'Not FIT for purpose' - ACT government on tariffs

24th Jun 2013

Earlier this month, the ACT disappointingly announced that it would be reducing its solar power feed-in tariff (FIT) scheme to 7.5 cents per kilowatt-hour.

The territory had been one of the few remaining areas in Australia that was clinging to a 1:1 FIT, which means the money paid back to solar PV system owners for excess energy matched retail prices – in this case 18 cents.

While certainly a blow for investors in solar rooftop technology in the ACT, it was a move predicted by industry experts and continues a trend of backtracking on rebates that has occurred across the country.

The problem

One of the core issues at the centre of the FIT debate is that many electricity distributors across Australia have significant state involvement.

This means that any threat to electricity demand by solar power can mean a reduction in revenues for governments – which creates an obvious conflict of interest for politicians who are also trying to push the renewable agenda.

We examine the most commonly cited reason for slashing rebates, and see whether the argument really holds water.

"Solar panel prices are falling"

One of the primary reasons given for reducing FIT benefits in the ACT (and elsewhere) is that solar power systems are falling in price.

Ergo, there are fewer cost barriers to installation and government incentives are less important.

So is this true? Well, solar power systems are certainly getting cheaper – however, many experts argue that the government's stance is short-sighted and forgets a number of the additional benefits of solar rooftop PV.

These include:

Offsetting losses: Electricity distribution is hardly perfect. The Australian Energy Market Operator predicts it could be as much as ten per cent of what is generated. Solar power helps plug some of these gaps.

Reducing capital expenditure on new generation capacity: Solar power reduces electricity demand from distributors. New transmission lines and other electricity generation and distribution infrastructure becomes redundant, saving taxpayers considerable money on state-funded initiatives.

Subsidising peak demand: As storage systems become more complex, solar power systems can help homeowners to avoid peak-time demand by reserving energy for later in the day.

Reaching renewable energy targets: The Australian government has committed to ensuring that 20 per cent of all energy in the country is generated from renewable sources by 2020.

Providing incentives for households to invest in solar panels is an excellent way of achieving – or even surpassing – this target.

Posted by Bob Dawson

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