Victoria regulator cuts rooftop solar tariff, wants mandatory time-varying FiT

Victorian solar households are set to be given a choice on how they are paid for the excess power they send to the grid – albeit at reduced rates – with the state’s economic regulator proposing to make retailers offer either a time-varying or a set feed-in tariff from July 2020.

The Essential Services Commission said on Wednesday it wanted retailers to offer either a “single rate” feed-in tariff of a minimum 10c/kWh, or a FiT that ranges from 9c/kWh and 12.3c/kWh, depending on the time of day.

Both mark a reduction on the feed-in tariff rates of 2019-2020, which offered a minimum of 12c/kWh for the single rate and between 9.9c/kWh and 14.6c/kWh for the time varying setting.

The ESC said this reduction in the tariffs offered was based on the futures market for wholesale prices, although this time using a 12-month average of future wholesale electricity prices instead of the 40-day average used in 2019-20.

It also noted that “given the high share of rooftop solar in Victoria and our draft decision to mandate a time-varying FiT,” the wholesale electricity price used for setting the time-varying FiT should also be solar-weighted.

“This means that under the technology neutral time-weighting approach, solar owners under a mandated time-varying FiT are likely to be paid more than the true value of their exports to the grid,” the ESC’s draft decision document says.

“If all current solar customers were to switch to a time-varying FiT, this would entail additional FiT payments from retailers to customers with solar panels of about $12 million (upper bound), and ultimately these additional costs could be borne by retail consumers.”

As One Step Off The Grid reported in May of this year, Victoria last year became the first state to offer “time-variable” tariffs, in an attempt to properly reflect the value of rooftop solar exports at different times of the day and also to encourage solar households to install battery storage.

But as was the case back in May, the idea hasn’t gained much traction with retailers; as the ESC noted this week, Energy Australia is currently the only one to offer a time-varying FiT.

To remedy this, the regulator wants to take the choice away from the retailers, and put it in the customers’ hands instead.

And the 2c/kWh cut in the single rate FiT might tip them in favour of the variable option, with customers possibly more likely to choose the option that offers around the same amount as the minimum fixed rate were previously getting, if only during peak periods.

“This draft proposes a step forward in creating choice for Victorian customers by requiring retailers to offer time-varying feed-in tariffs and we want to hear from both households and retailers on what this means for them,” said ESC chair Kate Symons in a statement on Wednesday.

“With a 46 per cent increase in solar installations and a rapid uptake of batteries, we need a scheme that supports customer choice.”

For those customers who choose the variable rate, as you can see in the table above, the peak amount of 12.3c/kWh would be offered between 3pm and 9pm on weekdays, while a “shoulder” rate of 9.7c/kWh would be offered on weekdays between 7-3pm and the rather unlikely window of 9-10pm; as well as 7-10am on weekends.

The minimum rate of 9c/kWh would be offered during the off-peak, from 10pm-7am on weekdays, and weekends, which – as with the 2019-2020 offer – doesn’t provide much incentive for solar homes to get battery storage.

Both the draft minimum feed-in tariff as well as proposed changes to the state’s electricity distribution code are open for consultation on Engage Victoria until January 17, 2020. The final decision will be made by February 28, 2020.

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