Ergon considers partial buy-back of $1.5bn solar feed-in tariffs

Queensland state-owned utility Ergon Energy is considering a proposal to “buy back” at least part of the 44c/kWh feed-in tariffs in a bid to try to change consumer behaviour and deal with some of the major grid constraints that it has on its huge network.

The Queensland state feed-in tariff is predicted by some to cost up to $3.4 billion before it expires in 2028/29, in one of the most generous tariff schemes set up in Australia.

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But while the cost burden on consumers is one issue, the 44c/kWh tariff is causing consumption behaviour that is creating major problems on the Ergon Energy grid, many of which are thin wires that are struggling to cope with rising peak demand.

Ergon CEO Ian McLeod says his network has 80,000 households on the 44c/kWh tariff, and because of that tariff they are more likely to maximise their earnings by using little electricity through the day (maximising exports), and then switch on their appliances during the evening peak.

In some areas, such as those around Hervey Bay, one of the areas with the highest solar penetration, Ergon Energy is facing a $30 million bill to upgrade sub-stations and lines to deal with the rising peak demand.

This is causing massive head-aches. So much so that McLeod says it could be cheaper for the network to “buy out” the feed-in tariff from the households, and put them on the 6.5c/kWh tariffs, which would encourage them to use appliances such as pool pumps in daylight hours to get the benefits of consuming solar electricity, rather than exporting it, and to avoid grid charges.

McLeod says a buy back could be paired with initiatives such as home energy management schemes, which could include the installation of battery storage and other demand management devices.

Ergon considered the issue last year, but put the idea on hold when the then LNP government talked of shifting the $3.4 billion feed-in tariff bill (the tariffs last until 2028 unless a household is sold).

Since the LNP is no longer in power, McLeod says Ergon staff are now crunching the numbers on a buyout, focusing on some highly constrained areas to see if the idea makes economic sense.

Ergon Energy, which covers 97 per cent of Queensland by land area, faces a $1.5 billion bill from the 44c/kWh feed in tariff out to 2028, with more than one in 10 of its residential customers on that rate. The total bill for the state is put at more than $3.4 billion.

McLeod says the problem of constrained grids is particularly acute on 35°C days, in areas with a high level of solar PV penetration. He said “hundreds of feeders” are being looked at.

“We want to see if a buyout on the net present value of the tariffs, combined with home energy management systems to help shift the load, …is the cheapest option.” Battery storage, to shift grid demand away from the peaks, was also an option.

“This is where change happens,” he said. “Instead of building transformers and wires and all that sort of stuff … the value goes into the analytics, understanding the data, and understanding the problem and the technology solution.

“Can I manage that constrained grid – can I manage that for two years until when I know the battery nexus point is coming in two years time?”

Comments

11 responses to “Ergon considers partial buy-back of $1.5bn solar feed-in tariffs”

  1. Gordon Bossley Avatar
    Gordon Bossley

    That high feed-in tariff is now to some degree a trap for some, I’d be open minded to a sale of it. I’d be looking to expand my PV investment with the proceeds, and think about storage, either in battery or in a heat-pump hot-water system to replace our aging ondemand gas system. The numbers would have to add up though!

    1. Ken Dyer Avatar
      Ken Dyer

      It seems to me that Ergon could offer a reduction in feed-in tariff in return for additional panels and/or battery system. Obviously they have to do their sums, and satisfy their shareholders, but equally, it is an opportunity for solar users to improve their systems. That would mean receiving something of value for a legislated benefit, a benefit that could be reduced if it threatens the integrity of the electricity distribution system.

  2. Gerberaman Avatar
    Gerberaman

    I think the 44c feed-in tariff was a huge mistake. All these householders treating their PV systems as a little business. Looking for maximum profit regardless of the effect it has on emissions at the power station. The idea of putting panels on roofs was to reduce emissions, not make money for middle australia. Personally I think the government should reduce it to a reasonable level, which would encourage people to use their ‘green’ energy at home, which is the cheapest and least polluting way to use it. Feeding it back into the grid during the day, and then using ‘dirty’ grid power at night defeats the whole idea. I’m going off-grid anyway. Not because it makes me richer, but because it is the best possible way to reduce my power usage from non-renewables. Do we care, or are we all just pretending so we can watch our bank balance get fatter?

    1. trackdaze Avatar
      trackdaze

      Thr 44cents was representative of high initial capital cost and the fact it would cost at least the qantum to build another 1gw power station and accompanying transmission lines. In short the qld govt has used private equity. The 6odd cents now is represantative that youll now pay 5grand instead of those early adopters that paid 20grand.

      And now its easy for the govt and others to yell witch no matter if it sinks or swims!

    2. Ian Avatar
      Ian

      The 44c/ KWH feed in tariff is ancient news and new prescribers were cut off from this incentive a long time ago. If Ergon was really keen to dissuade new installations of solar then they should make their product as cheap as chips. What is the cost to produce 1 KWH of solar? 5 to 10 c /KWH. – that should be the cost to consumers of their product to remain competitive. Like many I haven’t really enjoyed the hefty price hikes we have experienced in the past few years. The likes of Ergon keep thrashing that 44c whipping boy, that’s their prerogative but don’t buy into their sham. Anyway their plan will not succeed. 1. People planning to sell their houses with the 44c FIT will potentially be paid out to cancel the premium instead of just forfeiting it. 2. It does not matter what the tariff is the solar fleet will still happily do what solar panels do best – produce electricity. Ergon will still have to account for that. If the total consumption available is 100% and 60 % is provided by solar then after any tariff change 60 % will still be provided by solar! Consumers might shift their usage a bit but I can’t see most using their slow cookers and showering in the day to save a few KWH at night. 3. With high tariffs more and more people and companies will install solar making Ergon’s problem worse. As said earlier the solution is simple Ergon must become more competitive and must meet the market with their prices. As I said 5 to 10 c/KWH. After all that’s what they are willing to pay new solar electricity exporters.

      One must remember the history of the 44c FiT. It was introduced at the time of the Kyoto protocol and at the time when Australia rapidly ramped up its CSG and coal production for export. It was designed as a sop for international and local public opinion. It was saying , look at us we are doing something for the climate. Mean while and back at the ranch the fossil fuel industry was underhandedly vastly expanding the exploitation of our resources. The ruse was working just fine until the price of solar panels plummeted . Poor old Newman panicked and shut down the 44c FiT, but not before he gave his Voters a grace period, he didn’t want to pee them off , right. Of course Australians are not stupid and saw the writing on the wall. They did their sums and saw that the EOFY was at hand. They installed solar by the hundreds of thousand . And so my friends, the rest is history. So don’t blame those lucky ones who have this legacy tariff it’s not their fault. Remember we’re not Spain and our Government still has the decency not to renage on its agreements. A deal is a deal and keeping ones word is worth more than the short term benefit of going back on it.

  3. disqus_3PLIicDhUu Avatar
    disqus_3PLIicDhUu

    Might be more cost effective to site grid battery storage at the substations in the areas of concern, surely these areas would be few, the storage systems could also be used to augment the grid.

  4. trackdaze Avatar
    trackdaze

    So if one in ten have the feed in wouldnt it make sense for those other nine to be incentivised to use that power when its available before the peak? Therebye reducing the peak? Of the 80000 how many will turnover their property over the next few years? Remember the 1gw of solar installed in qld has meant no multi billion power stations or transmission lines be built.

    Or maybe incentives for installing western focused solar need considering.

  5. JohnRD Avatar
    JohnRD

    Part of the problem in Qld is that the feed in tariff is a net feed in tariff. Which means that, for people getting 44 cents/kWh it makes sense to use as little power as possible during daylight hours. Might make more sense to switch to a gross feed in tariff which pays the tariff for all power generated by solar no matter if it is used in the house of fed into the grid. (The gross tariff would have to be lower in order to be cost neutral.
    The other option is to put more household items on controlled (off-peak) power so that peak demand is easier to manage.

  6. Ronald Brakels Avatar
    Ronald Brakels

    Any discussion involving Hervey Bay and electricity use should include the fact that the population has grown by about 40% over the past 10 years. Buying back feed-in tariffs and installing battery storage are both interesting ideas to avoid the need for transmission upgrades, but no one should overlook the fact that it is not feed-in tariffs that are the main cause of transmission difficulties, but high population growth in the area.

    Edited to reduce snark levels. Also contains 10% less Jabberwocky.

  7. trackdaze Avatar
    trackdaze

    Perhaps ergon could champion daylight savings to shift daylight hours to better align with peak use? Maybe offer its customer’s some uv stabiliser to spray on their curtains.

    Yes I know it would shift peak till later…… but not entirely and yes fnq miss out on some sun hours in summer.

    1. mick Avatar
      mick

      thought you banana benders didn’t like daylight savings annoys the cows must be delicate Brahmin composites etc as murray grey/angas/Hereford don’t seen to care strange ay

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