Queensland’s Energex suggests buyout of 44¢/kWh feed-in tariff recipients as alternative to network upgrades

A Queensland network operator has raised the prospect of buying back the high feed-in-tariffs locked by tens of thousands of rooftop solar households in the state in until 2028, so that it can avoid costly network upgrades.

Ergon Energy CEO Ian McLeod revealed that his company was considering the scheme during an event held in Brisbane on Thursday, in the lead up to the G20 talks in Brisbane this weekend.

McLeod said that the 80,000 households on the the 44c/kWh net feed-in tariff were more likely to use little electricity in their homes during the day, and switch on their appliances at night, thus maximising their revenue from the tariff.

But this was causing major problems at some points in the network, such as in the area around Hervey Bay, where Ergon was facing a $30 million bill to upgrade sub-stations and lines to deal with the rising peak demand.

Rather than upgrade the grid, the company has calculated that it could be cheaper to “buy out” the feed-in tariff from the households with an upfront payment, and put them on the 6.5c/kWh net tariff.

Ergon Energy’s own research showed that homes on such lower tariffs were more likely to use appliances such as pool pumps during daylight hours because they were getting a net benefit of consuming the power from the solar panels, rather than exporting it, and offsetting the cost of grid-based power. This would help lower the peaks in the early evening.

Ergon Energy, which covers 97 per cent of Queensland by land area, faces a $1.6 billion from the 44c/kWh feed-in tariff out to 2028, with more than one in 10 of its residential customers on that 44c/kWh tariff.

It has not yet crunched the numbers on what sort of payment it would offer, but some factors it would have to consider include a discount for the time value of the money, and the potential of some homeowners to move house anyway – an act that normally causes an automatic switch to the lower tariff.

McLeod says Ergon Energy is also mulling whether to may make an offer to all households on the 44c/kWh tariff, or it may restrict that offer to parts of the network with serious congestion problems. It is talking to some third party companies to consider a model for the buyback.

© 2014 Solar Choice Pty Ltd

Giles Parkinson

Giles Parkinson regularly contributes unique content to Solar Choice News. Giles is the founder and editor of clean energy industry news service RenewEconomy. He is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the founding editor of Climate Spectator.
Giles Parkinson