The sharp cuts in solar feed-in tariffs that have marked the Australian household solar landscape in recent years may be about to be reversed.
Both the Queensland and the Victorian governments have been pushing to have the benefits of the technology reflected in payments in reviews to try and discover the “fair price” of solar.
Queensland energy minister Mark Bailey said this would include an estimate of the benefits of solar PV to the grid, and on the “public and consumer benefits” of solar PV.
“This is the first time a price of solar will go beyond what it’s worth to electricity retailers,” Bailey told the Disruption and the Energy Industry conference hosted by RenewEconomy in Sydney this week.
Indeed, pricing regulators across Australia have followed a similar pattern of estimating only the wholesale price value of solar PV, and none of its potential benefits to the grid – where it is shifting and reducing the peaks – and its social and environmental benefits.
That has resulted in feed-in tariffs that are only a fraction of the retail price. This affects solar households, which on average export more than half of their output back to the grid.
This is in contrast to the US, where regulators in some states include network and environmental benefits, and in some cases suggest that the value of rooftop solar is greater than grid power.
This is despite some intense lobbying from some utilities and fossil fuel lobby groups, as this video shows.
Bailey was particularly critical of the recent decision by the Independent Pricing and Regulatory Tribunal (IPART) in NSW, which recommended a cut in the feed-in tariffs – which are voluntary anyway – to just 4.8c/kWh.
IPART justified this on the fall in wholesale market prices (ironically partly driven by the growth in solar PV) and suggested that if households were unhappy with exporting electricity back to the grid at that price, then they could install battery storage.
“We think the IPART reasoning on battery uptake is a little premature,” Bailey said. He said there would be no return in Queensland to premium tariffs of before, but “we think we can do better” than the current offering, which he said was based on a very narrow economic view, and only the costs, not the benefits of solar.
“You have got to look at the bigger picture … previously the perspective has been too narrowly economic.”
Regulators and utilities have been playing a risky game by driving down solar feed-in tariffs at the same time as jacking up fixed charges, and seeking to load extra network costs on solar households.
As Vector’s Simon Mackenzie indicated at the same conference, too many incumbents and regulators think they can resist change.
Some analysts fear that such attitudes will simply force many consumers to not just take up battery storage, but to leave the grid altogether. Getting the balance right on tariffs is a critical issue for all states, and for all networks.
Bailey’s government has promised to more than double the number of solar households in the state to one million (there are 450,000 now), which means doubling the installed capacity to 3GW from 1.45GW.
But the latest data shows that the take-up of rooftop solar is slowly declining, possibly due to a combination of the fact that many of the easy houses have already been installed, and that declining tariffs and rising fixed charges is making solar less attractive.
Bailey says it is essential for policy makers and regulatory to understand what it is they are trying to achieve.
“Do we want to encourage homes to have solar PV that feeds into the grid, or be consumed at home? Do we want a smart grid with multiple generation points, or do we want less interconnection or even disconnection? Does solar PV help or hinder the cost of energy?
Bailey said the evidence suggested that renewable and decentralized energy will deliver long term benefits to consumers, and pointed to the various battery storage initiatives being undertaken in the Ergon network, including the virtual power plant trials.
But he said also that in the absence of federal leadership, states needed to run their own race.
Queensland has flagged a 50 per cent renewable energy target for 2030, but wants to hold a public inquiry into how this can be achieved. Bailey says an expert panel will be named in the next few months to undertake this.
“It would be nice to see federal leadership,” Bailey said. “I find it astonishing that there is an ideological divide over this issue.
“Germany has a conservative leader – and is pushing ahead with renewables. They see where future lies. Yet here we are in Australia, dragging the chain, with 20th century thinking by Abbott government. They need to get with the program. At the moment it is costing the country.”
Victoria’s new Labor government is also launching an inquiry into the “fair price” of solar, which follows the decision by that state’s energy regulator to slash the feed in tariff to just 5c/kWh, again on the basis on falling wholesale prices.
The government has also announced new legislation that will prevent electricity retailers from refusing discounts to households with rooftop solar arrays, and to address “unfair discrimination” where retailers sought to hit solar households with additional supply charges.
D’Ambrosio says the government is also working on a “new energy technologies” discussion paper, to be issued shortly, which will look ate how the state can ensure that the state can capture its share of the market.
D’Ambrosio says the government will shortly announce details of the review into solar tariffs.
“Technological change can be very rapid, and we need to be prepared … and we need to able to encourage and facilitate the uptake of new technologies.” Consumers don’t necessarily respond to conventional economic theory. “We want to make sure we can scope all the opportunities available for energy storage,” she said.