The Brumby government in Victoria, Australia, announced the impending introduction of new Feed in tariff legislation in May 2008 following and election promise in 2006 to introduce it.
While the intention to encourage clean energy production from solar panels was good, the initial structure of Victoria’s proposed feed in tariff did not achieve this. Amendments to the legislation were made in the Upper House of the Victorian Parliament which improved the effectiveness of the final feed-in tariff introduced as legislation.
Criticisms of the initial structure of the feed-in tariff
Several criticisms of the the feed-in tariff initially proposed are detailed below.
The Feed in Tariff is only paid on net metering
The total electricity generated by panels should be subject to the tariff, as all the clean electricity generated has zero emissions which directly substitutes for coal-fired power and therefore reduces emissions accordingly.
In Germany and other locations where they pay the tariff on gross metering, there has been a dramatic rise in installation of solar power. Germany now has 400 times the solar output of Australia despite having about half our sunshine.
The opportunity has been missed to provide similar encouragement to a new economy and local industry (and jobs) based on increased installation of panels on available roof space.
The Feed in Tariff had a maximum ceiling of 2kW
The more solar zero emissions power we generate as a nation the better. This is a critical measure for reducing our emissions to combat climate change. The 2kW array size limit for getting the Feed in Tariff would have crippled the financial motivation for people to install solar panels, and crippled their payback if they choose to install a bigger array.
Most five star standard households currently consume about 20 to 25kwH of electricity per day. A 1kW array produces about 5kwH per day, while a 2kW array produces about 10 kwH per day. Such systems will therefore export negligible net energy to the grid, particularly if a 2kW air conditioner is run on hot sunny days.
No certainty for investment was provided
The complexities and restrictions of the initial feed in tariff resulting from net metering combined with the 2kW ceiling provide no certainty or guarantee for investment in a solar array, unlike gross metering with no ceiling which does. This is evident in countries like Germany where there has been significant investment in solar power – now the equivalent of two coal fired power stations, but with zero emissions.
The resultant lack of certainty for investment would have impeded the uptake of solar power in Victoria.
The Feed in Tariff was discriminatory
The very few who may be lucky enough to benefit from your tariff will be those who can afford a 6 star house, relatively expensive efficient appliances and a 2kW array. By contrast, lower income less efficient households with a 1kW array and less efficient appliances will get no benefit. This was discriminatory.
Community groups and small businesses were excluded
The tariff was to paid to domestic residences only; community groups and small businesses were excluded getting it.
Unused “credits” would expire
Any unused credits resulting from payment of the feed-in tariff would have expired at the end of the financial year.
The final outcome – amendments improved the feed-in tariff
The Brumby Labor Government’s feed-in tariff legislation passed by the Victorian Parliament on 25 June 2009.
The final structure of the Victorian feed-in tariff includes:
- 60 cents credit per kilowatt hour for energy fed back into the grid within that year. This is about four times the current cost of electricity in Victoria.
- The tariff is paid to residences, community organisations and small businesses with energy consumption less than 100 MWh a year
- An array size limit of 5kW applies
This outcome is a significant improvement on the feed-in tariff initially proposed by the government. Amendments introduced in the Upper House which improved the scheme include:
- extending participation to community organisations and small businesses with energy consumption less than 100 MWh a year
- increasing the array size limit from 2kW to 5kW
Two electricity retailers have also provided letters which state they will provide cash or rollover credits for energy produced, rather than these credits “expiring” as was initially proposed.
The additional amendment put by the Greens for the tariff to be paid on the gross output (rather than the net output) was not accepted.
The tariff does not apply to large scale solar or wind either, so there is potential to further improve this legislation in the future.
On balance, this is a significant improvement over the legislation initially proposed. The government states that the amendments were made “in response to input from responsible environment groups” which demonstrates that the efforts made to contact politicians and build community support for a good feed-in tariff were successful.
- Victorians to benefit from the fairest and best solar feed-in tariff scheme in australia, Media Release, Peter Batchelor, 25 June 2009