New Victoria Feed in tariff – a fair price?

On Monday 3 September 2012 the Victorian Government announced the end of its previous 25¢ per kwh feed-in tariff. This move brings Victoria in line with state level solar PV incentives across Australia, but with the new rate set at 8¢ per kwh–below current market value–is the government doing a diservice to everyday Victorians trying to reduce their energy bills?

While the move has received support from the Victorian Competition and Efficiency Commission’s (VCEC) whos research has suggested that offering inflated feed-in tariffs (FiT) to new solar customers will result in increase in standard energy bills to subsidise households with rooftop solar. One of the major components of energy bills is distribution, or the cost of using the grid to get energy where it’s needed, this means if fewer customers are relying on the grid as well as reducing their peak time energy usage – the time when utilities traditionally make their money.

The Clean Energy Council has voiced their disappointment at the reduction in the feed-in tariff to below the current market value:

“It is appropriate that the Victorian government reduces the level of its support scheme, given the recent reduction in the cost of solar power systems. However, the proposed FiT of 8 cents per kW hour is too low and does not reflect the fair and reasonable value of the electricity and other benefits that solar power systems provide to our energy system.”

The Victorian Government, in a bid to avoid the the same rush the changes to the Queensland feed-in tariff caused, have stipulated that only solar PV systems that have been fully-installed, signed-off by a licensed electrical inspector and have submitted all paperwork to their electricity suppliers by 30 September 2012 will receive the 25¢ per kwh rate. Paperwork includes: a Solar Connection Form; an Electrical Work Request; a Certificate of Electrical Safety; and a feed-in tariff contract application.

In addition to meeting the paperwork deadline, customers will also need to have their meters upgraded and be receiving credits from the feed-in tariff by 31 December 2012. There have been suggestions, most notably by Victorias Energy and Resources Minister – Michael O’Brien, that if you have paid a deposit and have all the other paperwork completed by 30 September that you may still eligible for the higher rate but information from Solar Choices’ Team of Solar Brokers and our extensive network of suppliers has discredited this information.

© 2012 Solar Choice Pty Ltd

Rebecca Boyle

Rebecca is a sustainable development and marketing graduate, with a background in community engagement and research. She has a particular interest in sustainable resource use.
Rebecca Boyle

Comments

  1. Before reading these posts, I was unclear as to whether the solar electricity had to be consumed as it is generated in ‘real time’ or whether the total ‘inputs’ minus ‘outputs’ over a period of time (say, quarterly) were used to determine feed in tariff payments. This latter scenerio (where your total electricity usage from the grid is offset with your solar production over a billing cycle) is what I believe Steve was referring to in the first post.

    From my understanding, the tariff will not be applied over the billing cycle, but for solar energy produced in real time. So, for example, it would be possible for a household to produce enough solar energy to match its electricity usage over a billing cycle (with a sufficiently large system), however it would not be able to reduce its bill to zero because of a mismatch of timing between demand and supply. The houshold would have to pay the market rate for this surplus electricity, but would only be able to sell the solar back at less than the market rate (i.e. 8 c/kWh). This seems like a significant disincentive for households to uptake solar power (as is evidenced by Mark Habgood’s example). And you say that ‘solar PV is not for everyone’ – well, with this current price structure solar PV will not be for MOST people – as most households don’t have people at home all day using power, the peaks would be early in the morning (when people get up to go to work/school) and in the evening when people come home and turn the TV and lights on. Peaks that don’t match solar output, which would peak around the middle of the day. Unless the FiT is a 1:1 arrangement, or electricity storage solutions become much more economical, this unfair tariff is a significant disincentive to invest in solar power.

    1. Hi Duncan,

      Under net metering situations you are quite correct, energy is consumed in real time with excess being fed into the grid. Under a net metering arrangement customers buy energy from the grid when the solar panels are not producing energy and are charged at the regular retailer rate (or you can think of it being discounted by the energy you’ve fed into the grid). The only way to get round this is to invest in a battery and go-off grid, but this is too expensive for many customers. Under gross metering all of the energy produced is fed back into the grid (at equivalent to or greater than market value) and purchased at the going rate for your energy retailer, when the Premium feed-in tariffs were in place many customers bought systems above their energy needs to take advantage of this.

      As the energy is used in real time the cumulative total isn’t taken off your overall energy bill, and yes, this does mean it isn’t possible to reduce your bill to nothing. What would allow customers to reduce their bill to zero is a 1:1 buy back scheme, which several state have implemented, and is something the solar industry has supported for some time.

      Although the current incentive isn’t as good as the original Premium tariffs, we believe it shouldn’t put you off going solar. Energy prices are rising across the country, the Carbon Price has resulted in a small increase but the real driver is rising networks costs, forecasts predict significant increases in the future. This means that the energy generated by solar PV systems is going to be worth more and more to system owners, every kWh you can avoid buying from the grid is a saving that pays off your system in the first instance and saves you money well into the future.

      What’s more the cost of solar PV systems have reached an all time low meaning the time it takes a system to pay for itself is getting shorter and shorter.

      State Governments, Utilities Companies and Energy Retailers have recognised that growing adoption of solar PV across the country has reduced peak consumption (meaning they don’t have to turn on the really expensive generation plants) and shifted the peak to a short sharp increase late evening when solar panels stop working. In response to this new retailer tariffs have been developed to encourage homeowners to shift their energy use (check out the Smart Grid, Smart City project in NSW) and become more energy efficient.

      Hopefully we’ll reach a stage where solar PV owners are paid a fair price for the energy they generate. In the interim we hope people recognise the value they can get from solar, allowing them to take control of their energy usage and reduce their energy bills.

      1. Don’t see how it can still make sense to go solar with the new feed-in tarriff rates, unless your electricity usage occurs at the same time as when you generate it (ie. during daylight hours).

        Victorian Dept Sustainability & Environment have confirmed we obtain feed-in tarrif rate of 8c per kwh for excess between consumption and generation during every 30 minute interval.
        If your consumption-to-generation ratio is around 1:1 in daylight hours during each of these 30 min intervals, then you effectively save your peak electricity rate for the power you generate (ie. ~25c per kwh). This is a good outcome because you’re effectively obtaining a premium of 25c per kwh for solar energy you generate.

        If, however, like most families adults work away from home during day, with kids at school, during the day your consumption is low when you’re generating electricity and you’re earning only 8c per kwh. Then we you come home in the evening (when you are NOT generating electricity) you are paying 25c for every kwh you consume.

        So for a typical family, we now need to generate 2-3 times the amount of power we consume to achieve a neutral electricity bill. For most families that’s a substantial (and costly) solar system…..

        Would love to go solar in my new house, but unless I’m mistaken it just doesn’t add up anymore…..

        1. Hi Chris,

          Thanks for your comment, from what you’ve said it does sound like solar PV might not be a viable option for you.

          When our Solar Brokers work with customers, helping them make a well informed decision, sometimes we have to advise that solar may not be worth their investment. The reasons for this can range from excessive shading (there isn’t any point on getting solar if trees or other building are going to block the sun) or their energy use patterns mean they won’t benefit from the energy they generate.

          As we’re in the business of helping as many households as possible go solar, this might sound a little crazy, but we want our customers to have the best possible experience with solar. We know some installers, who are not on our network, use pressure tactics and we’ve seen pictures of systems installed on totally shaded roofs. We want everyone we help to go away having made the best decision for them.

          If you’d like you can fill in our Solar Quote Comparison to the right of the page and get an idea of the price options available in your area, we’ll also follow this up with a call where we’ll discuss your needs and see if there is a way you can go solar with a good ROI.

          We look forward to helping you soon!

  2. I’ve been looking at over all savings charts if you buy outright or through some sort of loan. What i have found is that after ten years you havnt saved much thus look after the pennies and the dollars look after themselves. However these feeble 3 kw systems seem to be more like a gimmick for the average family that consumes more energy. Face it, the bigger your family the bigger your consumtion of pretty much everything. After cruising the web and video websites I have thus found systems are out there ranging from 10kW upwards for around the same price of a 3 and 4 kW system and yes they are fully approved providing you dont try and install them yourself. Face it, the government dose not get as much in GST if you dont pay electricity companies loads of cash for energy. If you ad a back up dry or lead battery system on a basic 10 kW system you no longer need the support of the grid or the millionaires who thrive on it. Look for yourself, let your fingers do the searching!

    1. Hi,

      Thanks for your comments. We would be very wary about buying a 10kW system that cost the same as a 3-4kW system, it’s likely that the components are from tier 3 Chinese manufacturers who are highly likely to go out of business in the next year or so if they haven’t already. The parts these manufacturers make are extremely low quality, a panel manufactured by an established company should last and perform at a high level for in excess of 25 years, a low cost, low quality system is highly likely to fail with the first 5-10 years. I’m not sure if you looked into the cost of battery storage during your research but the cost is currently so high it prohibits many homeowners from investing.

      I also noticed that you haven’t completed a Solar Quote Comparison and received a free solar quote from ourselves. We work with customers to help them choose the best solar PV system to meet their needs and one of the first questions we ask is about their energy usage. We recommend that people purchase a system that matches their energy usage as closely as possible. Obviously a solar PV system cannot cover their entire usage as some electricity will be used after the sun goes down but by implementing a few changes in behaviour to take advantage of all the energy the panels produce people can see a real change in their bills.

      If you are thinking of going solar fill in our Solar Quote Comparison or call us on 1300 78 72 73.

  3. For me the new near zero feed-in tariff has made installing a solar system completely uneconomic and I have abandoned it. I was looking at installing a 4kW system for just shy of $8,000 (after assigning STCs to the installers). However, connecting to the grid results in my unit cost for electricity jumping from 25c kWh to 33c kWh (a 32% increase or interestingly by 8c kWh). Most of my household consumption is not during the brightest daylight hours, it is mainly early morning and early evenings so the system would not reduce the amount I need to buy from the grid by more than 15%. Electricity that would be exported to the grid during the day would only be 10-11 kWh on a good day. Thus for a typical day during which I use 20 kWh, I would save 3 kWh by local production/consumption and export 11 kWh to the grid for an income of $0.88. I would still have to buy 17 kWh at a cost of $5.61 ($4.71 after subtracting the $0.88). This compares with $5.00 if I didn’t have a system and bought all 20 kWh at 25c. The net saving from a 4 kW system would be $105.85 per annum and it would take over 75 years for the system to pay for itself. Not even worth considering.

    1. Hi Mark,

      Thanks for your comment.

      It’s true that solar power in Victoria under an 8c/kWh Feed-in Tariff scenario means that those who benefit most from having a system will be those who are home during the day, when the sun is shining. Being able to use the power from the solar system as it is being produced reduces the amount of power that needs to be purchased from the grid. This is the new value proposition for solar PV across most of Australia as Feed-in Tariffs are being phased out or reduced. This means that solar PV is not for everyone.

      Regarding your retailer charging you more if you had a solar system–keep in mind that Victoria is home to Australia’s only deregulated electricity market, and customers can shop around to find the best deal for them. One of these retailers–Diamond Energy–does everything they can to make the experience of having solar PV on their roof a pleasant and economically advantageous one for their customers. They’re worth checking out for those who are still in the market for a solar system, and they’re proof that not all retailers will penalise you for having solar panels.

      Some retailers may also eventually offer a premium on solar power fed into the grid (e.g. 8c + some additional voluntary amount), but this is not the case at the moment.

  4. In line with the case I have presented above – I see the time is now ready for stand alone power station in your garage where battery banks store the power generated and then make that power available on demand through a 240 volt inverter to your house.
    Should the voltage drop to a predetermined level, the property then power automatically is drawn from the grid once again, buying power at 36 cents per kW.

    1. Hi Trevor,

      We’re glad you liked the article. Obviously we’re a little biased as we believe investing in a solar PV system at either a Residential or Commercial level is a good idea.

      Although the incentives have dropped to below market value in Victoria, a Net feed-in tariff has been introduced. This means it is only the additional energy you produce that is sent to the grid, so you’ll still be making a little bit of money from your system. When the feed-in tariffs were originally introduce at above the market value it made more sense to export everything and buy energy back at a cheaper rate. Although we hope that tariffs will change in the future to reflect the contribution small scale solar energy makes to the grid there is no reason to boycott solar power.

      If you’ve ready our other post on ‘The changing cost of solar power‘ you can see that the cost of energy is only going to increase in the future. While it may not make a huge amount of financial sense to install a system way above your energy needs, it does make sense to install something that will offset your energy bills.

      If we’ve changed your mind we’d be happy to help you get a solar PV system installed, you can call one of our Solar Brokers on 1300 78 72 73 or complete the Solar Quote Comparison.

  5. It would make more sense for any surplus day-time generation to be offset against the total consumption in the billing cycle, THEN offer 8 Cents / kWH for any generation over-and-above the consumption. With that scenario, at least the house-hold has the opportunity to use the credits to reduce the bill at market-rate energy down to a gross consumption of zero. The 8 cent surplus would (then) be of the order the generators are paid for base-load generation, with the difference being the distrubition network cost.

    1. Hi Steve,

      Not sure I catch your meaning. Can you clarify?

      The 8c/kWh rate will apply only to surplus electricity that is exported to the grid, and this will be credited onto quarterly power bills. Consuming power as it is produced by the system means that purchasing power from the grid can be averted and money saved. So basically, installing a system will primarily save the household money, but it will also earn them credits. It is highly unlikely, however, at the 8c rate, that it would be possible for a home to reduce its power bill to zero–unless they use power only during the day and only as much as their solar system can supply.

      1. I was pleased to see someone express some sense with respect to this issue of the generators paying me 8 cents for each kW I generate then “turning it around” at the meter and selling it straight back to me for 36 cents.
        A good analogy is found in communist countries – i grow all the vegetables on my farm, pay for the seeds and fertilizer then the hierarchy take all my vegetables and make me buy my own tomatoes back for 36 cents per kilogram!
        This “stealing” of electricity generated by roof top solar that I have paid for has to stop.
        Anyone who installs rooftop solar under current arrangements needs their head read!

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