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Qld pricing regulator slashes solar tariffs again – but why?

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(Update: QCA has admitted it erred in its calculations and says it will revise the tariff upwards!).

The Queensland Competition Authority has announced a further cut in the feed in tariff for exports back into the grid from rooftop solar arrays, but the solar industry is questioning whether the cut is justified.

solar-rooftops

QCA chairman Malcolm Roberts, in one of his last acts as head of the QCA before taking up his new role heading the country’s biggest oil and gas lobby group, the Australian Petroloum Production Exploration Association, announced that the FiT for solar customers in regional areas of the state covered by the Ergon network would be cut from 6.53c/kWh, to 6.03c/kWh.

Roberts justified the cut on the basis that energy losses from networks had been reduced.

“The main reason for the lower rate is that the Australian Energy Market Operator has updated its estimates for transmission and distribution losses,” Roberts said in a statement. “Lower energy losses reduce the value of energy exported from solar panels.”

Analysts agreed that, in principle, it is true that lower energy losses due reduce the value of energy exported from solar panels. But there are questions over why the lower energy losses – which were not itemised – justified a near 10 per cent cut in the solar tariff.

AEMO estimates that total energy losses – the electricity lost between the point of generation to the point of deliver – can amount to around 10 per cent.

Ironically, it is the emergence of rooftop solar and other distributed generation, which generates electricity at the point of consumption, that has helped reduce those losses.

But the problem with the QCA decision is that AEMO is yet to release its updated estimates on energy losses. It won’t do that until later this month.

A spokesperson for QCA pointed RenewEconomy to estimates provided by ACIL Allen on energy losses. Both this, and last year’s AEMO estimate, suggests small gains in some part of Ergon’s network (of no more than 1 per cent), and increased energy losses at some nodes.

RenewEconomy asked QCA for further information on how the data justified the decision announced late on Friday. It did not receive a response by the time of publication.

The size of solar tariffs in Queensland and in other states have been hotly contested. The QCA says its methodology ensures “a fair return for the energy they export to the grid without imposing unjustifiable costs on the customers buying that energy.  We calculate the true market value of the energy.”

It says that when retailers buy energy from customers with solar panels, they avoid some of their normal business costs, but retailers still incur most of their normal business costs, including retail operating costs and transmission and distribution charges.

The solar industry says this is not quite true, and some losses are involved. And the FiT does not take into account benefits of solar systems, such as reduced energy losses, grid resilience and reduced emissions.

John Grimes, the Chief Executive of the Australian Solar Council, described the QCA as a “relic of the dark past of the Campbell Newman era”, and described the decision as “old thinking” on the value of solar.

“The price cut punishes solar families outside of southeast Queensland and fattens the profits of the big power companies and the fossil fuels industry,” Grimes said in a statement,

“The Palaszczuk Government promised Queensland families a fair price for solar. The Australian Solar Council supports that commitment. The Queensland Government must move quickly with its inquiry into a fair price for solar and ensure a swift conclusion to get a fair export price for all Queensland families.”  

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  • john

    As I remember reading a PDF to do with transmission losses for Ergon the figures were 45% for tier 3 areas.
    Of course the tier 1 areas being the largest by far users of power reduced the tier 2 and 3 to minor amounts of loss over all.
    Not having to transmit large amounts of course reduces the loss.
    I am of the thought that because of the price to install systems now this has come into the equation and resulted in a lowering for the FIT.
    I still feel Ergon will welcome anyone in the Tier 3 area to install PV and battery back up because they will help reduce the huge subsidy paid to get power to these uses.
    Just imagine if the cost of delivered power was priced at the actually cost to get it to these people $600 million extra on the bill which would equate no doubt to around 50c or more a KwH for power.
    In this situation everyone in Tier 3 areas would immediately get PV, Wind and Battery backup and disconnect rendering the huge expense of building those lines redundant.

  • john

    Is 6 cents for the fit reasonable
    Qld 5 Kw system cost $7000
    Output for reasonable system 8000 KwH power.
    Home usage between 20% and 30% @ 29.4 cents per KwH
    @ 20% this is 1600 Kwh $470 export and 6400 @ 6cents $384
    So totals $864 saving for $7000 expend that is about 10.8% return.
    As anyone can see anything above 20% home usage is going to be so much better but I think a 10% return is a total no brainer.

    • Ian

      A small business can soon get an instant tax write-off for purchases up to $20 000 as this site has shown before. Redo your numbers based on this, and on usually, much higher self useage percentages. $7000 company profit would incur $ 2100 tax ie $4900 if distributed to the owner(s) . Electricity savings: 8000kwh per annum x 29.4ckwh is $2352/year. Return on investment 2352/4900 is 48% per annum! If you want to upset the coal generator apple-cart advertise figures like these to every small business.

      • john

        ok
        CapEx expend by small business company $7k
        cost of power for small business 25.6c kwh
        Using I expect about 25% of output from 7000 KwH output lets see
        1750 KwH @ 25.6 a KwH = $448
        5250 KwH @ 6.25 a KwH = $325
        Total $773
        Return on expend $773 against $7000 =11%
        Last time I looked 11% beats any safe return on expend anywhere this is a total no brainer.
        Even reducing the use of power to a low figure of say 10% lets do it again.
        700 Kwh @ 25.6 = $179
        6300 Kwh @ 6 c = $378
        total = $557 a return of 7.9%
        So the return on your expend as a small business will between 7 and 10 % I think this is compelling.

  • Matthew Wright

    It’s a lobbyocracy. Only in Australia could you get the head of the competition omission which is supposed to be impartial – to lead the lobby organisation for the most fractious industry in the country, the petroleum and gas industry.

    It’s almost unbelievable.

    • Jason

      I completely agree! It is unf&%$ing believable

    • Cheryl T

      I think the relevant term might be “incestuous”.

  • Mike Dill

    This will only push a few more people towards self-storage for those electrons.

  • WR

    From memory, the current Ergon FIT was based on a transmission loss of about 15%. So the FIT price before transmission loss was 6.53c/1.15 = 5.68c/kWh.

    A new price of 6.03c/kWh would appear to be based on a transmission loss of about 6.2%, which seems unrealistically small. Maybe they are also using a base price lower than the 5.68 c/kWh value.