Wave of FIT reductions to hit over 275,000 Australian solar households

Some Australian state-based residential solar schemes put into place between 2010 and 2012 offered households attractive FITs, in measures designed to kick-start the distributed solar sector. The schemes were enthusiastically taken up by consumers, however these solar households now face significantly reduced revenues generated by their PV system, as the initial incentive tariffs expire.

The Life After FITs report, published by the Alternative Technology Association this month, commissioned by Energy Consumers Australia, concludes that over 275,000 households will be affected by the tariff programs’ expiring, with solar feed ins dropping by as much as 90%.

146,000 solar homes in New South Wales (NSW) are in line for the biggest tariff drop, with solar FITs under the Solar Bonus Scheme falling from either an extremely generous AU$0.60 or AU$0.20/kWh falling to between AU$0.055 to AU$0.072 on January 1, 2017. However, in NSW the government has not mandated a minimum FIT that utilities must pay households for solar electricity fed into the grid, and the new FITs represent only a “benchmark range” determined by the state’s Independent Pricing and Regulatory Tribunal.

In neighboring Victoria, more than 67,000 solar customers will see tariffs drop from AU$0.25/kWh to around AU$0.05/kWh in the New Year under one scheme. A later net metering program was will also expire on December 31, with solar feed ins falling to the AU$0.05/kWh rate. The number of solar net-metered customers in Victoria could not be determined by the Alternative Technology Association report.

The third affected state is South Australia, where the AU$0.16/kWh FIT will fall to a minimum required payment of Au$0.068/kWh. This will affect some 63,000 households and will come into effect in September.

Coping strategies

To minimize the impact of the FIT digressions, the report recommends that households take a number of measures. These include upgrading electricity meters to a smart mater, shopping around for a retailer with the most generous solar FIT, the optimizing of the self consumption of solar electricity produced on site, and switching space and hot water heating from gas to electric.

The Alternative Technology Association modeled the feasibility of households installing lithium ion battery storage, to allow them to maximize their solar self consumption, but found that it does not yet make financial sense for the affected homes to do so.

“The modeling results demonstrate that retro-fitting energy storage to solar is not cost effective for existing solar PV customers prior to 2020 – with some scenarios remaining unfavorable after 2020 (particularly those associated with the larger [7kWh] battery).”

After 2020, the report concludes it’s a different story for storage: “it should be eminently possible for most solar homes to be consuming the majority of their own solar electricity whilst at the same time reducing their annual stationary energy bills to below AU$500 per annum (a reduction of 75% – 83% on what most Australian households currently pay per year).”

Until that point, the Alternative Technology Association recommends households endeavor to shift loads within the household to daylight hours and take steps to move away from the heating of the home and hot water away from gas.

“Steps two & and three [maximizing self consumption and shifting away from gas] will likely take one to three years to implement, by which time batteries will have come down in cost; and your existing inverter may be coming close to needing replacement anyway (a necessary step for existing solar customers moving to a solar-battery system).”