Archive for December, 2008

Each Australian state is taking its own path on feed-in tariffs.

Feed In Tariff Queensland

Queensland implemented a Net Feed In Tariff in July 2008. Anyone producing electricity above what they are using get a credit of 44 cents per kWh produced. It is handled by the energy retailer (some pay more than 44c) and offset against the electricity bill. If there is a credit at the end of the year, you actually get paid by the energy companies.

Here is a sample calculation. It assumes an average quarterly power bill of $345. One third of that is off peak power (costing 9c/kWh), two thirds is for the continuous tariff (at 16c/kWh). With rising electricity prices in Queensland, the savings will be even better.

A 1kW solar system produces about 2,000 kWh of electricity in South East Queensland in 1 year. So at the very least, you will reduce your electricity costs by $340 (if you have a northern roof at the right angle, etc). That is if you do not feed anything back into the grid at all.

Note: These figures do not take losses into account. Please check the updated Solar Bonus Cost Savings post that shows the corrected figures and a real life example.

If you are able to reduce or eliminate your energy consumption during the day (while the solar panels produce electricity), you might feed 1,000 kWh (50%) back into the grid. For that you would get a credit of $440 per year. The other 1,000 kWh would reduce the electricity you need to purchase. So your total savings a year would be $610.

Or if you can push that even further (100% will not really be possible, because usually the fridge is running during the day), you do even better.

So even though the electricity produced from a 1 kW system is only about 20% of your needs, you can reduce your invoice by up to 50%. A 2 kW system might bring it down to zero.

How to Benefit the Most

It is pretty obvious: If you can minimise your electricity consumption during the day, you have the biggest savings.

Here are some tips of how to achieve that the easiest (or of who is most suited for it):

• Smaller households will lower electricity bills to start off with, will benefit much more dramatically.
• If you are away during the day (e.g. work, school) you are more likely to achieve big savings.
• See whether you can use natural breezes and fans instead of air-conditioning.
• If you have a pool, can you set the timer of the pool pump so that it does not run between 10am and 3pm?
• Can you do the washing early in the mornings or evenings after the sun is down?
• If you need to use light during the day, do you use energy efficient lighting?
• Are you used to turning appliances off at the wall to avoid using stand-by power?

Feed in Tariff in Other States

South Australia – Net feed in tariff, paying 44 cents per kWh (electricity costs 22 cents, so the savings are different to the Queensland example above).

Northern Territory – Only available for residents of Alice Springs through the Solar City Program. They offer an elevated buy back rate (which is in essence an gross feed in tariff) of 45.76c/kWh (which is CPI indexed), but capped at $1,825 per year.

ACT – gross feed in tariff, began March 2009). It pays 50.05c/kWh  up to 10kw capacity and 40.04c/kWh up to 30kW capacity. That is an excellent scheme that should see most 1 kW system cover the whole electricity bill (even with the lower solar gain in Canberra).

Victoria – A net feed in tariff of 60 cents/kWh commenced on 1 November 2009, but it is credit only.

NSW – A gross feed in tariff of 60 cents/kWh to commence in January 2010 and run for seven years. Available for systems up to 10kW.

Tasmania – 20c kWh commenced.

Western Australia – Announced a net feed in tariff commencing 1 July 2010.

National Gross Feed in Tariff

Germany has run a successful model of gross feed in tariffs and is one of the countries with the most solar panels installed (even though they have a lot less sun than Australia). They have a gross feed in tariff so it is often cited as a reason for doing that.

I am not so certain. The benefits of a net feed in tariff are that consumers become more conscious of their electricity consumption habits. So it has additional environmental benefits.

Financially, the two systems can be used to achieve the same savings. It is just a matter of choosing the right level to pay.

If the federal government decided to implement a national gross feed in tariff, a lot of rewiring would have to be done. Every household that has a solar system now with a net feed in meter would need a new meter. And seeing that the electricity prices in the states vary anyway and that some states have taken action already, I think we should continue along those lines and support it.

What About Solar Hot Water?

We sometimes get questions about solar hot water and a feed in tariff. Solar hot water system do not produce any electricity. They use the sun’s heat directly to produce hot water.

They are able to use 80% of the sun’s energy where solar panels that produce electricity are only about 20% efficient. So if there was no off peak tariff, and we paid continuous tariff rates for electric hot water heating, solar hot water would have a much bigger impact on an electricity bill.

As it stands, large families (or people on continuous tariff) usually get a better financial return from solar hot water. Single and double households with small electricity bills benefit more from solar photovoltaic, especially in the states with generous feed in tariffs.

The draft legislation for the renewable energy target scheme is available after all. In the post on the solar credits, I said it was not, but now I found it.

Legislation Makes Lying Legal

“For the purposes of this Act, a certificate created in accordance with the regulations as mentioned in subsection (2) has a value of 1 MWh (even though the certificate does not actually represent 1 MWh).”

When I wrote about the solar credits before, I wondered whether our government might have overlooked the implications of inflating the REC’s they are promising. The above statement proves that they have not.

In fact they have just legalised lying, or shall we call it pretending? We can pretend to produce more renewable energy. It looks great on paper and it is enough for the purposes of this Act.

But is it enough to have an impact on global warming and climate change? If enough people take action: Yes

Here are some more details that the draft legislation reveals:

It will not affect solar hot water. Only small solar (photovoltaic), wind and micro hydro systems.

Only Systems Installed After 1 July 2009

Any system installed after 1. July 2009 is eligible for 5 times the renewable energy certificates (to 30 June 2012). Then it goes down to 4 times in 12/13, 3 times in 13/14 twice the amount in 14/15 and back to normal after 30 June 2016.

The result will be that the solar PV installations will stall in the next 6 months, as everyone is waiting to get in with the better REC’s. The only counterweight is that the $8,000 rebate might be scrapped. Here is what the federal rebate program says about their right to take it away whenever they want to.

Changes to Program Guidelines
The Australian Government reserves the right, at its sole and absolute discretion, and at any time, to change any or all of these guidelines, including to remove all or any of the guidelines or to introduce new or additional guidelines.

If the Australian Government changes or discontinues this rebate program, all applicants whose complete applications have been received before the date of change or discontinuation will be entitled to receive the rebate at the rate applicable on that date if they are assessed as eligible.

The Australian Government retains the flexibility to adjust the size of rebate in response to demand for the program funds.

Only for the First Deeming Period

REC’s can be created yearly, for 5 years (3 times or for 15 years when a photovoltaic system is installed. The legislation specifies that you can only get the “inflated” REC number for the first deeming period. So naturally, it will only make sense to create REC’s for the full 15 years at installation.

Not for Systems With Previous REC’s

Let’s say that someone installed a system in August 2004. They might have created REC’s for a 5 year period. That means in August 2009, the next 5 years can be created. They cannot get the solar credit (inflated REC’s).

Expanding a Solar System does not Seem to be Covered

Nothing can be found in the renewable energy target draft legislation about expanding a system. So it looks like it is possible that anyone with a current system can benefit by expanding it after 1 July 2008. The REC’s created for the expansion should be able to get claimed at 5 times their value.

How the $7,500 Rebate is Calculated

All media reports talk about a $7,500 rebate. That comes from the fact that the first 1.5 kW of a system can receive the increased REC’s. With the current federal solar rebate, it is $8,000 for a 1 kW solar system. You can easily add another $3,000 to the system costs for the extra half kW.

The government released details on the 20 per cent Renewable Energy Target today. One of the main impacts for households are the solar credits. The media release highlights the impact of these:

• “Solar credits worth 5 times the value of REC’s”
• “Up to $7,500 in value to someone putting in Solar”
• “The means test scrapped”

Sounds great at first glance, but what does it really mean?

Solar Credits Worth 5 Times the Value of REC’s

One REC (renewable energy certificate) is the equivalent of producing 1 MWh of renewable energy. A standard solar electric system (1kW) received 21 REC’s to offset 15 years of energy production. All of a sudden, the same system would now receive 105 REC’s.

Without producing any more renewable energy!

Electricity retailers have to purchase REC’s to achieve the renewable energy targets set by legislation. The government release today touted a 4-fold increase of this target. At the same time, they are in effect devalueing the REC’s by four fifth.

The result: we are going backwards with regards to reducing energy emissions.

Up to $7,500 in Value to Someone Putting in Solar

REC prices are market driven. If more are created than needed by the energy retailers, they drop in price. Or they might increase if more are needed than available.

Currently, the market price sits around $45. The highest was $49. But they have been as low as $16 in the last 2 years.

If you take your 105 REC’s and sell them, you will get $4,725 currently. A far cry from the promised $7,500. And if it goes bad, it might be as little as $1,680. So unless I am missing something, they’ve got it wrong.

PS: I figured out where the $7,500 come from. See my post on the Renewable Energy Target Legislation.

The Means Test Scrapped

Currently the federal rebate for solar is $8,000. However, that is only for people whose combined household income is under $100,000. It was the Rudd government who introduced the means test, making it impossible for many middle income earners to go solar. When did they do that? On May 18th of this year – a mere 7 months ago.

Now they introduce solar credits and congratulate themselves for scrapping the means test.

So they are going back and forth, making it harder and harder for the industry to keep up with the changes and to plan with any certainty.

The other unanswered question (and no one in the Department of Climate Change had an answer for us when probing today) was what is going to happen to the $8,000 federal rebate?

If these solar credits are an additional incentive, great. But if it means that the federal solar rebate gets scrapped, everyone is worse off. We also do not know whether they will be any impact on solar hot water. The draft legislation is not available yet, but it might shed some more light on that in the next few days.

Conclusion

For anyone who is eligible for the federal solar rebate, I would grab it while it is there. With the pre-application process for solar electricity, you can be certain that you get the rebate before comitting to any purchase. Once you have that pre-approval, you have 9 months to install your system. Or you can change your mind, if legislation changes to your advantage. Without the pre-approval, they might scrap it from one day to the next (as we have seen with the waterwise program in Queensland).

And once the solar credits are a certainty, you can still benefit from them.

Details of the Emmisions Trading Scheme (or ET) was announced 15-Dec-08 (eg www.abc.net.au) and are to reduce by 5% carbon emissions of 2000 levels by 2020, or 15% if the rest of the world steps up.  Per capita this is on par with Europe.

With a carbon price of $25 per tonne, electricity is expected to increase by around $4 per week, with a rise in gas prices of around $2.

Some time ago, I wrote that people change for one of three reasons

• They make money
• They lose money
• It’s the law

Whether you are strongly of the view that the government is a whimp, and this is a cop-out, or of the view that climate change caused by humans is a complete furphy, one thing is now going to be fixed in law. The law to start change will be in place.  It may not be high, but it does start to change attitude. A government might even have to raise the levels if Australia is to meet 60% by 2060!

The good news is when you replace your electric or gas hot water system with a solar hot water system, you will now contribute and benefit in 4 ways.

1. You will help Australia meet the ET target.  (Solar Hot water reduces household carbon emissions by 40% – see  electricity savings).
2. The expected rise in energy prices for households will mean you are going to be up for an additional $5 per week ($250 per year.)  This is on top of an expected 15% price increase of electricity this coming year. Put this towards a new solar hot water system.
3. You can give the energy company (and the dirty coal power plants) the finger!  You are not beholden to the major polluters.
4. You pocket the expected $20 a month extra compensation. (If you are on a pensions, family Tax A, then you get 2.5% benefit; with minimal increase in other costs)

As philosophers say all the time: Good things start small.

Queensland, the smart state? The new budget has axed the waterwise rebate scheme for Queensland.

Even though that has nothing to do with solar hot water, you might have wanted to use some of those rebates. Now there are 18 days left to act. You have until 16 February to get your application in but you need to purchase and pay in full before 31 December.

The main rebate of $1,500 is for a plumbed-in rainwater tank. It needs to serve your laundry or toilet. You only have to purchase and pay before the end of 2008. But it needs to be fully functional before you send the application in (by 16 February).

If you wan to take action, the best starting point is probably the Green Plumber website. They have a list of accredited plumbers who have received special training in rain water tanks. You can just call on 1300 368 519 and they’ll give you a number of the closest green plumber who can quote for you.

The Other Waterwise Rebates

Front loading washing machines (or another 4-star) get $200

Lowflow showerhead $30

Dual-flush toilet $150

Swimming Pool Cover $200

Greywater system $200-$500

Garden products (mulch, drought resistant plants, etc.) $50

For more details on eligibility, you need to check the Waterwise Website.

Implications for Solar Hot Water

There are no direct implications. However, it shows how fickle our government can be. The waterwise program was always planned to run until June 2009. Now it has just been axed with less than 3 weeks to take action.

Currently the various rebates pay for over 50% of a solar hot water system. Hopefully, the Australian government understands the value of these rebates more clearly and keeps them in place.

The only thing we know for sure is that there is no certainty at all. So if we cannot be waterwise any more, let’s be solarwise while we can.