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Submission to the Independent Pricing and Regulatory Tribunal of NSW: Review of solar feed-in tariffs 2017–18 (PDF, 43 KB, 29 May 2017).
The Science Party NSW made a submission to the most recent review of NSW solar feed-in tariffs. These reviews are conducted annually by the Independent Pricing and Regulatory Tribunal (IPART).
Solar feed-in tariff regulation
Electricity retailers pay customers a "feed-in tariff" for feeding unused solar-generated electricity back into the grid. This financial incentive encourages the uptake of rooftop solar. Australia has had some very high feed-in tariffs over the past decade, but these have since dropped off sharply.
IPART sets a benchmark feed-in tariff for NSW retailers. The benchmark is the recommended amount that retailers should pay customers per kilowatt hour fed back into the grid. These benchmarks are voluntary, but the review fact sheet (PDF, via IPART) notes that "many" retailers comply.
Our submission: reflect market prices
The 2017–18 review was particularly interesting as the recommended feed-in tariff looked likely to be substantially increased, in line with rising electricity market prices. This is what the Science Party NSW supported in our submission.
Pro-solar groups and many individuals advocated for a tariff that was higher again, to match retail prices. Their justification for the higher tariff was the environmental benefit of reducing fossil fuel use. The Science Party NSW went against the grain on this point, and the review (PDF, via IPART) noted this on page 27. In short: if the tariff is too high, retailers may pass the cost onto customers, which disadvantages those who aren't able to install solar panels.
We also believe that the voluntary nature of the benchmark has served NSW residents well so far. We therefore recommended against making the benchmark mandatory at this time. It is worth seeing who offers customers a better deal initially.
Outcomes of the review
IPART turned this review around quickly, presenting their final report on 23 June. Their major recommendation is a benchmark range of 11.9–15.0c per kilowatt hour, a little more than double the benchmark for the previous year.
This is a big deal: this new tariff allows solar panel owners to break even if they export all of their solar power over the lifetime of the panels. In contrast, the current tariffs of 5–6c per kilowatt hour meant that a household needed to use at least a third of its solar energy to break even on their solar panel investment.
If retailers comply with the new benchmark range, solar becomes economically viable for households regardless of consumption patterns. If this fact is communicated well, we could well see a new surge in rooftop solar in NSW.