The Solar Feed-in Tariff

A feed-in tariff is just another great benefit of installing solar panels. The renewable energy feed-in tariff is a rate paid to eligible households, small businesses and community organisations for excess electricity fed back to the electricity grid from designated renewable electricity generation sources such as solar panel systems, solar thermals, hydro systems or wind turbines.

The national and state governments across Australia have adopted various approaches to solar feed-in tariff, also known as solar buy-back schemes or solar bonus schemes. Over the past few years, the feed in tariff legislation has experienced many changes in virtually all the states and territories across Australia.

Despite the fact that premium tariffs have long been scrapped off, homeowners can take advantage of available solar feed-in tariff schemes that are currently ‘net’ schemes. A net FIT rewards the solar panel owner for each unit of solar power exported to the grid.

Unlike in Australia, solar feed in tariffs have experienced massive success in countries such as the UK and Germany, where their introduction has led to huge uptake of solar photovoltaic systems. With the right policies, Australia too can experience this success.     

The State of Small-Scale Rooftop Solar Installations

According to a new report by Australia’s Clean Energy Regulator, household rooftop solar installations hit 4.59 GW by the end of 2015. With this, Australia has propelled a global increase in renewable energy, and is now rated as the continent with the highest number of small-scale solar panel installations in the world.

Data released by the regulator further indicated that there were 119,000 new household PV installations in 2015. This number certainly sets Australia apart as the only country/continent in the world with the highest percentage of residential buildings having rooftop PV systems installed.

The current number of small-scale rooftop solar in Australia also indicates that the country is leading globally in distribution of rooftop solar. Following a calculation on 1 December, Australia hit a high of 1.49 million household PV installations. This is as per the data released by Australia’s Clean Energy Regulator.

The country’s Clean Energy Regulator was instituted by the Clean Energy Regulator Act 2011 on 2 April 2012 as an independent statutory authority to execute its mandate as part of the Environment portfolio.

The Future of Solar PV Systems in Australia

Australia is ranked as one of the sunniest continents on the planet. The land down under has massive potential for solar system installation which can significantly contribute to generation of electricity in coming decades if only the various state and federal authorities would provide a secure policy environment.

Of course, Feed-in Tariffs may have been abandoned by states and territories, but a combination of the rapidly falling cost of PV systems and the ever rising prices of electricity makes solar a more compelling business. According to a 2012 Australian Energy Technology Assessment, the Bureau of Resources and Energy Economics predicted that by the end of the decade, solar power would be one of the cheapest sources of energy.

Following the Federal Government’s action of reviewing the Renewable Energy Target, there are concerns that the move could lead to a decrease in the up-front rebates for the solar PV systems. Campaigners warn that slashing these rebates is poised to increase the overall cost of small-scale rooftop solar systems by about 30 per cent. This would in turn bring to a halt the number of solar PVs being installed by Australian households and businesses by more than 50 per cent.

Even as the sun sets on solar through rebates and Feed-in Tariffs, the Australian solar energy market still has a bright future as more households continue to make the most of the benefits of going solar thanks to the offers provided by companies in the energy sector.

Apart from the rising electricity bills that compel households to invest in solar panels, home owners are also taking control of their power bills through low rooftop solar PV prices and generous incentives including FITs and economics of 1-for-1 solar buyback schemes.

For instance, AGL offers customers of New South Wales a feed in tariff of 5.1 cents per kilowatt hour* for excess electricity generated and transported into the grid. In essence, NSW residents can feed back into the grid any excess energy produced any time and get paid for it. This appears as credits on the customer’s bill. Ideally, no energy generated by the solar panels is wasted.

Click Energy also offers its consumers in Queensland some fantastic rates. As a matter of fact, their 11¢ solar power retailer-funded feed-in tariff in Queensland is so far the best in the country.

And with the advent of solar energy battery storage solutions, users can now produce and store within their own homes the excess electricity produced so it can be used any time of the day, even when the sun is not shining.

Solar Power FITs in NSW

In what appears to be a deliberate attempt to push consumers in New South Wales to adopt solar battery storage, as well as a lock-in of long-term deals with key retailers, the state’s pricing regulator in September last year slashed the value of solar energy feed in tariffs.

The Independent Pricing and Regulatory Tribunal (IPART) had earlier announced in its draft determination that the average tariff endorsed—which is voluntary for electricity retailers in the state, had been reduced by 14 per cent to a minimal average of 4.8c/kWh, the lowest FIT in Australia.

This move is poised to significantly affect the over 3,000 households that install rooftop solar in NSW each month, and also provides a forecast of the kind of tariff that awaits about 160,000 households on premium FITs when the current tariffs are terminated at the end of 2016.

In a bid to justify the slash from an average of 5.6c/kWh in 2014, the IPART based the cut on the drop in wholesale electricity prices which are as a result of the proliferation of solar PV as well as the decline in costly peak pricing activities.

The Independent Pricing and Regulatory Tribunal concludes that investment in rooftop solar panels has significantly helped to cut down the amount of daybreak peak pricing activities in NSW besides lowering the average peak demand levels by 8 per cent.

While FITs for solar households have been slashed by various authorities due to the falling wholesale prices, it’s obvious that the low wholesale prices have not been transferred to the general consumer. Ideally, retailers only increase their businesses’ “retail” component margins so as to offset the decrease in revenue from their coal plants and other energy generators. Notably, all major retailers significantly increased their margins this past year.

Solar Battery Storage Redefines The Future Of Solar Energy

According to IPART, tariffs are not important since much of the electricity generated from rooftop solar panels are directly consumed by the home and nothing is exported to the grid. IPART further suggests that households shouldn’t be fussed about the reduced FITs but should instead install solar battery storage.

“The uptake of battery storage will make it possible for PV customers to use more of the electricity they generate to meet their own needs,” it adds.

Indeed, in the absence of the premium FITs, then battery storage will be the way to go. And of course this is expected to start a fierce battle between the small and big retailers, as well as providers of energy management systems for residential use.

In an interesting conclusion, the IPART suggests that the Feed in Tariffs are irrelevant following the move by major retailers to offer complementary products including battery storage and power purchase agreements.

“These new products will make solar PV accessible to a broader range of customers, and make it possible for PV customers to use more of the electricity they generate to meet their own needs,” IPART says. “The structure of some of these products may mean that traditional feed-in tariffs become less relevant over time.”

Clearly, the issue of solar tariffs is very controversial in Australia. The networks—most of which are state owned, fiercely shield their revenues. Despite the fact that electron from one household with solar can travel a distance of a couple of metres to a neighbor, these networks still charge the same rate as transporting the same from one state to another.  

Obviously, this is an artificial structure since those costs only exist because they are contained in the regulators’ rules. Really, it’s not that costly to transfer electricity from one customer to another. Those electrons can easily flow to the neighboring consumer.

With the ability to make their own rules, retailers can pay 4.8c/kWh for any excess solar output imported from a consumer—only to sell it to the consumer’s neighbor for almost 10 times as much (46c/kWh) during the afternoon peaks.

No doubt, if a consumer could sell their excess solar energy on their own, it would only cost them the price of buying and connecting an extension cord through the fence. If you think safety issues might be a problem, effective solutions like virtual retail pricing for electricity (net metering) and micro grids are already in place to meet this need.                  

Both IPART and other pricing regulators have always treated single rooftop solar PVs as though they were big centralised plants or generators such as the coal-fired electricity stations. This should never be the case.

In Conclusion

The tariff for solar exports should take into consideration the attributes of advanced technology—not just in reducing wholesale prices but also its capacity to suspend network upgrades by way of lowering the peak demand as well as its environmental gains including driving out coal-fired power generation from the grid, as acknowledged by Western Australia’s energy minister Mike Nahan.

There’s no denying it, Australian solar customers deserve to have a choice. And with the High feed-in tariffs, great discounts and other market-leading solar plans offered by retailers such as Diamond Energy and Australian Solar Quotes, the response Australian consumers will give these retailers is simply “I accept”, then go ahead to install more solar panels and solar battery storage.

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