Update 25 June 2012: The Queensland Solar Bonus Feed-in Tariff scheme will be reduced from 44c/kWh to 8c/kWh. Applications to connect to the grid must be submitted by midnight 9 July 2012.
Update 26 March 2012: The Queensland Solar Bonus Feed-in Tariff is “safe” after the Labour party lost the State election in a landslide.
The possible near-future conclusion for Queensland’s generous 44c per kilowatt-hour (kWh) Solar Bonus Feed-in Tariff has been a topic of speculation as of late. So far, there is no official source indicating that the state’s incentive scheme will be ending any time soon, but a number of issues–notably the budgetary situation in the state (and pursuant political situation), talk about the less-than-adequate ability of current electricity grid infrastructure to absorb a massive uptake in solar-generated electricity input, and a lack of coordination and will at the top to tackle the problem holistically could possibly result in a reduction or cancelation of the scheme by the next election, which will be held by March 2012. This article attempts to cut through some of the speculation to dissect some of the actual issues confronting the scheme.
Queensland Solar Bonus Feed-in Tariff: Where is it headed?
The original purpose of the Queensland Feed-in Tariff, like all state feed-in tariffs, is to encourage the uptake of (usually) small-scale solar power generation units in order to grow the local solar power installation industry, facilitate the attainment of the state’s 250 megawatt (MW) Renewable Energy Target (already surpassed 3 years early), and to reduce the state’s carbon emissions (although these reasons are all intricately intertwined). Queensland’s scheme began without an application end date or a capacity cap (most other states had one or the other). Feed-in Tariff schemes like the one in Queensland are intended to be wound down as economies of scale evolve and the cost of solar power comes down. The price of installing solar has indeed come down, but slightly lower-than-the-national-average electricity prices in the Sunshine State mean that grid price parity will be a bit longer in coming than it has been in other states (notably rural NSW). Subsidies designed to support a nascent industry are usually, by their nature, phased out as that industry reaches maturity (or abruptly and rudely dropped in their entirety as was the case in WA and NSW). Such will also be the case in Queensland. The most pertinent questions to ask are ‘When?’ and ‘How will the government handle the transition?’
Queensland’s budget woes: the ballooned budget for state health payroll software
One issue that may affect the Queensland Solar Feed-in Tariff’s future stability is the unexpected inflation of the price of a contract with IBM to instate a better-automated state healthcare payroll system from $6.19 million to a budget-busting $208.7 million spread over the next 3 years, dwarfing expenditures for a number of medium-sized projects outlined the budget. This foul-up has resulted in a rise in negative sentiment towards the otherwise popular Premier Bligh’s Labour government, and there is speculation that the next election, to be held sometime between now and March 2012, will end in victory for the less renewables-friendly opposition.
There is also the issue of where how the cost of the Solar Bonus Scheme is being paid for. Unlike, for example, South Australia, where the retailer’s contribution (6-8c/kWh) and the state’s contribution (16c/kWh) are clearly outlined, the allocation of funding for the Solar Bonus Scheme is not clearly outlined in the State’s 2011-2012 budget. Nigel Morris, director of Solar Business Services, has attempted to extrapolate how the Solar Bonus Scheme is paid for, but has yet to find a clear and definitive answer, despite thorough inspection of the state’s budget documents. This could mean budgetary sleight of hand whereby the cost is internalised by the state-owned electricity distributors at the request of the state government, according to Morris. An email he sent to the energy minister in regards to this matter has not been returned.
The electricity grid and solar power feeding-in: Yes, there is is a limit, but we’re still a long way off.
Now to the putative issue of the grid’s ability to accept electricity from small solar systems. The Sunshine Coast Daily recently published an article pointing out that some sections of Queensland’s ageing electricity grid will be unable to handle ‘feeding-in’ from solar power generation systems over a certain threshold of saturation in the grid. In a nutshell, transformers on the electricity grid are limited in their ability to ‘absorb’ and put to use power from small-scale systems; there is a ‘solar saturation point’ after which problems could begin to develop in sections of the grid.
The areas most likely to be affected by the transformer issue will be areas at the further reaches of the electricity grid that have high solar penetration. The percent of solar penetration will vary from area to area, but high solar penetration could have the greatest impact in areas with low populations at the end of electrical spur lines. These areas require electrical substations to ‘ramp up’ voltage levels and ensure that the requisite voltage levels are being met, and generally have relatively narrow ‘pipelines’ through which the electricity can flow. A sudden influx of power could potentially push voltage levels above the level than the grid can handle, blowing transformers out in the process. Urban areas with antiquated grid infrastructure may also be susceptible to this issue, but as the infrastructure tends to be better in cities it is less of an issue.
In any case, according to Morris, although the transformer issue is indeed a real one, it is as of yet only a potential one, as the threshold is 30%, while solar power penetration is currently at less than 1% across the state. Another perspective is that solar power is being made the scapegoat for the larger issue of antiquated nature of the current electricity grid infrastructure. If Australia–and Queensland–are truly to have a clean energy future, solar’s integration into the grid will have to be approached holistically, and the emerging technology cannot be written off in its entirety as flawed just because it does not integrate perfectly with old infrastructure.
Some potential solutions: Localised feed-in tariffs or Smart Grids
The problem of oversaturation is an issue that would ideally be dealt with preemptively, though this is unlikely given the nature of the political cycle and its inherent pressures on decision-makers. Supplying remote areas with grid electricity can be expensive; voltage drops in the wires as distance increases, requiring ‘ramping up’ at electricity substations to maintain the requisite voltage levels for household use. Distributed generation by small-scale power stations like solar systems can actually be of benefit to the electricity grid, provided the solar is installed in remote areas to which it is expensive to send electricity generated at conventional, centralised power stations.
One of the main problems at the moment, says Morris, is the disjunct between where the grid could benefit from solar and where it is currently commercially convenient to do so–and no one is holding the reigns at the top to harmonise these needs. “The community mindset wants solar, but not necessarily where the grid needs solar.” Solar installers are concentrated in population centres, where grid infrastructure tends to be sturdy and dependable, and therefore would benefit less from what distributed generation has to offer. There are a two potential solutions for this issue.
One option would be to design a localised feed-in tariff system to incentivise solar where the grid could benefit most as opposed to having a blanket, state-wide feed-in tariff like the one currently in place. However, determining where these areas are and how much the Feed-in Tariff rate should be in each area is not a simple task. In fact, when IPART considered at implementing such a system in NSW, it was written off as ‘too complex’ (and therefore ‘inconsistent with the terms and conditions‘ (see page 27) of the review) to undertake.
If not localised feed-in tariffs, the other option would be to upgrade the electricity grid itself to a ‘Smart Grid’ system that would track and manage electricity supply and demand automatically. This would, however, be a massive project that would take an impressive amount of political will, coordination, and capital to implement. These three things are unlikely to be mustered at present. The fact that Smart Grid technology is still fairly new and experimental means that the Queensland government is unlikely to roll it broad-scale without first testing it in localised areas.
The future of Solar Power in Queensland: Still bright
Despite the complications, the solar power installation industry in Queensland will hopefully be able to survive even when the state’s Feed-in Tariff is eventually reduced or withdrawn. This is not to say that the industry does not need support–in recognition of this fact, Victoria and South Australia wisely chose to offer transition scheme rates of 25c/kWh and 22c/kWh, respectively. While less than hoped for, these still offer a significant incentive for homeowners to install solar, and a fighting chance for the solar industry.
With electricity prices slated to rise nationally while the price of solar power reaches all-time lows globally, solar is expected to become a more and more economically sensible option for households in Queensland and across the country. Although two short-term issues that could potentially disrupt this trajectory would be a drop in the value of the Australian dollar (making imports more expensive), and a drying up of the current oversupply of solar system component stock in Australia, the in the long-term, prices are expected to continue to fall. With any luck the federal and state governments will find more strategic and intelligent ways to integrate solar’s potential into the electricity network.
Considering the problems and potential solutions outlined as they are above, it seems highly unlikely that the Queensland Solar Bonus Scheme will carry on ad infinitum (those who sign up are entitled to continue receiving their tariff until 2028, however). The hope of the solar industry is that when the 44c/kWh rate is cut, there will be a replacement scheme in place that provides a soft landing.
© 2010 Solar Choice Pty Ltd
Resources and Links:
Sunshine Coast Daily, “Uncertain future for solar energy”
Independent Pricing and Regulatory Tribunal (IPART) issues paper, “Solar Feed-in Tariffs: Setting a Fair and reasonable value for electricity generated by small-scale solar PV units in NSW” (pdf)
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He is now the communications manager for energy technology startup SwitchDin, but remains an occasional contributor to the Solar Choice blog.
James lives in Newcastle in a house with a weird solar system.
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