Are Australian solar homes getting a fair deal? QLD & NSW vs Minnesota

Australian solar households are beginning to ask themselves if they are getting a good deal for the excess solar electricity that they export back to the grid during day time hours.

In most parts of Australia, those households installing rooftop solar arrays for the first time, or those coming out of previous contracts, are getting little – and sometime nothing – for their output.

In Queensland and NSW, where retail electricity rates are a minimum 26¢/kWh, and sometimes more than 30¢/kWh, households are getting only 6¢-8¢/kWh for the energy they export.

This is in contrast to the situation in the US – where net tariffs mean that households receive the same amount for their exports as their pay for their imports.

In some states, however, tariffs are moving away from net tariffs and seeking to make a “fair value of solar.” A ground-breaking ruling in the state of Minnesota, where retail electricity rates are just 12¢/kWh (less than half the Australian rate) are to be offered 10.9¢/kWh for the solar that they export back to the grid.

The reason for the difference is the way that solar is valued. In Australia, the amount paid for solar power exported to the grid by households and businesses is mostly framed around the value to the retailer.

But in Minnesota the value of solar – illustrated in the graph below – took into account the avoided fuel cost, various transmission and distribution capacity costs, avoided generation capacity costs and also the avoided environmental cost.

Part of the problem in Australian states such as Queensland is that the ultimate arbiter of pricing is the state government – the very same entity that owns the network and generation businesses threatened by solar and distributed generation, and the same entity that appoints the regulator. It is a clear conflict of interest.

The Australian Photovoltaic Institute suggests that the tariff for exports should include avoided transmission costs, and the hefty retail margins and “head-room” components of the bill. It also argues that there is a strong case for the household to benefit from the “merit order effect” – the downward pressure on wholesale prices caused by renewables – as well as some of the network benefits created by avoided infrastructure investment. Right now, all these benefits are being captured by the incumbent utilities.

© 2014 Solar Choice Pty Ltd

Giles Parkinson


  1. Equity would demand a “like for like” situation. The same price for a kWh of solar energy given to the grid as for a kWh of energy bought from the grid. Or as close to that as possible. Giving solar homes one-half or less for a kWh than what they are charged to receive a kWh from the grid is blatantly biased decision making.

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