NSW solar tariff cut – reward for slashing power price peaks

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NSW pricing regulator flags a cut to state’s solar feed-in tariff, linked to fall in wholesale power prices rooftop solar helped deliver.

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One Step Off The Grid

Solar households in New South Wales look set to be penalised for the lower electricity prices their rooftop PV has helped to deliver, with the state’s pricing regulator proposing a cut to the feed-in tariff by around 3c/kWh.

In an issues paper published this week, NSW’s Independent Pricing and Regulatory Tribunal flagged plans to cut the state’s recommended solar feed-in tariff from around 11c/kWh to 8c/kWh, starting July.

The paper explains that the reduced solar FiT range – which serves only to guide retailers, and is entirely voluntary – is based on a forecast of lower average prices for wholesale electricity in 2018/19, compared to 2017/18.

“These suggest wholesale prices will fall to around 8c/kWh, compared to around 11c/kWh when we published our Final Report last year,” IPART says.

Rather ironically, however, the state’s increasingly impressive uptake of distributed solar has been one of the key factors helping to drive down electricity prices, by shaving the top off peak pricing events, and pushing them to later in the day.

IPART acknowledges this but does not believe it should be factored into the value of the solar FiT.

“The increasing penetration of solar during the afternoon is resulting in prices lower than they otherwise would be, due to a reduction in the system-wide demand for electricity from the NEM at this time.

“As a result of these lower prices, retailers are paying less when they buy wholesale electricity during the afternoon,” the report says.

“Stakeholders in previous reviews have argued that solar feed-in tariffs should reflect this saving to retailers. However, we are not proposing to adopt this approach because it would be inconsistent with how markets work.”

As with its 2017/18 tariff decision – which, incidentally, almost doubled the tariff from the year before – IPART continues to argue that solar households already get an upfront subsidy, that retailers would make a loss if forced to pay retail rates for the exports, and that it is unfair to pass on environmental costs on to households that could not install solar.

IPART’s latest decision to favour of the retailer over the consumer, and ignore any of the broader benefits of rooftop solar, comes as the regulator’s southern counterpart, the Victorian Essential Services Commission, heads in exactly the opposite direction.

The Victorian regulator last month finalised details of a first-of-its-kind time varying solar FiT, in response to a government-backed push to give solar exports a “fair” market value.

The new Victorian rate, which will be introduced in July this year, and will eventually become compulsory, will require retailers to pay a minimum 29c/kWh for rooftop solar exports between 3pm and 9pm, a minimum rate of 10.3c/kWh for 7am and 3pm, and a minimum rate of 7.1c/kWh (down from 7.2c) between 10pm and 7am.

The ESC is also looking at imposing “critical peak tariffs”, which will result in even higher payments when wholesale prices jump above $300/MWh and surge to the market cap ($14,200/MWh, or 142c/kWh).

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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42 Comments
  1. Joe 11 months ago

    I knew it was too good to be true to last very long when last July my FiT went from 6.1cents to 12.5cents. Let’s now see in July how genuine The Energy Sharks ( aka The Retailers ) will be in valuing their ‘solar customers’. This ‘undervaluing’ of home solar is what makes us all mad as hell. The Energy Sharks will continue to lift the tariff rates at which they charge us as ‘consumers’ and at the same time pay us less as ‘producers’. It’s the same in agriculture where farmers get shafted with crazily low farmgate prices whilst the grocery majors reap the gains from inflated retail prices.

    • MaxG 11 months ago

      Join EnergyLocals, they will pay more then 10 Cents/kWh… no ordinary retailer, but a social enterprise funding community projects with profits made.

      • Joe 11 months ago

        Thank you Max. I’ve heard of them, Energy Locals, through earlier articles here in the pages of RE. I’ll go deeper and do some extra research on them.

  2. Chris Fraser 11 months ago

    If IPART believes FiTs are inconsistent with how markets work, how come IPART does not insist on access to peer-to-peer trading for all small generators ?

  3. Peter F 11 months ago

    More incentive for people to upgrade solar and or install batteries

  4. George Darroch 11 months ago

    How many billions are solar households saving Australia in network upgrades?

    They deserve every cent they get, and then some.

    • Joe 11 months ago

      …I want to see some of …”then some”… NOW!

  5. Jonathan Prendergast 11 months ago

    This should prepare NSW well for the Liddell closure in 2022.

  6. Ray Miller 11 months ago

    Seems the level of “independant” is token when it comes to all state governments, as the State entities seem to bias decisions based on which ideology has the power. This does our democracy no favors.
    As Chris below has eluded to, the battery companies are going to be very busy.

  7. JWW 11 months ago

    This is bad. They really doing their best to delay end-user PV uptake as much as possible. If the retailers follow the guidance, it will put off a lot of people. On the other hand, it will accelerate battery uptake by those who have PV systems already, and will therefore also accelerate battery price reductions, I would think. Not sure which scenario is better for the retailers in the long run.

  8. Neil Garrad 11 months ago

    Is it possible for NSW folk to sell their PV power to Vic??? Please excuse my ignorance.

    • Jo 11 months ago

      Should we ship it in bags or in cans?

    • nakedChimp 11 months ago

      Yeah, that’s what the grid owners want, a public grid were anyone can sell and buy as he so wishes, preposterous!
      /s

  9. Leon 11 months ago

    I’m pretty sure that $14,200/MWh is actually $14.20/kWh, or 1420¢/kWh. And i am pleased to see Victoria moving in the right direction and recognising that domestic solar generators should share in these riches paid to every other generator in the NEM.

  10. neroden 11 months ago

    This is an incentive for homeowners to install batteries, rather than giving away their solar power to retailers at substandard prices.

    There is, in the long run, no way for the coal companies to win and no way for the grid cartel to win. They can either accept the future, which is 100% renewable energy and break-even rates for transmission/distribution — or they can watch people go off the grid.

    • nakedChimp 11 months ago

      Say ‘between rock a rock and a hard place’ 😉

  11. Marcus Whitley 11 months ago

    Helps make the case for grid connected batteries,

    I couldn’t imagine buying a battery if the Feed in Tariff was 20 cents, you would be far better off just putting solar panels every single concivable place you can fit them.

    I do like the idea of time of use feed in tarrifs.

    • Joe 11 months ago

      Correct me if I am wrong but unless you are off grid I think there are limits or ‘barriers’ set by the energy majors as to the sizing of solar systems you can stick on your roof.

      • Marcus Whitley 11 months ago

        Yes but you generally won’t have an issue adding less than 10kW per phase. I doubt most people can fit 10kW on there roofs.

        • Joe 11 months ago

          10 kW is a lot of panelling uptop to be sure. But aren’t the energy majors limiting ( or thinking of limiting ) the amount of solar export from large PV installations, just further discouragement from people installing larger sized solar systems.

          • Marcus Whitley 11 months ago

            Network operators can limit the size of systems being installed if it is potentially harmful for the grid.

            Some areas can be voltage hot spots where adding more generation could push the voltage over the limit.

            This isn’t common though, in very few circumstances does network operator turn down a system.

    • Mike Dill 11 months ago

      I am looking at getting a battery to kill my peak and shoulder(s), that are running close to what joeR_AUS has posted. Currently, my peak and shoulders run about US$500/year, as I have cut most of it with my solar array. I need the battery to get down to about $400/kWh installed for it to make economic sense.

      • Marcus Whitley 11 months ago

        Somewhere in the range of $400/$500 a kWh was the number i found during my thesis that made batteries a worthwhile investment for nearly all households. Numbers may inflate slightly as electricity prices increase but its pretty ball park.

  12. JoeR_AUS 11 months ago

    In reality its not all dome and gloom!

    Last year I was getting paid 6c for my FIT and then it went up to 9c around July 2017.

    Which I agree is appalling, as Origin on sells it during the day at 23.79c (shoulder) or (peak 2pm-8pm) at 53.01c !!!!

    Finally, I got the smart meter installed by Origin with the solar now feeding the house first, this is my bill now. As you can see during Peak its not much but Shoulder is around 3 times as much usage. The rest is off peak and supply – 50% of the Bill.

    https://uploads.disquscdn.com/images/cf415a621ca5017f1525bad8fd784b1cfc75c471e6f5dc48177f25eb47e5f90c.jpg

    • Jonathan Prendergast 11 months ago

      Controlled Load – Hot water I presume, is nearly half your bill. We had the same before we got a heat pump.

      • JoeR_AUS 11 months ago

        Correct but its only 36% of the bill and how much would a heat pump save?

        My plan is:

        1. move the pool pump from Shoulder to Off Peak
        2. add more Solar Panels to negate Peak and reduce Shoulder

        Will be interesting to see what the numbers will be like for Winter.

        • Jonathan Prendergast 11 months ago

          Indeed. From an energy and environmental perspective, the saving is good. From a economics perspective, more like 6-8 year pay back to go heat pump. Your strategy sounds good.

        • Joe 11 months ago

          Can I suggest that you run your pool pump during the day when the sun is doing its best business, which is the ‘shoulder’ usage ToU . Self consumption is more valuable than sucking power from the grid even if you do the suckling at off peak ToU. If you are able then also consider adding extra panels which would also cut down your ‘shoulder’ usage suckling from the grid.

          • JoeR_AUS 11 months ago

            Agree on self consumption first.

            My neighbor will cut down a massive Liquid Amber tree that casts shadows over my panels , this will help their production and when I fit more panels I will run the pool pump too! Thanks

        • Ian 11 months ago

          Generally hot water heat pumps have a COP of 3 to 4.5 that’s the multiplier of what you would save. If your water heating is 36% of your bill then your saving would be 27% of your bill. The cost would be about $2000 to $3000 to install. The nice thing about the heat pump is that it’s savings are available 24/7 come rain or night unlike solar panels fitted to heat your water.

          • JoeR_AUS 11 months ago

            like Jonathan Prendergast mention its around 6-7 years, however if the current water tank fails its a option.

    • MaxG 11 months ago

      Controlled load: ideal for feeding by solar, instead of exporting; you would earn 10Cents net per kWh.

    • john 11 months ago

      Get a bigger PV because your power usage is large very large.
      Please look at energy efficiency products like newer AC perhaps your use of power for cooking I do not know but your use of energy is rather large.
      If you can build PV array in the back yard and Storage perhaps this will reduce your high cost of energy.

    • JWW 11 months ago

      Hi Joe, I think you can improve on your current situation. Having more PV of course never hurts :-), but also you should shop around and get a retailer that pays a better FIT. You said you get 9c now. Powershop (I am with them) or Energy Locals pay something like 12c. I just had a look at Energy Locals – I they think they are worth having a look. Not sure whether they offer Green Energy, in case you are interested in that. But they do have good prices and a simple and transparent tariff structure, as as MaxG pointed out further up, they are are community based organisation that re-invests profits rather than a traditional retailer.

  13. Ryan 11 months ago

    The lower they make the FIT the bigger the incentive to install home batteries or diconnect from the grid altogether.

  14. MaxG 11 months ago

    I wish I had the power to organise all solar people to switch of their breaker and send the state into darkness. I know, I know, why iI said “I wish” 🙂

    • JWW 11 months ago

      Hmmm. In the times of social media and Arab Spring revolutions being organised using Twitter, maybe one could organise an event like your are suggesting. Imagine the next 39C super-hot afternoon and half of the PV systems in Sydney go off for an hour or so! That will demonstrate the true value of behind-the-meter PV generation. I am sure the participants in such an experiment would not mind loosing half a dollar on FIT payments!

      • Ian 11 months ago

        Electricity generators produce 2 types of power: electrical power in terms of kW and kWh and political power in terms of influence and votes. If the state has 20% renewables then that is pretty -much renewables’ ‘vote’ . If homes housing 51% of voters had renewables then policies would likely reflect their interests. This principle is obviously modified by many other factors like investor risk, demographics etc but you probably get my general drift.

    • Bill Mastrippolito 11 months ago

      MaxG, that is exactly what needs to be organised. Power off our solar and turn on our air conditioners to stress and fail the grid at various times (rolling outages). Only then will the authorities see the true value in homes having solar propping up the grid.

      • MaxG 11 months ago

        The problem are the clowns at the helm… they may ban solar from feeding into the grid; or ban it altogether; sounds crazy?! Agree. But look what’s happening: NEG, Monash…

  15. Pedro 11 months ago

    FiT at a good rate is an added bonus. But I have noticed in WA that most small commercial systems get no FiT. That says to me that Solar PV is still a good investment regardless of the size of the FiT.

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