The Independent Pricing and Regulatory Tribunal (IPART) has released an issues paper into solar feed-in tariffs as part of its review into the Solar Bonus Scheme, which was closed to new participants on July 1st.

 

The paper finds that the generosity of the subsidies and the higher than expected uptake of solar PV have resulted in much higher than anticipated costs to governments and  electricity retailers. These higher costs have contributed to the recent rises in electricity prices from 1 July 2011 and increased the burden on taxpayers.

 

In light of these costs, the NSW Government closed the Solar Bonus Scheme to new participants on 1 July 2011.

 

In addition, it asked the Independent Pricing and Regulatory Tribunal of NSW (IPART) to review certain other actions it might take to stem the costs arising from the installation of small-scale PV units in NSW and their impact on electricity prices and taxpayers, while continuing to support a sustainable solar PV industry in NSW.

 

IPART’s terms of reference for this review are to provide advice on establishing a future feed-in tariff that is for customers who are not participants in the Solar Bonus Scheme, and are not subsidised by the Government or other customers, including a ‘fair and reasonable value’ for the electricity generated by small-scale solar PV units and exported to the grid, which is consistent with the Council of Australian Government (COAG) principles for feed-in tariffs; how this value should be implemented in NSW – for example, whether it should be used to set a minimum feed-in tariff that all retailers must pay for the solar generated electricity their customers export to the grid, or a benchmark price that retailers and customers can use as a guide in negotiating a price for this electricity;  and whether comprehensive network system modelling is required to value the impact of small-scale solar PV on network costs.

 

The second task relates to mitigating the ongoing costs of the Solar Bonus Scheme to the Government and taxpayers over the remaining 5 years of the scheme’s life.

 

While the Solar Bonus Scheme is closed to new participants, it will continue to operate and generate costs until 31 December 2016.  IPART will investigate the level of contribution retailers could be required to make towards these costs, to reflect the benefit they currently receive from the scheme, due to metering and payment arrangements. There will not be a review or recommendations about the statutory feed-in tariffs paid to participants in this scheme.

 

In undertaking the first task of the review, IPART proposes to calculate the value of the electricity produced by small-scale solar PV units using 2 methods:

 

By estimating the financial gain to retailers if they were to pay no feed-in tariff to customers for the electricity these units export to the grid. For those retailers whose customers export electricity, this financial gain occurs due to the difference between the revenues the retailers collect from their customers and the costs that they face in supplying their customers.

 

By estimating the wholesale market value of the electricity these units export to the grid (including energy losses).

 

It will consider and consult on the impact of small scale solar PV, if any, on the costs of distribution networks to the extent necessary to make recommendations as to whether comprehensive network system modelling is warranted.

 

It will then consider the results of the above calculations and consultations, and each of the matters set out in the terms of reference, to determine the most appropriate ‘fair and reasonable value’ for a future feed-in tariff.

 

In undertaking the second task, IPART will estimate the financial gain to retailers whose customers are participants in the Solar Bonus Scheme, in a similar manner to the first approach that we are taking to establishing a future feed-in tariff.

 

All interested parties to make written submissions in response to this Issues Paper by 12 September 2011. You may comment on some or all of the issues raised in the paper, as well as other issues that you consider relevant to the terms of reference.

 

A draft report will be released at the end of November and call for further submissions.  The final report will be released in April 2012.

 

The Issues Paper may be accessed here.