What is the right solar FiT for a smarter grid?

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.