Sun Tax: What solar export tariffs could cost you, and why you should be worried

Solar households in New South Wales and Canberra could start being charged for the electricity they send to the grid in the middle of the day as soon as July next year, as network companies submit their solar export tariff proposals – and justifications – to the regulator.

Three network companies in NSW and one in ACT have submitted 2024-29 revenue proposals to the Australian Energy Regulator than include plans for a so-called “sun tax” of some shape or form.

RenewEconomy on Wednesday took an in-depth look at what Essential Energy, Ausgrid, and Endeavour Energy have proposed for their solar export tariffs and the reasoning they have used to justify it.

Two days later, the industry reaction to the network proposals is starting to filter out, including a clearer picture of how these tariffs might affect the energy bills of solar households in 2024 and of why people might have opposed them in the first place.

What’s the cost?

As RenewEconomy reported, the overall impression – and due to the distinct lack of actual figures and modelling in some of the proposals, that was all that could be gleaned – is that the initial financial hit to households from these solar tariffs, should they be approved, will be minimal.

Renewable energy consumer group Solar Citizens estimates that between the four networks the proposed charges range from 0.94c/KWh to 3.6c/KWh for solar homes that export above limits set by each network and between certain times of the day.

Solar Citizens says this could translate to bill increases of more than $30 dollars a year for a household with a 5kW solar system. Might not sound like much, says deputy director Stephanie Gray, but it’s just the starting point.

“These charges are likely to go up over time and for many families and businesses struggling with the rising cost of living it’s the last thing they need.”

Gray and other critics of the solar tariff also argue that its cost, particularly if rushed into use in 2024, will spread further than home energy bills, if it acts – as many fear – as a dampener on rooftop solar uptake at such a crucial point in Australia’s transition to renewables and fight against climate change.

“We can’t be doing things that are going to create barriers for consumers to take up these technologies,” says Stephanie Bashir, a principal at Nexa Advisory.

Bashir says Australia already faces a challenge of making sure people who can’t install rooftop PV aren’t locked out of the benefits – and of trying to ensure that any rooftop that can have panels, does have panels.

“For people who can actually have solar panels on their roofs, we can’t start to slow things down. We need them to put solar on their roof, resulting in lower bills directly,” Bashir told RenewEconomy.

Not happy, networks

It’s early days, but the consensus on the network proposals from those who have opposed the idea of solar export tariffs from the start is “we told you so.”

To critics, the “sun tax” was always going to be a way for monopoly network companies to cut the lunch of rooftop solar households that, in a sense, have done their small bit to cut the lunch of the monopoly network companies.

To avoid this happening, the Australian Energy Regulator set Export Tariff Guidelines warning it “will not approve two-way pricing proposals unless a distributor can, through the regulatory proposal (including the tariff structure statement) process, demonstrate its need.”

The AER said it networks would need to fully investigate their ability to absorb more solar exports without new investment (ie, its intrinsic hosting capacity); how users would be impacted by not introducing an export tariff; “evidence of current or estimates of future DER penetration on the network (including rooftop solar and electric vehicles) and how this impacts network costs;” and feedback from customers and other stakeholders.

But even those who campaigned in favour of reforms to network pricing and incentive arrangements for distributed energy resources, like Total Environment Centre’s Mark Byrne, are not convinced this criteria has been fulfilled.

As Byrne wrote here in December of last year, networks did not even wait for the results of trials before proposing to introduce some form of export tariffs in 2024 and continue to provide very little actual evidence to substantiate their propositions.

“Their arguments have more holes than Swiss cheese,” says Solar Citizens’ Gray of the DNSP export tariff proposals submitted to the regulator in January.

“Ausgrid’s own data shows that the vast majority of their network can accommodate more rooftop solar, but they want to start slugging people now because by the end of the decade there might be grid issues that arise. That’s not good enough.”

Nexa Advirsory’s Bashir, too, says there remains a distinct lack of evidence to demonstrate that solar export tariffs are necessary in 2024 to alleviate existing or even imminent network problems.

“If the networks impose charges on the public, the public has the right to understand the justification behind the charges,” Bashir told RenewEconomy.

“None of the networks have put forward concrete data or evidence that demonstrates rooftop solar is an issue for the grid.

“Until then, all of this noise in our regulatory environment to introduce solar tariffs, inverter controls and capacity limits have no consumer social licence,” Bashir says.

“Consumer trust in our Industry is already at a low ebb, imposing rules and charges without justification or social licence will only make matters worse.”

Gray says the other justification for solar export charges – to encourage more electricity self-consumption during the day and exports in the evening – is also an unrealistic outcome in the current market.

“How many working families will be able to shift their main electricity use to the middle of the day and afford a battery so they can export at night?” she asks.

“The state government had an opportunity to stop these charges from being implemented and they sat on their hands,” Gray says.

“Now it falls to the Australian Energy Regulator to clamp down on these unfair charges before they see the light of day.

“The NSW government may have been slow to act, but there’s still time for them to act in the face of a worsening cost of living crisis.

“We’re calling on them and the Labor Opposition to support the rollout of battery storage to alleviate any grid issues and help solar households protect themselves from getting slugged,” Gray says.

A final word…

As Mark Byrne wrote in this great piece we keep coming back to, “from a regulatory perspective, recognising solar and battery exports as a service was a critical step in the transition to a decentralised energy system.

“That means, amongst other things, using tariffs to signal when and where there is too much or not enough energy being exported back into the grid.

“So the rule change is not the problem here. But the integrity of this reform is at risk. Unless these networks either change tack or fill in the blanks, TEC will recommend to the AER that it not approve these tariffs.”

Over to you, AER…