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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Tim Nelson & Paul Simshauser & James Nelson, 2012. "Queensland solar feed-in tariffs and the merit-order effect: economic benefit, or regressive taxation and wealth transfers?," Economic Analysis and Policy, Elsevier, vol. 42(3), pages 277-301, December.
  • Handle: RePEc:eee:ecanpo:v:42:y:2012:i:3:p:277-301
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    More about this item

    Keywords

    Feed-in Tariffs; Electricity Prices; Merit Order Effect;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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