Draft review into the NSW Solar Bonus Scheme by IPART
Introduction and executive summary
In recent years, government schemes have provided generous subsidies to customers
installing solar photovoltaic units (PV units). The Federal Government’s Renewable
Energy Target provides an up-front subsidy on PV units, while the NSW
Government’s Solar Bonus Scheme provided subsidised feed-in tariffs for the
electricity produced by PV units.
At the same time as these subsidies were available, the cost of installing PV units fell
significantly. As a result, over 150,000 customers have installed over 340 megawatts
(MW) of PV generation capacity in NSW.
The uptake of small-scale PV units has been much greater than anticipated by
Government. As a result, the costs of the subsidy schemes are also greater than
expected. These costs have already contributed to higher retail electricity prices in
NSW, and will continue to put pressure on prices for the life of the schemes.
In an environment of already increasing electricity prices, the NSW Government
closed the Solar Bonus Scheme to new participants on 1 July 2011. It then asked
IPART to recommend a ‘fair and reasonable’ value for a feed-in tariff for customers
who export electricity to the grid but are not eligible for the Solar Bonus Scheme, and
a mechanism to implement this value in NSW. However, it stipulated that our
recommendations:
should not result in an increase in electricity prices in NSW, and
should not require funding from the NSW Government budget.
In other words, any future feed-in tariff for these customers must be subsidy-free.
The Government also asked us to undertake 2 related tasks. These were to:
Examine the impact of PV on the costs of electricity distribution network
businesses and recommend whether further detailed modelling is warranted to
understand this impact.
Recommend a contribution that retailers could make towards the costs of the
Solar Bonus Scheme, reflecting the benefit to retailers of the energy produced by
PV generators. This contribution would lessen the electricity price increases
required to cover the costs of the scheme.
We have completed our draft review, and seek comment from stakeholders on our
draft findings and recommendations before we make our final recommendations.
This report sets out our draft recommendations, and explains how and why we
reached them.
1.1 Fair and reasonable value and mechanism for implementing a
subsidy-free feed-in tariff in NSW
In summary, we recommend a fair and reasonable feed-in tariff of 8 to 10 cents per
kilowatt hour (c/kWh) in 2011/12. This value will increase after the introduction of
a carbon pricing mechanism on 1 July 2012, but we cannot provide an estimate for
2012/13 until June 2012.
We think that the best way to implement the feed-in tariff is to make it a benchmark
range. However, we are not recommending that retailers be obliged to offer feed-in
tariffs within the benchmark range. We expect that the publication of the benchmark
range will exert competitive pressure on those retailers who do not currently offer a
feed-in tariff.
We are still considering whether Standard Retailers should be required to offer a
feed-in tariff to their regulated customers. Currently 2 of the 3 Standard Retailers do
not offer a feed-in tariff (except the statutory rate for customers eligible under the
Solar Bonus Scheme). Such an obligation would mean that a PV customer could
remain on the regulated price and receive a feed-in tariff. However, if we decide
they should be obliged to offer feed-in tariffs to regulated customers, we propose
that Standard Retailers set their own rates. We are seeking comment on the likely
costs and benefits of requiring Standard Retailers to offer feed-in tariffs to regulated
customers.
Download complete report HERE
