Victoria solar feed-in tariff to be slashed to 5c/kWh in 2016 | RenewEconomy

Victoria solar feed-in tariff to be slashed to 5c/kWh in 2016

Essential Services Commission confirms plan to cut Victoria solar FiT to 5c/kWh, one week after state govt promised to fight for rooftop solar rights.

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One Step Off The Grid

Less than a week after the Victorian Andrews government promised to fight network discrimination against rooftop solar households, the state’s Essential Services Commission has confirmed it will slash the feed-in tariff for solar power exported to the grid to 5c/kWh.

The ESC said in a statement on Monday that it has decided to set the minimum rate for purchases of small renewable energy generation electricity at 5 cents per kilowatt hour, starting January 2016.

rooftop solar

It said that it had come to this price by weighing up the marginal cost of the equivalent amount of electricity that would otherwise need to be purchased from central generators, as well as “the locational value of electricity produced close to the final consumers compared to relatively distant central generators.”

The ESC said the energy value of PV electricity had been calculated as a weighted average of the forecast spot market prices for Victoria for each half-hour period of 2016, as prepared by ACIL Allen Consulting.

Ironically, the Commission also said part of its decision to go with the lower 5 cent rate, down from the previous 6.2c/kWh rate, was due to a lower forecast wholesale market price of electricity, particularly during daylight hours when PV electricity was being generated.

The commission said it did not take into account any environment or network benefits of rooftop solar, because of a “lack of evidence”. The decision was panned by the solar industry, who say the fair value of solar should be at least twice as much, if not equivalent to the full retail rate.

“This decision delivers a transfer of wealth from solar PV owners to electricity retailers,” said Australian Solar Council chief John Grimes.

“Solar energy exported to the grid is sold to your neighbors at the full retail rate, often upwards of $0.25 per kilowatt-hour. So paying a solar owner $0.05 cents per kilowatt hour for that exported energy is simply unfair.”

Solar Citizens national director Claire O’Rourke said the ESC had got its decision wrong, and was sending a starkly different message to Victorians that the state government, which just last week announced a Renewable Energy Roadmap aimed at achieving a renewable energy target of no less than 20 per cent by 2020 and with the stated goal of promoting rooftop solar uptake, and protecting the rights of existing rooftop solar households.

“The slashing of the feed-in tariff by the ESC is extremely unfair and risks undermining increased renewable energy as part of Victoria’s energy mix,” O’Rourke said in a statement on Tuesday.

“The Victorian government has committed to a review determining what a fair price should be later this year, but this could be too little too late if the ESC feed-in tariff cuts get the green light.

“It’s not proper process to cut the feed-in tariff now, before we know what a fair price for solar fed back into the grid should be.

“Energy Minister (Lily) D’Ambrosio should delay these changes until the results of the upcoming State Government review are available.

“It punishes tens of thousands of households that are likely to lose a large chunk of the already small financial return they receive from providing clean, renewable energy back into the grid.

“This cut will also make it more difficult for the thousands more families in Victoria who want to make the move to solar and enjoy the cost savings on electricity that rooftop solar can bring.”

This article was originally published on RE sister site, One Step Off The Grid. To sign up for the weekly newsletter, click here.

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34 Comments
  1. Jennifer Gow 5 years ago

    “Less than a week after the Victorian Palaszczuk government…”
    I don’t think you can blame the Queensland premier or her government for this act of sheer bastardry.

    • john 5 years ago

      I was just going to say “Palaszczuk” as in Annastacia Palaszczuk is the Qld Premier.

      I guess it follows Qld. in as much they follow the QCA recommendation of some 6c a KwH export price possibly a mental association I would expect.

  2. Gordon 5 years ago

    ” But for some in the state, who installed PV systems back when there was
    a FiT of 62c/kWh on offer, the adjustment will be huge …”

    There’s
    not a lot of difference between going from 62c to 6c and 62c to 5c per
    kWh, or are you suggesting they will have their 62c/kWh contracts
    terminated and be forced into accepting 5c/kWh instead? That would be
    huge!

  3. john 5 years ago

    Even with a 5 cent per KwH for export considering the displacement value of the energy the system on the roof produces this is still a net positive if done today.
    However for those who may have paid $27000 for a system it is not exactly going to help them at all but I thank the early adopters who ensured the drop in price for the technology

  4. trackdaze 5 years ago

    If I invest in a new billion dollar power plant of any colour all I can expect on the sale of my power is about 5ct per kw. So why shouldn’t everyone even prosumers?

    Its a good thing as it will engage the power companies to buy solar power

    • Craig Allen 5 years ago

      If you invested a billion dollars on the basis of an agreed rate over a specified period I suspect you’d be a bit cranky if the government turned around and changed it. At my place we spent $19,000 to instal a 4.6kw system with the govt promising 60c/kWh for 14 years. If they can unilaterally tear up their contract with us then why not tear up the contracts with companies that have built freeways, railways, airports, port facilities etc.? For that matter, why not just declare all government debt obligations null and void?

      • trackdaze 5 years ago

        Yeh sorry I didnt realise they were tearing up 62c fit contracts? I support those that coughed up big capital amounts to get the ball rolling.
        New stuff however is economic at wholesale rates.

    • jeffhre 5 years ago

      Your long term contracts average 5c/kWh. Your peak hour spot price requests are often 25c/kWh.

    • Alastair Leith 5 years ago

      you’d be selling a lot of power so you’d be expecting low wholesale prices most of the time. peak demand events are where the big money is made by generators and rooftopPV is killing those midday and summer peaks, hence the ESC payback being delivered to people wanting to do something about CC.

  5. Laikathespacedog 5 years ago

    I bought a 1 kw system with a 3.5 kw inverter years ago and I am on the 60c tariff. If they do this I will be getting a stack more panels and battery storage and I wont be doing any pay back period type calculations. I”ll just do it on principle.

    • Wolfgang Loescher 5 years ago

      The ESC is extremely foolish as it will push people off the grid and affordable batteries aren’t far away. What is going to happen to the aging grid and old power generators? Roof top solar and other renewable s are helping keeping it all going.
      As pointed out in the article rooftop solar is getting a paltry 6.2 cents and it goes next door for 23 cents makes no sense. A big investment is needed to just keep on maintaining the system.
      Change is coming in the energy sector and everyone should come on board or they will parish in the not to distant future.
      Hang in there solar people

  6. juxx0r 5 years ago

    In the waterfall chart of the costs of power, the solar owner should get everything to the left of the distribution. In the chart below, that would be about 40%, at 25c/kWh retail, that would be 10cents. If it was done this way, nobody would lose out. The Essential Services Commission are just being a bunch of wankers in this instance.

    • juxx0r 5 years ago

      Chart, didn’t work the first time

    • jeffhre 5 years ago

      So, the value of centralized generation is 22c/kWh plus all costs added to complete the retail bill, but the value of solar generated in the neighborhood is only 10c/kWh, at the exact same time! How can the poor energy retailers hope to survive!

  7. Reality Bites 5 years ago

    The AEMO website indicates the current wholesale rate in Victoria is $30.51 per MWh, so yes even at .05cents per kWh, they are being subsidised by all the other consumers.

    • JeffJL 5 years ago

      So the other 22c/kWh are in marketing and distribution of the power. They do not need to do any extra marketing with the power they receive from home owners, nor do they need to send out extra bills. As for the distribution the distance the power travels down the power lines is insignificant compared to that from the other wholesale suppliers. It does not add up Reality.

      • Reality Bites 5 years ago

        Really, yes it is a plot to take all your money, which is orchestrated by the State and Federal governments who currently actually own the majority of power assets and operate AEMO and the AER. All the documents and financials are printed on the AER website, so if you want to know the truth, study them up and you will find that yes it does cost a lot to run the networks and deliver power across Australia.

        • JeffJL 5 years ago

          What the ‘f’ does this have to do with your previous comment and my response. You troll.

    • john 5 years ago

      No they are not when transmission losses are taken into consideration and the export is sold at retail prices the solar is subsidising the retailers

      • Reality Bites 5 years ago

        Transmission losses, especially in Victoria are only a small percentage. The big cost is the network. Why would the utility want to pay $50 per MWh when the wholesale market is $30.51? If you were in say Malvern in Victoria the loss factor is estimated by AEMO to be 0.0036%, hardly a concern. The reality is undeniable that solar feed in at 5cents is currently a 2cent subsidy to the exporter. On top of that, if the site is only exporting the excess solar power, previously they were not paying to be connected to the grid, however the increase in fixed charges means they pay at least something for the transport of their electrons around the grid.

        • john 5 years ago

          No wonder the networks want to get into supplying solar to commercial in Vic.
          I would contend that the 2 c is a saving to the network upgrade and money well spent which saves all consumers increased network cost in the retail price.
          Looking at the chart posted under seems to underline this.

          • Reality Bites 5 years ago

            Yes that is a point, that commercial solar will reduce the demand and therefore limit the growth, so no upgrade of the network is required. That is a limited strategy though in that the more solar arrays that are connected, then upgrades will be required in order to stabilise the swinging feed ins, which will create voltage surges and sags in the network. This then requires compensators to smooth the voltage. In QLD Ergon Energy has actually looked at buying back the solar feed-in contracts in order to avoid upgrading the network in Harvey Bay, where there is a high penetration of PV’s.

    • Wolfgang Loescher 5 years ago

      that $30.51 per MWh is calculated for 24 hour average and at parts of the day when the retailers have to pay much more then $30 per MWh. Solar is produced during the day when most businesses are running and therefore solar is helping keeping the price down.
      Will see what happens when affordable batteries been taken up.

      • Reality Bites 5 years ago

        See what happens when EV’s become common place.

        • Wolfgang Loescher 5 years ago

          The whole energy is in for a major transformation over the next few years but not many people can see it. EV’s are just another thing to add to the mix of energy use.
          Power demand is declining due to more efficient appliances and the slow down in the economy which is not going to change in the near future

      • Kenneth Gee 5 years ago

        electricty companies are nothing but crooks, they get our solar power free as the government is paying the 25 cents to us. if you get over this amount then they pay it.. so their prices are over the top, if you have solar your rate for usage off the grid is higher. if you have 2 rate your day charge is higher.
        elon musk will fix these thieves soon as the storage units are available in aus..
        around $3500- $5000 5kw to 7 kw. then we can get rid of these solar thieves .

  8. Richard Mason 5 years ago

    Wholesale price is fine what about the avoided cost of distance transmission cost and the lower
    Load on network and a fair feedin would help more renewables to be installed

    • Wolfgang Loescher 5 years ago

      There is about a 7 cents transmission cost. I’m not sure if that is build into the supply charge.
      If someone knows what the supply charge covers i would appreciate to know
      thanks

  9. JustThink4Once 5 years ago

    I’ve pondered for some time what governments will do when battery storage is in full flight. Many people will install just to raise a middle finger towards all the aggression directed at them by generators and collusive governments. Arguments about fair pricing of solar generated power become vapid if nobody is selling it to the grid.

  10. lin 5 years ago

    The Andrews government in Victoria should note what is happening in Canning, with Solar Citizens letterboxing against the sitting member because of their poor attitude to renewables.
    Andrews – make sure that fairness for all is paramount in the regulator’s decisions, or suffer the electoral consequences. Perhaps find a mirror and start practicing “Labor-Green coalition government….”

  11. Craig Allen 5 years ago

    An addendum has added to the original article acknowledging that this change will not be applied retrospectively to people with pre existing contacts.

  12. Neil Frost 5 years ago

    I wish there was a switch on our systems to turn export off.

    • Luc Pierre Lison 4 years ago

      you always can invest in storage and go of the grid

  13. Luc Pierre Lison 4 years ago

    I have 2.8 KW system, if the feed in tariff change my inverter can take much more, so i will organize more panels like 5KW and install batteries and go of the grid, this is by principle as well

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