How much is solar PV worth?
Submissions to the review of solar PV tariffs have been made to the Independent Pricing and Regulatory Tribunal in NSW, and it appears that the established energy utilities and the emerging solar industry are as far apart as ever over the value of electricity produced on the nation’s rooftops.
IPART has been commissioned by the NSW government to try and find out the “fair and reasonable value of solar PV” and then try and decide who should pay for it. None of the utilities are putting their hands up to volunteer, and some networks even concede that a mass rollout of PV would be a threat to their business model.
The position of the energy utilities is quite firm: electrons from solar PV installations are not worth any more than those from a coal-fired power station – even if they concede that they merit a higher wholesale tariff (6c-8c) because of the time of the day the solar panels produce electricity. And if there are any other benefits, then someone else should pay for them.
At the other end of the scale, there are suggestions that the merit order effect of solar PV on the National Electricity Market may be so great that the benefits (through reduced wholesale prices) could offset much of the cost of even the ridiculously generous NSW solar bonus scheme. And solar advocates suggest that fair and true value should reflect that calculation.
The debate is quite critical to the future of solar PV in this country. How incentives are designed and defined will influence not just how many systems will be sold, and how many solar business and employees survive, but how quickly costs will fall, how big these systems are, and where and how they are positioned.
Many solar systems have been stuck facing north to gain maximum generation to benefit from the excessive gross tariffs offered by the previous NSW government. It might well be a better idea to have some panels facing north and some facing west to better capture the sun during the day, export less to the grid and use it as a more effective hedge against rising electricity costs. But the utilities are muttering even about that, and the government-owned distribution company, Essential Energy, doesn’t like that idea at all, saying that too many people on net metering (ie. using most of their own electricity and less of the grid’s) will cause a loss of revenue from their business.
The three energy retailers that dominate the market – Origin, AGL and TruEnergy – as well as their peak body, the ESAA, have certainly got their lines right. All advocate a “light-handed” approach to feed-in tariffs, which in their language means no regulated tariff at all, apart from one that is decided by the “competitive market”. They use the 6c-8c they pay voluntarily as proof that there is “genuine” competition.
Curiously, only Alinta, the WA group that is trying to break into the retail market in NSW, has a slightly different take. It agreed that the market should set the prices, but reckoned that if customers were “savvy enough” to realise the benefits of installing solar PV in the first place, then they should be “more than capable” of getting good rates from their retailers. That sounds like an invitation!
The Clean Energy Council, however, said the fact that the prices are offered are in such a narrow range is proof that there is not enough competition for retailers to aggressively bid against each other for solar households. “There is little reason to believe that this will change whatever the outcome is of this process,” it noted.
The CEC has a point – the key language used by the three retailers in their submissions was so similar, there was not even a competition for words, let alone ideas and tariff offerings. All three wanted the regulator to back off and let the market decide, and threatened to rescind their “voluntary contributions” paid to current customers if they were forced to chip in and pay for some of the cost of the NSW Solar Bonus Scheme.
This goes to the heart of how much retailers might benefit from sourcing electrons from one household and then being able to sell it to a neighbour. A report prepared by SKM MMA on behalf of the CEC has dismissed the contention that solar PV should be ascribed the same value as a centralised coal-fired power station. It says that if you take into account benefits such as avoided network losses, avoided market fees and regulatory fees, and avoided emissions, and add them to the wholesale value, then the value of solar should be at least 50 per cent and up to 70 per cent of the retail price.
The problem is, these are difficult to estimate because, as many of the submissions agree, this is a new and rapidly evolving technology and there has not been enough time to gauge its impact. Retailers such as TruEnergy say there may well be network benefits, but if these exist then the bill should go to the network owners, not the retailers.
Essential Energy, however, does not believe that solar PV generation provides any benefit in reducing operating costs on the distribution network, and while avoided transmission use may exist, and some capex deferred because of it, it would be hard to identify. It suggests that if solar PV is to reduce peak load – and deliver a benefit to distributors – then solar PV panels need to face west into the afternoon sun, and customers given an incentive to do so. The network operator Endeavour Energy rejected the idea there was any network benefit at all, even though the Australian Energy Market Operator has said that the rollout of PV has helped defer the need for new generation capacity by around two years.
However, the most compelling argument in support of the impact of solar PV may come out of an upcoming University of Melbourne Energy Institute study on the merit order effect on the NEM. A submission by the Australian Solar Roundtable – a group of CEOs whose businesses account for around one quarter of the Australian PV market – says the merit order benefit of having 5GW of solar PV may be more than 30c/kWh, which added to the wholesale price of 7c/kWh, and avoiding network losses of 2c/kWh, would give a total value of solar PV of around 40c/kWh.
(The merit order effect is a calculation of the impact that energy sources with marginal costs of production – such as wind and solar – have on the electricity market, which has a bidding system designed to give priority to those sources with the cheapest marginal cost.)
A recent study showed the impact of wind on the NEM, while a study in Germany in 2006 found that the benefits on the wholesale market may outweigh the cost of incentives. Indeed, the calculation of the merit order effect as justification for the cost of FiTs and other incentives forms part of the policy platform for the International Energy Agency for the rollout of renewables.
The Solar Roundtable says any such benefits should be reflected in the tariffs. The CEC says the FiT should be framed as a percentage of the retail price, rather than a fixed or market-determined price. The Australian PV Association wants a 1:1 tariff.
Clearly, though, there is a lot at stake. The APVA submission noted that technologies such as solar PV, cogeneration, electric vehicles and fuel cells, as well as storage, had the potential to reduce costs and increase reliability of supply, and to be deployed rapidly.
“They also have the potential to significantly reduce electricity sales by retailers, putting increasing pressure on their traditional revenue and business models," APVA said. "Energy efficiency technologies, including solar water heaters, are already reducing electricity use and have significant potential for much greater reductions, and so will also have the same sort of impact on retailers. As a result, this review has implications far beyond PV.”
But it could also have a profound impact on the PV market. The APVA submission expressed concern about the increasing power of the electricity retailers in the solar PV market, noting that Origin is already the biggest installer, AGL recently acquired Rezeko to make it the sixth biggest. (The largest independent installer, Solar Shop, recently went broke and is up for sale).
“If electricity retailers capture a significant part of the PV market, through offers linked to their own electricity sales, competition from independent PV suppliers may be reduced, which in the longer term may impact competitiveness,” APVA wrote. “Such increases in market power may be sufficient to influence PV prices, STC prices, customer choice of retailer and hence electricity prices.”
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Comments on this article
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This is a new and rapidly
This is a new and rapidly evolving technology and there has not been enough time to gauge its impact. Retailers such as TruEnergy say there may well be network benefits, but if these exist then the bill should go to the network owners, not the retailers. directory size
More info on Rooftop solar and why it saves everyone money
In Germany customer own hookups on a smart meter that is remotely addressable allows the local network operator to signal the smart meter and open circuit if there is a significant congestion event on the local network. A new standard for inverters also arrives in 2012 that will make them provide low voltage ride through etc (providing grid support) Privately owned systems are just as easily controlled as electricity company owned systems. Which is a business model that is working well with leased rooftops in US and Germany.
PV is serious and in Germany generates 16TWh of electricity a significant amount. If that amount of PV was installed in Australia it would generate ~24TWh of electricity or just under 10% of the electricity on the NEM
And the industry is just starting.. The cost of 20GW here by 2020 (Germany is increasing capacity to between 50GW and 72GW by 2020) would be betwen 1/4 and 1/8 of what Germany has paid to get its 20GW And they're not 4x as rich as us in GDP terms.
24TWh and 20GW of capacity is not a tiny amount. 24TWh is more than the energy to run our aluminium smelters but instead of delivering it at times where Aluminium smelters are the only significant consumers it is delivered when the wholesale price ratchets up above $300 a MWh towards and hitting $12,000MWh We will not see very many of these $12,000MWh events any more if ever again with PV generation occuring when more than 90% of these events have occured historically.
Understand wholesale price volatility to understand why PV saves
An understanding of wholesale price volatility (intermediate power / daily peaks and extreme peaks) is needed to understand why paying for the energy service value of PV on the grid which is to suppress wholesale price volatility lowers everyone's electricity bills. The basics of it are that more expensive gas, hydro and diesel generators on the grid no longer spin up. They don't get paid upto $12,000 a MWh ($12 per kWh versus the FiT of 40cents) and nor do the baseload plants that get repriced at $12 per kWh. Example the week prior to black saturday one days trades were about $700 million. FiT driven electricity price stack funded PV would have taken an axe to that extreme profit ltaking of the vertically integrated geneeration traders. Saving all consumers.
PV acronym is PV and has never been PVA
Just a quick note that the internationally accepted acronym for PV is PV and has never been PVA
David leComte
You claim NOT to be rich or powerful David .......however , despite you denigrating your own physical attributes , personal charisma & life-style(?) you still have managed to obtain a girl-friend !
She must admire your fine mind & tenacity perhaps ?
Personally , I enjoy your contributions to these 'threads' , however , you really must get over your paranoia regarding anyone who doesn't agree with your opinion. It is just possible that the climate alarmists have 'ever-so-slightly' exaggerated the effects of CO2 & it's cataclysmic warming effects (o.8 degrees Kelvin up from 288 degrees Kelvin over the last 150 years looks like a pretty stable climate to me ! )
Regards , look forward to further postings.
Why stuff about with solar panels, go for autonomous building
Way back in 2002 British architects Brenda and Robert Vale said that It was quite possible in all parts of Australia to construct a house with no bills, which would be comfortable without heating and cooling, which would make its own electricity, collect its own water and deal with its own waste.
Almost a decade later, the mad rush for cheap electricity has seen overseas buyers spending billions of dollars acquiring Australian coal companies. The most recent, Gina Rinehart's $1.2 billion sale of unlisted coal assets to Indian company GVK Coal. The truth of the matter is that in the mid to long term, the standards of living in China and India will equal those in developed countries, giving rise to an exponential increase in per capita global emissions, while we dabble with Mickey Mouse solutions. Perhaps, it's time for a reality check.
So we're on the same page after all.
Agreed with David and John. Gentailers should be leasing roof space (through reductions in cost of supply to the household) and owning and managing the PVs themselves, then supplying decentralised energy solutions to nearby customers. Sure they might still find that it is more cost effective and lower emmissions to build suburb scale power plants but I doubt it. Rooftop PV works pretty much anywhere and provides a massive potential surface area for energy capture. Power storage and regulation might be better off centralised at a suburb scale.
Feed-in tariffs are most successful and egalitarian policy
I share Mathew Wright's frustrations with vested interests, and the Australian renewable energy industry.
Why request 1:1? Even if you'd be happy with that, basic negotiation skills should tell you to ask for more than you want.
The 'grid parity' argument against feed-in tariffs does not hold water either as 'There are other reasons to retain FIT laws even as grid parity approaches, which should be retained even if renumeration drops to 1:1 equivalence with the retail electricity price. These include the obligation to purchase, the obligation to connect and the long term payment guarantee associated with FIT laws.'
http://en.wikipedia.org/wiki/Feed-in_tariff#Grid_parity
Feed-in tariffs are an elegant and simple mechanism that encourage community owned, distributed renewable energy generation. They are the most successful and egalitarian policy known to foster the rapid uptake of renewable energy.
Look at Germany in wind and solar PV, Denmark with wind, Italy in solar PV, China in wind and now solar PV, the Czech Republic with solar PV, Ontario with its local content requirements and Aboriginal and other community owned incentives.. Japan has just committed to a Fit because it needs to rapidly ramp up its renewables... NSW Solar Bonus was good policy that only needed to be expanded and the payment rate revised down on a regular basis.
Feed-in tariffs are so successful that countries typically surpass their renewable energy targets, unlike Australia where the situation is pretty grim for 20% in 2020.
Read these and tell me it isn't the future and it isn't exciting
http://www.wind-works.org/FeedLaws/USA/Gipe%20Cactus%20and%20Succulent%20Society%20Bakersfield%2020110913.pdf
http://www.newrules.org/energy/publications/democratizing-electricity-system-vision-21st-century-grid
Daniel Kogoy
I'm with John Davidson
If the retailers were responsible (at least in part) for the PVA installation, and they had some control over its management, they may be able to pass on their effective savings to the customer.
Whilst I dont know if PVA is better than solar thermal - the latter at least has the advantage of heat storage - it might make sense to purchase rooftop real-estate rather than farm land to place PVA cells.
That way a retailer could become a gentailer by taking part in the sale, installation, and management of rooftop PVA. By also controlling the technology of the power feedback, they could implement a proper control plane as well.
That makes far more sense than some punitive imposition of a fixed price FiT.
That isnt true Matthew
Making the retailers and/or government subsidise your PVA purchase, just pushes up everyone else's costs.
Those of us, who are not "true believers" end up paying indirectly and directly for those who are.
I preferred the Matthew who helped write the ZCA2020 report - at least that didn't pursue this utopian idea of "peoples power". You proposed serious power plants, and semi-serious wind farms, and a national electricity grid - where has that Matthew gone, I want him back!
I have absolutely no problem with people buying their own PVA cells. My girlfriend has a house on a farm in a place called Grevillia, Nth of Kyogle. The farm is shared with her brother and sister. They have windmills, solar water heating and PVA arrays. These are great, but they still need bottled gas for cooking, and a diesel generator to run TVs and computers in the evening.
They receive no subsidy for this as they are not connected to the grid.
Well if people in the city feel that they need a government imposed subsidy to do the same, then I'd prefer that we instead applied that subsidy to generating serious amounts of power - not these token bits.
CHANGE THE BUSINESS MODEL
Part of the problem is that rooftop solar started as soemthing idealistic home owners did. So the householder owns the installation and struggles to negotiate with big power suppliers.
Might be better if the panels were owned by business's who leased roof space from home owners. Makes it easier for competitve tendering for the supply of rooftop solar power to work.
Joel Dodd - PV is cheaper for consumers though
PV is cheaper for consumers, and PV installed at the demand side is competing with delivered price at the meter. Not the price of power at the power plant that hasn't even been delivered down the transmission lines, through the switch yards, through the distribution system. Hedged, backed up, retail mark up, ancillary services etc etc.
And finally PV is cheaper because it supresses the underlying wholesale power price removing the wholesale price volatility the retailers are always complaining about.
Windfarms can control their output
Modern wind turbines can "feather" the vanes, ie turn them into, or away from the wind.
Normally that is used to reduce the wind load on the tower in heavy winds, or extract more power from light winds. It also allows the output power to be controlled.
RE: David LeCompte Middle Class Welfare
David Feed-in-Tariffs stimulating massive deployments are not middle class welfare. If you want to frame it like this it is charity for all, thanks to the PV FiT advantage.
- you do not have to install solar photovoltaics to share the benefits of 100,000s of installations across Australia.
You just share in the lower electricty prices. That's because when the last generators bids in in the power market the power market reprices every unit at that cost. However Solar Photovoltaic has effectively a $0 bid price and therefore it displaces higher cost generators saving money for all consumers.
The cost of funding a Feed-in-Tariff to get a massive deployment today is less than the savings we get from the resultant reduction in underlying wholesale price volatility (supression of the weighted average wholesale price)
This is great news for you, because somebody else is willing to put upt the private capital on your behalf to give you lower electricity bills.
Q1 2011 Germany got 20.8% of electricity from Solar & Wind
Germany gets a significant amount of annual electricity from Wind and Solar PV.
And it disproportionaly (punching above its weight) lowers the electricity price for all electricity consumers through the Merit Order Effect while nuclear plants dump electricity sometimes at negative power prices in the middle of the night because they are producing when there is much lower demand.
Germany will install 6,000 - 7,000MWe of Solar Photovoltaic this year along with significant wind power
In 2013 it will install the same amount again. And will retire 3,200MWe of old dirty fossil fuel - coal and gas plants.
Germany is now getting more electricity from renewables than nuclear.
See http://www.bloomberg.com/news/2011-09-21/germany-s-green-drive-subdues-2...
Please explain
"We could generate 20-50 times more power from windfarms or solar power stations (PVA or thermal) for the same cost as all this rooftop PVA.
I do not condone the subsidisation of any source of electricity, nonetheless, whether we subsidise coal power stations or not, the issue still stands that rooftop PVA can only ever be a minor contributor to the nation's energy needs."
David I am genuinely interested in seeing any sources you have for these statements as I see this come up a lot. I find it hard to believe that as the price of PV comes down and efficiency goes up that it cannot play a major role in meeting our energy needs. There's a long way to go but if I think about how computers have gotten faster, smaller and cheaper... Flying over a city and imagining solar panels on all those rooftops, makes me think we could generate a lot of our energy needs that way.
Then the argument becomes if we assume that PV gets cheaper and more efficient, why wouldn't you consolidate them into centralised generation, so that the cost is even lower, but I've seen a lot of evidence supporting decentralisation of energy supply, taking it closer to the user, as it cuts out the losses in transmission and transformation, and the cost of building them.
let middle Australia getting its fair share of sunshine
To David leCompte: You seem to be ok with the idea that the large power companies continue to receive Government charity. You seem to have a problem with tax payers getting something back from the Government and you call it “middle class welfare”. It seems that some people like the Greens try to fight a later day class war. It is my opinion that an Australian tax payer should have first priority if it comes to Government subsidies. It is your right to believe that large power companies should enjoy continuous help from our Government. It is your right to believe that ordinary tax payers should pay not only for social welfare but also help the super rich to upgrade from a BMW’s to a Porsche? I disagree with you and I prefer that middle Australia starts getting its fair share.
Gee Robert, last time I checked I wasn't rich or powerful
Well I think the whole idea of a FiT is middle class welfare.
I rent a grotty flat in an average suburb, drive a 2nd hand Commodore I bought for $13k, and is now worth about $6k.
I'm an overweight, boring, grumpy, bald, 57 year old electronics design engineer. I wander from little electonics company to little electronics company, as they need, or dont need, someone such as me.
I dont get paid to represent powerful, evil interests, who are secretly plotting to target you.
You know Robert, maybe you need to defend why your desire to cover your roof with PVA cells, needs someone else's subsidy, rather than just assume that your cause is noble and just.
It seems that belief in evil conspiracies is not only the preserve of climate deniers.
Electricity retailers (who
Electricity retailers (who make a living out of buying electricity and selling it to consumers at a margin) feel that consumers who generate their own power and export excess to the grid shouldn't be encouraged. Now there's a surprise! This is "Who Killed the Electric Car" all over again. We shouldn't be surprised that as a powerful and well resourced and well connected interest group the gentailers are fighting back and doing their level best to wipe out Solar PV as it represents the single most compelling threat to their business model. Just because they say this kind of thing doesn't mean we have to believe it.
Hmm - Beat likes middle class welfare, but not government waste?
The assertion that rooftop PVA stops a power station being built (here in Oz) needs some support.
An article a few months ago in Climate Spectator showed that we had just passed the 300MW mark for installed rooftop PVA. That is equal to less than half of one turbine at one coal power station. Also that is peak power of course. Ie we need brand new cells, midday, and no clouds to get close to that amount of power.
Who knows what the effective capacity factor is, but if the average output exceeded 60MW (20%) I'd be surprised.
We could generate 20-50 times more power from windfarms or solar power stations (PVA or thermal) for the same cost as all this rooftop PVA.
I'm not sure how the power lines cause these fires - my understanding is that it is overloaded switches and transformers, mainly in the LV network (< 33kV). I also dont see why rooftop PVA will reduce the need for transmission lines.
Serious renewable power from solar, wind and geothermal (or even nuclear?) plants will need more investment in long-haul HV, EHV, and possibly UHV transmission lines.
I do not condone the subsidisation of any source of electricity, nonetheless, whether we subsidise coal power stations or not, the issue still stands that rooftop PVA can only ever be a minor contributor to the nation's energy needs.
A FiT is just another form of middle class welfare.
Beat hates government waste; unless of course they waste the money on him.
The problem is the retailer can't control rooftop PVA output
The retailer can control the output of rooftop PV no less than it can control the output from a windfarm, PV output is actually much more reliable, this is why they have a portfolio of generation sources and contract arrangements.
PV generates at times when demand is high.
The problem is the retailer can't control rooftop PVA output
The retailer can control the output of rooftop PV no less than it can control the output from a windfarm, PV output is actually much more reliable, this is why they have a portfolio of generation sources and contract arrangements.
PV generates at times when demand is high.
Matthew Wright
"Germany almost has 20,000MWe of Solar Photovoltaic on rooftops."
But how much of Germany's electricity do they produce?
What's the real cost to the economy? About $200 billion? For what? next to no power when needed and about 2 real jobs lost for every "green job" created from tax payer subsidies.
Disappointed the APVA is calling 1:1 as 40c is cost neutural+
The APVA calling 1:1 in its submission is basically calling for a significant retarding of growth of the Solar Photovoltaic industry. This makes no sense. To get an equivalent per capita roll out as cloudy Germany we would need around 35 - 40 cents (NET). as a starting price this year or next then dropping over 4 or 5 years to 30 cents which is parity with retail prices. 1 for 1.
At 35-40 cents (NET) there would be more savings on electricity bills to all electricity consumers than actually covering the cost of the Feed-in-Tariff. (lower costs for all)
The APVA are shooting the industry in the foot, stopping Australia from heading towards 20 or 30GW of PV (at high penetrations would be controlled through smart meters/smart inverters). and delivering 10 - 15% of the nations entire electricity demand from people's rooftops.
The APVA should consider sticking to representing the academic research community.
Subsidised?
Every time cost of PV electricity comes up some body is sure to say
"Solar PV electricity is subsidised to about 10 times the value of its electricity."
This may have been true 20 or even 10 years ago but it is not true now. I have a 2kW system in Perth. Without any subsidies or FIT the cost of electricity generated by me would be 20C per KwH, which is better than Synergies 22 c charge according to my last bill.
If someone claims Nuclear is cheap, clean and green, could they please quote an independent study to support that.
RE: The problem is the retailer can't control rooftop PVA output
Germany almost has 20,000MWe of Solar Photovoltaic on rooftops. They are not reporting that they are having trouble controlling the supply. This is the equivalent of Australia having one 200 watt panel per man woman and child or 5,000MWe of installed Rooftop Solar capacity. Today we have 1,000MWe
Reports out of Germany and Spain show that they are managing high penetrations and they are reducing the cost of ancillary services etc as well as dealing with wholesale price volatility.
Germany is continuing to increase their PV penetrations and is expected to add another 3,000 - 6,000 MWe (or upt0 an entire Latrobe Valley worth of energy production during the day when prices are higher by the end of this year.)
we still give charity to fossil fuel power stations
The current feed-in tariff of about 44 cents is the right one. It allows more people to install solar PV and allows delaying the construction of large new power stations and massive new distribution networks. Solar PV provides benefits for all and helps to conserve fossil fuels for future generations. Here we have an effective way to reduce CO2 emission and we reduce the incentives for solar PV installations ion fee-in tariffs? Solar PV does not stress our water resources and solar energy does not pollute. We currently maintain a massive financial support for fossil fuel industries and accept it as it makes the power industry more profitable. We provide free and or cheap water to power station for cooling and steam production. We allow power stations to emit all forms of pollutants and we allow it to build ugly power lines all over this country without having to pay compensation for the visual vandalism and increased fire danger. Let’s be open and let’s compare apple with apples and look at the total costs of all power produced. Forget some fine artistic accounting and get real!
Charge your car, not the retailer
In six years time, or sometime thereafter, I will convert my rooftop array to charge my electric car. No more petrol bills, and the electricity companies be damned.
NEM?
merit order effect on the NEM? 1. What is the NEM? 2. need a bit more info on the merit order effect. Then would be happy to comment more.
Greg Smith