Ergon may “buy back” solar feed in tariffs to avoid costly upgrades

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Ergon Energy looking to “buy back” 44c/kwh feed in tariff in attempt to change household behaviour and avoid need for costly grid upgrades.

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Queensland network operator Ergon Energy is considering a scheme where it would “buy back” the high feed-in-tariffs that are locked in until 2028, so that it can avoid costly network upgrades.

The proposal was revealed by Ergon Energy CEO Ian McLeod during a panel session at the Brisbane Global Café, an event held in the lead up to the G20 talks this weekend.

McLeod said the structure of the 44c/kWh net feed in tariff meant that 80,000 households on that tariff within his network were more likely to use little electricity in their homes during the day, and switch on their appliances at night. That way, they could maximise their revenue from the tariff.

ergon_bundaberg_solar_panels-257x300But this was causing major problems at some points in the network. In some instances, such as around Hervey Bay, one of the areas with the highest solar penetration, Ergon Energy was facing a $30 million bill to upgrade sub-stations and lines to deal with the rising peak demand.

Hence the idea that rather than upgrade the grid, it could be cheaper to “buy out” the feed in tariff from the households with an upfront payment, and put them on the 6.5c/kWh net tariff.

Ergon Energy’s own research showed that homes on those tariffs were more likely to use appliances such as pool pumps during daylight hour because they were getting a net benefit of consuming the power from the solar panels, rather than exporting it, and offsetting the cost of grid-based power. This would help lower the peaks in the early evening.

Ergon Energy, which covers 97 per cent of Queensland by land area, faces a $1.6 billion from the 44c/kWh feed in tariff out to 2028, with more than 1-in-ten of its residential customers on that 44c/kWh tariff.

It has not yet crunched the numbers on what sort of payment it would offer, but some factors it would have to consider include a discount for the time value of the money, and the potential of some homeowners to move house anyway – an act that normally causes an automatic switch to the lower tariff.

McLeod says Ergon Energy is also mulling whether to may make an offer to all households on the 44c/kWh tariff, or it may restrict that offer to parts of the network with serious congestion problems. It is talking to some third party companies to consider a model for the buyback.

Ergon Energy has been active in battery storage installations, announcing recently that it would begin the first of what could be hundreds of 100kWh battery storage systems around its network, to avoid the cost of grid upgrades and to help with integration of renewables such as solar.

McLeod says the company is also in discussions with builders of sub-divisions to possibly install battery storage as a matter of course for households, and to put in less solar.

Currently, many new houses were coming with 5kW rooftop solar systems – but this more than many of the homes could use, and would mean that Ergon Energy would have to install a network to match the solar output rather than the energy consumption, at much greater cost.

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15 Comments
  1. Ronald Brakels 5 years ago

    When done voluntarily buying back feed-in tariffs is a perfectly reasonable thing to do. But – and I want to be clear on this – it is not people on 44 cent a kilowatt-hour feed-in tariffs that are causing grid transmission capacity to get close to maxing out on hot summer evenings, it is population growth and associated air conditioner installation and use. The Frazer Coast is a high growth area, but paying people to go off their high feed-in tariffs to help cope with this growth is not a bad idea. Just as long as it isn’t badly executed. Having home energy storage installed would also reduce the need for transmission upgrades but the suggestion that people should install less solar otherwise, “…Ergon Energy would have to install a network to match the solar output rather than the energy consumption, at much greater cost.” is just bizarre. If, for the sake of the argument, there is more solar electricity being produced than the grid can export to where its wanted, then rooftop solar systems will simply go offline as the local voltage rises and the electricity they could have provided will just go to waste. As far as I am aware there is no obligation to build a grid to transport that electricity away. Of course, since that’s basically free electricity going to waste, they certainly has an incentive to transport it away. And sell it to someone for 29 cents a kilowatt-hour.

    • Mike Stasse 5 years ago

      In the case of excess export, the voltage of the grid does NOT go up…. but the AMPS flowing through it do! If there’s one thing grid tied inverters are good at, it’s feeding the grid with better wave patterns than the grid itself can….

  2. Rob Campbell 5 years ago

    Energy storage is the answer, the price works at any FIT over 20 cents. Ergon could provide an export FIT, with a time of use tariff with exports at 6.5c most times but boosted to 30 cents at peak times, Ergon could meet their evening demands from within the same street. This should encourage a new surge in solar uptake and ultimately reinforcing the whole grid. It should be noted however that this scenario is ideal for areas such as Hervey Bay because Queensland has Summer, not Winter peaks.

    • john 5 years ago

      Rob about 18c for storage and yes it is the the way that we will go Ergon should get on the front foot and offer this to customers so they have an ongoing business plan service charges to maintain the storage systems and ancillary equipment otherwise they will be left out of the market.

  3. Chris Drongers 5 years ago

    This is great! If Ergon does end up buying back FITs it will lock in a future cost should residential PV be taken off the system as the network upgrade would then have to occur at substantial cost and against falling PV and battery costs. This could well be the stage 2 of a migration of Ergon to a distributed generation network utility.

  4. Leigh Ryan 5 years ago

    They can by my contract for $375,000

    • john 5 years ago

      about $37k would be resonable

      • Ronald Brakels 5 years ago

        I think a lot of people with 1.5 kilowatt systems are likely to bite for $5,000 or less. This may not strike many people as wise, but humans are funny things. They will scrimp and save to make an extra mortage payment and then celebrate by going out to an expensive restaurant and paying for it by credit card.

  5. john 5 years ago

    There is a mistake here following quote from article talking about 44c FIT.

    that homes on those tariffs were more likely to use appliances such as pool pumps during daylight hour because they were getting a net benefit of consuming the power from the solar panels, rather than exporting it

    The mistake is that
    “Homes on these tariffs are more likely to use appliances such as pool pumps AFTER daylight hour because it is cheaper”
    If the consumer is on 6.3C FIT then yes would make sense to use pool pump during the day as exporting for 6c and paying 35c at night hmm think I will use the solar.
    If you have the 44c FIT there is no way you are going to consume power to drive a Pool Pump during the day.
    Actually they would be better off getting a DC Pool Pump and use it as it is far more efficient only need 1 or 2 panels cheap and will work every day.
    For those who have not got solar do it and use DC for you pool pump and storage the payoff now is 9 years with home use of 20% and using only 80% of the storage for a year mind this is going to bet better as there are a huge number of start-ups getting into storage.
    Distribute energy very shortly will be regarded as the norm for suburbia

  6. John Silvester 5 years ago

    One option would be to offer to heavily subsidize, or even pay outright, behind the meter energy storage. This would have an immediate effect on the late afternoon/early evening peak.

    A small portion of that storage, maybe 10%, could be made available to the network operator for voltage, frequency and VAR control. Electricity exported for network conditioning could be paid at a premium. This could be setup to operate automatically by programming the inverter to carry out certain actions if certain variables go outside predetermined limits or remotely controlled by network operator.

    This would be a win win for network operator and PV owner. The PV owner retains the ability to offset the cost of using electricity when the PV system is not producing. The network operator is able to reduce late afternoon/early evening peak, has access to valuable network conditioning infrastructure. Network operator pays a premium for exported electricity only on those occasions and in only those locations where that electricity has the greatest value.

  7. Ian 5 years ago

    A smart home owner would take up the offer to buy back the 44c FIT and use the money to buy off grid storage

    • Mike Stasse 5 years ago

      EXACTLY what I was thinking if an offer was made to me. I’m with AGL and getting 52c, so it would have to be a pretty good deal for me to give up my nearly $2000 a year income that pays our rates…

  8. Phil 5 years ago

    How stupid are governments not to see this , blind freddy could see this. I just bought a block of land and built a house and the nearest power poles are 4 blocks away and i’m 100% off grid . I’m sick of the EXPERTS in the utility industries telling me how they know best so i’m off grid for everything now , have better uptime and lower costs and no restrictions , and they tell me i’m feral ! .I hope all utility suppliers go broke and your all desititute – you deserve it.

    • Ross Kapernick 2 years ago

      It was not the utilities. It was a Labor Gov. buying Green preferences at the cost of other consumers who could not take advantage of the over generous scheme. There should be provisions in Law to stop Governments using my money without my consent to buy votes for themselves.

  9. Ross Kapernick 2 years ago

    About time they did something. One of the most stupid things done by the then Labor Gov. simply to get more Green Preferneces at the cost of industry and others who do not have the ability to go to Solar. Democratic Governments are not supposed to do that. Make one consumer pay a subsidy to othere consumers in order to attract votes.

    If it was good enough for State Governments to take interests in land off people who had paid the Government for certain rights when they bought there land from the Government surely it is OK for them to take back something that as unjust as the ridiculous 44c rebate that other consumers who could not take advantage of are now forced to pay for. Since when did we become a Communist State.

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