Economic incentives for Solar Systems in Australia

Economic incentives are strong motivations to change the behaviour of consumers. One such incentive is being rolled out in South Australia.

The SA government has passed the Feed-in-tariff bill in both the houses and this has led to an opportunity to increase the solar power installation in households across the state.

What is the feed-in-tariff. According to Wikipedia:

A Feed-in Tariff (FiT, FiL, Feed-in Law or solar premium[1] is an incentive structure that boosts the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources such as solar photovoltaics, wind power, biomass, and geothermal power) at above market rates.

This difference in price covers the cost disadvantages of adopting renewable energy sources, and the rate differs between the different forms of power generation.

In SA’s case, the legislation covers for solar systems installed by small customers (this includes households and small businesses). The legislation ends on 30 June 2028 giving a period of 20 years from this June to recover the cost.

The legislation mandates energy retailers to pay these customers a charge of $0.44 per KwH compared to the current cost of $ 0.18 per KwH for energy in South Australia for energy usage in excess of consumption. In European schemes and other countries, the charge is mandated for all energy created by the solar systems.

In addition to this there is the  Photovoltaic Rebate Program (PVRP) by the Federal government which provides $8/W of installed capacity upto a maximum of $8,000 or 1KW of installed capacity.

This can be enhanced by the Renewable Energy Certificate (RECs) which provides you with a “carbon credit” for the renewable energy used. REC is created for each megawatt-hour of eligible renewable electricity generated or deemed to have generated. The price of RECs change on a daily basis. These can be used for Solar, wind or small hydro electric. They can also be used for Solar hot water systems. You can find the registered list here.

Various government rebate information can be found at the Solar Shop.

In the end, what is the payback for solar systems?

A sample solar power payback calculated by Eenrgy matters which show a simple payback period of 13.69 years without the feed-in-tariff. A more detailed and better analysis is conducted by Mike Bassett-Smith and Shane Robinson of Powersmart NZ. This was conducted for NZ which take into account one-on-one price provided by the utility (no feed-in tariff), no federal government rebate, no RECs but consider the reduction in electricity costs and increased value of property. The result: a payback in 10 years. Mike worked in the investment banking industry before founding Power Smart and he basis his product (grid connected solar systems) as an investment with comparable returns to a government bond and other investments.

It will be really interesting to see the real pay back in South Australia for a similar analysis.

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4 thoughts on “Economic incentives for Solar Systems in Australia

  1. Pingback: Solar Cities Congress 2008 « World is Green

  2. As far as I can tell the feed-in tariff will make no difference at all. The people it is targeted at (residential and small consumer) can’t afford to put massive arrays on their homes, so in most cases they will be producing LESS power than they consume. The feed-in tariff (unlike the one proposed for the ACT) is “NET” rather than “GROSS”, which means you only get the 44c on any excess you sell back to the grid, i.e. in 99% of residential scenarios you don’t get it on any of the solar power you produce.

    I hope I’ve missed something, but apart from the public acknowledgement at the Solar Cities congress most of the delegates were saying it was a publicity stunt rather than a real feed-in tariff such as the ones in Germany.

  3. Hi Mitra:

    You are right about this. I did some research after writing this post and realized that the “net” tariff will not help much.

    Thanks for pointing that out.

    And you are right about the solar cities congress. It does seem a publicity stunt.

    Cheers

  4. Hang on – I wasn’t saying the Solar Cities Congress was a publicity stunt, to the contrary, it was an excellent conference bringing leaders together from across the world- and really showing up how far behind Australia is.

    I meant that many of the delegates at the congress were saying how South Australia’s FEED-IN tariff was a publicity stunt.

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