Since the Premium Feed-in Tariff review announcement last month, many pundits have been trying to work out what is the best for the industry as a whole, what is best for the Government, what is best for the end consumer, and what is best for business.
Many see the review not as a wholesale opportunity for the government to reduce a commitment to renewable energy, but in fact as a way to further encourage the take up of renewable energy and to extend to program beyond its current generous but very restricted scope.
The Scheme is outlined in Section 15A of the Energy Supply Act. Specifically the objectives as defined in the Act are:
- to encourage and support persons who want to generate renewable energy as a response to climate change;
- to develop jobs in the renewable energy sector by assisting renewable energy generation to compete with non-renewable energy generation;
- to increase public exposure to renewable energy technology in order to encourage the whole community to respond to climate change.
Key terms of the Act for securing the above objectives are contained in section 15A and include:
- the length of the scheme – commencing on 1 January 2010 and operating for 7 years.
- tariff rate – crediting eligible customers at a rate of 60 cents per kilowatt hour.
- tariff type – customers with a gross meter receive a ‘gross’ feed-in tariff rate for all the electricity that their eligible solar photovoltaic (PV) system or wind turbine generates.
- customer eligibility requirements – small electricity customers (those with an annual electricity consumption of up to 160 megawatt hours) are eligible to participate in the Scheme.
- system eligibility requirements – only customers with one solar photovoltaic (PV) panel and wind turbines (up to 10 kilowatts in capacity) that connect to the electricity network through an inverter (up to 10 kilowatts in capacity) are eligible to participate in the Scheme.
Currently there are 4 major barriers in the program. First, the cap of 60¢ per kWh generated, second the maximum of 10kW system size (giving an effective cap of around 40kWh per day or thereabouts, depending on your location), third the maximum of 7 years for which the tariff can be received, and fourth, the maximum energy consumption of 160MWh per annum (438kWh / day) eligibility criteria.
Each of these in turn, with appropriate changes provides an opportunity to further positively develop renewable energy generation, and realistically, put the power back in to where it is needed. So lets examine each in turn.
The feed-in tariff of 60¢ is a reasonably good fit for the end user as it provides an average householder with a system which can be sized to make a significant dent or remove their power bill with a reasonable investment. Most homes should expect to remove the vast majority of power bills over a year with an out of pocket investment of $6000-$10,000. Coupled with the value of the RECs for this system, the capital investment value of around $15,000 provides a solid investment, with a return on investment which will see the average system paid of within 4 to 5 years.
Again, this is great, provided electricity bills stay the same. Electricity bills unfortunately will not stay the same. These are only going to increase, so on order to address this it would be appropriate to introduce and indexation of the Feed-in Tariff reviewed every 3, 6 or 12 months (with a mechanism for determining the PFIT rate predetermined). This would enable a Solar Electricity system to directly add value into the future, and would discourage a wholesale increase in the price of electricity by the generators. There have already been a number of instances of price gouging of unwary end user customers, and matching the PFIT rate to electricity charges would discourage this.
This then brings into focus the second point – the current maximum PFIT system size of 10kW. This is greater than the PFIT system in Victoria, however is only a third of the reviewed rate in the ACT which now sits at 30kW. Enabling business to take part in the PFIT is key to providing a true sustainable resource as it is business which has the wherewithal to invest in renewable systems. Businesses which can afford to invest in Solar should be encouraged to do so. We have already see many businesses invest in 10kW systems in NSW, however this is just the tip of the iceberg. The two avenues to improvement here are providing a scaled business investment system through a structured, indexed system which permits the entry of medium scale PV systems. Systems up to 100kW should be permitted to be eligible, as they are currently eligible under the ORER RECs scheme. This would provide real tangible value back to the end users.
On order to provide medium scale users with access, the consumption based PFIT eligibility criteria must be removed. Larger scale energy users need to be encouraged to put back and invest in renewables. These will generally be companies or businesses with large roof space, which can afford to add solar panels.
It would be reasonable also however to step the PFIT value based on the size of the system being installed. I would propose a structured PFIT rate as follows:
Based on an index base of 20¢ per kWh charge rate, Gross PFIT could be calculated as
1kW – 9.995kW – PFIT = 3 times index base
10kW – 24.995kW – PFIT = 2.5 times index base
25kW – 49.995kW – PFIT = 2 times index base
50kW – 100kW – PFIT = 1.5 times index base
One of the greatest benefits of this would provide is that it would directly encourage the development of solar energy input into the some of the areas which most need it, and which have the most consumption (industrial). Whilst there is not necessarily a base load facility, having the capacity available in these areas would not require significant additional infrastructure spend (substation and high voltage power lines) as the power would be used mainly in the local area in which it is generated, and the substation transformer capacity would also (generally) already be available.
So – in conclusion, we would like to see the NSW government amend secion 15A of the Energy Supply Act as follows:
- Introduce an indexation of feed-in tariff rates to energy supply costs to ensure that the value of the feed-in is not eroded by supply price increases, and to have this index adjusted each 3 months by a pre-determined mechanism.
- Remove the cap of 160MWh consumption as an eligibility criteria to encourage medium business to take up Solar
- increase the maximum rated system output to 100kW in line with ORER’s REC creation policy
- Introduce a sliding scale of PFIT multipliers based on rated system capacity
1kW – 9.995kW – PFIT = 3 times index base
10kW – 24.995kW – PFIT = 2.5 times index base
25kW – 49.995kW – PFIT = 2 times index base
50kW – 100kW – PFIT = 1.5 times index base - Maintain the current ‘gross’ metering arrangements as set out in the Act
The above changes would encourage persons and businesses to generate renewable energy as a response to climate change, would make significant inroads into allowing renewable energy to compete with non-renewable energy sources. This would encourage the current renewable energy industry to develop and grow, and provide new long term employment opportunities for the industry, and encourage the further development of alternative energy resources and commercialisation of R&D projects.
I commend these recommendations to the review panel.
A.
Enviromate Australia 