The Premier of Australia’s largest state, New South Wales, recently announced a gross feed-in tariff of AU$0.60/kWh for 7 years for solar power.
Comment: Australia’s largest solar feed-in tariff
19 November 2009
Warwick Johnston, SunWiz
This feed-in tariff is approximately four times the rate residential customers pay for electricity, and is available for all small consumers of electricity (below 160 MWh/year consumption): residential, business and government.
The recent announcement of a gross feed-in tariff, paid on the entire amount of solar generation from systems up to 10 kWp, modifies the initially proposed net feed-in tariff, which would have run for 20 years.
The Australian states of Victoria, South Australia, and Queensland all have net solar feed-in tariffs, which pay a premium only for power export to the grid.
This incentivises solar photovoltaic (PV) owners to install large solar power systems and to minimise daytime power consumption in order to maximise revenue from power exports.
The problem with a net solar feed-in tariff is that it does not provide guaranteed returns on investment, as the revenue created depends significantly upon the occupant’s daytime power consumption. As such, the gross feed-in tariff opens up the market for small scale solar commercial systems, which could have paybacks within 7 years.
The gross feed-in tariff also means that the more affordable small installations of 1.5 kW again become financially sensible investments, largely due to ‘solar credits’, the complementary federal government support measure that targets 1.5 kW systems.
It’s not all good news, however. Solar systems in niche markets that would have exported significant power to the grid anyway now face a shorter feed-in tariff duration, which might halve their return on investment.
By 2012, financially-motivated investors will require significant system cost reductions in order to compensate for the remaining five years of a premium tariff.
However, the assured return on affordable solar systems that exists for the next two years offers some confidence that one part of the Australian solar energy industry will be able to survive the low Renewable Energy Certificate price.
Meanwhile, solar installers located in states with net feed-in tariffs must creatively convince small electricity consumers with large roofs to invest significant amounts of money in order to have a reasonable return.
Warwick Johnston manages SunWiz, an innovative solar energy consultancy that has recently addressed the difficulties of selling solar power into net feed-in tariff markets. Contact via firstname.lastname@example.org