GREENS BILL: Solar Feed-In Pricing
May 17th, 2017
On the 17th of May 2017, Mark introduced the Greens Bill - Electricity (Feed-in Pricing) Amendment Bill 2017.
The Hon. M.C. PARNELL: This bill relates to the retailer solar feed-in tariff. It is the amount of money that electricity retailers pay to the owners of solar panels for the electricity that is exported from rooftop solar panels back into the electricity grid. In other words, it is electricity that is surplus to the requirements of the owners of the solar panels.
As members would appreciate, the solar panels that are now on one in four rooftops in South Australia generate electricity which can be used by the householder. If the householder happens to be at work, for example, and there are not many appliances running but the sun is shining brightly, there is excess electricity and that is exported back to the grid. The question is: given that that electricity is going back into the grid where it can be onsold and reused by other electricity customers, what is a fair price for the electricity companies to pay the owners of those panels?
In the very early days of solar panels, the price was effectively the same price that we paid the electricity companies for electricity they sold to us. It was effectively one-for-one. The reason it was a one-for-one price was because most of us had old-fashioned spinning disk meters. In other words, when you purchased electricity from the grid, your electricity meter disk would spin in a certain direction. If you had solar panels and you exported electricity back to the grid, your disk would spin in the opposite direction. It is a bit like winding back the odometer on a car—not that I have ever done such a thing, but I have seen people do that in movies. It was similar for electricity.
Then, we had a system of import-export meters, where the meter was able to separately identify electricity that was imported into the home and electricity that was exported out. Around the same time, the government-legislated programs for feed-in tariffs came in. The very first of those feed-in tariffs — we are going back to about 2008 or 2009, from memory — was for 44¢ per kilowatt hour. That was a 20-year scheme and that is still going. There was a subsequent scheme for 16¢ per kilowatt hour. That was limited to five years. That scheme has now come and gone; it has ended.
What happened when these legislated feed-in schemes came in was that the electricity companies decided not to pay anything for the electricity. In other words, they relied on the feed-in tariff that had been collected from other consumers and did not put any of their own money into compensating solar panel owners for the electricity that the electricity companies effectively got for free and could then onsell to other customers at an absolute profit. They had not had to pay for it. They were given free electricity, which they could then onsell.
As a result of what I labelled back then as the great solar rip-off, the government introduced measures which provided for the Essential Services Commission to set a fair price for the retailers to have to pay solar panel owners for the electricity that was exported back to the grid. That regime has been operating for a number of years. The amount per kilowatt hour has gone up and down, but just in these last few months—in fact, just before Christmas—the Essential Services Commission decided that they would not set a minimum price. In doing so, they effectively set the minimum price at zero. That means that electricity companies are quite within their rights legally to not pay anything for excess electricity that solar panel owners export back into the grid.
When they made their pronouncement, the Essential Services Commission of South Australia basically said to the electricity companies, 'We're watching you.' They said, 'If you go back to your bad old ways and stop paying anything for electricity, then we will re-enter the market and we will re-regulate for a minimum price.' Effectively, what the Essential Services Commission has said is that they are going to trust the market to do the right thing; they have set no minimum price.
As of the last month or so, it looks as if most electricity companies are continuing to pay 5¢ or 6¢ per kilowatt hour for electricity. The question that arises is: how do they calculate that amount and is that a fair amount for the electricity that is generated? To answer that question, I think it is informative to look at how the exercise has been done in other states. For example, if we look across the border into Victoria, we can see that their Essential Services Commission has set a minimum payment of 11.3¢. In other words, it is twice what the last South Australian minimum payment was and an infinite amount more than the current minimum amount in South Australia, which is zero.
The way they came up with that figure is they had a look at what was the true value of the solar energy that was being exported back into the grid. They had a look at what the electricity companies were saving by not having to buy electricity from another provider—whether it was coal or gas or wind, it did not matter. In other words, the wholesale price of electricity was the cost avoided by the retailer. If they can get their electricity from someone's solar panels they did not have to then buy it on the market. That was one part of it, but the Victorians also had a very good look at other benefits that solar power provides to the network.
We know that there are benefits in terms of transmission losses that are avoided because your excess electricity from your solar panels does not go back to the power station, it flows next door. It basically hangs around the neighbourhood. If we were able to sort of DNA-track every little electron that was moving through the wires, you would see that you are avoiding a lot of the transmission losses and the costs of transmission that would flow from power that had been generated centrally from a remote power station.
The Victorians also had a look at the positive benefits for greenhouse gases. They had a look at positive benefits for health, because we know that fossil fuel power stations are bad for the health of local communities. When they put all of these things into the mixing pot, they came up with 11.3¢. Similarly, if we have a look across another border to New South Wales, we find that just this month, in fact on 1 May, their version of the essential services commission, the Independent Pricing and Regulatory Tribunal (IPART), has now released what they call a draft benchmark range for voluntary solar feed-in tariffs.
The reason it is described as that is that they do not have the same laws as us where they mandate how much the electricity companies have to pay for solar power. They basically have a recommended rate, which all of the electricity companies then adopt. It might not be quite as strict a regime as in Victoria and South Australia, but nevertheless they went through the same exercise and asked: what is the true value of solar to the retailers? What would be a fair price for the retailers to pay the owners of solar panels? They have come up with a range of 11.6¢ to 14.6¢ per kilowatt hour.
At the top of that range, it is three times what people in South Australia are generally being paid. What that says to me is that the Essential Services Commission of South Australia needs a little bit more guidance to help them determine the true value of the electricity that is exported to the grid. That, effectively, is what my bill does. I have extracted from the Victorian legislation the list of criteria that have to be taken into account in setting the minimum feed-in tariff for solar and I have incorporated those criteria into South Australian law.
As a result, the next time the Essential Services Commission undertakes this task they will probably come up with a similar result to Victoria. In fact, I reckon they will come up with a higher result because, as we know, the wholesale price of electricity is going up, largely as a result of the gas situation and the lack of competition in the market, and whilst in South Australia wholesale prices for electricity went down for about eight years, largely as a result of cheap wind energy, they are now going up as a result of expensive gas energy.
I expect that when ESCOSA undertakes this task again, if this bill were to pass and they were to take into account all of the benefits that solar power provides to the network, to the economy and to the community, then they will come up with a number probably similar to what the situation is in New South Wales.
At the risk of stating the obvious, I probably need to point out that it is not enough to just mandate that electricity companies must pay a certain amount for solar power because, if they were minded to, they could structure their tariffs in such a way that they appeared to be very generous in paying for solar power but were charging customers an extortionate amount for electricity that they imported into their homes. Customers still need to have a look at the range of offerings and how much they will be paying for electricity they buy from their retailer, as well as how much they will be paid for electricity they sell back to their retailer, to make sure that they are getting the best offer.
If history is any guide, the history in South Australia is that, given half a chance, the electricity companies will go back to their bad old ways and will pay zero—they will pay nothing. That is what they were doing 10 years ago, not paying a brass razoo, not paying anything for the electricity, effectively taking it from customers and selling it to other customers at a profit. We cannot go back to those days. So, I do want to see a legislated minimum tariff.
The other consequence, of course, which will flow from a regime where solar panel owners are not fairly compensated is that an increasing number of people will decide that it is just not worth their while to stay on the grid anymore. Think about it: if you have five, 10 or more kilowatts of panels on your roof, you are not using a lot of that power yourself, you are exporting the vast bulk back to the grid, you are not part of any other feed-in tariff and you are getting virtually nothing for it, then why on earth would you not invest elsewhere? You would ring up Mr Musk (I understand the Premier has his phone number) and say, 'Send us down some of those batteries.'
An honourable member: Twitter.
The Hon. M.C. PARNELL: Sorry, we have the Twitter handle for Mr Musk; we could contact him that way. People will start to think, "Well, it's not worth my while to generate so much power that I am effectively donating back to these big power companies." People will decide to try to be self-sufficient. They will start putting batteries on, in extreme cases, but in a growing number of cases they will disconnect from the grid. People might think that is fair enough, but I think we need to be quite careful about a situation where the electricity grid simply becomes a last resort option for people who cannot afford solar panels. That would have a bad social outcome, so I do not think we want to go there.
South Australia was a leader in renewable energy, and certainly a leader in rooftop solar. We were the first state in Australia to have a statutory feed-in tariff. The best figures I have seen show that most people no longer get that tariff. People who have put panels on in the last six years certainly are not getting any feed-in tariff at all by virtue of the statutory scheme. I think if South Australia wants to retain, or regain, its role as a leader in renewable energy and rooftop solar in particular, we need to make sure that our Essential Services Commission properly values the contribution that solar power is making to the grid, to the economy and to society as a whole. I commend the bill to the council.
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