The Queensland government’s promise to deliver a “fair price of solar” for new and recent solar connections has hit a major roadblock, with the Queensland Productivity Commission saying it sees no reason to impose a mandatory payment and figures households are receiving enough already.
The draft report from the QPC, released on Thursday, rejects the idea that solar households should be rewarded for any network benefits, such as reducing peaks and deferring investment, and for pulling down the price of wholesale electricity, or any other social benefits.
It says it is clear that solar PV reduces the amount of coal-fired generation, but says that the emission reduction benefits are already rewarded in the federal small-scale renewables scheme, which provides an upfront subsidy to the cost of solar panels.
And it also rejects the idea that solar households should be allowed to trade with each other, saying that such schemes are too complex, and may be addressed separately by the Australian Energy Markets Commission.
The findings of the QPC are not a surprise, given its past and current attitude to solar and the networks generally. It and other state-based regulators are criticised for seeking only to protect the interests of the incumbent network operators and gen-tailers.
Last month, for instance, the QPC recommended the premium feed-in tariff of 44c/kWh, enjoyed by more than 300,000 households in Queensland, should be cancelled, rather than allowed to continue until 2028.
That report on the broader issue of electricity prices focused entirely on the cost of renewables, which make up less than 5 per cent of the average consumer bill, and largely ignored the impact of network costs and wholesale prices, rising sharply because of the rising cost of gas. As we said then, it was a big fail.
This latest report on the fair price of solar looks at the current feed-in tariffs, which in south-east Queensland are not mandatory. Major retailers pay between 6c/kWh and 8c/kWh, while other smaller retailers offer between 4c/kWh and 11c/kWh.
The QPC argues that these FiT payments are a subsidy, although many in the solar industry argue that the ability of incumbent utilities to buy the output of rooftop solar at a low price and sell it “over the fence” to the neighbour at three times the price – or significantly more in time-of-use tariffs – is a subsidy in the other direction.
The utilities, supported by regulators, say these low FiTs, or payments, are justified because of “unavoidable” costs. But the industry wonders why that is the case.
One graph recently released by Energex, and used in a series of presentations, goes to this point. It shows how the network can benefit by shifting electric hot water systems from the current “off-peak” in the middle of the night, to the middle of the day.
The diagram above showed how the network could use the output of solar PV as a “solar sponge”, effectively eradicating an evening and an early morning peak.
This has a clear network benefit, but those solar households on “controlled load tariffs” are being paid 6c/kWh for their solar and paying 18c/kWh for the same output, even though the output has not even gone into the grid – it’s travelled just a few centimetres from one meter to another.
They are effectively paying the network 12c/kWh to use the output from their own solar system. As one analyst says: “Work that one out.”
Alan Pears, from RMIT, says the key question that none of the regulators address is where does the money go when the networks pocket the difference in money paid to solar households and the electrons sold either back to them or to their neighbours.
“On what basis can regulators justify allowing retailers and network operators to grab the difference between the low FiT and the price at which they re-sell that electricity to someone down the street?”
Pears says QPC and other regulators, such as IPART in NSW and the ESC in Victoria, based their assessments only on savings to the incumbent electricity supply industry. There is no scrutiny on the cost impact of households using air conditioning, for instance.
The QPC’s take on solar PV’s ability to reduce peak demand and defer network expenditure is also interesting. It says there is evidence of “some” network peak reduction, but it is not uniform enough to justify a tariff adjustment. In typically dry economic terms, it even questions the benefits of deferring network upgrades.
But its logic is difficult to follow. When a local network is upgraded, all consumers share in the costs. That, it suggests is OK, but it is not OK for the benefits of investment deferral to be shared.
As one analyst said: “This reads like a 100-plus page justification to deliver a preconceived position to do nothing. The wording of so many phrases in the document reads like the opening position is that FiT socially is bad. Some of the tricky answers are not explored to try to find useful solutions.”
The Australian PV Institute, a research body, says it is clear that solar PV does reduce peaks.
“There is a significant amount of well-documented evidence provided by network operators that PV reduces network demand peaks – both at the feeder and system-wide level,” it says in a submission to the QPC’s electricity price inquiry.
It notes that the peak for Queensland for 2015/16 to date was on Tuesday, February 2, when solar PV reduced it from 9,576MW to 9,062MW, a reduction of 5.36 per cent
The APVI says the QPC appears to make no efforts to ensure that the networks’ cost-reflective tariffs are, in fact, cost-reflective.
One consequence of this is that batteries, and similar load control devices, are most likely to be programmed to operate in such a way that they will do little to reduce network peaks and current proposals for demand-charge tariffs could result in significant dead weight losses.
John Grimes, from the Australian Solar Council, says the QPC report grossly underestimates the benefits of solar, including the reduced investment in grid infrastructure, and overestimates the benefits of the federal subsidy, not recognising it is winding down.
Advocacy group Solar Citizens said the report ignored the main obstruction to fair feed-in prices for solar owners, which was the costs imposed by the state-owned networks.
“Excess solar power that travels a few metres over a neighbour’s fence is charged the same high rates for the use of the poles and wires as power that travels hundreds of kilometres from coal or gas-fired plants,” said consumer campaigner Reece Turner.
“The benefits of rooftop solar are failing to be realised and all Queensland consumers are suffering.
“Queenslanders are leading the world in the take up of residential rooftop solar and have invested millions of their own dollars towards a cleaner, healthier renewable energy future, but the big, state-owned companies are failing consumers. The commission’s report does nothing to address or even recognise this.”
