Got Solar? Want More? Tough! Rules Designed To Promote Solar Stop Australians From Buying More
Increasing numbers of Australians are finding their desire to add to the amount of rooftop solar they have blocked by rules that were originally meant to help solar power expand. While nearly a million Australian households have benefited from these policies, increasing numbers of Australians are in the unfortunate situation of finding that the rules have become a dead albatross around their necks. It stinks, and it just won’t fly.
To understand how we got into this mess, you have to understand that there are only two types of people in Australia: those who own roofs and those who don’t. More than two thirds of Australian households own their own roof, which is a lot. Of course, our roof ownership rates aren’t nearly as high as in Bulgaria, but then Bulgarians are the masters of roof ownership. Trying to beat Bulgarians on roof ownership is like trying to beat Canadians on moose-related injuries. Go to a random house in Bulgaria, knock on the door, and I can almost guarantee that you’ll find someone living there who owns the roof. Go to the next house and knock on their door and you know what? They’ll own the roof too. Keep doing it and you’ll find that just about everyone happens to own a roof. And the really amazing thing about Bulgaria is you can keep this up for an astonishingly long time before they actually get around to arresting you.
Among Australians who own roofs, there are only two types of people, those with rooftop solar and those without. Wait a minute, didn’t I say there were only two types of people in Australia just before? That can’t be right, because now I have a total of three types of people in Australia and I haven’t even divided them into those who like My Little Pony and those who don’t yet. Forget what I said about there only being two types of Australians, there are all types. And, of course, we’re all wonderful. Even the horrible, nasty, misanthropic ones. We’re all wonderful somewhere deep down on the inside, even though it may take an organ donor card for this fact to be of use to anyone.
When it comes to rooftop solar installations, Australians have a little problem. While the penetration of rooftop solar is high, with about one in ten homeowners enjoying it on the roof, our average installation size is, quite frankly, tiny. While there are Australians who have erected large installations of up to 10 kilowatts, most are a teeny weeny 1.5 kilowatts or less. As a result, I’m quite envious of the Germans whose large Teutonic installations commonly dwarf our meager antipodean ones. And since the average roof size in Australia is larger than in Germany, it makes our tiny little systems look even smaller than they are, which just compounds the embarrassment.
The reason why Australia is in this self-esteem sapping situation is due to how our solar subsidy system used to work. You see, in the good old days (two months ago) the first 1.5 kilowatts of rooftop solar received twice the subsidy as the rest of the system. As solar panels used to cost a lot more than they do now, many people opted to only install 1.5 kilowatts or less. And now that the cost of solar is so much cheaper, many people have realized they can benefit from installing more solar, but are unable to do so because of the way the rules for our solar feed-in tariffs work.
Hundreds of thousands of households are in the position of not being able to increase their amount of rooftop solar because if they did they would loose their high feed-in tariff that was locked in when they had their system installed, and which has since been cut to a fraction of what it used to be. Since the cost of solar has dropped so dramatically, it’s perfectly reasonable that people not receive the old feed-in tariff for any extra capacity that they add. However, with the way the rules are, it’s not possible to expand capacity without losing the old tariff, and that simply makes installing more solar not worthwhile for many Australians. Because the rules didn’t take people wanting to increase their capacity into account, a system that was meant to help expand solar power in Australia is now holding it back.
The state of New South Wales has recently taken steps to allow people to expand their rooftop solar without losing the feed-in tariff on their old system. Unfortunately, while they deserve a kudo or two for trying, they are doing it in a very stupid way, as they require a new electricity meter to be bought for the expansion. Buying and installing a new meter increases the cost of adding more solar to the point where it’s simply not worthwhile to many people, so this is definitely a sub-optimal solution. It also means that people wouldn’t be able to plug all their solar panels into a single new inverter, which could cause problems if the old inverter gives up the ghost.
A much better solution would be to look at how much electricity a person with an old feed-in tariff is exporting, use that to estimate how much electricity they would export until their old feed-in tariff would normally expire, and then determine how much this should be worth as a lump sum right now. The amount could be reduced slightly to account for paperwork and then some more could be subtracted to account for moral hazard. And then the money that remains could simply be given to people who want to cash in their old feed-in tariff and receive the new, low feed-in tariff for any electricity they export to the grid. This method allows people to expand their rooftop solar; it prevents them from having to buy an unnecessary new electricity meter; they can use a single inverter if they want; and it gives them money they can use to expand their solar capacity if they so desire. All over, a huge improvement on the current situation.
A possible objection to this idea is, what about people who know they are going to increase their electricity use, or people who know their systems are on their last legs, or who want to knock their house down, or burn it down, or eat it, or something? Won’t they be tempted to cash-in their old feed-in tariff and effectively get paid for electricity exports they never intend to make? The answer is: Yes, they would be tempted to do this. Except perhaps for the people burning down or eating their houses, as they may not be sane enough to work out the whole ‘money good’ thing. Reducing the payment to cover moral hazard solves this problem, at least in an accounting sense. (It won’t stop the house eaters from being crazy.) But I don’t think these things will be large problems. While some people may increase their electricity use, overall, Australian households are decreasing electricity use due to improved efficiency. Rooftop solar is very reliable, and only a tiny fraction of systems would fail before their old feed-in tariff would expire anyway. If someone actually knows that their system is on its last legs, it’s possible they deserve a reward for paying attention. If a house is being knocked down, then the solar system would normally be removed and installed somewhere else, so it’s capacity shouldn’t disappear. And as for arsonists and crazy people, well our society has other ways of dealing with them. (Sometimes by electing them.)
One other possible problem is that people might slack off on conserving electricity once their feed-in tariffs go from high to low, but any increase in electricity consumption would be far surpassed by the expansion in rooftop solar capacity that would result.
Letting people cash in their old feed-in tariffs would be a lot more efficient way of doing things than the current system of giving people a huge financial incentive not to expand their solar capacity, or making them pay for unnecessary new electricity meters. Since Australian households are still improving the efficiency with which they use electricity, it should overall be cheaper to let people cash-in their old solar feed-in tariffs than let them expire normally.
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After reading half the article, I began to realize I still hadn’t been informed about the rule that is causing the problem. Then, I stopped. Three paragraphs at most and all could have been explained.
I caught it all. The humor was okay. I was able to skim the humor and put on my brain during the information part.
too right, how ever reading what Mandy had to say mad it worth it.
Never mind the complexity of the promulgated formulae[and just think I used to agree with Obama’s assertion that just because a problem is complicated it should still be tackled] now I know how cottage pie is made.
I do tend to yammer on a bit, don’t I? I’ll have to try to be more concise.
Ronald i didn’t decreased my electricity because of efficiency but the high cost of electricity passed on power bill like rooftop solar power, i was forced to use less energy in the day time hours, and use power at off peek rates at 1 am to 3 am rates.
I loved the post, and appreciate a little humor in these matters! I thought that made it easy to read the whole thing. Entertaining, but it also makes a lot of sense.
I’m glad you enjoyed my yammering on. I’ll have to try to do some more of it for you in the future.
we could stick reader polls on the bottom of the posts asking if it was too much yammering, not enough, or just right — sharpen things up perfectly. 😉 (ignore the fact that those who get to the bottom are more likely to enjoy it. :D)
No I under stand what is been said, but one point is wrong that in NSW if a new system is installed on a third smart meter you lose your 60 cent rate and fall down to the 20 cent rate. on the forth smart meter you lose and the get 6 cents .
May be you could get him to right an article on what Mandy raised in relation the government 15 years deeming on the REC for the RET on rooftop.
Generating solar energy sound good but I recently had to sign a contract that stated that generating solar power to the grid come solely the owner risk and not the power company meaning I can be sued if something goes wrong and caused damage to the network. The legal advice I received is that the risk was too high under the contract, and I must maintain the solar system for 15 year under the REC under the federal government RET benefits, so I went off the grid with battery not to be court up in a court of law paying damages to others, or paying back the federal government REC for not generating the full output power of the grid tide solar system under the agreement under the REC RET contract. I’m very glad that I got legal advice and went off the grid with out the risk.
Be careful, Mandy. I hope you don’t own the computer you are typing this on. If someone uses it to spread malicious software you can be liable for millions in damages.
stop yammering on mate, all the other people here are given you good advise, even good sound legal advise.
Hello Ronald,
I’m a fan of yours in the U.S., and a long-time researcher and sometimes writer in energy and environmental economics. If possible, it would be nice to share ideas and info with you by email. I hesitate to broadcast mine, but it’s peterunderscoregray at wsu dot edu.
Sorry about the literacy level of so many of your other commenters. Is this an Aussie thing? I thought we had it bad over here.
I like your idea for solving the expansion bottleneck problem. Assuming I understand your scheme correctly, I see a few little enhancements you might want to make. First, I would calculate the projected output of the owner’s current (old) panels over the FIT span, including the (small) decline in output over time. Multiply that by the difference between the old and the new FIT. Second, time-discount that cash-in value by a reasonable interest rate, to get the lump-sum payment. This takes care of financing the old panels.
Third, allow the homeowner to install as many more panels as she wishes, and connect all the old and new capacity to the same meter. Fourth, pay the new FIT for the entire array, over the timespan of the new installation. Treat the whole thing as one big new installation. This would seem to take care of the moral hazard problem, by which I assume you mean homeowners who might otherwise remove the old panels and sell them. If the next owner will get the new FIT for the old panels, there would be no resale market. There’s no loss to the utility, either, since they can just as easily pay a discounted present value, if they’re just as confident of not losing the expected output. The homeowner does just as well as before on the old panels, and still has the incentive to keep them on the grid.
I look forward to your next article. I’m a former underground coal miner as well as a carbon tax advocate, so I find your pieces on coal vs. solar quite interesting.
Peter Gray
Washington State University
I think Ronald has a fan who tracks him and posts garbage under a variety of names and from a variety of web addresses.
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I wonder if it’s time for a new model.
Suppose someone set up a company and leased rooftops from people who had a well sited back roof. (Keep the panels out of site from the street side and avoid those criticisms.)
Fill that roof with panels, up to the extent that the existing grid connection would allow. Assume a 200 amp service. At 120 vac you should be able to install over 20 kW.
Pay the owner with free electricity or a percentage of the profit.
The lease would stay with the house in the case of a sale. Free electricity should be a good selling feature.
We could pack the “best” rooftops with panels. That would cut down on installation costs as opposed to doing several ~3kW installations. It would minimize maintenance costs.
The leasing company would operate like a company that owned a large solar ‘farm’. They could enter into PPAs or whatever system is locally used.
i know there are people in Germany doing this. they go around and offer to “rent” people’s rooftops.
Thanks for chiming in, Peter. Always love getting thoughtful comments from those in academia (and, of course, those not in academia… thoughtfulness being the key).