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IPART gets tough on tariffs for NSW rooftop solar

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One Step Off The Grid

New South Wales pricing regulator IPART has confirmed plans to effectively penalise the state’s solar households for the lower electricity prices their rooftop PV has helped to deliver, by cutting the recommended feed-in tariff in half for 2018/19.

In a solar FiT pricing update released on Tuesday, IPART said its draft benchmark for the price of solar exported to the grid – which serves only to guide retailers, and is entirely voluntary – was 7.5c/kW, down from the 11.9-15c/kWh range in 2016/17.

IPART justifies the proposed tariff cut, which it first flagged in March, using the same reasoning it used then: that wholesale electricity are forecast to fall in 2018/19, partly because of the impact of rooftop solar, and so solar payments should, too.

“We set the draft benchmark for the all-day solar feed-in tariffs based on our forecast of the average price that retailers would pay for solar exports across the day (weighted by solar output) if they were buying them on the wholesale market,” the IPART draft report says.

“For 2018-19, our draft all-day benchmark is 7.5c/kWh. We consider this benchmark is reasonable, and that setting a higher benchmark would lead to unacceptable outcomes.

“In particular, if retailers were required to pay more for these solar exports than they would pay for wholesale electricity on the NEM, retail prices for all customers would need to be higher to recover the difference,” it says.

It says the new recommendation is lower than the preliminary estimate of 8.3kWh, because it reflects the most recent forward contract wholesale price from the ASX, which has fallen from 8 cents to 7.4 cents since the release of the Issues Paper.

But the regulator denies claims that cutting the tariff will effectively punish solar households for the contribution they have made to shifting peaks, cutting network costs and reducing wholesale power prices for all consumers.

In fact IPART disagrees completely with that notion, instead taking the hard line that solar exports are “not likely” (their emphasis) to provide system-wide net benefits for networks.

This seems to fly in the face of a move by Ausgrid to encourage more rooftop solar in its network so that it can deflect network upgrades.

“Some stakeholders called for feed-in tariffs to include a value for the benefit that solar provides to the electricity network, particularly the potential to defer investment in the networks,” the paper says.

“Because retailers do not capture any value associated with benefits to the networks, our view is that such a payment would need to be made from the networks (rather than retailers) to customers.

“We have found that solar exports are unlikely to contribute to meeting peak demand on the distribution and transmission networks (because the peak occurs in the late afternoon when the proportion of exports is very low), and therefore are unlikely to defer network costs,” the paper continues, omitting, perhaps that rooftop solar has already shifted and reduced peak demand.

“Solar exports may impose costs on the distribution network. For example, investments may be needed to support bi-directional flows of electricity to handle the volume of solar exports.

“In effect, a higher feed-in tariff would result in households without solar panels paying higher electricity bills so that customers with solar could receive more for their solar exports,” IPART says.

IPART’s line also stands it apart from its counterpart in Victoria, which was asked to include both a social price of carbon in its tariffs, and is also introducing a time-reflective tariff. IPART looked at that and decided it didn’t like it.

The report noted that the regulator had decided to set a single price point, rather than a range, for this year’s recommended benchmark, because it expected “little variation in the value of solar exports across the day.”

It did, however, propose benchmark ranges for time-dependent solar feed-in tariffs, which it has provided in this review on request from the state government.

“The government has asked us to also set a benchmark range for time-dependent solar feed-in tariffs (ie, to guide retailers in setting a tariff that varies depending on the time of day the solar customer exports to the grid).”

IPART said it had based the benchmark ranges for those tariffs – shown in Table 1.2 below – on when the most price variation occurred during the day.

As you can see, the solar is valued the highest in the afternoon, because – as IPART concedes – this could incentivise solar households to export more solar in the afternoon, when demand is higher.

Indeed, this sort of demand response market mechanism is considered by many – including the Australian Energy Market Operator – as part of a highly valuable suite of behind the meter resources that could further reduce peak power demand and defer the need for expensive network upgrades.

But IPART doesn’t seem keen on time-reflective tariffs either.

“We note that while the time-dependent feed-in tariffs are likely to be more cost-reflective, retailers may continue to prefer to set an all-day rate, reflecting the small amount of variation in the value of the vast majority of solar exports,” the report says.

“Retailers submitted that a single, all-day solar feed-in tariff is simple to understand and does not create complexity and additional costs to retail operations.”

Not surprisingly, solar advocacy groups are not happy with IPART’s decision – or its reasoning – and have been quick to get that message out.

“A feed-in tariff of 7.5c is simply daylight robbery,” said Shani Tager, senior campaigner at Solar Citizens.

“Solar households in NSW cut $2.2 billion off the the wholesale price of power for everybody in the state in just one year and they helped keep the lights on during the heatwaves.

“The NSW government needs to step in and mandate a fair price for rooftop solar that’s fed back into the grid, recognising the many benefits of rooftop solar, such as grid savings, environmental and health values that are not recognised at the moment.

“400,00 plus solar households in NSW have stumped up their own cash to put solar on their roof and unless the Government does something big retail companies will pay them a pittance for the clean energy they produce,” said Tager.

This article was originally published on RenewEconomy’s sister site, One Step Off The Grid, which focuses on customer experience with distributed generation. To sign up to One Step’s free weekly newsletter, please click here.  

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  • PLDD

    I actually think their time-dependent logic makes sense. After all if you can’t generate you can’t export thus 96.4% of exports are before 16:30 each day.

    I said that variable tariffs could incent battery take up rates but I can’t see a payback based on FIT’s. So in effect the variable tariff is rather academic rather than practical.

    It will be interesting to see if the falling wholesale rates reduce retail prices if they did that supports IPARTS pricing logic. But, if as I expect the falling wholesale rates simply offsets the increased distributer and retailer costs in 2018 so unit costs stay flat. Then non-solar customers are now being subsidised by roof top solar as roof top solar has helped reduce the wholesale price.

    • Chris Drongers

      What are the increased costs to retailers in paying time-sensitive feed in tariffs, apart from the obvious that high demand tariffs are higher (but low demand tariffs could be lower)?
      Don’t all solar PV systems have smart meters that allow internet reading (at a fraction of a cent per interval, say 0.5 hr) and don’t ever more powerful accounts computers already charge time sensitive rates (TOU)?
      How much more investment would really be needed to include time sensitive tariffs. If the higher evening tariff is still less than needed to include cost-effective batteries then that is the householder’s issue, not the retailer’s.

      • PLDD

        I suspect it is quite simple to implement ToU FIT’s but not certain why you ask the question.

        The higher evening tariff obviously lowers the day time tariff as the proposed one size rate of 7.5c is a blended rate. So few are able to export and so all get even lower FIT’s. That doesn’t seem very strategic.

        Certainly if evening FIT’s reflected battery investment costs it could be a useful way to stimulate demand. After all one of the strategies to improve stability is to encourage more behind the meter generation and storage.

        • Chris Drongers

          I asked because distributed generation, each with an electronically controlled inverter and some with battery storage has a range of values that go beyond substituting for coal power during the sunlit hours.
          FCAS at all times and peak smoothing in the evening peak are potentially value-able, and therefore valuable, to retailers who can on-sell power quality and power. Being able to control the amount of each available and the time could be worth significant dollars. But in the coming age of blockchain peer trading these valuable attributes will have to be paid for in a competitive market.
          Perhaps in 10 years we will be worrying not about renters who don’t have access to PV on their roof but will be buying pooled PV from a warehouse or solarfarm, but about renters without rooftop PV who pay more because the ancillary values attached to their subscribed power generating PV farm have been sold by someone else.

  • George Darroch

    Solar households should be getting payments from the grid operators in line with their reduction on grid stress, that much is clear.

    • Aerial Fencer

      Should Solar households pay for the distribution transformer upgrades that are often required in neighbourhoods with high solar penetration? I’d refer not.

  • Malcolm M

    Time-dependent feed-in tariffs would provide an incentive to face solar panels west, which would increase the proportion of solar exports during the evening peak. If the time-based incentive is not offered, then the incentive is to face panels north.

    During daylight saving, the 3:30 pm start of the shoulder peak is actually 2:30 pm by solar time, and solar energy after this time would account for ~30% of the daily total. In locations with a large proportion of diffuse radiation, there is little benefit in facing panels west even if there were a higher tariff, but in inland areas with clear skies it could be an incentive worth promoting.

  • Chris Fraser

    Without even one conscious intention, IPART becomes the best friend of battery installers.

  • mick

    ive got a cheap pair of scissors if anyone wants to cut the cord used once will ship at my expence :]

  • JWW

    I think at 7.5c/kWh the roof top solar owners should go one strike and flick the DC isolator when the next heat wave is happening, and see whether that would trigger a rethink by IPART. Could be organised via Facebook or Twitter.
    On the other hand, it is not clear that the retailers will follow the advice of IPART. So maybe solar owners should just keep their eyes peeled.

  • neroden

    Batteries. Use your solar yourself, tell the grid goodbye.

    • PLDD

      Have you done it. If so interested in how big a battery you have and how it went over this last weekend.

      We had little sun and low temperatures in NSW so the heating was on – my production down to 11KWh and consumption up to to 30KWh.

      My battery model says a battery would have lasted until about Friday evening and then I would have been pretty short the rest of the weekend.

  • Ken Fabian

    IPART – weren’t they the ones that got used for partisan politicking by NSW government with the mandated “Green schemes added $xx to everyone’s power bills” messages that I found so objectionable? The messages that avoided mentioning that “Gold Plating” added a lot more than $xx to those bills, or never mention the ongoing amnesty on climate costs enjoyed by fossil fuel burners, that would be, if it were a subsidy, be the largest subsidy of all? IPART… sure it’s not been stacked to be more like IPAart?