A gross Solar Feed-in Tariff for Queensland?

Although a gross metering setup for small-scale solar, suggested as a possible alternative to the current set up, has resulted in uncertainty and concern in solar industry, solar PV still offers substantial benefits to consumers who install as system before a final decision is made in March next year. The change was suggested by the Queensland Competition Authority (QCA) in a recently released Issues Paper, but strong opposition and the practical applications of implementing such a change mean it is unlikely to go ahead retroactively.

The prospect of gross metering – what it means for customers considering solar now

The suggestion for gross metering came as part of an issues paper looking to estimate ‘a fair and reasonable’ feed-in tariff for the state. The issues paper was written by the QCA at the request of the Queensland Government. As implementation of the QCA’s gross metering arrangement suggestion would result in unfavourable conditions for those who go solar, the QCA Issues Paper provides a strong incentive for those considering going solar to proceed with their plans in the next few months, while a net metering setup is still the standard.

The Queensland Government recently spent millions installing smart meters in properties across the state, although they had the option to install a system that would have allowed both gross and net metering arrangements, they chose the cheaper net metering model. This means that, if a gross metering scheme were to come into effect and applied retroactively, the Government would have to replace all of these meters and force existing solar PV customers to change the meters they originally had installed. Both of these situations are extremely unlikely, as the uproar from residents being forced to upgrade their meter so they can give all their energy away is certainly something the Government will be keen to avoid.

For those thinking of going solar, now or in the future, an upgrade to a smart meter will be required. Until a formal decision is made by the QCA in March, net meters will continue to be installed.

Commercial solar customers with larger systems (10kW+) may be excluded from a gross metering setup, should the government implement one. The QCA Issues Paper refers to ‘micro-renewables’ and is primarily focused on developing ‘a fair and reasonable value for energy generated by small scale solar photovoltaic (PV) systems‘. Given these circumstances, Solar Choice strongly believe that a gross metering outcome is unlikely.

About the Issues Paper

Although submissions are now closed for the issues paper, there will be further comments invited once a first draft is completed. The issues paper itself is a cleverly worded document that seems to be written with the backing of the coal industry and utility companies. Although the QCA doesn’t go as far as to recommend a gross feed-in tariff, it invites comments regarding whether Queensland should have a net or gross metering arrangement.

The potential implications of a gross metering setup are this: After purchasing panels and paying for their installation, customers will have to sell all of the energy they produce back to the grid for 8¢ per KWh and then buy back what they use for between 17-32¢ per KWh. The response from the industry and solar PV owners has been one of disbelief. The Clean Energy Council’s Policy Director, Russell Marsh, said of the proposal:

“What the Queensland Competition Authority has proposed is the equivalent of telling people they can’t just use the lemons growing on the lemon tree in their backyard – they have to sell the produce to a wholesaler for next to nothing, and then buy the lemons back at a premium from the supermarket,”

While the arguments for adopting a gross feed-in system are technically valid, many see the move as a means for network operators to protect their revenue from the effect renewables are having on the energy market. The issues paper seems to present contradictory arguments for working out ‘a fair and reasonable price’. On one hand they quote the COAG’s first principle on feed-in tariffs for micro-generators:

“That Governments agree that residential and small business consumers with small renewables (small renewable consumers) should have the right to export energy to the electricity grid and require market participants to provide payment for that export which is at least equal to the value of that energy in the relevant electricity market and the relevant electricity network it feeds in to, taking into account the time of day during which energy is exported.”

The QCA acknowledge that solar PV offers benefits to, not just the owner, but the energy retailers as they avoid ‘some costs that it would otherwise incur in purchasing energy from the National Energy Market (NEM)‘. Based on COAG’s first National Principle the QCA define ‘fair and reasonable’ as the value to retailers from electricity exported to the grid by small scale solar PV customers.

The second point is largely where the gross feed-in tariff suggestion falls down – there must be no consequential increase in electricity prices in Queensland or cost to the Queensland Government budget. At the present time network costs are recovered through customers based on their energy usage, the cost of a kWh includes retail, network, and transmission costs. The argument is that because solar customers use less energy, they are paying disproportionately low network costs and thereby forcing the price of energy up for everyone else. This is the QCA’s main argument for the gross tariff. If solar PV customers are forced to purchase all their energy from the grid then network costs will be met.

Unless, of course, solar PV owners simply invest in an off-grid system.

Alternative outcomes – a review of how energy is charged for is needed

This will further increase the cost of energy as there will be even fewer customers to pay for network costs and the valuable contribution residential solar PV makes to the grid will be lost. Based on the above information and additional arguments contained within the issues paper itself, the logical recommendation would appear to be a review of how customers are charged for network costs. If all customers are charged equally (or proportionately based on some other factor e.g. the size of their home) the network cost will still be met without the burden falling on those unable or uninterested in purchasing solar PV.

This review deemed as necessary by many energy insiders for some time now and was more recently publicly addressed by Prime Minister Gillard. The introduction of renewable energy, the increasing cost of fossil fuels, the age of the grid itself and the remote location of many towns mean that Australia, not just Queensland, needs to re-evaluate the way energy is distributed and charged for.

Gaps in the argument – what the issue paper doesn’t address

In the longer term, a gross feed-in tariff will see an increase in electricity prices and cost to the Queensland Government budget, the very thing that has been used to question the need for a gross metering option.

The Liberal Coalition Government has disbanded almost all Climate Change and Renewable energy projects in the state but has left projects like the Community Service Obligation in place. The Queensland Government pays Ergon Energy for the additional costs involved in supplying electricity outside South East Queensland. It is forecast that the cost of this project will increase nearly 10-fold over the next 12 months to $667 million in 2012/13. Without the contribution, clean energy technologies can, and do, play in meeting demand in remote areas, the cost to the Queensland Government will sky rocket–something it appears has not been considered along with the rising cost of fossil fuels.

Much of the ‘missing’ information would support a feed-in tariff that encourages further solar development, this information has been provided to the QCA by the solar industry and will appear in the first draft of the paper due out in December. Hopefully we will see a more evenly argued report and a recommendation that energy charges be reviewed. In the interim there is every incentive for those considering going solar to proceed and take advantage of net metering technology.

© 2012 Solar Choice Pty Ltd

Rebecca Boyle