Victoria’s rooftop solar feed-in tariffs are falling. Here’s why that won’t slow the solar juggernaut – ABC News

6 minutes, 56 seconds Read

For many people, the idea that governments or regulators should make it harder to put solar panels on their roof seems baffling – offensive, even.

Australia’s love affair with solar – and the pace of uptake among households – has been nothing short of remarkable. 

That solar can provoke such feelings has been thrust into the spotlight by a little-known Victorian regulator, which has slashed the value of a key incentive.

At issue is what are known as solar feed-in tariffs — a wonkish term in an industry that abounds with them.

But its purpose is simple enough.

What is a solar feed-in tariff?

Solar panels are a standard part of new home builds in many parts of Australia.(ABC News: Briana Shepherd)

A feed-in tariff is a payment to a householder for exporting their surplus solar power back into the grid.

That is, the power from the panels they don’t use themselves.

The tariffs were rolled out with gusto by state governments about 15 years ago in a bid to kickstart a rooftop solar industry in Australia.

At the time, the technology was at the margins – it was extremely expensive, and there were virtually no household installations anywhere in the country.

Accordingly, governments set what they thought had to be generous rates.

From one side of the country to the other, states were offering consumers feed-in tariffs around 40 cents for every unit of electricity their system fed back into the grid.

In New South Wales, the government at one stage offered an extraordinary 60 cents a kilowatt hour for excess solar production.

The push by governments worked beyond anyone’s expectations.

Very quickly, huge numbers of people subscribed to the schemes and installed solar panels, forcing governments to hastily scale back their offers in a bid to cap exposures.

Solar installer on roof

The rise of the rooftop solar industry has spawned a workforce of installers.

Combined with the falling costs of manufacturing solar panels, such incentive schemes lit a fire under the demand for the technology, spawning the industry as we know it in Australia.

Why has the rate in Victoria been cut?

To a large extent, the latest changes in Victoria are a sign of an industry that’s maturing.

Under the decision by the Essential Services Commission, the base rate retailers can pay customers for their solar exports will be 3.3 cents a kilowatt hour – a 32 per cent reduction.

There are similar cuts in store for households that are paid a varied rate depending on the time of day.

Retailers will be able to offer more than these rates if they want to, but the fact the tariffs have been lowered is very much a sign of the times.There is now so much solar on rooftops across Australia, including in Victoria, that it’s pushing out all other forms of generation and leading to a daily glut of supply.

And unlike other generators such as coal and gas plants and even large-scale wind and solar farms, which may choose not to produce when prices are low, rooftop solar typically just floods into the market when the sun is shining.

It is inherently less controlled, or controllable.

An aerial photo of a coal power plant surrounded by Australian bush.

Rooftop solar has hollowed out the business model for traditional coal generators.(AAP/Greenpeace)

This daily flood means there’s plenty of supply in daylight hours, pushing prices into low and often negative territory (where generators have to pay someone to take their output).

By the same token, very little of this solar capacity is produced during the evening peak when the sun is going down.

As a consequence, many of the large-scale generators that were squeezed out of the market earlier in the day have to fill the breach.

The relative death of supply at these times means prices, more often than not, spike.

By further reducing feed-in tariffs, Victoria is trying to tell households to either use more of their own solar generation or figure out ways of providing it later in the day when it’s badly needed.

What are other states doing?

Victoria is by no means alone in its efforts to shake up the rooftop solar industry, although it appears to be going harder than its neighbours.

Last year, the Queensland Competition Authority, which regulates power prices in the state’s regional areas, set a tariff of 13.4 cents a unit.

In New South Wales, the Independent Pricing and Regulatory Tribunal offers a pricing guide of 6.2 cents to 10.4 cents.

Drone shot of suburb including roofs with solar panels

About one in three Australian homes now has a solar installation.(Supplied)

South Australia, by contrast, does not provide direct oversight of tariff rates, instead leaving it up to retailers to set their own terms.

Across the Nullarbor, Western Australia’s state-owned retailer Synergy pays 2.25 cents between 9am and 3pm, rising to 10 cents at peak hours.

In every case, though, offers have been gradually falling as governments and energy players respond to the rampant growth of solar.

And some states are beginning to take more direct action.

In SA, extraordinary measures have been put in place to ensure the system can cope.

Among them are extraordinary powers for the Australian Energy Market Operator — which is responsible for keeping the lights on across Australia’s major electricity systems.

The powers allow AEMO to effectively switch off a host of rooftop solar systems in the event supply is overwhelming demand and putting the security of the grid at risk.

These “curtailment” powers are also in force in WA, too, while there are expectations they will be extended to all other states in time.

Does it mean we shouldn’t get solar?

While the actions of Victoria’s energy watchdog might seem harmful to the rooftop solar industry, in all likelihood the effects will be marginal.

Solar panels are now so cheap — and electricity prices so high — that the technology is likely to be affordable for many people regardless of feed-in tariffs.

Aerial shot of big battery

Across Australia, a growing number of large-scale batteries are being built.(Supplied: Synergy)

Recent research from Green Energy Markets looked into the affects of declining feed-in tariffs as well as the increased chances of curtailment in future years.

The consultancy found that while feed-in tariffs have historically been a major source of value from solar panels, they were becoming less and less important.

Whereas a typical solar householder in New South Wales, for example, was getting about $600 a year from feed-in tariffs in 2020, it expected this to fall to as little as $320 a year by mid next decade.

Despite this fall – and the risk of solar panels being curtailed at times by the market operator – Green Energy Markets said growth in photovoltaic cell capacity was likely to carry on regardless.

Underpinning the forecast – and much of the calculus by regulators – are forecasts that batteries will become much cheaper, enabling households to soak up and use more of their own generation.

But right now, the biggest value from solar these days is in using the power they generate yourself – at no marginal cost – rather than buying it over the grid at perhaps 30 cents a kilowatt hour.

What does this say about the transition?

Victoria’s actions are an acknowledgement that solar is now a dominant force in Australia’s energy industry and its adoption needs to be managed carefully.

Australia has gone from virtually no household solar installations 15 years ago to more than 3 million today.

The combined capacity of rooftop solar across Australia’s biggest grid is already 20 gigawatts, roughly equivalent to the total amount of coal-fired capacity in the system.

Long rows of solar panels stretch into the distance in a open landscape. The sun reflects off one of the panels.

Perversely, solar farms are some of the biggest losers of the rise and rise of rooftop solar.(Four Corners: Louie Eroglu ACS)

Of course, solar panels don’t produce all the time and so the push is on to integrate the technology in a way that makes the most of its advantages while accounting for its shortcomings.

That means having enough other kit available to keep the lights on when the sun isn’t shining.

Part of that equation will involve generators from large-scale wind to hydro and gas power.

But a key plank is also bound to be storage, including small-scale batteries and electric vehicles.

The runaway success of rooftop solar is a salutary lesson for governments, regulators, and the energy industry that consumers can move much faster than they anticipate.

In the case of solar, it’s had – and is having – major implications for the grid.

How the forecast revolution in storage is handled is likely to be equally important.

This post was originally published on 3rd party site mentioned in the title of this site

Similar Posts