This year many Australian households will find themselves cut off from generous incentives paid for electricity they export into the grid from rooftop solar systems. Between September and December, state feed-in tariff (FiT) schemes in New South Wales, Victoria and South Australia will finish. The FiTs applying to over 275,000 customers will drop from between 16 and 60 cents per kilowatt hour to between 5 and 7.2 cents per kWh. In NSW, the replacement FiT won’t be mandatory, with retailers allowed to decide what they pay. Of course, many of those customers have already recouped their investment. Now that our rooftop solar industry has matured, we need to reconsider the purpose of FiTs and align them with our goals for the electricity system in the future.
The governing body for our energy market, the Australian Energy Market Commission, has just missed a major opportunity to modernise our electricity networks. Last week the commission rejected a proposal to pay credits to small, local generators (such as small wind, solar and gas). Our research shows that this could save electricity consumers A$1.2 billion by 2050. In July 2015, the City of Sydney, Total Environment Centre and NSW Property Council proposed the Local Generation Network Credit rule change. This would have required network businesses to pay a credit for electricity exported into the distribution grid – that is, close to where it is actually consumed. This is different to the credit (known as a “feed-in tariff”, or FIT) paid by electricity retailers for solar households that export power, which reflects the energy value of the solar rather than any network value. FITs are a fixed payment for the amount of power exported with no variation for the time of day. In most states, retailer FITs have replaced generous mandatory FITs set by state governments, and usually have an upper limit on system size somewhere between 5 and 100 kilowatts. The network rule change would have been a small but crucial step towards recognising that in the future electricity will flow both to and from consumers, as more and more individuals, communities and businesses install their own generation.
