Victoria’s pricing regulator has published its final report on the Energy Value of Distributed Generation, recommending changes to tariff structures to reflect the true value of rooftop solar and other small renewable electricity generators.
Marking a first among Australian regulators, the Essential Services Commission report, tabled in Victorian Parliament on Thursday morning, concludes that the state’s current feed-in tariff design does not adequately reward the value of distributed energy generation on a number of levels.
It says the tariff should be changed to factor in time of export, location of generator, and avoided greenhouse gas emissions – a finding it flagged in its draft report, published in May.
“The current FiT in Victoria makes payments based on the price of electricity in the wholesale electricity market and any distribution and transmission losses avoided by the supply of distributed generation electricity,” the report said.
“(It) does not include the value associated with a reduction in greenhouse gas emissions. …Moreover, the FiT currently makes no provision for payments based on environmental or social value.
“(And) by being limited to a single rate, the existing FiT framework does not reflect the way wholesale prices vary across time and location.”
To remedy this, the ESC recommends the introduction of an overarching Distributed Generation Tariff (DGT), which is structured around two elements: one a multi-tariff mechanism to mirror wholesale market value; the other a mechanism accounting for environmental and social value.
The first part, called a flexible feed-in tariff (Flexible FiT) would value exports from small solar and wind generators based on the time and location of the export. The payment would be flexible in the sense of having different rates for different times of day, and for different locations.
The other element of the DGT, the deemed output tariff (DOT), would account for the annual monetary value of the environmental and social benefits of the distributed generation system’s deemed output. This payment would be calculated for the year in advance, using the defined methodology that accounts for the type and size of the distributed generation system, the ESC said.
The changes will have a sting in the tail for retailers, who, the ESC estimates would face costs of between $4.5 million and $6.8 million to implement the tariff structure changes, the majority of which is attributable to the DOT.
© 2016 Solar Choice Pty Ltd