Feed-in tariffs seem to be the flavour of the month in Australian political circles. The South Australian Government passed Australia’s first feed-in tariff legislation back in February this year, closely followed by the announcement of a similar scheme in Queensland in March which passed through state parliament last night.
The Victorian Government looks to be moving on a feed-in tariff commitment made in the lead-up to the last state election 18 months ago, a private members bill has been introduced in the ACT, Kevin Rudd has promised the unification of state-based schemes and Martin Ferguson mentioned feed-in tariff no less than seven times during a recent ABC TV interview.
So what are they? Feed-in laws require electricity utilities to pay renewable energy generators such as roof-top solar panel owners a mandated price over a guaranteed time period for electricity they feed back into the grid.
Internationally, feed-in tariffs have fast become the incentive of choice for increasing the uptake of solar and other renewable energy technologies, being implemented in over 40 countries around the world.
Not all feed-in tariff schemes are equal. Feed-in tariffs internationally are almost exclusively paid on the entire production from the chosen renewable energy source. This guarantees a payback on investment within a given time, providing the certainty required to encourage people to go out and invest in solar and other renewable energy technologies.
However, the schemes introduced in Australia thus far are designed to reward homeowners for the electricity exported to the grid minus what is consumed in the home at the time of production. This system of “import-export metering” significantly discriminates against certain classes of consumers, as well as making calculation of the cost of the scheme, and potential financial return, extremely difficult.
An import-export metering regime for feed-in tariffs discriminates against both owners of smaller grid-connected systems and those who are more likely to consume electricity during the day, such as senior citizens or stay-at-home parents. Alternatively, “double income no kids” families who are able to afford a larger solar system and are typically away from home at work during the day will are set to do very well.
As well as being discriminatory, such a system makes calculating payback times very difficult. It is virtually impossible to know what portion of the electricity generated will be returned to the grid without undertaking a detailed energy audit. And people’s circumstances change.
Feed-in tariff schemes paid on total production from renewable energy systems, such as in Germany and elsewhere, suffer from none of these problems. They provide certainty of return, and it is this guarantee that encourages people to adopt these technologies.
Since introducing feed-in tariffs in 2000, Germany has doubled the proportion of electricity it generates from renewable energy sources, reaching the 2010 target of 12.5% three years ahead of schedule. As a result of this success, Germany has recently increased its national renewable energy target to 27% of all electricity generation by 2020. Further, Germany now employs nearly a quarter of a million jobs in renewable energy, with solar power creating three times the number of jobs per installed megawatt than coal fired electricity.
International experience tells us that feed-in tariffs can be very successful in stimulating the uptake of renewable energy, addressing climate change and creating booming local industries and employment. However, state, territory and federal governments looking at introducing feed-in tariffs would be wise to learn international examples and ensure that any measures they do adopt are efficient, effective and equitable.
Quite apart from inequities that result from different patterns of use, the import-export model is actually a disincentive for anyone producing power unless the cost of production is less than the normal tariff. Most renewable sources are small scale solar or similar systems, so this is the usual situation.
Since the power used is subtracted from the power generated to arrive at a net output (or input) this means that for most household producers, they effectively will be paying for their own power use at a higher rate than the normal grid rate. Who in their right mind would want to invest in something that results in their paying more for their power than they would by simply connecting to the grid?
Whoever thinks this is an incentive needs their head read and should be fired. Poor policy thinking indeed!
At the age of 70 I’m unlikely to see the break-even point so will give it a miss.
I really wonder why anyone would put their name on an article such as this which has so many errors in it that it is meaningless drivel. Feed in tariff rates are what they are called – rates you are paid for the power you feed into the grid. I am not too sure of the origins of this myth that in other countries they are rates you are paid for the power you generate whether you use it in your home or factory or whether you export it to the grid. The truth is that in Germany or any other international country you are only paid for what you put into the grid. If the readers if Crikey.com are interested in the German system they should look at http://www.wind-works.org/FeedLaws/Germany/ARTsDE.html and see that feed in means just that.
Well, Gordon, that’s a real public-spirited approach. Here’s a response in a similar tone of voice – Let’s hope you die soon and stop wasting our oxygen.
To clarify a point in my earlier post, I notice a small omission …that is, the cost of smaller producers is usually higher that the cost from the grid and so household production will be more expensive.