Solar electricity incentives

As energy prices soar, solar electricity should be a smart investment – but are the incentives strong enough?
 
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04.State-by-state tariffs

State by state feed-in tariffs

Most states have introduced or are considering plans for feed-in tariffs, which set the rate at which householders must be paid for solar electricity generated in systems connected to the grid.

Feed-in tariffs help those who invest in solar panels to calculate their returns and payback period. They also ensure better returns, since the tariff is significantly higher than what electricity companies currently choose to credit their customers because it is funded through a small levy on everyone’s electricity bills. However, Muriel Watt, Chair of the Australian PV Association, believes only the ACT has introduced a truly effective gross feed-in tariff where customers are paid for all electricity produced by the panels, even what they use themselves.

In contrast, SA, Queensland, NSW and Victoria have introduced a net feed-in tariff, which means PV owners are paid only for the excess electricity they send to the grid, which for most households is very little. The ACT is also the only state or territory to apply the feed-in tariff to larger systems as well as small ones, thereby attracting large commercial installations and solar farms to the state.

Although the solar industry has argued strongly for a national gross feed-in tariff, state governments have shown little interest in collaborating on a national scheme and are instead going their own ways. Our solar panels buying guide details feed-in tariffs state by state.

Case study

When Lizette and John Salmon installed a solar system in 2007 on their home in Wodonga, northern Victoria, they were prepared for a large upfront cost to reduce their family’s environmental footprint. They live in a spacious family home with their two young children. More than half of their electricity consumption was for powering their pool’s filtration pump.

The Salmons installed a top-of-the-range 3kW system worth $34,000. They received the $8000 federal rebate plus a further $1500 from selling the RECs, making their total investment $24,500. They calculate they have saved an average $1000 per year through reduced electricity costs and credits paid to them for the excess green energy they feed into the grid. Currently, their electricity provider credits them at the same rate as they are charged for incoming conventional electricity (this rate will increase under the new Victorian feed-in tariff).

As electricity costs rise, their payback time will reduce. Based on their electricity savings to date, and at an annual increase in electricity prices of 6%, the payback period for their investment would be 30 years; a 10% price rise would reduce this payback period to 19 years.

The Victorian net feed-in tariff, which will kick in later this year, sets the return on excess generation at 60c per kWh and is credited to their account. This will most likely reduce the Salmon’s payback period.

 

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