AU$65 and AU$100 per t CO2e in 2020. Household PV reduced Australia’s emissions by 3.7 million t CO2e in 2013 (1.7% of Australia’s total emissions) and is expected to reach eight million tonnes (3.7% of Australia’s total emissions) by 2020.