Sunday, May 18, 2008

Feed in Tariff - Victorian government reasons don't hold up

I rang Peter Batchelor's office to discuss details and reasons for the structure of the Feed in Tariff being introduced in Victoria. I spoke at length to one his ministerial advisors. The concerns raised by the advisor and my reponse to them are listed below.


Thanks for taking the time to speak with me last Friday about the feed in tariff legislation.

In answer to the following concerns you raised regarding gross metering, and your reasons for justifying the 2kW limit:

1. The government doesn't want to pay people for the energy they use

The government should pay a premium for every watt of renewable energy, both when used domestically and when exported to the grid. This is because the energy is zero emissions and directly replaces energy from coal-fired power stations. The energy is also very valuable as it is generated at peak times on hot days when the grid is nearing capacity to supply.

2. A gross metered feed in tariff without the 2kW cap will drive up electricity bills for low income households

Premier Brumby claimed on Stateline (Friday May 9, 2008) that the FIT "would have imposed a significant burden on low income households, with some estimates that this would add up to 10% to the cost of power bills". I understand from you that the economic model used to support this claim is now a Cabinet in Confidence document that cannot be released to the public.

Given that other economic analysis has estimated no more that 1% increase in power bills, I question the veracity of the report (or model) that the government claims has informed their decisions on structuring the FIT.

I also think is is quite inappropriate for such an important and non-sensitive piece of economic information to be subject to Cabinet secrecy. This is not transparent or accountable process or decision making.

In addition, specific measures, such as Government funded installation of a solar system, could be provided for low income households if they are genuinely disadvantaged by the feed in tariff. Other subsidies or grants to them are also possible.

3. The FIT doesn't encourage energy efficiency.

The feed in tariff is not a policy instrument for directly encouraging energy efficiency, and should not be regarded or measured as such. However, households with solar panels generally become more aware of their electricity consumption and production and are therefore more likely to investigate and adopt measures to improve the efficiency of their electricity usage.

A more appropriate way of encouraging energy efficiency - which is complementary to a gross-metered non-capped FIT is to mandate that homes produce an amount (say 15% or 20%) of the energy they consume. This would drive efficiency measures so that the energy production percentage can be achieved (e.g. by solar panels) with the minimum and most cost effective energy generating system.

The Government should also mandate energy efficiency labelling for all appliances immediately.

4. The VRET is a more important factor in encouraging renewable energy

While the Victorian Renewable Energy Target is good to have, I would argue that it should be higher (e.g. 20%). Also, it yields little benefit to household producers with solar panels, it mainly benefits energy companies and large scale producers. I addition, a FIT complements and supports the VRET. Treating them as alternatives is a false dichotomy - we can have both.

5. The 30 minute timeboxing for net metering reduces the impact of the 2kW cap

While this may result in some additional payments to producers I think this will be insignificant compared to what gross metering would yield. This is very complicated too - the vast majority of people simply don't understand this measure.

A 2kW system will supply about 60% of an average household's elecricity consumption, so there will be very little net exports to the grid from such systems. I can see no good reasons for the 2kW cap.

In summary

It seems to me that the Victorian government has lost sight of the overall goal of reducing carbon emissions. Many more solar panels on Victorian and Australian roofs would directly reducing carbon emissions, and successful Feed in Tariff models in other countries have proven that this works. In Germany, this has resulted in power now produced from solar panels that is equivalent to two coal fired power stations - Germany now has 4,000 times more energy output from solar panels than Australia.

The Victorian Government's claim on the proposed Feed in Tariff will pay off solar panel systems in 10 years is inaccurate. More accurate financial modelling indicates that it will have negligible effect on reducing the payback period for panels.

Increased clean energy production for solar panels, along with investment in other forms of renewable energy such as wind power and large scale solar, will reduce and hopefully eliminate the need to build any more coal fired power stations which the entire community would have to pay for - and which would also impose significant financial burden on low income households.

I strongly urge the government to modify the tariff to a proven effective and equitable model , which is:
  • 60 cents per kWh
  • paid for at least 15 years
  • paid on the entire output of a system via gross production metering
  • no caps on array size and/or outputs.
This tariff would encourage many more people to install panels, dramatically increase output of clean zero emissions energy, and contribute to a thriving and growing local solar installation industry in Victoria.

It would benefit all Victorians, and be a key local measure in tacking climate change.


Peter Campbell


1 comment:

Anonymous said...

Good, proactive work Peter. Excellent.