A Peter Dutton idea applied

Over the weekend, I had a Peter Dutton moment. It started with working out whether to get a storage battery for the house rather than sending excess electricity from the solar array to the grid.

The grid pays about 12 cents a kilowatt hour for the excess solar generation you send to it. But if you buy from the grid, it costs 30 cents a kilowatt hour. Those amounts are similar in most jurisdictions. So storing the solar excess in a battery and drawing from the battery rather than the grid will save about 18 cents a kilowatt hour.

Will that justify spending about $10,000 on a battery? There is a mesmerising miasma of data online about it. It depends on how much excess power from the solar array is put into the battery and used at home rather than  being sent to the grid. Then there is the interest forgone on the $10,000. And the depreciation and replacement cost if the battery wears out.

The broader economics of this is important as Australia tries to move to net zero. A lot of the low-hanging solar fruit has now been picked. Putting solar panels on owner-occupied houses by owners who can afford it is reaching its peak.

Installing more batteries is one element in taking the grid to total renewable energy. More about the other elements later.

But there is an overriding matter: most people do not have a lazy $10,000 sitting in a bank account for a battery or an array of solar panels .

People over 65 might be able to dip into their superannuation to pay for it without a tax penalty, but that is only a small number of people.

That is when I had the Peter Dutton-inspired moment. You know how the Opposition Leader and the Coalition generally love the idea of people dipping into their super to fund emergencies like Covid or to help provide a deposit for a house, and so on. Why not, I thought, go one step further.

Instead of just allowing people to pull money out of super to buy solar arrays and batteries, thus depleting their funds. Why not permit their super accounts to buy the solar gear as an income-generating asset? 

Of course, it would horrify Dutton to think superannuation could be used to help us do something useful like investing in the decarbonisation of the electricity grid. But it makes a lot of sense.

The Coalition’s hare-brained schemes to allow people to dip into super, is less about the problem at hand (Covid, medical expenses, access to housing etc) than about sabotaging the universal superannuation scheme.

The scheme was set up by Labor and is one of the top five public-policy ideas put in place in Australia in the past 70 years. The Coalition hates its universality; the fact employers have to administer it; and the fact that employees get to have representatives on superannuation trust fund boards. 

The Coalition has consistently opposed the step-by-step increases in the levy to take it to 12 percent – which is the level needed for the bulk of employees to have a decent retirement.

Hence its willingness to adopt spend-it-now schemes. The super-for-housing-deposits scheme, for example, will only throw more fuel on to the already over-heated housing market – jacking up prices by more than what home-hopefuls can withdraw from their super.

However, the super-for-solar scheme is fundamentally different. It is not for frittering away but is an active investment that can produce money for retirement – the whole aim of superannuation.

And the investment income can be preserved for retirement with a bit of (admittedly complicated) tweaking and some changes to present investment rules. 

These days all the electricity generation, usage, costs, and exports to the grid are easily recorded. 

For example, our recent bills show that we are exporting slightly more to the grid than we are taking from it. If we took nothing from the grid (after the super fund installed a $10,000 battery) we would be about $1600 a year better off.

So, under this scheme we would pay 6 per cent to the super fund as earnings on the $10,000 it stumped up to pay for the solar gear ($600). That would leave us $1000 a year better off, so the battery would be paid for in 10 years. And its future savings would be in effect retirement income.

I am sure that Treasury officials – now excused from any further work on negative gearing – would have plenty of time to model this stuff.

Essentially the householder would pay interest to the super fund for the outlay and would keep the balance in the form of lower power bills. Eventually, inflation would eat away at the real cost of the interest payments and the householder would be left with what amounts to an income-generating (expenditure-saving) asset for retirement.

If the householder sells, the super fund would have to be repaid from the proceeds of sale. But the householder cold renew the scheme with their new dwelling.

The scheme would be completely voluntary so there would be nothing for anyone to whinge about. It could apply to batteries for households that already have solar arrays and to solar arrays and/or batteries for those who don’t.

With an electric car being charged at night from a battery topped up from solar during the day, the economics would be even better.

This is what you do when the sun is not shinning or the wind not blowing or when you want to reduce some of the need for extra transmission lines.

The other elements in moving the grid to net zero mentioned above will also require some out-of-the-square thinking. How do we get solar panels; batteries; and EV chargers into strata dwellings; dwellings occupied by tenants; and on the roofs of commercial properties, especially the acres of warehouses and shopping centres right within cities were the power is used.

Requiring landlords to provide a base level of electricity to all tenants would give landlords an incentive to go solar. Allowing strata corporations to be the sole recipient of electricity and to divide the bill among unit holders would cut connection fees and provide an incentive to go solar.

In short, the Government should produce some practical, economical, and sensible incentives to ramp up solar and battery uptake and demonstrate that going nuclear is unproven, costly, and will require coal and gas to burn while we wait – to the great profit of the Coalition-donating fossil fuel industries and the great cost of the environment generally and the irreplaceable Great Barrier Reef in particular.

Crispin Hull

This article first appeared in The Canberra Times and other Australian media on 1 October 2024.