The deadline for applications for Victoria’s transitional and standard feed-in tariffs (FiTs) was announced on the first business day of September 2012. As the transitional scheme was capped at 75 megawatts of installed capacity, it’s unlikely that many people were surprised by the news, but it’s equally unlikely that many were thrilled to hear it.
Although less pronounced than in some other states, the result of the announcement was virtually identical in form: a rush of customers hoping to avoid missing out on the soon-to-be-unattainable incentive. If previous experience is anything to go by, a downturn will ensue. This does not need to be the case for the subsidy-dependent solar industry, as other countries such as Germany have demonstrated, but this ‘on-off’ method of incentive seems be the Australian style.
Where do the FiTs sit now?
Things have settled down on the FiT front, and there isn’t much left to lose anywhere in the country. On page 8 of the November 2012 edition of Solar Australia magazine, a quick glance at what rates are on offer to those who install a small-scale system – 10 kilowatts (kW) or less in most cases – in various Australian jurisdictions reveals a mixed bag.Article continues below…
A few things are noteworthy about these rates: one is that a good chunk of them are not state-mandated – they are either wholly or partially voluntary. This means that many electricity retailers want to attract solar customers, or – in the case of northern Western Australia in particular – network operators want solar on the grid.
The other, more obvious point is that most of these rates are well below the retail cost of electricity. These purportedly ‘fair and reasonable’ rates usually set by state government bodies mostly hover around 7–8 cents per kW hour. This means that the ‘buffer’ that a generous FiT provides is no longer present, and solar only makes sense for buildings that use power during the day.
Many would argue, and do, that these rates are not ‘fair’ at all – they don't include the network value of solar power, or the fact that high penetration of photovoltaic (PV) solar has actually been a factor in falling electricity demand across the National Electricity Market. Given that no one realistically expects any FiTs to be reinstated or significantly increased by the state or federal governments, these are the ‘lemons’ that installers and potential system owners have to work with. Given no other options, the best course of action is to make lemonade.
A resurgence after the bust after the boom
It is clear that the situation is improving; in line with Australian and global long-term forecasts, rooftop solar PV installations are still growing.
It is the ‘worst case scenario’ states, New South Wales and Western Australia, which are now setting the example for how to move on once the FiTs have gone. They have both passed through the peaks and the subsequent doldrums associated with FiTs, and appear to have reached a state of equilibrium.
Indeed, an undeniable recovery is underway in these states. Solar Choice has seen a steadily growing number of enquiries coming from New South Wales and Western Australia, and our experience of a growing interest in solar is corroborated by data from Nigel Morris of SolarBusinessServices showing that installation numbers in both states have been rising since the beginning of the year.
The more recent growth is partially attributable to a rush to get in before the federal Solar Credits Scheme reduction deadline, but it also shows that people still think solar PV is a worthwhile investment even without strong subsidisation for feeding in.
In New South Wales, May and June of 2012 boasted figures higher than they’ve ever been since the state’s Solar Bonus Scheme was ended in June 2011. Some of the major contributing factors? The previous FiT rates have been forgotten, electricity prices have skyrocketed, and solar system prices have fallen to about half what they were just two years prior.
Similarly, in Western Australia, installation numbers have been comparable to those of two or three months before the FiT was cut. Although a good portion of these new installations are happening in the incentivised northern part of the state, most of them are in the more populous Perth region. Again, rising electricity prices and falling solar PV costs are the drivers.
Even if the predictability of their implementation leaves something to be desired, FiTs have managed to transform the way in which the average home or business owner looks at solar PV. Grid-connected solar power is not just about being environmentally-minded; to the customer, owning a solar system is about saving money.
Across the globe, FiTs have been the most effective mechanism for encouraging uptake of rooftop solar and other renewables because they increase the financial attractiveness of buying a system. It is thanks in great part to them that Australia became the small-scale rooftop solar leader of the world for the year 2011.
Solar PV is set to remain a powerful force in Australian power generation, and presents competition for electricity retailers in a shape that has never been seen before. In a sign of the times, Chinese solar giant Yingli Green Energy recently pegged Australia as the world’s first mass market for solar, and is positioning its expansion here accordingly. FiTs paved the way for this to happen by doing what they were designed to do: give a boost to a nascent industry whose products were environmentally and socially desirable but, because of the expense, confined to niche markets. They did such a great job, it’s a pity they couldn’t have stuck around a bit longer.