Economics of solar power in Queensland with the 8c/kWh Solar Bonus Feed-in Tariff

The economics of going solar after the Queensland Solar Bonus Feed-in Tariff scheme reduction

by James Martin II on July 6, 2012

in Solar and Renewable Energy Policy,Federal Government solar incentives,State Government solar feed-in tariffs,QLD

Applications for the Queensland Solar Bonus Feed-in Tariff scheme’s 44c/kWh rate are flooding in, with electricity distributor Energex handling over 1000 forms per day since the announcement of impending reductions to the scheme. At the moment, the focus remains on meeting the Monday 9 July midnight deadline, but the fact is that life will go on for the solar industry even after the cuts. What will the business case be for going solar when the Solar Feed-in Tariff rate drops to 8c/kWh?

The economics of installing a solar PV system with the 8c/kWh rate

Queensland is not the first state in Australia to see a significant drop in its Solar Feed-in Tariff rate. NSW and Western Australia also once had generous programs in place (40c and 60c respectively), both of which were cut to back to much lower rates (around 8-10c/kWh). Both of these states are now seeing a resurgence in interest in grid-connect solar PV systems, and the same is bound to go for Queensland.

Queensland’s Solar Bonus Scheme has also done a fantastic job of growing the state’s solar PV installation industry, which is currently the most vibrant one in the country. There are accordingly predictions that the industry will retract significantly in the aftermath of the subsidy reduction. The state government must be given some credit, however, for giving nearly a year for systems to be installed after grid connection applications have been submitted; the 2 weeks between the rate cut announcement and the application deadline will allow solar installers to ‘stock up’ on jobs for the remainder of the financial year. This was more warning than was given in either NSW or WA when the Feed-in Tariffs were cut.

Queensland government’s take: Payback times and returns on investment are as good now as they were under the 44c/kWh rate

This marks the end of the most generous first round of Australia’s Solar Feed-in Tariffs, which were implemented in NSW, Victoria, Western Australia, South Australia, and Queensland to facilitate the growth of their solar power industries as well as the broadscale dispatch of a modular, low-carbon emissions energy source.

The Queensland government, on its website in a Queensland Solar Bonus Scheme FAQ, acknowledged that the former goal has clearly been reached, although it makes no comment on the latter. In particular, it points out the fact that solar power system prices have more than halved since the scheme was conceived in 2008. This has no doubt aided the state’s solar industry in its rapid expansion and will play a major role in its ongoing health post-44c rate.

The 44 cent rate was set in 2008 when solar PV prices were substantially higher (around $6,000 per 1.5 kilowatt system installed, with rebates). The installed price of solar panels (inclusive of rebates) has approximately halved since 2008. A 1.5 kilowatt solar PV system can now be installed for around $3000 in south-east Queensland.

The 8 cent rate will mean that households purchasing solar PV can pay back their system in around seven years. This compares with approximately 10 years in 2008 (due to the higher purchase price of systems at that time).

This emphasises the fact that solar system prices have indeed fallen significantly since the beginning of the Solar Bonus Schemed. The price drop, combined with the Feed-in tariff drop, changes not only the dynamics of buying and selling them, but also the dynamics of how they should be used. Self-consumption of solar power will become the new norm, and exporting solar power to the grid will become less attractive for system owners.

What are the returns on purchasing a solar system in Queensland under the 8c rate?

The longer-term challenge for solar installers will be selling systems after 9 July. In order to do so, they may have to wait until the historical memory of the cut has cleared from the public consciousness and people no longer feel that they have ‘missed the boat’ on something. Solar will still offer a strong value proposition to the right people in a post-44c Feed-in Tariff Queensland (especially with electricity prices rising and solar PV prices falling by possibly as low as 45c per watt by 2015), but a bit more care will be required for system owners in timing the usage of their electricity.

A strong Solar Feed-in Tariff such as Queensland’s 44c rate is higher than the cost of retail electricity. This means that it is more financially advantageous for a home or business to export as much of its power to the grid as possible. Although they also stand to save money by ‘self-consuming’ the power that their solar system generates, this will only save them as much money as they pay for electricity per kilowatt-hour.

The change in subsidy structure to a Solar Feed-in Tariff that is below the retail cost of electricity (such as the 8c/kWh rate) will mean that solar PV systems will provide the most benefit to those who can use their solar power as it is being produced–i.e. those who can use electricity during the day when the sun is shining, either by scheduling their appliances to run or by being physically present in order to use them. This could be pensioners, people who work from home, or stay-at-home parents. On such a low rate, without affordable storage for the solar energy, exporting power to the grid is not the most efficient way to use it.

It is important for those who are considering going solar in Queensland to remember that different electricity retailers offer different rates for solar power. With the right solar buyback rate through the right electricity retailer, a home with a solar power system installed may receive up to 16c for every kilowatt-hour of solar electricity exported to the grid.

(Read more: The economics of 1-for-1 Solar Buybacks vs Solar Feed-in Tariffs.)

How will the 8c/kWh rate change in the coming years?

The new 8c/kWh buyback rate will be up for review by 1 July 2013, and will be continued until 1 July 2014. No one is sure what the future rates will be, but it is likely that they will increase as time goes on (as is the case with South Australia’s ‘minimum  retailer contribution‘) to reflect the rising value of solar power to the electricity grid. Already, certain electricity retailers offer double the state-mandated rate of 8c/kWh. It is unlikely, however, that the rates will be raised much higher than this so households and businesses with solar systems will want to consume as much of their electricity as possible themselves–i.e. as it is being produced.

Other options for Queensland customers: Solar leasing/’Free solar panel’ schemes/Pay-as-you-go solar

Another option that is sure to gain increasing prominence and traction in the Australian market in the coming years is the ‘solar leasing‘ model, where customers essentially have a solar system installed on their roof at no upfront cost to themselves, and then ‘buy’ the solar power from the company that has installed and will maintain it. This model is already available in some parts of Queensland through the Solar Choice installer network. Get a free and instant Solar Quote Comparison by filling out the form to the right of this page to initiate a dialoge with one of the Solar Choice team to determine if solar leasing is a smart option for you.

Queensland solar PV system return on investment (ROI) calculator under the 8c rate

Download a Solar Power System ROI Calculator for Queensland

Queensland Return on Investment Calculator Screenshot

How to use the calculator*:

1. Download one of the Queensland Solar Power System Return on Investment Calculator,

2. Open in Microsoft Excel or Google Docs,

2. Request a Solar Quote Comparison of the solar system installers in Brisbane to obtain system prices,

3. Visit SwitchWise or a similar site to find the best deal on solar electricity,

4. Find out which electricity retailer is offering the best solar Feed-in Tariff rate in Queensland,

5. Alter the variables in the light blue boxes (system size, system price, etc) in column B to calculate system Return on Investment (ROI).

*Calculator outputs are indicative only–please keep in mind that electricity rates, as well as Queenslands’s Feed-in Tariff rate, may change over time.

Top image via Global Solar Council website.

© 2012 Solar Choice Pty Ltd

James Martin II

James Martin II

Communications Manager at Solar Choice
James has been Solar Choice's primary writer & researcher since 2010. He lives in Newcastle in a house with a weird solar system.
James Martin II

{ 14 comments… read them below or add one }

Gerry October 1, 2016 at 1:33 pm

I am still getting the Queensland 44c feed-in tariff. Will I still get this rate if I switch to another provider?

Reply

Solar Choice Staff October 4, 2016 at 10:06 am

Hi Gerry,

You are apparently allowed to switch retailers (according to the DEWS.qld.gov.au website), but you will lose the 44c/kWh rate if you sell or rent out your home (more basic details here).

Hope this helps.

Reply

Edward Claydon December 19, 2014 at 3:33 pm

and finally. We could consider a ‘day of action’. Lets wait for a super-hot day during school holidays, then lets all turn off our solar systems at the same time – and demonstrate to the government, the power companies and the community that we are in fact needed, provide grid stability during peak demand and offer a super-cheap source of power into the grid at this time.

Brilliant!! to get this organised would be difficult but it would be wonderful to show the stinking government just what they are doing to us solar power generators.

Reply

s November 21, 2014 at 7:35 pm

With the demise of the 8c FIT, it is time that solar power producers work together to ensure that we get the best possible deal for the investment we have made in providing power for the grid.
1- please check the market and find the best deal available. It is a combination of the tarrif you pay for the incoming power and the feed in rate offered. Don’t stick with just anyone. Review it at the end of each contract and move to the company that offers the best deal. If we are all moving based on best-rates, the power companies will wise up and offer better deals as a way of increasing market share.
2 – legality unclear, but think about exporting your power. Talk to your neighbour who does not have solar but does have a pool (or other appliance they use during the day. Run an extension lead across the fence and let them connect to that. Then charge them somewhere between 16c and 8c per kWh – everyone wins except the greedy power companies
3 – realise that the power companies are sending you a price signal. Now it costs you only 8c (or maybe 6c) to power your AC during the day – using clean/green energy. Go for it, put that AC on and enjoy the lower cost. This will stop the power companies from being able to profiteer 15+cents per kWh to take your power and provide it to your neighbour.
4 – lets all watch the economics of battery storage. It doesn’t make sense yet, but when it does, as solar power owners, we become the winners and the grid owners risk being wiped out. They need to wise-up to the value of distributed production and storage and should stop treating us like dirt.
5 – and finally. We could consider a ‘day of action’. Lets wait for a super-hot day during school holidays, then lets all turn off our solar systems at the same time – and demonstrate to the government, the power companies and the community that we are in fact needed, provide grid stability during peak demand and offer a super-cheap source of power into the grid at this time. We dont’ want to cause black-outs but the power companies will be screaming as they are stressing about overloading local grids, power stations need to crank up to maximum power and they may even need to restart idled facilities (costing millions of dollars).

The government is declaring war on solar. We need to work together as Believers in the technology and make sure that we remain the winners, and stop getting abused by the government.

If you agree, post back here – and maybe we can set up a forum where we can share ideas.

Reply

DJW371 October 8, 2014 at 1:24 pm

I pay roughly 27c per Kw for power & I just put a 2.5Kw Solar system on which pays 8c per Kw if I feed the grid (I power my house 1st).
What is confusing me is, should I run Pool Pump etc. through the day now off the Sun, or leave it running overnight on Off Peak from grid.

Reply

Solar Choice Staff October 9, 2014 at 5:14 am

That’s an excellent question–pool pumps are a great example of a device that can be run at any time of day, so it’s best to run it when cheapest.

Generally speaking, we would recommend running the pool pump during the day if you’re not using much electricity otherwise–that is, you should try to use as much as possible of the solar power produced while it is being produced. If the other appliances in your home are already doing a good job of using up all your solar power, then it’s probably best to use the pool pump at night.

The other consideration: How much is the off-peak rate for your pool pump? All other things being equal, if you’re not consuming all of your solar power and if the off-peak rate is less than 8¢/kWh, you should run the pump at night and allow the excess solar to go into the grid for 8¢/kWh credits.

This is not true of all appliances, most of which need to be run during when people are awake–when you need to use these, you need to use them.

Hope this makes sense and is helpful.

Reply

keith September 29, 2014 at 8:34 pm

my system produces almost double what my family uses we used 511Kw this quart our solar input was 963Kw for the quart the outrage is we use to get a total of 16 cents per Kw but now it has dropped to 8 cents a Kw as a consumer we get charged up to 26.73 cent a Kw . Were is the fairness we pay for the system we maintain the system pay for the repairs so once again we are being screwed wonder if the accc would agree with this or maybe we should go Erin Brocavich on them and sue them for false pretences (basically lieing to us )

Reply

Solar Choice Staff September 30, 2014 at 1:06 am

Hi Keith,

You’re definitely not alone in being angry about this arrangement: Feed-in tariffs have been slashed around the country to paltry rates. We would love for something to be done about this (and in fact, throughout most of the US, 1-for-1 rates are the norm–don’t know where Australia went wrong), but nothing looks to change in the near future. On the contrary, the federal government is looking to make things worse by knocking back the federal subsidies for solar as well.

Right now, it is the responsibility of the solar industry to be properly educating customers about what incentives are, how they’re changing and what they mean for their customer’s investment. We do our best to make sure our customers understand that self-consumption of solar power is the rule these days–sending power into the grid is not beneficial for solar system owners. Instead, they need to size their systems and plan their behaviour to try to capture a bigger piece of their own solar pie. We’ve written about this a bit in this article and this article. You could try to follow some of these recommendations while we’re all holding out for the government to get our utilities to act sensibly.

Best of luck!

Reply

Mark November 25, 2012 at 1:39 am

I refer to your reply to Vern where you mentioned that powers generated by solar panel are consumed at source with only the “excess” feeding back into the grid.

My question is, are there differing systems or set ups where the solar power generated feeds 100% into the grid whilst the home owners consumes only the base-load from the supplier?

The reason for my question is that our quarterly power bills showed the kwh (and costs) we have consumed and the kwh (at buy back rate) separately. Then using one to offset the other to give us the amount payable for the quarter. Doesn’t this mean that the Feed-in and the Consumption do not mix?

Reply

Solar Choice November 26, 2012 at 11:02 am

Hi Mark,

There are two different set-ups in terms of feeding back to the grid, net or gross metering. Gross meters send all the energy you generate to the grid and net meters just export what you don’t use.

After this it gets slightly trickier. When the Premium tariffs were available (60¢ per kWh in NSW, 44¢ per kWh in QLD etc) it made sense to purchase a large system and export everything to the grid to pay off the system as quickly as possible and then make you money. With the current feed-in tariffs, that give solar PV owners less than the retail value for the energy they generate, it makes sense to buy a smaller system and use as much of the energy you produce as possible. This effectively makes the energy you generate and use worth what you would otherwise have paid from the grid, so if you pay 32¢ per kWh for electricity every kWh you generate and use is worth 32¢, if you do get a feed-in this is effectively discount off your remaining electricity bill.

In Vern’s case he is on a 44¢ per kWh feed-in tariff and is locked into this until 2028, it’s in his best interests to export as much as possible to to the grid (until energy costs more than 44¢) and make as much money as possible.

The other situation is only applicable in SA and the ACT, where a 1-to-1 solar buy back scheme is in place. Solar PV owners export all their energy to the grid and are payed the retail price for this, they then buy everything back from the grid at the same rate. At the end of the billing period energy production is taken away from energy consumption and the customers bill or credit statement generated. This is the situation the solar industry has been pushing for.

Hope this answers your question.

Reply

Suzie November 2, 2012 at 9:31 pm

The real economics are being charged a higher tariff by AGL once I had my PV system installed. We could only afford a 6 panel system and it does not produce more than we consume resulting in a higher bill than I was paying before I had solar. With an 8 cent feed in and higher usage tariff than before I’m really not ahead at all. Given the fact that retail electricity has increased 111% in 10 years solar is clearly a complete waste of time!!!

Reply

Solar Choice November 5, 2012 at 12:39 pm

Hi Suzie,

Unfortunately we have come across cases where it looks like the energy retailer is penalising solar PV owners, despite the valuable contribution they make to the grid. What we’d recommend is finding yourself a better energy deal, you can look at a site called SwitchWise to see what energy retailers offer better buy back rates. There is also a company called Diamond Energy who deal specifically with solar PV customers and offer a better deal than the larger energy retailers.

Unless you have a battery as part of your system you will still require some energy from the grid, what we would normally recommend is a system that closely matches your energy needs. If finance is an issue you can either get the biggest system you can afford, as you’ve done, or work with an installer to find a finance option, in some areas of Queensland you can also take advantage of something called Solar Leasing. If you think you’re system is not operating to optimum capacity there should be a clause in your contract where the installer will come back and relocate your panels to a better position, you might want to double check that there is no shading on the panels as this will make them almost useless. We have come across cases where installers who are not on our network have installed systems almost fully in the shade!

To help you maximise your current set up you can get advise on energy efficiency from many independent and Government websites, the advice ranges from simple tips to more complex suggestions like running the conditioning unit of your Air-Con running intermittently while the fan continues to circulate air. As Air Conditioning is a major user of electricity tricks to reduce it’s use will have a major impact on your bill.

The last thing to remember is, although the feed-in tariff is only 8¢ per kWh at the moment, every unit of solar energy you’re using is preventing you from purchasing from the grid effectively making it worth whatever you pay for your grid energy. So if you pay 32¢ per kWh from the grid every kWh of solar you use is worth 32¢!

Good luck getting a better deal for your energy bills.

Reply

vern September 28, 2012 at 2:06 pm

I paid for the high priced panels in 2008 and a change in the buyback rate will mean I will be out of pocket. Why would any thinking person trust a Government scheme after this example of price reductions. I will be turning my solar production off from 1 pm till 2pm everyday in protest. That way the real value of my contribution may be more obvious.

Reply

Solar Choice September 28, 2012 at 3:48 pm

Hi Vern,

If you purchased your panels back in 2008 you should be receiving the 44¢ per KWh tariff, and if you are receiving it you will get 44¢ per KWh until 2028. Hopefully by 2028 we will have a reasonable and fair set up that recognises the valuable contribution solar PV owners make to the grid.

In the interim the best thing you can do to is turn off all you appliances during peak generation, this will mean that you send even more power back to the grid and the Government has to pay you even more money! In addition to this if you are able to run any non-essential appliances at off-peak times (before 7am and after 10pm) or employ any other energy efficiency measures you will be able to export more solar power to the grid at the 44¢ rate.

Hope this helps!

Reply

Leave a Comment

Previous post:

Next post: