Western Australia energy utility Horizon Power has achieved what appears beyond the capabilities of its larger peers in the eastern states, the Victorian and NSW governments and regulatory pricing authorities, and produced Australia’s first differentiated feed in tariff for rooftop solar PV.
Horizon, which services 100,000 residents and 9,000 businesses in towns and communities across the state, beyond the grid located in the south-western corner, is introducing area-specific solar feed-in tariffs which recognise a higher value for solar put back into the grid from remote locations, and a lower value for solar energy fed from near towns and alternative energy sources.
For instance, in remote townships such as Meekatharra, Cue and Wiluna (and a dozen others), households will receive 50c/kWh for any surplus energy exported to the grid, more than double what they currently receive in their 1:1 net tariff. In major towns such as Broome, Esperance, Exmouth, Port Hedland and Karratha, where the cost of power is lower, a rate of 10c/kW will be paid. Towns such as Kununurra, Wyndham and Lake Argyle, which are remote but close to hydro-power sources, will receive a rate of 16 c/kWh.
All these payments – described as a “renewable energy buyback” – will replace the 1:1 net tariffs that Horizon currently has in place and will change automatically from July 1. And all these payments will be over and above the mandated state tariffs, and will compare with the 5.4c-10.3c/kWh range that is being suggested in NSW as a voluntary rate by energy retailers. A full list of the pricing proposed by Horizon, and how different towns and communities are affected, can be seen here.
Horizon says the changes will reflect, more closely, the cost of generation in each town, and that they follow unprecedented demand in the last two years from customers.
“Our new pricing method will continue to reward customers for the energy they are producing and is more closely aligned to what it would have cost us to produce or purchase – and in many towns, customers will receive double the buyback rate they get today,” said Scott Davis, the head of sales and marketing at Horizon Power.
“There is an obvious customer appetite for renewable energy and this product review will ensure that Horizon Power is able to continue to offer customers a buyback product for many years to come,” he said.
As Solar Choice, a NSW solar installer wrote in a recent blog: “Horizon, in implementing the town-specific, differentiated, flat-rate tariffs, has done what no other electricity retailer has done to date: Attempt to incentivise the uptake of ‘distributed generation’ (i.e. small-scale wind, solar, and other renewables) on a localized basis to harness the potential benefits.”
It noted that this had been considered by the NSW government in its review of its solar feed-in tariff, but had been thrown in the too-hard basket due to the larger scale and more complicated nature of the grid. Indeed, as we pointed out in this article, IPART simply walked away from the task of ascribing the value of PV among generators, distributors and other customers.
Such a move has long been recommended by the Australian solar industry. Muriel Watt, the chair of the Australian Photovoltaic Association, said similar measures could prove very effective in other parts of Australia, particularly in regional areas which were suffering from network constraints because of increasing demand, particularly during the day.
“It would make a lot of sense in Australia generally,” Watt told RenewEconomy. She said providing incentives for customers to install more solar could save millions of dollars in network upgrades, in much the same way as installed PV avoided the need for a costly upgrade to the network link on Magnetic Island. Germany also used similar incentives to get wind farms built in less windy areas, to spread the geographic diversification of wind farms, rather than installing them all in one area.
“It’s a good approach, but politicians have been loathe to provide differential support,” she said, adding that while it would avoid capital expenditure by the network operators, it was not clear they wanted to avoid those costs while the regulatory framework rewarded them more for building bigger and longer network connections.
In regional WA, demand for solar PV has been so great that it has created other network issues, and Horizon was forced last year to put caps on the amount of solar PV that could be installed in some towns such as Carnarvon and Exmouth. However, it has now introduced “generation managed” systems, which allows them to control the amount of solar PV being put into the grid at any one time, and drop some systems out if it causes a voltage surge.
“Like other utilities, Horizon Power has been grappling with the challenge of managing customer demand for renewable energy technology with the need to provide reliable and secure power supplies,” Davis said. “From 1 July 2012, customers will have the option… of installing a generation-managed system, that is a system where the output can either be stored or managed by Horizon Power, in towns where restrictions are currently in place.”