Electricity prices in Australia are rising inexorably, and the the reason is not, as many would have us believe, due to support for renewable energy or the implementation of the Carbon Tax. The reasons have more to do with market dynamics than they do with any of the above, or even the wholesale cost of coal-fired electricity generation.

Australian electricity has until recently enjoyed a reputation for being some of the cheapest in the world. The usual explanation for the Lucky Country’s favourable power rates is the natural abundance of one of the least expensive power sources–coal, from which around 90% of Australia’s electricity is sourced.

A recent report (pdf) by the Energy Users Association of Australia (EUAA)–composed of 100 of Australia’s top electricity users, including BHP, Rail Corp, Coles, Commonwealth Bank, and Brisbane City Council–decries the high rates and calls on the Federal Government to take action to right the situation. Although an analysis of the EUAA report questions whether the report was not compiled with the end goal of serving its composite members’ shared goal of access to cheaper electricity rates and therefore contains cherry-picked statistics, it has managed to foster discussion as to why Australia’s electricity rates are as high as they are.

In particular, the report has prompted Climate Spectator’s Tristan Edis to discuss in detail the issue of Australia’s rising electricity prices. Despite having some of the most carbon-intensive electricity generation in the world, Australia also rather counter-intuitively has some of the most expensive electricity. The wholesale price of generating power–which hasn’t risen much in recent years–isn’t the main driver. Nor is it the much-maligned Carbon Tax (which has not yet come into effect and is not expected to have a major impact on prices), or even Federal and State Government subsidy support for renewable energy. In fact, there are plenty of other countries with more aggressive renewable energy policy and lower electricity prices than Australia.

Australian Electricity prices and carbon pollution intensity. (Graph via Climate Spectator, via Carbon Market Economics.)

This leads one to wonder what on earth could be happening. Germany and Denmark have higher electricity rates than Australia, but electricity usage is also lower per capita thanks to more efficient usage in those nations, so the impact is not as great. Edis says that the problem lies in the way that the electricity networks are operated in Australia; that their quasi-governmental nature creates a situation where it is in the Government’s financial interest for people to use more electricity. “You’ve got government setting the rules governing these networks, and at the same time potentially profiting from rules that encourage excessive electricity demand,” he says. Reduced peak demand means reduced profit.

He also criticises the lack of transparency in electricity bills: “Well, imagine if Woolworths and Coles decided they would remove price labels from all the goods in their stores. Also, rather than giving you an itemised docket at the checkout, they instead sent you an invoice every two months with absolutely no itemisation to identify what items were costing you a lot or a little. You’d be a little bit angry wouldn’t you?” However, most Australians do pay their electricity bills without a thought as to the exact breakdown of what their money is going to.

The solutions to the problem, Edis suggests, can be found in changing the market dynamics and by altering the average Australian electricity user’s experience. First off, there should be a transparent, standardised system for payment for electricity generators who could reduce the load placed on network infrastructure during peak demand periods–when retailers make a significant proportion of their profits. (Reneweconomy’s Giles Parkinson has written about European power utilities’ battles against distributed solar PV for the same reason.) Then, on the electricity user’s side, there should be a roll-out of interactive smart-meters that give real-time data on electricity usage and rates, so that homes and businesses can keep accurate track of their electricity costs and manage usage accordingly. This could be coupled with higher peak-time electricity rates, so that there is a clear price signal and disincentive to use power at peak times. This would help to reduce overall demand, and would have the ultimate result of reducing electricity bills.

All of the above would require an entirely new approach to the way that Australians use electricity, but it is clear that things are not functioning in their current state. Distributed generation in the form of small-scale solar and wind could also play a role in bringing down the cost of electricity for individual homes and businesses.

© 2012 Solar Choice Pty Ltd

Depending on where you live, your home may be fed by single-phase or 3-phase electrical transmission wires. What relevance does this have for your solar PV installation?

Electronics 101: AC vs DC current

First, a bit of background about the types of electricity. AC (alternating current) electricity. AC electricity is what most household electrical appliances require to operate. The other type of electricity, DC (direct current), is what solar panels and batteries produce. DC electricity is converted to usable AC electricity through a device called an inverter. AC current is distinguished from DC current primarily by the fact that its direction ‘switches’ back and forth rapidly, whereas DC is uni-directional. Without getting into the technical details as to why this is so, this property makes AC electricity more suitable for long-distance transmission.

3-phase and single-phase electricity transmission

In the world of electrical engineering, both single-phase and and 3-phase electricity are methods of generating, transmitting, and distributing electricity. 3-phase systems are better than single-phase for transporting electricity over long distances, thanks to the fact that less conductive material (i.e. wires) is required to transport an equivalent amount of electricity at the same voltage through single and 2-phase systems.

Although it can be used to power energy-intensive motors and certain other machines, 3-phase electricity does not ordinarily enter homes to power appliances. This is instead the job of single-phase systems. In areas where 3-phase electricity is used in transmission lines, phases are therefore broken down into into single-phase before they enter the home (or at the sub-board).

What does this mean for my solar PV system?

Not all electricity lines in Australia are 3-phase. Some areas–especially regional areas on remote electricity ‘spur lines’–are serviced by single-phased transmission systems. As single-phase systems cannot channel the large volumes of electricity that 3-phase can, there are usually limits on the size of solar systems that can be connected to the electricity grid where single-phase is the only option. For example, in South Australia, solar PV system size is limited to 10kW in areas with single-phase lines, whereas residents of areas with 3-phase lines may install systems as large as 30kW. Generally speaking, this is why a requirement for special approval from utilities for grid-connection of large solar PV systems in remote areas is more common than in areas with high population densities.

© 2012 Solar Choice Pty Ltd 

Top image via Wikipedia

Sydney is Australia’s largest city, and a good place to install a solar PV system, even after the collapse of the state’s Solar Bonus Feed-in Tariff scheme. The fact that the cost of installing a solar power system has never been lower, combined with the up-front financial incentives available through the Federal Solar Credits rebate scheme, means that purchasing a system has never been more affordable. Additionally, rising electricity rates across Australia mean good returns on investment for households and businesses that use lots of electricity during sunshine hours.

The benefits of owning a solar power PV system in Sydney

Taking advantage of Sydney’s sun

Finding the best deal on solar PV in Sydney, or anywhere in NSW, depends first on understanding what a solar PV system potentially offers a home or business. Solar panels produce electricity only when the sun is shining, and how much electricity is generated depends on the intensity and duration of the sunshine.

Averaged across the year, a rooftop in Sydney receives around 3.9 hours of sun per day–although this number will be higher in summer and lower in winter, and accordingly so will the output of a solar power system. With a 1.5kW solar array, 3.9 hours of peak sun will result in approximately 5.85kWh of electricity. A 2kW system in Sydney will generate approximately 7.8kWh of electricity, a 3kW system in Sydney will produce around 11.7kWh per day, and a 5kW system will generate around 19.5kWh per day.

Home electricity use vs solar PV system electricity generation in Sydney

Household and business electricity demand varies by the number of occupants and use patterns through the day. However,  as a ‘base case’, we can assume that the average 3-person home uses an annual average of about 20kWh per day. A 5kW system in Sydney, for example, would produce enough power to just about cover a home or business’s electricity consumption (provided all electricity is consumed during the day).

Since Sydney residents do not have access to a Solar Feed-in Tariff, it makes the most economic sense for a home or business to 1) install a solar system that will not generate more electricity than the occupants require, and 2) endeavour to use as much solar energy as possible while it is being generated–i.e. during sunshine hours. Although some electricity retailers do credit customers 6-8c/kWh of solar electricity exported to the grid, this is a nominal offering; by consuming solar power as it is generated, building occupants avoid purchasing electricity from the grid–effectively making each kWh of solar power worth as much as each kWh of power bought from the grid.

(Read more about the economics of 1-to-1 Solar Buybacks vs Solar Feed-in Tariffs and who should consider going solar in NSW.)

Federal Government Solar Rebates for Sydney, NSW

Under the Federal Government’s Solar Credit Scheme, solar systems are awarded a greater or smaller number of Renewable Energy Certificates (RECs, also known as Small-scale Technology Certificates or STCs), depending on their location, the size of the system that installed, and the REC price agreed on between the customer and solar installer. It is also important to keep in mind that STC prices are not set in stone–rather, they fluctuate with supply and demand. Installation companies will usually tell customers what price they give per STC when initial pricing details are settled on. (STC prices are also clearly listed in Solar Choice’s Solar Quote Comparison sheets.)

Most of Sydney is located in REC Zone 3. (REC Zone and applicable STCs can be calculated for free on ORER‘s website.). A 5kW solar system installed in in Sydney city would, for example, generate a base number of 103 RECs/STCs. When the Solar Credit REC Multiplier (currently 3x until 1 July 2012) is applied, however, the total number of STCs generated is (103 + 62 =) 165. This means that, assuming an STC price of $30, a discount of $4,950 off the up-front price of the system will be applicable. This up-front rebate is one of the reasons that  solar PV system prices are currently reaching record levels of affordability throughout Australia.

Electricity bill savings through solar PV systems in Sydney

Grid-connected NSW residents can benefit financially from having a solar PV system installed by reducing their electricity bills. Since the Solar Buyback schemes in NSW are available only through certain electricity retailers, and even then only at a nominal 6-8c/kWh rate, it is only economical to install a solar PV system in NSW if occupants can somehow ensure that electricity can be used while the solar panels are generating power. This means, in essence, that solar is a great option for residences where the occupants are home during the day, or for businesses that operate during daylight hours. This is because power is automatically drawn first from the solar system; only when electricity generated by the solar panels has been exhausted or exceeded is electricity imported and purchased from the grid.

The future of the NSW Solar Bonus Feed-in Tariff Scheme

Since the abrupt conclusion of the NSW Solar Bonus Feed-in Tariff scheme, there has been no state government-mandated incentive for small-scale solar power. The Solar Bonus Scheme is currently under review, and a report detailing IPART‘s recommendations as to how electricity from solar PV should be valued is due out in April of 2012. The recommended rate is not expected to be much more than the 6-8c/kWh on offer voluntarily by some of the state’s electricity retailers, however, and it is expected that, should a new scheme be introduced, those with solar systems already installed will be eligible for the new rate. However, this new rate is not expected to have a significant impact on return on investment or payback periods for solar PV systems.

Finding the best solar deals in Sydney

Good return on investment and short payback periods on solar PV systems depend first on finding a good deal on a system. A reasonable price for reasonable quality components is what anyone interested in going solar should look for. Brokering the best deal on solar power installations is what Solar Choice does best, with a network of over 70 installers Australia-wide.

Solar Choice’s head office is located in Manly, NSW.  However, as Australia’s free Solar Energy Brokering and advice service, Solar Choice matches up potential solar PV customers with installers who service their area–anywhere in Australia, including Sydney. Solar Choice is uniquely positioned to identify the best deals on offer and help our customers to find the solar system that best suits their needs and budget. Request a Solar Quote Comparison today by filling out the form to the right of this page, or call us on 1300 78 72 73.

Download a Solar Power System ROI Calculator for Sydney, NSW

How to use the calculator:

1. Download the Solar Choice Sydney Solar PV ROI calculator (Excel file)

2. Request a Solar Quote Comparison of the solar system installers in Sydney to obtain system prices,

3. Visit SwitchWise or a similar site to find the best deal on solar electricity,

4. Find out which electricity retailer is offering the best solar Feed-in Tariff rate in NSW,

5. Alter the variables in the light blue boxes in the calculator (system size, system price, etc) in column B to calculate system Return on Investment (ROI).

(You may also open the file in Google Docs if you have a Google account.)

*Calculator outputs are indicative only–please keep in mind that electricity rates, as well as NSW’s Feed-in Tariff rate, may change over time.

© 2012 Solar Choice Pty Ltd 

(Top image: James Martin)

A recent article in the Sydney Morning Herald analyses German’s plans to pipe solar power from the Sahara Desert across the Mediterranean, and into its electricity grid. The project, known as Desertec, is on the concept level simple, but on the technical, economic, and political levels, fraught with potential risks. Desertec is an interesting foil to the Australian Federal Government’s Solar Flagships project, which sets to support solar power plants of similar size, but within its own national borders.

The first 20MW instalment of what is to be a 150MW concentrating solar power (CSP) plant is already under construction in a flat, desert section of Morocco. The Desertec project is essentially a pilot program to test the viability of large-scale solar power as a means to meet the energy needs of a future, fossil fuel-constrained world. Desertec is also an attempt by Germany–already the unquestioned world leader in installed solar PV, and well-recognised for its renewable energy targets and efforts–to test the waters to see if importing electricity in its raw form is a viable approach to securing its future energy security.

As a pilot project, Desertec bears certain similarities to the projects proposed under Australia’s own large-scale solar incentive scheme–Solar Flagships–which will eventually see through the development of up to 400MW of capacity between two plants–one CSP and one photovoltaic.

Despite the disparity in size, both the Desertec and Solar Flagships initiatives are looking to prove the technical practicality and economic viability of large-scale solar power plants, with hopes of leading the way to the broad-scale commercialisation of large-scale solar technologies. Both seek to take advantage of an abundant yet untapped energy resource. Both are heavily reliant on government subsidies to get off the ground.

One of the key differences between Australia and Germany’s large-scale solar ambitions with regard to these two projects is that Australia’s projects will be developed within the nation’s borders, making use of a national resource that is abundant and free. The power generated by the Flagship winners will be created and consumed domestically through an existing network. In contrast, in order for the power from Desertec to reach Germany, cables will have to be laid across the Moroccan desert and the bottom of the Mediterranean Sea. The power loss due to voltage drop will be significant, and relying on power piped in from a foreign country leaves Germany vulnerable to any political instability or post-colonial resentment that Morocco may undergo in the future.

The idea behind subsidising projects of this scale is to increase the certainty surrounding financing future projects of comparable size. The developers become ‘loss-leaders’, with government and non-governmental agencies copping the ‘loss’ in the interest of aiding the commercialisation of the technology. The Desertec project is a fascinating, almost sci-fi-esque endeavour that is being made into reality. It also puts Australia’s solar power potential into context–inspiring one to think that it is only a matter of time before Australia attains its (*ahem*) place in the sun as a solar world leader.

© 2012 Solar Choice Pty Ltd 

(Top image via SMH)

The Solar Flagships program has been receiving a lot of media attention recently for the failure of the program’s two winning applicants to meet the deadline for funding requirements. The 250MW concentrating solar power (CSP) plant in Chinchilla, Queensland has managed to have this deadline extended, while the Moree Solar Farm, a 150MW solar PV plant in NSW, has been thrown back into the running against its former competitors for the funding, with Federal Resources and Energy Minister Martin Ferguson’s office noting that the Moree project had also been altered significantly from the original plan.

What happened to the Moree Solar Farm?

This hitch in the Solar Flagships application process brings up some important issues regarding how large-scale solar power can be most effectively subsidised. The Solar Flagships program essentially lays out sets of requirements and administrative red tape for applicants to get funding; the theory is that the best suited and most economically viable option will come out on top after all requirements are met and vetting of the candidates and their projects has been completed. Although the size of the figures ($1.5b in grants between the two projects) and objective (subsidising deployment as opposed to R&D), have little precedent, the funding approach for the Solar Flagships program is a relatively conventional in that it is centralised: government sets requirements for application, and then selects applicants to ‘win’ the money.

The problem with the Moree Solar Farm, a solar photovoltaic (PV) installation intended to be 150MW in capacity, is that it did not meet the deadline to secure requisite private funding for the project. The project was only to be partially subsidised, and even then only on the condition that private funding sources are first sourced at a ratio of $3 to every $1 of public (i.e. taxpayers’) money. With the Moree Solar Farm project in limbo for having missed their deadlines for requirements, there was debate as to whether the Resources Minister Martin Ferguson would reopen the tender process to all of the previous applicants, or to simply extend the deadline to the exclusion of the previous, failed applicants. In the end, the former option was chosen.

The purpose of Solar Flagships was to trial the efficacy of solar panel as a source of large-scale power generation; the Solar Flagships Program’s website states that it “supports solar power playing a significant role in Australia’s electricity supply and operating within a competitive electricity market”. Minister Ferguson, in reopening the process to the other shortlisted competitors, with whom the Moree consortium must once again compete, emphasised that taxpayers’ money must be spent prudently in supporting the Renewable Energy Target, and seems set to ensure that the best contender comes out ahead in the process.

Australia’s Energy Infrastructure and Large-scale Solar Power: Gentraders, LGCs, and PPAs

One of the main issues at play here, as Melbourne University Research Fellow Dylan McConnell has pointed out (first in the Conversation then on Climate Spectator) is the nature of the REC market. Under the Enhanced Renewable Energy Target (eRET), electricity generators and other big carbon polluters must periodically purchase a set number of Renewable Energy Certificates (Large-scale Generation Certificates, LGCs and Small-scale Technology Certificates, STCs) A glut of certificates, due in part to the Solar Credits REC multiplier (incidentally set to fall again from July 2012) and in part to retailers’ having stocked up on RECs while they were cheap, has depressed REC prices, disincentivising 3rd parties from installing renewable energy generation systems.

Some ‘gentraders’–hybrid power generators/retailers that both produce and sell the power in a vertically integrated system that does not always foster competition, and whose interests lie in keeping as much of the electricity grid infrastructure under their own control as possible–are now developing their own renewable energy projects, removing the need to enter into PPAs with or purchase LGCs from 3rd parties. By doing so, the gentraders become both the creators and purchasers of certificates. This is all part of the greater trend of vertical integration from electricity production through to retail. Introducing 3rd parties into this means the gentraders have to purchase LGCs take on more risk, and that more of the grid infrastructure is out of their hands. This could partially explain the current Solar Flagships holdup.

Another significant issue is the difficulty in securing Power Purchase Agreements (PPAs) with Australia’s gentraders. PPAs provide a measure of confidence to investors in any energy project, ensuring its long-term commercial viability. The Moree Solar Farm may have run into problems in meeting its fundraising requirements because of its failure to reach a PPA with a retailer–a task the Federal government promises no assistance with.

Robert MacGregor, of Sustainable Energy Constructions Pty Ltd, a Power Station Development firm, commented that the media’s attention the failure of the Moree Solar Farm consortium to secure a PPA is not the only aspect that needs to be considered.

“It’s true that finance is the most essential component of seeing through the development of any large-scale power station–there can’t be a project without it. If a project developer doesn’t know what kind of returns they’ll get (i.e. a PPA), then there can’t be a finance agreement. However, the reality is more complicated than that; seeing through a power station development is a bit like tetris–there is constant negotiating and back-and-forth between all the parties to reach equilibrium–an agreement that everyone is happy with. This includes the varying levels of finance, the energy company purchasing the energy, the developer; which affects negotiations with all the other strategic partners – property owners, contractors, etc. Disagreement at any point with any major party or external affectations such as change in Government policy, litigation or economic circumstances can put a halt to the project. Most major energy developments are approached on a project basis only. We have a partnership approach, in which all the parties work with each other on a number of projects and streamline the the engagement on individual developments, ensuring mutually beneficial outcomes. It doesn’t have to be a series of difficult or adversarial relationships.”

Incentivising Large-scale Solar Power

The predicament with the Solar Flagships process is making headlines in the media, and may become ammunition for opponents of large-scale solar and renewable energy schemes as impractical and idealistic, fraught with insurmountable issues and ultimately doomed to failure. But as Solar Choice has pointed out before, bad policy does not reflect on the nature of the technology. Transitioning from the current status quo of fossil fuel generation to a renewable energy scenario will mean troubleshooting numerous issues as they come up, and there will inevitably be a learning curve.

The Solar Flagships project is an admittedly valiant attempt by the Federal Government to make this learning curve a bit smoother by removing some of the financial risk; but considering the size of the Government financial contribution to these projects, there are inevitably going to be hurdles. Solar Business Services Director Nigel Morris commented: “Getting one of the largest PV projects on the ground in Australia is worthy of enormous merit. However, rolling government into the program brings obligations, conservatism, political concerns, and a dreadfully slow rate of progress that can significantly bog down progress. Governments have traditionally been most comfortable funding R&D projects. The Solar Flagships funding represents a monumental shift in government approach to funding a project; this means that it will be even more conservative and slower to move.”

ACT Large-scale Solar Feed-in Tariff: Leading the way

As Professor Dylan McConnell notes, large-scale and small-scale solar generation have been treated as two separate entities (best exemplified by the eRET, which divides the generation of Renewable Energy Certificates between small- and large-scale schemes). No state or territory in Australia besides the ACT has initiated a Feed-in Tariff incentive scheme for large-scale solar power. The ACT’s scheme is modeled after similar schemes overseas, and as RenewEconomy’s Giles Parkinson points out, the process for the ACT scheme has thus far proceeded much more smoothly than that of Solar Flagships.

That being said, in the ACT the stakes are also comparatively lower for both the government and investors. The first round of projects will have only a combined capacity of 40MW, which while still significant, is dwarfed by the 400MW proposed between the two Solar Flagships finalists. While offering no up-front grants, the ACT government is putting forward a feed-in tariff rate set by a reverse auction process and valid for 20 years. To further bolster investor confidence, the ACT has also worked a “Contract for Difference” (CoD) clause into the scheme (outlined in RenewEconomy). Essentially, this means that the ACT government would pay the difference between prevailing wholesale prices and the feed-in tariff set under the territory’s reverse auction process. The subtlety and economic flexibility of the ACT’s scheme are impressive.

© 2012 Solar Choice Pty Ltd

Solar Choice Commercial manages the tender process for a wide diversity of large-scale solar power projects throughout Australia, including for solar communities, mining companies, restaurant groups, shopping centres, and rural solar farms. A unique Commercial Solar Financing Package, requiring no capital expenditure and other benefits, is also available exclusively through Solar Choice Commercial and partner CAFGA. 

A future where Australia’s power needs are met by renewable energy sources will demand substantial alterations to the way that electricity is generated and distributed. This point was recently highlighted in an editorial in the Sydney Morning Herald by Matthew Wright, executive director of Melbourne-based thinktank Beyond Zero Emissions, who described how rooftop solar power could actually be a benefit to the electricity grid and, ultimately, the average electricity user.

Solar power’s place on the electrical grid

Residential solar PV system incentive policies have been given a bad rap, especially in NSW, where an overly ambitious Solar Bonus Feed-in Tariff Scheme and the drama surrounding its hasty and badly-planned implementation have left a bad taste in the mouths of many. However, as Solar Choice has pointed out previously, poor policy-making does not reflect the viability of the technology itself (which does have a good reputation amongst Australians). There are numerous examples of Solar Feed-in Tariffs being implemented effectively throughout the world–most notably in Germany, where a scaled and measured approach to subsidisation has enabled the country to become a solar world leader in spite of its sub-optimal climatic conditions. Solar power can be effectively integrated into the electricity grid, to its benefit.

Distributed generation: Solar PV everywhere

A major benefit of distributed generation such as rooftop PV (as opposed to centralised generation in the form of large-scale generation plants) is the reduction in the costs of peak energy demand. A phenomenon termed the ‘merit order effect‘, recently discussed in a research paper published by the University of Melbourne’s Energy Research Institute, explains how different forms of electricity generation should be prioritised to meet demand. Under the merit order effect, sources with the lowest marginal cost per kWh would be brought online first, followed by more expensive forms of generation. Where solar PV generation is concerned, this means during periods of peak demand–most notably late afternoons in the summer, when home air-conditioning units are at full throttle.

Marginal cost of energy: fossil fuels vs solar power

Such high-demand events have a disproportionate influence on the average cost of electricity–up to 30% of the cost of power as shown on your bill at home is attributable to a handful of these extreme peak periods across the course of a single year. This is primarily due to the fact that, conventionally, the sources of electricity that meet this peak demand, such as gas-fired power plants, have a high marginal cost–as much as $12.50/kWh. This is partly because energy retailers can use their position in the market to charge higher rates to put their plants online when needed most. As Wright comments, “The reason customers were getting an average price under the state (feed-in tariff) programs is because it’s too difficult for ordinary home owners to set up a trading desk and participate in the national electricity market.” Instead, Feed-in Tariffs simplify the matter by setting a flat rate for solar, making it easier for owners of small-scale generators to understand and rely on.

In addition to the cost of generation, there are also additional infrastructure costs associated with the construction of ‘peak’ plants and maintenance and upgrades of the network infrastructure (‘poles and wires’) required to deliver this power over long distances. In contrast, a Solar Feed-in Tariff guarantees a price for power that, once implemented, does not increase as time goes on; 1kWh of solar energy fed into the grid on a 44c/kWh Solar Feed-in Tariff will never cost more than that.

Solar power: modular generation distributed across the grid

Solar PV systems, once reaching a high level of grid penetration, have the ability to confront the electricity price issue on several fronts: They are a modular, scalable, and proven electricity generation source that can be deployed gradually over time (as opposed to in a one-off investment in a centralised plant); they reduce the need for transmission of electricity over long distances (electricity from solar systems connected to the grid is generally used by homes and buildings nearby); and if connected to the grid on a net feed-in tariff, they reduce overall demand by becoming a home’s primary electricity source (electricity is drawn from the grid only when consumption exceeds production).

Realising the benefits of solar requires vision and willpower

The take-home point made by Wright in his SMH editorial is therefore that, with a bit of holistic vision, drive, and willingness to change the status quo, the Australian state and Federal Governments could protect electricity users against the spectre of rising electricity prices whilst simultaneously smoothing a transition to a clean energy economy. The advantage of a Solar Feed-in Tariff as a policy instrument for achieving these goals is precisely what has given it such a bad reputation in NSW–its cost. While electricity purchased from conventional fossil fuel sources in order to generate 10kWh of energy can cost in the order of $120, an equivalent amount sources from rooftop solar PV on a feed-in tariff rate of, for example, 50c/kWh (lower than NSW’s now defunct scheme but higher than Queensland’s existing one), would cost only $5. According to the University of Melbourne’s findings, the projected savings would be enough to cover cost of the NSW government’s electricity price support scheme for low-income households.

Reaching the level where this benefit could be realised would require rooftop solar PV on a broad scale, however. Although PV prices are reaching all-time lows, attractive Feed-in Tariffs for solar such as those in Queensland, South Australia and Victoria would provide a significant incentive for households to go solar.

© 2011 Solar Choice Pty Ltd

Australia’s installed solar power capacity has grown 35 times what it was in 2008, according to a report (pdf) recently released by the Clean Energy Council of Australia. The report covers the growth of renewable energy generation across Australia (currently standing at 9.64% of all generation) in the 2010-2011 financial year. The approximately 1 million solar photovoltaics (PV) systems installed throughout the country produced 2.3% (at 680 gigawatt-hours (GWh)) of Australia’s renewable energy.

Australian renewables on track to reach 20% by 2020

Renewable Energy in Australia--Breakdown of components. (Source: Clean Energy Council)

According to the report, Australia is on track to reach but not greatly exceed its commitment under the Federal government’s Enhanced Renewable Energy Target (eRET) of 20% of all electricity production being sourced from renewables by the year 2020. At the moment, the majority of renewable energy is sourced from hydropower, followed by wind, then bioenergy. Solar PV, for all the media attention poured upon it, comprises only a small part of Australia’s renewables portfolio.

Small-scale solar PV cumulative installed capacity by year in Australia. (Source: Clean Energy Council)

Solar PV installations on the rise

Solar PV has nonetheless seen significant growth since the 2008, when the country had a mere 29 megawatts (MW) of solar PV capacity installed. Australia now has a total installed capacity of 1031MW (1.031GW–about 0.04kW per capita). This increase is in line with the global trend for solar power, which has seen enormous growth in the last 5 years. By comparison, the world leader in installed solar PV, Germany, has more than 17GW (17,000MW–about 0.2kW per capita) of installed capacity. Despite the speed of the Australian solar industry’s expansion, Australia still did not make the list of top 10 “solar countries” for 2010. (See infographic at bottom of page. N.B. Keep in mind that the PV industry is growing at breakneck speed, and figures of cumulative capacity quickly become out of date, with record-keeping inherently incapable of tracking installs in realtime.)

Uptake of small-scale PV in Australia was driven by generous state-level solar feed-in tariff incentives (many of which have since been withdrawn), as well as the federal incentives such as the Solar Credits rebate scheme. Increased demand in combination with the strong Australian dollar and a glut of supply of solar system components has seen the price of systems drop to an all-time low, with Solar Choice witnessing some system prices coming in as low as an unprecedented 66c per watt. (Request a free Solar Quote Comparison of solar installers in your area.)

Solar PV and financial benefits for individuals

PV systems cannot be installed on all buildings. However, according to the report, of those that are PV-suitable, approximately 8% have already had a system installed. This is an impressive level of PV saturation for such a short period of industry growth. What sets solar PV apart is that from other forms of renewable energy is that it is one of the only sources that can be deployed on a building level and provides a direct financial benefit to homes and businesses.

Solar PV systems, in states with a feed-in tariff, offer the double benefit of both electricity bill credits acquirable from the power that a system feeds into the grid, plus electricity bill ‘offsetting’–avoiding electricity bill costs by using power direct from the system (as opposed to purchasing it from the grid). Even in states with no feed-in tariff in place (such as NSW), with electricity prices on the rise, solar systems are becoming increasingly attractive investments. In the bigger picture, the decentralised nature of PV systems also means that grid-connected solar households have the ability to time and control electricity consumption, thereby potentially mitigating the need for electricity distributors to build additional conventional (i.e. coal-fired) power stations to meet peak demand.

© 2011 Solar Choice Pty Ltd

Top 10 Solar Countries for 2010. Figures may not accurately reflect 2011 installed capacity. (Click to enlarge. Source: 1bog.org)

The Australian Energy Market Commission (AEMC) has released a comprehensive review of the future of electricity prices across Australia. This report lends substance to speculation about the topic of energy prices the media. Factoring in the Federal government’s recently introduced Carbon Price (set to take effect from April 2012), the average price of retail electricity in Australia is expected to rise by 37.2% (22% in real terms) by 2014.

Despite media sensationalism, solar not a major cause of increases

Solar is often painted in the media as having a major impact on the price of retail electricity. Although solar feed-in tariff schemes (the cost of which is in many cases distributed over and paid for by an electricity retailer’s customer base) are expected to contribute to the price rises, their effect is expected to be relatively insiginificant: 2.8% nationally. Even South Australia, which will see the biggest increase due to a solar feed-in tariff anywhere in the country, only 6.6% of the rises will be attributable to the state’s feed-in tariff incentive scheme.

Percentage of price increases due to solar feed-in tariff schemes by state:

National: 2.8%

ACT: 3.9%

VIC: 0.7%

SA: 6.6%

WA: 0%

QLD: 0.2%

NSW: 6.1%

TAS: 0%

NT: 0%

Electricity price increases come mainly from rising wholesale energy and distribution costs

Rising electricity costs have been a cause for concern across the nation–most notably in NSW and Victoria, where disconnection complaints have reached record levels. Contrary to the perception that solar feed-in tariffs are a major factor in the growing cost of electricity, the bulk of the price rises are expected to come from two sources: the rising price of wholesale electricity (which includes the effects of the Carbon Price)–40% nationally, and the cost of distribution–33.6% nationally.

The other factors influencing electricity price are:

-Transmission (6% contribution nationally): “Driven by increasing investment to meet growing maximum demand, and higher commodity prices.”

-Retail (12.1%): Calculated as a “percentage of the total cost to supply residential customers”, expected to grow as the price of other components rise.

-Large-scale Renewable Energy Target (3.8%)

-Small-scale Renewable Energy Target (-0.8%): This is the mechanism through which Solar Rebates/Credits in the form of Small-scale Technology Certificates (STCs) are created. STCs provide an up-front rebate on the cost of a solar PV system.

-Energy efficiency and demand management schemes (2.5%).

-Other state-based schemes (only in Western Australia: -0.2%).

What implications does this have for the solar industry?

For those who install grid-connect solar–even in states with no feed-in tariff such as NSW–considerable savings await households that time electricity usage to coincide with PV system generation periods. The steady rise of the price of electricity means that small-scale solar PV systems will become an increasingly worthwhile investment–especially considering that their price is already at an all-time low in Australia.

Solar Choice, as an impartial brokering service with a bird’s eye view of the residential and solar PV markets, has seen prices drop as much as 50% (to as low as 66c per Watt) for all sizes of solar PV systems over the past year. The low prices are attributable to a glut of solar system components on the market and fierce competition between installers working hard to find customers after the collapse of generous state incentive schemes. As a result, the low cost of solar is not expected to last forever. In the meantime, however, going solar is a smart financial investment for those who want to protect themselves against rising electricity bills.

How much will electricity prices rise in each state, and why?

Electricity Price Increases in Australia to 2014 (AEMC)

The reasons for price rises in each state vary, but it is safe to say that network costs and wholesale prices comprise 70-80% of the electricity price rises in each state. Click the links below to see the details for each state, including the actual expected price of electricity in the years to come.

It is important to note, as the AEMC does, that the figures below are projections only, based on assumptions that may or may not be correct. As a result, the actual increases may vary as time goes on. It seems clear, however, that the general trend of rising retail costs due to rising wholesale and distribution costs are set to continue.

All Australia – ACT – VIC – SA – WA- QLD -NSW- TAS – NT

All Australia

Australian Capital Territory

Victoria

South Australia

Western Australia

Queensland

New South Wales

Tasmania

Northern Territory

© 2011 Solar Choice Pty Ltd

Resources and links:

Australian Energy Market Commission: Retail Electricity Price Estimates – Overview (pdf)

Brisbane is the capital of Queensland as well as the state’s most populous city. All of Queensland is famous for its sunny weather, and Brisbane is no exception, with an average of 5.4 peak sun hours throughout the year, making it an ideal location for installing solar power. In addition to the state’s natural blessing of abundant sunshine (or possibly in recognition of this), the Queensland government offers the most generous support for solar power in the country, at 44c per kilowatt-hour (kWh) on a net feed-in tariff.

Solar Choice Solar Panel Quote Comparison for Brisbane

The following is an example of a Solar Choice Solar Quote Comparison for the Brisbane area (postcode 4000). For the sake of confidentiality and to maintain our commitment of impartiality with regard to our installers, key details–such as the the names of the accredited solar installers and the total cost of the systems on offer–have been removed. However, by filling out the Quote Comparison Request form to the right of this page, it is possible to instantly receive a full, unedited, and up-to-date version of the document.

Solar Choice is Australia’s free, nation-wide Solar Brokering and Solar System Installation Quote Comparison service. Solar Choice specialises in impartially comparing and assessing solar power system prices and installers throughout Australia,  advising our customers and assisting them in determining what size system and which type of components will best suit their needs. Our customers’ receiving an automated Solar Quote Comparison is usually the first step in this process, providing a snapshot of the solar market in their area. (Read more: An overview of Solar Choice’s personalised brokering service.)

What information does the Brisbane Solar Quote Comparison contain?

-Brisbane Solar Installer names and website details. Up to 7 installers may be included.

-Prices for 1.5kW, 2kW, 3kW, 4kW, 5kW, and 10kW systems from Brisbane solar installers in our network (if offered–some installers do not install larger systems, or may only quote on request)

-Solar panel information: number and capacity (usually in the format e.g. “8 x 190 watts”), brand, technology (monocrystalline, polycrystalline, or thin-film), country of manufacture, applicable solar warranties, and (if not part of a package deal) the price.

-Solar inverter information: Rated capacity, brand, country of origin, applicable warranties, and cost (if not part of a package deal)

-The amount of your Solar Choice discount–this discount is available exclusively through Solar Choice, and guarantees a better deal than going direct to the installer

-The value of the federal Solar Credits applicable for the system, and therefore what discount you are entitled to through the federal Enhanced Renewable Energy Target Scheme

-Each installer’s required deposit amount

-A range of possible extra charges or options: oversized inverter option, possible additional costs for tile roofs, 2-story homes, tilt-frames, electrical cabling, meter installation, travel fees, or ground-mounting solar arrays

Download a sample Brisbane Solar Power System Quote Comparison

Click to download a sample of a Solar Quote Comparison for Brisbane (pdf)

© 2011 Solar Choice Pty Ltd 

(Top image via Wikipedia)