NOT so Clean Energy Act

Neanderthal Solar Policy in Sunshine State

NOT so Clean Energy Act –

Why the Solar Bonus Scheme will not work and Solutions

At 10pm on 14 May, 2008, after the Queensland Government gagged debate, the “Clean Energy Act” was passed in State Parliament. Part of this act was a scheme to introduce a Feed-in Tariff (FiT) for solar electric (photovoltaic or PV) systems mounted on homes and businesses. The scheme’s goals are described in the Department of Mines and Energy (DME) ‘Solar Bonus Scheme’ brochure as:

· To make solar power more affordable for Queenslanders

· To stimulate the solar power industry

Under this scheme, homes or businesses who install a solar electric system would be paid for power exported (fed to) the electricity grid during the day when the output of their solar system exceeds the power demand in their home or business. The payment rate is 44cents per kilowatt.hour (a unit of electrical energy written kWh). This rate is about 3 times the rated home owners and commerce purchase electricity at. So the scheme appeared attractive. This is called an import–export FiT

However, a group of sustainable energy industry experts and researchers had demonstrated in a meeting with the Department of Mines and Energy Minister, Hon. Geoff Wilson, that the goals of the scheme would not be achieved with the current import–export FiT arrangement.

We had requested in this meeting that the State Government implement a Sunshine State Gross FiT that would provide a strong financial incentive to encourage investment in PV systems. The Sunshine State Gross FiT should be:

· Based on metering that metering that allows both household demand and PV generation to be fully measured.

· Paid at 60c/kWh for all PV generation to give a low payback period.

· Valid for 20 years.

· Indexed for inflation.

· Available to all electricity customers.

We outlined that the FiT amount must reflect the true value of PV generation to the electricity network and to society in general for the following reasons:

· No polluting emissions during generation, including greenhouse gas emissions.

· No water required for generation.

· Power produced at peak demand times of the day, hence offsetting expensive power generation whose full costs of supply exceed $1/kWh 20% of peak periods (mostly mid-afternoon now).

· Does not attract trading and network charges for energy retailers.

· Saves infrastructure upgrade costs for the electricity industry such as local transmissions wires and transformers.

· Reduces energy transmission losses by producing power locally.

· Stimulates the solar PV industry and creates jobs.

· Saves land / infrastructure costs as it uses existing roof space / infrastructure wires etc

· Provides inflation free, stable power price into the future.

The import–export FiT scheme as passed in the Act has the following limitations:

· It will deliver no financial benefits to the vast majority of home owners because it is only paid on electricity that goes to the grid (generation minus consumption). Our computer modelling shows that the average household power consumption during the daytime (based on DME Solar Bonus Scheme Brochure – 27.4 kWh/day) is more than the PV power output. Hence the average household will receive no payment under the import–export FiT scheme (see Figure 1) at the rate of 44c/kWh. They typically would only save about $230 per year off their electricity bill because they only receive payment for the energy saved at the rate of 15.5c/kWh.

· It is inequitable because people who live and work at home during the day will have a higher daylight electricity demand and use a large proportion, if not all, of the energy produced by their PV system. Only those who leave their home daily and do not use the energy produced by their PV system will be credited with a FiT payment. Accordingly, households that have made equal investments in PV systems will be rewarded differently, depending on their living circumstances.

· It is only paid on electricity that goes to the grid (generation minus consumption). This does not recognise that all electricity generated by PV systems contributes to the grid by removing the need to generate and transmit power from other sources. Every kilowatt.hour (kWh) of PV generation delivers identical benefits, whether that power is consumed by the household generating the power or by another household in the electricity grid (see Figure 2).

· The Solar Bonus Scheme requires import–export metering. Under this scheme, the generation from the PV system and consumption by the household will not be be individually metered unless expensive new digital meters that can measure all three power flows are installed. If inappropriate metering is installed, the Queensland Government will not be able to determine the greenhouse gas reductions from PV generation or from energy efficiency measures in the home that contribute towards Australia meeting its Kyoto target (see Figure 3a and 3b).

· The proposed metering scheme may no longer give home owners feedback on their own consumption or on the performance of their PV system, depending on the metering arrangement and information to home owners on their bills. This will discourage energy saving measures and not allow home owners to check their PV systems operation.

· The scheme is limited to domestic and other small energy customers who ‘consume no more than 100 megawatt.hours (MWh) of electricity a year’. This limits the potential of the scheme to stimulate the solar power industry. All customers should be given the opportunity to invest in PV generation.

A FiT is a financial tool to encourage investment in PV systems. A FiT on gross PV system output would provide considerably greater benefits by paying on all generated power. This greatly reduces the payback time when combined with the current Federal Government rebate scheme. This will encourage investment in the installation of more PV systems (see Figure 4). The experience from Germany and other countries, with schemes similar to those suggested above, shows this to be the case.

The recent overwhelming public interest in the Solar Homes Program to install 1000 solar systems on Queensland homes confirms the public is enthusiastic to be involved in such initiatives. We believe that a Sunshine State Gross FiT, as propose by our group, would be more successful in making ‘solar power more affordable for Queenslanders and stimulate the solar power industry’.

Stephen Bower Consulting Electrical Engineer

Trevor Berrill Sustainable Energy Systems Consultant

David Keenan PV System Designer / Installer

Figure 1 – Average Hourly Power Output of 1kW PV System VS Demand for Average SEQ Home (10MWh/yr – DME Solar Bonus Scheme Brochure)

Notes: Average home electrical energy demand has increased by 50% in the past 10 years.

Factors which have caused this are:

• Houses are getting bigger but families are getting smaller (average 2.7 persons per home)
• 50% of homes have some type of air conditioning
• Many homes have pools
• QH down-lights have been used prolifically and promoted as energy efficient when they are not efficient.
• The average home now has a lot of electrical appliances, many of which are left partially ‘on’ or ‘on’ standby during the day.
• More people are working part-time or from home.

Figure 2 – Structure and Costs along the Electricity System

Notes: The diagram shows the structure of the electricity system and typical costs for based load generation (left side), transmission during peak periods and retail prices (right side). Generation costs vary throughout the day as supply and demand vary and the mix of generating sources changes. Base load coal is the cheapest source if one excluded environmental and social costs of this power source. If these costs are included, the cost for so called ‘clean’ coal or gas is about the same as renewable energy sources at around 10c/kWh.

Energy losses on the electrical system increase dramatically at peak times as wires and transformers run hotter. This is due to the huge amounts of power that need to be transmitted at peak periods such as very hot or very cold days. In Queensland, air conditioning now is the dominant load that caused peak demand at about 2pm most days.

The price home owners pay for electricity does not reflect accurately the cost of generation and supply throughout the day. It does not include the full environmental and social costs of pollution and health from burning fossil fuels.

Figure 3 – PV Metering Schemes

Description of Metering schemes; Metering of embedded generators in Australia by David Roche, Australian Greenhouse Office, 2001

Figure 3a

Imports and exports are separately metered by two unidirectional meters (AGO Metering scheme 2) Metering scheme proposed for the Queensland Solar Bonus Scheme.

Figure 3b

Gross generation and gross consumption are separately metered by two unidirectional meters (AGO Metering scheme 3) Existing metering scheme used by ENERGEX.

Figure 4 – Simple Payback Period for PV Systems of various sizes (in Watts) with various Feed-in Tariffs based on average Origin Energy Installed System Costs.

Notes: The simple payback comparison above is based on Origin Energy Prices for 1, 1.5 and 2 kilowatt solar electric systems (May 2008). It shows that the Solar Bonus Scheme as enacted will give long payback periods in excess of 20 years for the average home. Only a FiT based on gross output gives a reasonable payback time.

Only if the home owner reduces demand greatly (eg. by 70%) will the Solar Bonus Scheme provide an incentive. This is unlikely to happen without each home and business undertaking an energy audit to identify energy efficiency measures and savings. While this is essential and achieveable to tackle climate change, typically the home owner would need to:

Install a solar hot water system $2000 to $3000

Install energy efficiency lights throughout

Install ceiling insulation and external shading of east and west facing windows

Replace old appliances with 5star ones

Resist buying every new electrical product that comes on the market regularly