If you are one of the prudent people who installed solar panels over the last decade, you may end up being penalised by new energy market rules. The Australian Energy Market Commission (AEMC) has recommended that energy retailers be given the option to charge solar owners a fee to export surplus energy to the grid.
Lobby group Solar Citizens wasted no time dubbing the proposal a ‘Sun Tax’ and it’s hard to see it any other way.
Solar Citizens says the proposal is ‘iniquitous’, as big coal and gas producers do not have to pay to send electricity to the network.
According to the AEMC, the levy will not greatly reduce the credits solar users earn from the network. AEMC’s modelling showed that the proposal would reduce the annual benefits for a typical solar household (4 to 6 kilowatts) from $970 to $900.
Households without solar will be better off by about $15 a year as the fee/levy/tax adjusts inequities in the system.
Electricity producers and retailers are seeking a solution to the ‘traffic jams’ caused by a two-way energy flow.
The nature of the domestic solar network means that electricity suppliers often receive surplus power when it is not needed, leading to power surges and blackouts. In other words, the network providers are looking to develop more efficient ways of handling the extra power. Some electricity utilities have already blocked solar users from exporting to the grid, or are restricting them to a narrow time band.
One might ask how the network got into this state – it’s not like solar power was invented yesterday.
But the AEMC says doing nothing is not an option, given that solar users will be financially penalised by being blocked from the grid. For example, a solar user who is blocked 50% of the time would lose about $300 a year in benefits.
The AEMC compiled a report on this sensitive topic in 2017, concluding then that the sun tax proposal be abandoned.
“Further work is needed in order to understand whether distributed energy resources create benefits, or impose costs on the distribution network,” the report said.
It would now seem the AEMC has decided the latter applies. The AEMC’s chief executive Benn Barr said traffic jams and blackouts were occurring now and would get worse as more solar connects to the grid.
“The grid infrastructure was built when power only flowed one way. Within 10 years half of all energy users will be using home energy options like solar.”
“We want to reassure solar customers that we’re not proposing they should all start paying export charges,” he said in a statement. “We expect networks to deliver pricing proposals in close consultation with consumers, which may include options where they don’t have to pay for exports.”
Opponents of this proposal say it is coming at a time when feed-in tariffs (the price paid for surplus solar power), are dropping.
It seems improbable now to look back at our first home solar system (2004) when the feed-in tariff was 54c per kilowatt hour. This has now dropped to an average of 8c kWh. I always thought the dual purposes of a solar system was (a) to cut greenhouse emissions and (b) reduce power bills as close to zero as possible.
Choice Magazine investigated this topic when it sent 10,000 domestic power bills to be analysed by Solar Citizens. The conclusion was that retailers are paying many Aussie households below ‘spot market’ rates for their excess solar (the spot price being the wholesale market).
Choice being Choice, the article suggests monitoring prices paid for excess generation and be prepared to switch retailers when there is a better deal on offer.
Energy economist Bruce Mountain told Choice there is no obligation on electricity retailers to pay for the power that is fed in to their network.
“Some offer nothing while others offer very high rates because they want to attract customers with solar.”
On the most recent data (2018-2019), Australia has 2.6 million households with PV solar systems. FOMM would like to think the main reason people decided to install solar is to lower our collective greenhouse emissions. In truth, solar has become more affordable and the competition to strike a deal is red-hot. Also, solar converts no doubt assumed they will at least reduce the cost of power (by earning credits from surplus power fed to the grid) or even have a zero power bill and be ‘in credit’.
CanStar Blue’s survey of household power bills in 2020 highlighted the reason for increased demand for solar. The average annual power bill for a non-solar household is $1614. In our first year with a 6 kilowatt solar panel system, our power bills were less than 20% of that. Now, according to She Who Pays the Bills, we are in credit to the tune of $108.
“Can we cash that out?” I asked hopefully, heart set on a new set of Hohner harmonicas. (Wait til winter’s over.SWPB)
Energy Locals founder Adrian Merrick advised Choice readers to use all their solar energy generation before feeding in to the grid.
The best way for households to use as much of the energy they produce is to use energy-hungry appliances like washing machines and dryers during daylight hours.
Merrick also suggests investing in emerging technologies such as solar diverters and buying storage batteries as battery prices come down.
If you have been thinking this is much ado about nothing, consider how governments are continually working to increase tax revenue, openly or by stealth.
Who would have imagined the four-year punitive regime Spanish solar owners endured. In 2015, Spain’s conservative Popular Party introduced a new tax ‘Impuesto el sol’ which, as you’d guess, is a Sun Tax.
Spain’s Photovoltaic Union (UNEF) said in 2015 that self-consumers would pay double tolls for each kWh imported from the grid, compared to non-solar users.
“The new law makes it uneconomic for households and businesses to install PV with the latter endangered to lose in competitiveness too,” UNEF said.
The law also prohibited PV systems up to 100 kW from selling electricity. Owners were required to donate the extra electricity to the grid for free.
Fortunately, a new Spanish government scrapped the ‘Sun Tax’ in late 2018. In its place, as Forbes magazine reported, was a system to encourage ‘collective self-consumption’.
The new energy regulation brought Spain in line with its European neighbours and closer to achieving the EU’s energy targets for 2030.
It also encourages collaborative solar ventures between neighbouring buildings – easier to do in population-dense Europe.
We might be drawing a long bow citing Spain here, but consider this insight on the AEMC proposal from Victoria Energy Policy Centre economist Bruce Mountain.
“It is like arguing that bicycles should be charged for using the roads,” he told Renew Economy’s Giles Parkinson.
“The uptake of solar was the one big success we have had in the energy transition.”
The AEMC is seeking submissions on its proposal, with a May 13 deadline.
FOMM back pages: https://bobwords.com.au/solar-no-easy-energy-fix/