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Victoria solar feed-in tariff more than doubles to 11.3c/kWh

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More than 130,000 solar households in Victoria will benefit from a steep increase in their solar feed-in tariff in 2017/18, and will receive a minimum 11.3c/kWh for their exports back to the grid, up from 5c/kWh currently.

The hefty increase announced by the Essential Services Commission on Tuesday is the result of a big rise in wholesale prices, and the Victoria Labor government’s instruction to include an implicit carbon price, network benefits and environmental benefits into the tariff.

ESC solar VicWholesale market prices have jumped in recent months, thanks mostly to speculation and confirmation of the closure of the Hazelwood brown coal generator in one month’s time.

The calculation for wholesale prices is based on forecast average pool prices of $77.82/MWh, compared to just last year, with another 3.5c/kWh added for network, climate and other benefits.

But some are already suggesting that the wholesale price calculation – made by ACIL Allen – is selling solar households short.

Greens MLC Greg Barber referred to analyst David Leitch’s weekly Know Your NEM column, which puts forecast pool prices in Victoria for that period at $99/MWh.

“The regulator is undercooking the wholesale electricity price estimate, just like they did last year,” Barber said.

“If they looked at baseload futures in the real world, instead of hokey modelling, solar homes and businesses would be getting an extra two and a half cents per kilowatt-hour.”

Still, despite that shortfall, the recommended tariff is now vastly higher than any other state, thanks to the inclusion of other factors, even if the ESC was accused of failing to recognise the environmental and full network benefits of the state’s near 1GW of rooftop solar.

On top of the effective wholesale tariff of 7.78c/kWh, a premium for solar (because it produces during the day) has been added, along with avoided loss factors on transmission lines, which takes the overall price to 8.7c/kWh.

On top of this comes the 2.5c/kWh benefit calculated on the “avoided cost of carbon.” The Victoria government wanted the ESC to go further and include an estimate of avoided environmental costs, such as air pollution, but the ESC insisted it was unable to produce meaningful data.

“We remain of the view, therefore, that the Commission is not able to determine the avoided human health costs attributable to a reduction in air pollution caused by small renewable energy generation,” the ESC says.

The ESC has also been asked to set varying tariffs, depending on the network benefit for local grids. But it says it has set a flat rate for the first year to “allow sufficient time for consultation with energy retailers on the implementation of multi-rate feed-in tariffs in future years.”

Minister for Energy, Environment and Climate Change Lily D’Ambrosio said the new tariff meant that  households with solar panels are more fairly compensated for the power they send back into the grid.”

“The former Coalition Government reduced the amount Victorian solar households received to 5 cents per kilowatt hour and voted against the bill to make this change,” she said in a statement.

“This is a great win for the 130,000 solar households all over Victoria, we promised a fairer system and that’s exactly what we have delivered. ”

Solar Citizens senior campaigner Shani Tager said she hoped other state-based regulators would follow Victoria’s example.

“We have been campaigning for a fairer price for solar following some outrageous efforts by the big power companies to rip Australian solar producers off, it is encouraging to see that the Victorian Government and the ESC have sensibly decided to recognise the contribution that solar producers make.

“Solar owners are up against hugely powerful companies and corporations who are trying to make obscene profits from the solar they produce – solar owners want, and deserve, a fair go for the contribution they make to powering Australia.”

 

  

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  • Barri Mundee

    Welcome news for Victorians like me with solar. It might still be unfair, just less so.

  • Tom

    Give ’em spot price – that’s what smart meters are for!

    • Brunel

      I totally agree. 11.3c/kWh all the time is too much given how cheap solar power stations are in India/Chile/Dubai, but very appropriate at peak times.

      Heck, 20-40c/kWh if the spot price goes that high.

      • icowrich

        Just allow them to sell to their neighbors and be done with it.

        • Stewart Rogers

          What happens when everyone on the street has solar? This is the case in some neighbourhoods. Batteries are still a tad expensive.

          • icowrich

            What a wonderful problem to have! In such a case, you sell the the next neighborhood down. The market sets the rate for electricity, so when there is a glut of supply, electricity will become so cheap that other houses will buy from their neighbors rather than set up their own panels.

            As for energy storage, there are several solutions. I like pumped hydro, myself, where a neighborhood uses excess power (in the case of solar, this happens around noon) to pump water to elevation so that energy can be recaptured at night by bringing the water back down. You can do this at large scales with elevated lakes or small scales with water towers. Water is, at the moment, less expensive that batteries.

          • Stewart Rogers

            Pumped hydro way too expensive to build. The idea has been brought up and trashed for good reason.

          • icowrich

            Pumped hydro is not that expensive to build. Everything depends upon the local geography, of course, but water towers already exist. All that’s needed is the addition of generators for capture (since the pumps that get the water up already exist). And, in terms of more centralized, high capacity storage, the lakes already exist in those areas, as do the dams that generate power from the water there. In those areas, it’s only a matter of adding the pumps.

            It was, at one time, inefficient, because the cost of pumping the water up detracted from the value that could be extracted from the downflow. But the economics of that have changed now that we have lots of surplus power at times of peak efficiency.

            There are even systems that recapture energy from water flowing downhill (at grade) through standard water pipes:

            http://www.popsci.com/gregg-semler-turns-tiny-turbines-mighty-generators

    • Andrew Thaler

      you forgot about the network bit connecting them to the grid… there is a cost for that.

    • Stewart Rogers

      Spot price in Vic are nearly always under $100/MWh excluding Summer. Also the peaks are usually after the 2pm mark when solar is less powerful.

      This is way too generous as it is.

      • Mike Shackleton

        Solar production peaks out at about 11am and runs through to 3PM on my panels during the summer. I’m still producing a lot until 5 – 6 PM. The reason solar production drops off sharply after 4 PM is that people come home from school/work and start consuming the power themselves.

        • Stewart Rogers

          Sure but those people won’t be exporting unless they have a battery. People may change their solar panel orientation though.

          • What? Having a battery makes it less likely to export.

          • Stewart Rogers

            Depends on the setup of their system. If people were being paid spot price then they may export it to the grid with a Reposit type solution. This was a debate about whether spot price is more generous or 11.3 cents per kWh.

          • Greg Hudson

            Example: You see a spike in the peak rate to $139.99/kWh but it appears as though Reposit only pays you $1/kWh with their ‘Grid Credits’. Not exactly good value… Check their web site. Nowhere does it explain exactly howor when Grid Credits are created, and how much you can earn.

          • Greg Hudson

            Disagree. IMO it is more likely you would export when the price goes up. You can always refill the battery after ‘off-peak’ rate kicks in.

      • Tom

        Forward contracts are $80-110. Definitely agree it’s generous, just go spot so the govt. doesn’t have to muck it up every few years.

        • Stewart Rogers

          This is the best idea. Spot price gives the best of both worlds and with more uncertainty with grid investment it will allow consumers to take advantage of the peaks whilst reducing their demand if possible.

      • Mike Shackleton

        It’s not actually that generous when you consider the REC premium is 10c kW/h. So the retailer gets to sell your power as 100% greenpower and buy it off you for little more than the price of the REC.

        • Stewart Rogers

          Well the retailer can’t sell the feed in as GreenPower since the STCs have already been sold in most cases to claim that aspect of it. I think this is very generous given you do get the STCs and an effective wholesale rate of $113/MWh which is above the avg spot price in Victoria.

          Edit for clarity: I realise STC is federal and FIT is state but you can’t double claim a green subsidy. (Although the wholesale sector does it on a crazy level. ARENA funding + LGC + state subsidy)

  • lin

    A welcome step in the right direction.

  • Brunel

    8.7 – 7.78 = almost 1.

    Are they saying the cost of transmission is 1c/kWh?

    Thus I am correct in saying that a UHVDC transmission line should be built from WA to NSW.

    For the cost of transmitting solar power is way cheaper than the cost of storing solar power in batteries.

    • Alastair Leith

      SEN disagrees about that, but I’d like to see the latests UHVDC costings from a real project. Capacity is the telling factor in all this, double capacity, nearly double the cost. Small capacity UHVC for ‘thin-pipe’ top up of thermal energy storage e.g. molten salts that can drive large capacity generation when required might be the happy compromise.

      • Brunel

        We could possibly convert the existing HVAC transmission lines (that go from QLD to NSW to Vic to SA) to UHVDC.

        How can it be worth having AC transmission from QLD to SA but not UHVDC?

        If you see the videos, ABB show that you need way less pylons and way less wires than HVAC:

        • Alastair Leith

          Because the transformer plants for UHVDC are much more expensive than for HVAC. So for every take off or feed in point on the line you add significant costs with UHVDC or HVDC. Great for undersea cables or over a mountain range, not so great for a dense grid.

        • Alastair Leith

          Video didn’t really tell me anything, perhaps it’s a private market artifact that makes this economical, no way of knowing from that information. Doesn’t even say if it is point to point or pickups grids along the way.

    • simulacrum

      I think that’s just the value of avoided line losses. The true cost of transmission/distribution includes maintenance costs and is better represented by network tariffs you can find on the AER website.

  • Alastair Leith

    Well there’s the Harvard University Medical School correlation study that EV paid for they could start with for costing environmental pollution costs. There’s tonnes of global data about the cost in health terms from coal, gas and diesel pollution. Only outweighed by tonnes of lame-arse excuses from bureaucrats tied to the incumbent fossil industry who should hang their heads in shame.

  • Rob Bussey

    I think its great, they should pay more. I’m interested in what the Greens Greg Barber will have to say when Hazelwood closes, so far they (Greens) have come up with nothing,

    • Mike Shackleton

      Why should the Greens have to come up with anything? It’s a privatised network – More wind power is on the way and solar projects are springing up all over the place. There will be plenty of capacity in the network.

  • phred01

    If the power industry wants to stay relevant & head off battery storage the FIT should be 1 for 1. Most retail consumers are working & draw power when there is no sun @ nite. During the working day industry are the biggest users. Read on this forum German battery Co is going to enter the retail market which will as it appears to take the incumbents by storm. The more the power sector sets up more road blocks the greater likelihood there will be mass defections & then having another front to contend with

    • Stewart Rogers

      So you propose retailers should make losses now so they don’t die out in the future? You realise most retailers are lucky to work on 10-15% margins. They can’t afford to dish out 1 for 1s. Most of the cost of power is network charges and retail expenses. Not the wholesale rate.

  • howardpatr

    About time the ACT Government moved. For the 100% renewables Government it is deplorable that the two main energy providers can get away with the absurd 6 – 7 cents they offer.

  • al edg

    It just says prices for 2017/2018…. does this mean these new feed in tariffs take effect 1/7/2017 ?

    I think it’s time I bought my dear old mum some solar panels for her house – and perhaps an Enphase battery. (her birthday is start of July).

    • Yep, July 1. That would make a nice birthday present!

  • Michael Wakefield

    Tom I would be more than happy to be paid the spot price, you do realise that the Victorian spot price at 1740 hrs is $134.11, that’s $.13411 cents per KW. To Andrew I already pay a daily service charge to connect to the Grid as do all who are connected. To Brunel you do understand that the NEM/AMEO is a competitive tender process conducted over 30 minute periods, all available generators bid into this pool, that’s why the price fluctuates so much. Perhaps you three should do some research before posting what I consider ill founded remarks.

  • Stewart Rogers

    Crazy feed in tariff. Even crazier that the Greens are demanding a 1 for 1 FIT. I’m gonna be buying 15kW of panels to rort this FIT. 5kW for each phase.

    • Richard

      Well it’s done it’s job then.

      • Stewart Rogers

        I’m about to make $60,000 by 2024 on the PFIT and I could make another $20-30k on this easily. If lining the pockets of people like me due to subsidies is its job then it’s done that. lmao

        • Richard

          If you look at the rules I bet it wont apply to more than 5kwh systems. But go ahead and put up your 15kw of panels up. lmao

          • Stewart Rogers

            I’d say it will be more than 5kW of panels given small-scale currently covers up to 100kW. It will be limited based on how many phases you have and your distributor limitations.

            PFIT was limited to 5kW because it was known that this was generous (READ: Rort) scheme.

        • Mike Shackleton

          The PFIT won’t apply to any new capacity you install. You might need to check this, but if you augment an existing system that receives the PFIT I think the whole thing resets and it only becomes eligible for the standard FIT.

          • Stewart Rogers

            1. I never stated it was for new capacity.
            2. I got the PFIT in 2011 solely for economic reasons.
            3. I would put my new solar set up on a dedicated circuit which wouldn’t void my PFIT as I’m not altering the output or equipment on that meter.

          • Ken Morrison

            Correct in Victoria

  • Just_Chris

    Wow that certainly changes the equation. If you are almost breaking even on your export and saving big on your self consumption you start to get to a point where it makes sense for most home owners to pull the trigger on solar. I am not too sure the battery folk will be all that happy though.

    • Ken Morrison

      Tasmania had a FIT system running at 1 to 1 but you did not receive payment for any excess you generate over a reasonable period thus ensuring that you ran the correct size system with no incentive for overkill. I am not sure of the exact details but it seemed a very fair system at the time.

  • Greg Hudson

    ”following some outrageous efforts by the big power companies to rip Australian solar producers off”
    We need some regulations to stop power companies not only ripping us off with low FIT’s (Feed In Tariffs), but also how they charge solar owners more for the very same power they supply to non solar owners. e.g. I’ve just moved a short distance from a solar home (with PFIT) to a non-solar home. Same distributor (United), same retailer (Red Energy). At the old house I was paying 33c/kWh (ToU), and at the new house it is 17.9 (Flat rate, because they would not give me ToU). Can anyone explain a basic DOUBLING of price just because I has solar panels ? I doubt anyone can come up with a reasonable explanation…