In the lead up to the 3rd International Solar Cities Congress in Adelaide in late February, South Australia became the first jurisdiction in Australia to pass a law requiring that solar power system owners be paid a premium for energy they feed into the electricity grid.

Overseas, feed-in tariffs have been very successful in encouraging the uptake of solar power. As of 2007, feed-in tariffs were utilised in 18 European Union countries as well as numerous countries outside of Europe. Until now, there have been no feed-in tariffs in Australia. However electricity retailers have generally voluntarily offered ‘one for one’ buy-back rates – where the retailer buys electricity exported to the grid at the same rate as that which the customer pays for electricity.

The South Australian system

The South Australian legislation, first introduced into Parliament by Energy Minister Patrick Conlon in September last year, will ensure that solar power owners are rewarded for some of the energy their systems produce, by requiring them to be paid for solar power they export to the grid at twice the retail rate which households pay for electricity – this equates to 44 cents per kilowatt hour (kWh). However the Bill stipulates that this is based on ‘net metering’ not ‘gross production’, which means that system owners only get paid this premium tariff on the electricity produced by the system less any used on the premises at that time. The laws will come into force by July this year and system sizes under the scheme are capped at 10 kW on single phase or 30 kW on a three phase connection.

The amendments passed in the Electricity (Feed-in Scheme - Residential Solar Systems) Amendment Bill, will be critical to the success of the scheme. These amendments extended the scheme length from five to twenty years and extended eligibility for the feed-in tariff to any cover an extra 90,000 small customers, including small businesses and community organisations. This means that, for the first time, all South Australian businesses (with electricity consumption of up to 160 megawatt hours per annum) will be eligible for targeted support for installing solar power. While businesses are able to create renewable energy certificates for their systems they do not have access to the Photovoltaic Rebate Program. The 20-year scheme will deliver the guaranteed long term security that solar power customers and the industry need.

Because the South Australian feed-in tariff is based on net metering, the actual revenue created by the scheme for each system will be as dependent upon the household or business consumption profile as it will be on the system size. Households – where the occupants are routinely out in the middle of the day – will fare much better than retirees or families with young children at home during the day. The South Australian Government’s discussion paper reported data from South Australian solar PV systems, which showed a very wide range of export rates of between 10 - 50 per cent across the systems.

Why feed-in tariffs?

Feed-in tariffs for solar power are particularly useful as they are able to correct the current failure of the energy market – as highlighted in the Commonwealth’s 2004 Energy White Paper – to adequately remunerate solar PV owners for the true value of their solar energy.

According to Clean Energy Council analysis, over the current five year network planning period SA will spend over $1 billion on upgrades to electricity network infrastructure to cope with ongoing growth in demand for electricity driven by air-conditioning. SA is already the state with the peakiest demand. During January, the state again broke its record for electricity demand, previously set in January 2006. Summer peak demand is expected to grow by 11 per cent over the next five years.

The Labor Party announced during last years federal election campaign that it would work through the Council of Australian Governments to “develop a consistent national approach to feed-in tariffs”. A number of states have also announced their intention to introduce a feed-in tariff for solar power.

Victoria: The Victorian Government in the 2006 State Election implied that they would substantially improve the rate paid for electricity generated by small-scale renewable energy systems which would thereby encourage greater uptake of these systems. Their policy statement recognised the network and peak generation benefits of solar PV and committed to ensure that families with these systems would be rewarded accordingly for the energy they produce.

The Victorian Government has followed through on the first stage of this commitment. However the initial amendments on setting a fair price for renewable energy will involve little change for the rates paid for solar energy. They are currently undertaking the second stage of this process which to the government says will look at whether further reforms are needed to encourage the uptake of renewable energy generation by householders.

The position put to the Victorian Government in the Clean Energy Council submission was that feed-in tariffs should be based on gross metering; ensure system payback within a reasonable time period; be available to businesses as well as homes; and, should have a minimum life of 15 years. The Clean Energy Council submission to the Victorian Government is available on the website: www.cleanenergycouncil.org.au

The ACT: The Australian Capital Territory Government committed to introduce a feed-in tariff for renewable energy micro-generation in Weathering the Change, the ACT Climate Change Strategy 2007-25. Labor MLA, backbencher Mick Gentleman, first released an Exposure Draft of the Electricity Feed-in (Solar premium) Bill in late 2007. This was followed by the ACT Government’s Feed-in Tariff Discussion Paper. The position put forward in the discussion paper is outlined later in this article - submissions were due by 25 February.

Queensland: The Queensland Government has committed to introduce a feed-in tariff for solar power in its Climate Smart 2050 climate change strategy.

The challenge has now been handed over to the other states, territories and the Federal Government to take the lead by adopting their own feed-in tariff schemes.