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Queensland solar feed-in tariffs and the merit-order effect: economic benefit, or regressive taxation and wealth transfers?


Author Info

  • Tim Nelson

    (Level 22, 101 Miller Street, North Sydney, NSW, 2060)

  • Paul Simshauser

    (Level 22, 101 Miller Street, North Sydney, NSW, 2060)

  • James Nelson

    (Level 22, 101 Miller Street, North Sydney, NSW, 2060)


Premium residential solar feed-in tariffs have come under considerable scrutiny in Australia over the past 12 months following a sharp rise in the uptake of subsidised PV units and subsidy cost blow-outs. Using New South Wales data, Nelson, Simshauser and Kelley (2011) demonstrated that the inherent design of premium ‘gross’ feed-in tariffs are regressive in nature and required reform. Since the publication of that article in Economic Analysis & Policy (September 2011 edition), feed-in tariff policies have been substantially wound back in all Australian jurisdictions except Queensland. In this article, we examine the ‘net’ feed-in tariff in Queensland and similarly find it to be a regressive form of taxation. We also examine the so-called ‘merit order effect’ – a purported ‘economic benefit’ arising from premium feed-in tariffs. However, the evidence is clear that merit order effects must, by definition, be transient and above all, are not welfare enhancing.

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Bibliographic Info

Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

Volume (Year): 42 (2012)
Issue (Month): 3 (December)
Pages: 277-301

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Handle: RePEc:eap:articl:v:42:y:2012:i:3:p:277-301

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Related research

Keywords: Feed-in Tariffs; Electricity Prices; Merit Order Effect;

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  1. Gelabert, Liliana & Labandeira, Xavier & Linares, Pedro, 2011. "An ex-post analysis of the effect of renewables and cogeneration on Spanish electricity prices," Energy Economics, Elsevier, vol. 33(S1), pages S59-S65.
  2. Tim Nelson & Paul Simshauser & Simon Kelley, 2011. "Australian Residential Solar Feed-in Tariffs: Industry Stimulus or Regressive Form of Taxation?," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 41(2), pages 113-129, September.
  3. Tim Nelson & Simon Kelley & Fiona Orton & Paul Simshauser, 2010. "Delayed Carbon Policy Certainty and Electricity Prices in Australia," Economic Papers, The Economic Society of Australia, vol. 29(4), pages 446-465, December.
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Cited by:
  1. Liam Byrnes & Colin Brown & John Foster & Liam Wagner, 2013. "Australian Renewable Energy Policy: Barriers and Challenges," Energy Economics and Management Group Working Papers 2-2013, School of Economics, University of Queensland, Australia.
  2. Nelson, Tim & Nelson, James & Ariyaratnam, Jude & Camroux, Simon, 2013. "An analysis of Australia's large scale renewable energy target: Restoring market confidence," Energy Policy, Elsevier, vol. 62(C), pages 386-400.


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