What is the right solar FiT for a smarter grid? | RenewEconomy

What is the right solar FiT for a smarter grid?

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Ergon Energy says value of solar depends on the consumption pattern of consumers, and the tariffs they pay.

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Speaking from the Queensland perspective, and from the perspective of one of the only combined electricity retailer and distributors left in Australia, Ergon Energy chief Ian McLeod is quick to admit that he has a lot of problems to deal with.

And one of these problems is the number of solar households on the Ergon grid still contracted to a high, 44c/kWh feed-in tariff – one of the most generous solar tariff schemes set up in Australia – and the consumption patterns of these households.

As you can see in the charts below, Ergon’s network has 80,000 households on the 44c/kWh tariff, and because of that tariff they are more likely to maximise their earnings by using little electricity through the day (maximising exports), and then switch on their appliances during the evening peak.

In some areas, such as those around Hervey Bay, one of the areas with the highest solar penetration, Ergon Energy is facing a $30 million bill to upgrade sub-stations and lines to deal with the rising peak demand.


Ergon, as McLeod pointed out at RenewEconomy’s Disruption & the Energy Industry conference on Tuesday, has the second-highest rooftop penetration in the world, at 25 per cent.

And while this is a point of pride for Ergon, McLeod questions the theory that distributed solar is only adding value to the grid, and not costing it – “it depends on how you value these things,” he says.

While households with lower tariffs, who get the bast value from consuming the solar they generate, shift the load away from the middle of the day, resulting in a better outcome for everybody, those with the higher tariff are not making any contribution to the grid, McLeod says. Rather, they are sending a majority of their solar power to the grid, and therefore using more power from grid.

And it’s a potentially expensive problem, which he says will cost $1.4 billion before the tariff expires in 2028/29,a although Ergon has considered “buying back” the feed in tariff in some areas to save on grid upgrades.

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  1. Steve M 5 years ago

    They could spend $30 million upgrading infrastructure in Hervey bay or the could learn from the last infrastructure unnecessary spend and incentivise energy storage and have a FIT during peak demand?? Really they only need a buffer of 2-3 years until the technology defeats the extra infrastructure requirement so maybe offer a 5 year FIT.

    • Tim 5 years ago

      Only part of the story seems to have been told here. Hasn’t the solar delayed the upgrades in Harvey Bay with population growth actually being the problem?

      • nakedChimp 5 years ago

        yeah, remember hearing things like that.

  2. David Osmond 5 years ago

    I’d be interested to see the evidence that people on the 44c tariff are actually shifting the load away to the evenings. Have to admit I’d be quite surprised if this was occurring to any significant effect. Other than the pie chart showing 44c tariff houses were exporting a greater fraction (which could be explained by different system sizes, or different demographics ie. people at work during the day), was there any other evidence?

    • Diego Matter 5 years ago

      I totally agree.

  3. Jacob 5 years ago

    Why are the blue bars going down. Do people no longer get the FiT if they move house or what.

    • Tim 5 years ago

      yep, another Newman special. If the system is modified in any way or a person moves they go to the bad FiT.

  4. Tim 5 years ago

    The title of this article is a bit misleading. I was expecting something along the lines of net metering with the current small FiT so that consumers can use the power when they want rather than skewing of use caused by the large and tiny FiTs. Or net metering and 10c/kWh given the benefits solar gives to the grid. We should be encouraging people to have a right size solar/battery/grid combination rather than penalizing them so that everyones a winner rather than push everyone off grid and cause problems for the grid due to lack of consumers and the consumer loses out a bit without the grid backup and instead has to put up more panels and more battery backup.
    Personally I think we should just let consumers sell their solar back to the grid at whatever the market rate is at the time like the repositpower setup.

  5. Chris Fraser 5 years ago

    So say if half of all consumption between 4pm and 8pm was from home storage systems, how much value would Ergon attach to the FiT ?

  6. George Michaelson 5 years ago

    Since the application for the FIT declared the build cost, Is it possible for the company to calculate the NPV of $0.44 and then lay off these people with the buy out price? It might be significantly cheaper to terminate early with a wad of money, than go on bleeding 44c.

  7. nakedChimp 5 years ago

    And on the other hand they jack up the connection fee while lowering the kWh prices.. low usage customers pay more and people who use more pay less.
    That means if you got PV to and do exactly what they now want from the early adapters – use your own PV and don’t push the grid that much – you get screwed over.
    Seems fair.

  8. john 5 years ago

    Perhaps Ergon will supply backup storage for the PV enabled houses and lesson that $30 million spend.
    However as that would result in the 44c FIT going to 6.3c a compelling narrative would have to be made for the householder to go down that path.
    So to overcome this obstacle the buyout option comes into play.
    All new installs should be encouraged to install battery backup so that the evening peak can be lowered.
    Ergon of course have set up houses with exactly this course of action and the outcomes will show at what point the expend will result in not having to upgrade the substations. see https://reneweconomy.com.au/2015/ergon-trials-solar-storage-and-energy-trading-for-households-77974

    Would $30,000,000 buy 2000 batteries with 10 KwH, that should be able to lesson the grid by upward of 20,000 KwH.
    Yes I know have used high cost for battery just to be conservative.

    The Vector method would perhaps be a model, where any energy left is for the householder to use after the supply company has used it to meet higher demand.

  9. Steve M 5 years ago

    Of course they would also have to drop the $428 annual service/meter charges so the residents of Hervey Bay stay connected with the batteries rather that defecting completely. The benefit to QLD is far greater that people be encouraged to feed the grid during peak demand rather than leave the grid altogether.

  10. News Views 5 years ago

    It still amazes me that people think that spending $1.4 billion to subsidise solar systems is OK. it’s not and is a cost that is passed onto all consumers through higher prices whether they have solar or not.

    • Chris Fraser 5 years ago

      The subsidies are going to be removed … perhaps a little slowly for some.They’ll be seen in the future as quite successful, because they got 3kW of PV from $18k down to $3k in five years. Whereas fossil subsidies don’t make any maturing technology value improvement at all … like throwing money down a sinkhole.

  11. Mike Dill 5 years ago

    How much is electricity worth? How about the NEM spot.
    Yes, they contracted for a twenty year FIT, and at the time they were not complaining much. Seems like a case of buyers remorse. And probably some bad planning.

    So Ergon needs to put two or three hours of storage on some feeders to knock down the evening peaks. If they told the people who have the 6.53c connections that they would pay the NEM spot price, a lot of them would get the storage and sell into the peaks, which would just be another thing for Ergon to complain about.

  12. Ian 5 years ago

    The Harvey Bay issue with high penetration of 44c/KWH tariff solar has been addressed on this site often. As the graph shows this problem peaked in August 2013. Has Ergon still not solved their problem after 2 years, they say they still have to upgrade their network. The burn out of transformers and transmission wires from red hot solar power must be extremely slow.

  13. Rockne O'Bannon 5 years ago

    How much should the FiT be? Well, it depends on what the goal is. It seems like many people are viewing it as a reward or some kind of entitlement. But really it is a policy tool. It can be changed to get some kind of policy outcome.

    What does a high FiT do? it encourages people to build the largest, most efficient systems that IDEALLY supply more electricity to the grid than the home or business uses. The FIT is set high to defray costs and reduce risks and achieve outcomes that the market cannot provide.

    A low FiT might be in order if one wants to discourage systems designed for large scale efficiency. With a low FiT, no new solar owner will want a system providing much more power than the home or business uses. People will stop building to sell electricity and build more to lower their own electrical consumption.

    Maybe FiTs should be flexible. Large rural installations requiring a substation should probably not be encouraged, but large systems in urban areas with many neighbors using the generated power should be encouraged.

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