Sept 2, 2016: The Beginning of the End of Solar Subsidies in NSW

Cintia and I are currently on a fact-finding and sun-seeking mission between Sydney and Brisbane so this Newsletter will be brief as I am writing it from the road.

Last night’s campsite near Broom’s Head… another perfect deserted beach… ho hum.

FIT’s and REC’s

As most of you are probably aware, the days of high Feed-in-tarrifs (FIT’s) and big subsidies for home solar systems are winding down in NSW. Early adopters of PV power were treated to FIT’s (the amount you get paid for sending your solar power to the grid) as high as 60c/kWh. This meant that, even though the price of a solar system was very high, it would pay itself off in about five or six years. The effect of this was to stimulate the solar industry, encourage research and development of cheaper options and ultimately to bring the cost of solar down to the very low prices we enjoy today. For example, when my sister installed her 3kW system about seven years ago it cost her $22,000 and when we installed out 3kW system on the Greeny Flat about two years ago it cost $4,500. In both cases the upfront cost was reduced by a rebate payment through a government scheme known as Renewable Energy Certificates of REC’s.

To the horror of many people interested in Renewable Energy, both the high FIT’s and the REC’s are about to start phasing out. As far as I am concerned they have done their job and done it exceptionally well. Australia has one of the highest rates of solar uptake in the world and because of the massive progress we have seen in solar system efficiency, reliability and cost reductions, we don’t need the subsidies any more. Solar power makes perfect economic sense even without them. However it makes even better economic sense with them which is not for very long.

At the end of this year the high FIT’s will end and the REC’s will begin to phase out over a five year period. So, if you’re considering buying a solar system or adding to your existing system there’s a good argument for doing so while the full REC rebate is still in place. But you’d better hurry because the system has to be installed and operating before the end of the calendar year in order to qualify for the full rebate. And, if you are currently getting one of the high FIT payments you need to make sure you understand how any changes to your system will affect your FIT.

Gross and Net Metering

Also, if you are currently receiving a high FIT, you need to be aware that you are going to have to change your meter. The high FIT’s were paid under a system known as Gross Metering whereby every kWh of energy your solar system made was sent straight to the grid and you got paid for it. When you come off the high FIT you will convert to the new system, like we have at the Greeny Flat, called Net Metering whereby the solar power is sent to your house first and only if there is any excess power will it be sent to the grid. You still get paid a bit for the power sent to the grid but these days it’s generally only in the range of 6-10c/kWh. You will want to do careful research into which retailer will give you the best deal. We are with Click Energy because they offer a 10c FIT but we know a LOT of people who have recently switched to Powershop.

Regardless of who you choose as your retailer, you will need to have your meter changed over to a Net Meter. I am currently researching the best option for the changeover and will report on that soon. I believe that Powershop and some other retailers will give you a ‘free’ Net Meter if you change over to them but I think you will want to consider a Smart Meter.

The Benefits of Smart Meters

I believe that in the very near future we will all be interacting with the energy grid and our electricity retailers in a VERY different way than we do today. In a short time I think we will all become energy traders connected to a smart grid via a smart meter and with a smart Energy Management System (EMS) controlling how we send and receive energy to and from the grid.

Imagine you have a house with a solar power system, battery storage, an electric vehicle and a smart EMS controller that is connected to smart appliances like your reverse cycle A/C, water heater or clothes washer. When the price of energy is low (which will likely be when all of the solar power systems are putting energy into the grid during the day) the EMS will be able to switch on things like your home heating system, water heater and car or home battery charger to take advantage of any excess power you have from your solar system or simply buying cheap energy from the grid and storing it in a battery for later use or sale back to the grid. At the times when the price of power is the highest (likely early in the morning and evening when people are cooking breakfast or dinner and the sun isn’t shining) your EMS will be able to send power from your home or car batteries to the grid and sell it for a very good price, at the same time it will be able to turn off the high energy using equipment (like space and water heaters, car chargers etc) so that you’re not paying a high price to do things that can be put off until the price is low again.

Apart from saving you money on the power you import from the grid and making you more money for the power you export to the grid this ‘Smart Grid’ system offers huge environmental benefits to everyone when compared to the current system. The current system relies primarily on coal-fired power plants which cannot be turned up or down. They have one speed… full bore… and they therefore have to be sized to meet the maximum expected load on the grid. Because we currently have a dumb grid, there is very little ability to manage the spikes and troughs in the energy grid. So if there is a sudden spike in energy demand the only real control they have is to adjust the price of energy up. This causes certain very energy-intensive industries (such as aluminium smelting or cement making) to turn off their equipment until the price comes down again and has worked (mostly) to keep the grid running until now.

However, as more and more solar and wind power comes on line we are introducing another major variable into the mix. Not only is the demand unpredictable, now the supply is becoming increasingly variable as well (although reasonably predictable due to improved weather forecasting). By building a ‘Smart Grid’ we will be in a much better position to manage the energy demand to match the energy supply. Everyone will benefit both economically and environmentally… except perhaps investors in the coal industry.

As mentioned above, I am currently researching the best options for ‘smart meters’ and Energy Management Systems. It seems to me that, with the end of the high FIT’s and the beginning of the end of the REC’s, this is the perfect time to start the process of building the Smart Grid of the future. Unfortunately this opportunity seems to have escaped the politicians and power company executives but I will let you know what I learn and what I consider will be the best way to future-proof your energy system.