NSW networks back away from “solar tax” on households

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NSW networks have dropped plans for a “solar tax”, as new report finds that truly cost reflective tariffs “too complicated” for Australian households.

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The New South Wales electricity networks have backed away from a controversial proposal to impose special network charges – effectively a “solar tax” – on households exporting their solar output back into the grid.

The proposal – made last month in a document “Electricity Tariff Reform in NSW” – outraged the solar industry, which pointed out that most solar households in the state are paid nothing, or very little (just 4.8c/kWh), for the excess output sent back into the grid.

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The networks said the charge could be extended to households with battery storage and electric vehicles. But it seems that the NSW networks – in the process of being partially privatised by the state government – have backed off from the proposal, saying it was only “one option” being considered.

“The three NSW networks have no plans to introduce such a tariff,” a spokesman said in a statement.

The decision by the NSW networks contrasts to that by South Australian Power Networks, which has launched court action against a decision by the Australian Energy Regulator to reject a $100 network surcharge on solar households.

It is one of a number of court actions being fought by networks over pricing to consumers. The NSW networks have also taken the AER to court over the amount of money they are allowed to spend on networks, the cost of which they want to pass on to consumers.

And there may yet be a sting in the tail for NSW consumers. The networks have indicated they are still considering a tariff model known as “declining block tariffs” where the cost of electricity actually falls the more the consumer uses.

The networks say this is good, because the more the consumer consumes, the easier it is for the networks to meet their revenue caps.

“It’s welcoming to see the NSW Networks back away from the proposed “Sun Tax” that would unfairly hit solar owners. Yet the cynic in me wonders whether this was just being used as a distraction from the disaster of declining block tariffs being pushed by the networks,” said Reece Turner, from the consumer group Solar Citizens.
Solar Power Sydney
“A declining block tariff pricing structure such as the one being pushed by the NSW Networks is the worst possible outcome.
“It disadvantages low-income earners, solar owners who are trying to take control of their bills and those who use electricity more efficiency. It’s at complete odds with the goal of using electricity more efficiently and the fact that NSW Networks are pushing this idea is simply appalling.”
But networks across Australia have been floating a variety of tariff structures designed to defend their revenue models. Fixed network fees are rising in Queensland, special charges are being considered in Western Australia, and metering charges are being increased in most states.

SAPN, for instance, is proposing demand tariffs that it says will likely cut the uptake of rooftop solar by around half in the next few years, although it argues that it could increase the uptake of battery storage.

The Victorian networks have made similar proposals to the AER, suggesting that any household that looks to install rooftop solar should be put on a demand tariffs. They argue that this will protect their revenue streams.

Consumers, however, say that the low “usage rates” of less than 10c/kWh means that the payback time for rooftop solar will be considerably longer. It may mean that installing solar might have little or even no financial benefit.

Demand tariffs are considered a good idea, as long as they correspond to network peaks and are truly “cost reflective”. But the demand tariffs being proposed by networks across Australia are being portrayed as a “revenue grab” because they only focus on the peak demand of individual households, which may bear no relation to the network peak at all.

In a new report, the Grattan Institute also recommends a demand tariff for Western Australia’s grids, which as RenewEconomy has reported previously, is something of a basket case because its electricity system carries crippling costs yet is heavily subsidised by the government, to the tune of more than $500 million a year.

Grattan notes that the WA grid is laden with cross-subsidies, particularly to those with air conditioning. It concedes demand tariffs will impact solar households – noting that only 40 per cent would be better off under such a tariff, suggesting that the overwhelming majority would not be.

And it doesn’t even think the tariffs would address the main problem: “(Demand tariffs) do not provide a strong price signal for households to reduce consumption during the few hours a year when the network is most under strain.”


It says the fairest option is “critical peak pricing”, which links demand tariffs – and the period on which the bills are based – to the actual peaks in overall network demand. This idea is supported by the Australian PV Institute.

But Grattan says efforts to match network peaks are “too complex,” and so demand charges are an acceptable second-best solution.

What demand tariffs do provide is more guaranteed revenue for networks, and more incentive for households to combine solar and storage. It seems that some renewable energy advocates accept this, although others say it puts such technology further out of reach of many households.

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8 Comments
  1. Chris 4 years ago

    To say that cost-reflective network pricing is too complex is a complete cop-out. Electricity pricing is the dumbest of all regulated markets.

    The more we can allow consumers to ‘opt in’ to electricity market forces the better. I for one would love a smart meter with Critical Peak Pricing to enable costs savings. It would allow technology in the home to automatically cycle and load-shift for cost optimisation. Good for me and for societal network costs! Consumers who do not opt-in should be left no worse off than BAU.

    • Peter Campbell 4 years ago

      I am happy to be on a Time of Use tariff (in the ACT). It is very little bother to delay certain loads via timers (mainly the dishwasher and electric boost for solar hot water). I save a modest but worthwhile amount. I generally avoid peak time for charging batteries for such things as the laptop computer. If I could charge my electric car directly from my unit I would save rather more from choosing to generally avoid peak times.

    • Rob S 4 years ago

      Sounds good to me too! Are you willing to pay for the meter etc?

      • Richard Werkhoven 4 years ago

        We are willing to pay for the meter as our demand is hugely weighted towards night-time winter use.

        Hoping the snart-meter rollout in NSW takes care of it though. I am on here now trying to get updated info as to when that might happen because I’m reviewing our hourly use data collected by my energy monitor and we would come out ahead.

        Solar PV will cover a fair amount of our use within the peak period, making Time of Use billing even more attractive. It won’t do this for everyone but it will for us.

        This whole argument for a solar tax is seriously outdated. The only reason we have huge network costs is to cover peak loads.

        Solar doesn’t help with peak load on most days as peak is after the sun is hitting the panels.

        Storage will shift the Solar production into peak load times which will reduce the peak load by easily 14%. Negating the reason for network upgrades, thereby removing the justification for our enourmous unit costs.

        The reason the networks don’t want us to use Solar & Storage is that they make 8% on whatever money they spend on network upgrades. This is legislated for and IPART sets the price caps to make sure this profit happens.

        Now that they see this rort disappearing they are arguing for a way to get the money another way, and to hopefully stop anyone wiping out their monopoly position.

        Anyone with solar should be able to supply power at the wholesale rate to the grid. This ranges way above 6 c/kWh in many cases.

        If Solar power hoouseholds were paid the fair market price then they would find ways to move their generation to the more profitable times. (which storage will do)

        This would save everyone else a lot of money. It would reduce the grid costs, but also reduce the grid profits because of that 8% profit on capex guarantee.

        Any government that allows a Solar Tax should be thrown out immediately.

        We need new legislation that is not designed to support power monopolies and guarantee that customers are ripped off.

        Ultimately we need renewables to reduce our cost of electricity.

  2. Tim Forcey 4 years ago

    Let’s ponder the impact of declining-block electricity tariffs on the gas networks. Declining-block electricity tariffs would hammer gas use (which is already on declining block tariffs) by creating big incentive to use electric heat pumps for hot water and space heating (or even to use straight resistive electric heating). Declining-block electricity tariffs would also further incentivise fuel-switching away from petrol/diesel/LPG to electric vehicles.

    • suthnsun 4 years ago

      Worth pondering Tim. Perhaps we could add a ‘declining over time’ emissions intensity requirement to the network, could lead to a good outcome.

  3. Tim Buckley 4 years ago

    Typical – the Network regulator and networks have allowed, facilitated and profiteered by extensive goldplating of the grid, and now they propose to punish anyone who seeks to be energy efficient to avoid excessive charges. Abuse of monopolistic powers will backfire, just as failure to deliver a cost competitive value adding service has seen the collapse in share prices of firms like Origin Energy.

  4. eric 4 years ago

    why is it the networks can invent laws to suit themselves ?
    Why is this even allowed?
    Just imagine if we the consumers all got to gether and made a law that Coal generating power plants must reduce their tariffs before we use their product ?
    it would never happen so i have to ask who is behind legalising this corrupt law?
    seems to me the sooner solar power users with battery storage can get control of electricity the sooner we can run these capitalist bast***s and their government mates out of business.

    It’s clear to me the owners who are buying these power stations from the government are shitting themselves because when we get fair dinkum about carbon emissions they will be like dinosaurs.
    Unfortunately its obvious that some government guarantees came along with these sales so thats why the useless governments do nothing along with the fact that many of the politicians actually own share in these companies.

    If we all switch to an alternative it is the only way for us the consumer to get control.
    The power station owners are using the same tactic implemented for health insurance.if you don’t have it you get punished.
    is this the way we should run a democratic society ?
    people i ask you ,get off your lazy butts and stand up to this corruption.

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