Current state-of-affairs around Australia
Many States and Territories have recently reduced or cut their feed-in-tariffs for solar power:
New South Wales
Burned by the poorly designed and extremely expensive feed-in-tariff introduced by the former government, the new NSW Government has reversed course and now cut its feed-in-tariff for solar, leaving households that install solar panels with no guaranteed of being paid a fair price for the excess electricity that they feed back into the grid. Retailers sell this electricity to other consumers (usually other customers in the panel owner's street) at retail rates, but solar customers are complaining that they purchase the electricity at a far lower rate. In other words, solar customers are not receiving a fair price for the electricity their system generates.
The Government was unable to secure the numbers in Parliament to pass its proposal to retrospectively cut the rate paid to households already subscribed to the old feed-in-tariff, and so they continue to be paid at the premium rate of 60c per kWh for all electricity generated.
The industry claims that it is on the brink of collapse in NSW, with 73 workers a day losing their jobs. The Government, meanwhile, has announced that its independent pricing regulator (IPART) will conduct a review to determine a fair price for solar customers, and the Government will separately develop a Solar and Renewable Energy Action Plan to guide industry development.
Australian Capital Territory
The ACT Government had planned to cut its feed-in-tariff for small scale solar, to be replaced by a 'one-for-one' tariff for small scale (see below) and a premium rate for medium scale. However, the intervention of both the Greens and the Coalition in the ACT has resulted in support for small scale continuing.
South Australia
The South Australian feed-in-tariff for small scale systems will be reduced to 22c per kWh from October.
Western Australia
The Western Australian feed-in-tariff has been reduced to 20c per kWh.
Victoria
In Victoria, the Premium Feed-in-Tariff remains in place, with a 60c minimum rate for excess electricity returned to the grid. The Victorian scheme was of considerably better design than the New South Wales scheme, primarily because the rate was set at an appropriate level to stimulate steady growth in installations, but not precipitate an unsustainable and overly expensive boom. The scheme is costing Victorian households less than $10 per year, and is stimulating stable industry growth. Nevertheless, the scheme is approaching 100MW of installed capacity, and when this happens the Energy Minister may make changes to the scheme. The Coalition Government has committed to commission a review of the feed-in-tariff, and has promised to give the industry several months notice before making changes.
Considering the low cost of the scheme, MEFL urges the Government to maintain the scheme in its current form until the planned review can take place. Through the review, MEFL will be advocating for a staged degression of the Victorian scheme, and ultimately the removal of the Premium Feed-in-Tariff and its replacement with a one-for-one tariff of the kind the Greens and solar industry are calling for.
One-for-one tariff
So what is a 'one-for-one' tariff?
In short, it requires retailers to buy the excess electricity produced by solar panel owners at the same rate as those customers are buying electricity from the retailers. In other words, if you buy electricity at 20c per kWh from your retailer, they will be obliged to buy your excess solar electricity at the same rate. Another way of looking at this type of tariff is that you take the total amount of electricity you buy in a billing period (for example, over three months), subtract all the electricity that your system generates, and the result is what you pay for.
MEFL supports a one-for-one tariff as a good outcome for solar customers, as it ensures they are paid a reasonable amount for the electricity their system uses. It also has the benefit of allowing solar panel owners to use their systems as a hedge against rising electricity prices. As the price of electricity from the grid goes up, the value of electricity produced by solar panels goes up, and the price retailers must pay to purchase this electricity should follow. While this arrangement may not fully recognise the additional benefits of solar systems (such as the reduction of peak demand, which reduces the cost of electricity for all customers) it does put the industry on a stable footing.
However, considering that the current Victorian Premium Feed-in-Tariff is working well and at very low cost to households, we urge the Victorian Government to adopt a staged approach. This would see the incentive slowly reduced rather than suddenly cut, which could create a 'boom-bust' scenario like the one we are currently seeing in New South Wales.
More information
For further information about feed-in-tariffs, see MEFL's Guide to Feed-in-Tariffs.
