NSW solar tariff cut – reward for slashing power price peaks

Solar households in New South Wales look set to be penalised for the lower electricity prices their rooftop PV has helped to deliver, with the state’s pricing regulator proposing a cut to the feed-in tariff by around 3c/kWh.
In an issues paper published this week, NSW’s Independent Pricing and Regulatory Tribunal flagged plans to cut the state’s recommended solar feed-in tariff from around 11c/kWh to 8c/kWh, starting July.
The paper explains that the reduced solar FiT range – which serves only to guide retailers, and is entirely voluntary – is based on a forecast of lower average prices for wholesale electricity in 2018/19, compared to 2017/18.
“These suggest wholesale prices will fall to around 8c/kWh, compared to around 11c/kWh when we published our Final Report last year,” IPART says.
Rather ironically, however, the state’s increasingly impressive uptake of distributed solar has been one of the key factors helping to drive down electricity prices, by shaving the top off peak pricing events, and pushing them to later in the day.
IPART acknowledges this but does not believe it should be factored into the value of the solar FiT.
“The increasing penetration of solar during the afternoon is resulting in prices lower than they otherwise would be, due to a reduction in the system-wide demand for electricity from the NEM at this time.
“As a result of these lower prices, retailers are paying less when they buy wholesale electricity during the afternoon,” the report says.
“Stakeholders in previous reviews have argued that solar feed-in tariffs should reflect this saving to retailers. However, we are not proposing to adopt this approach because it would be inconsistent with how markets work.”
As with its 2017/18 tariff decision – which, incidentally, almost doubled the tariff from the year before – IPART continues to argue that solar households already get an upfront subsidy, that retailers would make a loss if forced to pay retail rates for the exports, and that it is unfair to pass on environmental costs on to households that could not install solar.
IPART’s latest decision to favour of the retailer over the consumer, and ignore any of the broader benefits of rooftop solar, comes as the regulator’s southern counterpart, the Victorian Essential Services Commission, heads in exactly the opposite direction.
The Victorian regulator last month finalised details of a first-of-its-kind time varying solar FiT, in response to a government-backed push to give solar exports a “fair” market value.
The new Victorian rate, which will be introduced in July this year, and will eventually become compulsory, will require retailers to pay a minimum 29c/kWh for rooftop solar exports between 3pm and 9pm, a minimum rate of 10.3c/kWh for 7am and 3pm, and a minimum rate of 7.1c/kWh (down from 7.2c) between 10pm and 7am.
The ESC is also looking at imposing “critical peak tariffs”, which will result in even higher payments when wholesale prices jump above $300/MWh and surge to the market cap ($14,200/MWh, or 142c/kWh).