Feed in tariffs in Australia - at a glance

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1 LB-Windservice Pty Ltd Renewable Energy PO Box 621 Byron Bay NSW 2481 mobile: lb-windservice.com Feed in tariffs in Australia - at a glance Australia currently has no nationalised program, only state run schemes. Here's an at-a-glance look at state arrangements. Please note: LB-Windservice advisers consumers to shop around for solar-friendly electricity retailers when considering accessing feed in tariffs to ensure they won't be penalised in other ways in regards to their electricity bill once they have a system installed. State Current status Vic Max Size Commenced November kw SA Commenced July 2008 ACT Commenced March kW (10kW per phase) Rate Program Paid Duration Model 60c (credit/cash 15 years Net ) 44c+/54c+* 20 years Net 200kW** 45.7c 20 years Gross TAS Commenced tbc 20c tbc Net Same as NT Commenced tbc consumption tbc Gross rate WA Commenced August 1, 2010 QLD Commenced July 2008 NSW Commenced See Western Australia notes below*** 30 kw (10kW per phase) 10 kw 40c/kWh 10 years Net 44c+ 20 years Net 60c/kWh & 20c/kWh 7 years Gross Germany sets the feed in tariff example Possibly the most famous and successful feed-in tariff laws would be those introduced in Germany over the past 15 years. In 1991 the German government introduced the Electricity Feed Act, legally regulating the feed-in to the grid of electricity generated from renewable resources such as solar power. This Act required utility companies to purchase electricity generated from renewable resources such as domestic solar power systems at set rates (feed-in tariffs).

2 The scheme, originally introduced in 1991, was expanded and enhanced in 2000, and has been responsible for the dramatic growth in Germany s renewable energy market, particularly the solar photovoltaic industry. In the five years from 2000, the quantity of electricity fed into the grid from eligible sources has more than doubled, with a seven-fold increase in installed solar photovoltaic (PV) capacity to over 1,500 MW by the end of By comparison, at the same time Australia had in the order of 7MW of grid-connected solar systems, or less than 0.5% of Germany s capacity. Germany has continued to grow it's solar market and currently has around 2,500 MW of solar power capacity. Based on exchange rates as of mid-february 2009 and under the new tariff structure introduced in 2004, the base level of compensation for grid connected solar power installations on homes and buildings is up to AUD$ 1.12 per kwh. Australia is lagging behind other countries such as Germany who, while having half the sunshine of Australia, have 200 times the solar production capacity of our country due to a generous feed in tariff program. Gross vs. net feed in tariff A net feed in tariff, also known as export metering, pays the PV system owner only for surplus energy they produce; whereas a gross feed in tariff pays for each kilowatt hour produced by a grid connected system. It's a very important difference. Is an income from a feed in tariff taxable? At this point, there doesn't appear to be any specific taxation legislation dealing with income derived from feed in tariffs. Whether it is assessable income depends on the income producing nature of the activity. If it can be demonstrated that the system was installed with a view to making a profit, then receipts under the feed in tariff would be considered assessable income while all expenses associated with the income generating activity would be deductible (eg depreciation). In most cases, systems installed at domestic sites would not be taxable as they would be considered personal use / hobby (i.e. not in the nature of a business or profit making scheme). If the system is installed at a commercial site, it will most likely be considered taxable. However, system owners should consult their accountant for advice or can also request a private ruling from the ATO. An example of an ATO private ruling result in relation to feed in tariffs can be viewed here

3 Feed in tariff income and social security According to a May 2010 anouncement from Centrelink, feed in tariff credits where applied as a credit on an electricity account are not included in Centrelink's income test for pensioners, but credits converted to cash payments such as a cheque or direct deposit will be. The adjusted policy applies from 14 May 2010 and is relevant to not just pensions, but all Social Security income support payments such as NewStart. However, we are still unclear if this applies to payments such as Family Tax Allowance and Parenting Payments. We are currently seeking clarification and advise people who may be affected should consult with their local Centrelink Office. Is GST payable on feed in tariff revenue? Individuals will not need to pay/remit GST from their feed in tariff income. The reason being that selling electricity back to the utility providers is considered an enterprise but you need to receive $75k per annum from this source to be required to register for GST. However, businesses will need to pay/remit GST for their feed in tariff income. Victoria net feed in tariff Victorian households with solar power systems will be paid a feed in tariff from November Legislation for the Victorian feed in tariff was introduced on March 10, 2009; then revised and passed on June 25, Under the program, Victorian households, community organisations and small businesses who consume less than 100 megawatt hours of electricity a year will be credited a minimum 60 cents for every unused kilowatt hour of power fed back into the state electricity grid. Some electricity retailers may offer a higher amount. While electricity companies are only obliged to offer the 60c rate and as only a 12 month credit, some are now offering cash payments at higher rates: AGL Origin FiT offer inc. GST Availability 68c 66c All premises Primary residence and eligible business and community organisations Cash or Credit? Cash Cash Payment frequency and method Payment can be received annually via EFT Once annually when in credit for more than $50 via cheque Additional fees $10 admin fee None

4 Country Energy Energy Australia 66c TRU Energy Red Energy 66c All premises Cash 66c 66c Primary residence and eligible business and community organisations Primary residence and eligible business and community organisations Primary residence and eligible business and community organisations Credit only Cash Cash Payment can be made every None billing period via cheque NA Case by case basis (generally when over $100 credit) via cheque 1 free refund per year via EFT / cheque None None $10 admin fee after annual refund *As at December Information obtained through sales consultants and data from official company websites The tariff will only be available until a total capacity of systems participating reaches 100 megawatts total capacity. PV systems larger than 5 kilowatts in size and other renewable energy systems up to 100 kilowatts in size remain eligible for the standard feed-in tariff. On July 21, the Victorian Government also announced new initiatives for medium and large scale solar power installations - details to be come. PFiT vs SFiT in Victoria In Victoria, electricity distributors (upstream from electricity retailers) Powercor and Citipower have created confusion regarding FiT issues by introducing their own terminology PFiT and SFiT, which stand for Premium Feed In Tariff and Standard Feed In Tariff. Essentially, they are two different options offered to solar power system owners with different rates for electricity consumed, depending upon usage pattern. The terms are defined as follows: PFiT This plan offers to pay you for the electricity you feed back into the Victorian grid, over and above what you use at home, at a premium of $0.60 per kwh. Most electricity retailers in Victoria offer a premium of between $ and you should contact your retailer to find out how much their premium is. Whenever your home electricity demands are less than what your solar panel is producing, you will be feeding electricity into the grid. SFiT This plan offers to pay you for the electricity you feed back into the electricity grid, over and above what you use at home, at the same rates as you pay to purchase electricity under your current electrical services contract. The plan is available for electricity generated from any renewable resource, such as the sun or wind. PFiT vs SFiT - what should you choose for consumption? Bearing in mind the PFiT and the SFiT options have been imposed at the electricity distributor

5 level, the general rule of thumb is: If you have more than one meter and it s being used to operate appliances during daytime such as dual element electric hot water, underfloor slab heating or an air conditioner, then you are likely best to choose the standard feed in tariff option (SFiT) If you have two meters & one applies to a single element HW system you will likely benefit most from the premium feed in tariff (PFIT) option. If you have one meter, then you would likely be best to opt for a premium FiT (PFiT) Which distributor should you choose? Unfortunately, you have no choice. A distributor is assigned to specific geographic areas: Citipower CitiPower distributes electricity to Melbourne's CBD and inner suburbs. Jemena Jemena Electricity Networks distribute electricity to the north-west greater metropolitan region of Melbourne. Powercor Australia Supplies electricity to Melbourne's outer western suburbs and regional and rural centres in the central and western areas including Ballarat, Bendigo and Geelong. SP Ausnet Supplies electricity to eastern metropolitan Melbourne and eastern Victoria. United Energy Distribution Supplies electricity to south-east Melbourne metropolitan area and the Mornington Peninsula. Which retailer should you choose? While you cannot change distributors, you can switch retailers. At the electricity retailer level, whether it is Victoria or any other state, we always suggest for people to shop around some retailers are far more solar friendly than others and will offer better rates, higher payments for the power your system produces and/or better arrangements regarding your account generally. Further details on Victoria's Feed in Tariff South Australia net feed in tariff From July , qualifying South Australian residents began receiving $0.44 per kilowatt-hour. On August , Premier Mike Rann announced proposed amendments to the scheme to increase the rate paid to 54c per kilowatt hour minimum and on April 6, 2011, the legislation was tabled. In addition to the 54c, electricity retailers will be obligated to pay an additional amount once the

6 legislation is passed. This amount is to be determined by the Essential Services Commission of South Australia and is expected to be around 6 cents per kilowatt-hour. Under the amended scheme, additional eligibility criteria will be introduced, including: Payment of the bonus limited to the first 45 kilowatt hours exported to the grid per day (far higher than what an average system would produce) A limit on eligibility to one generator per customer or entity Exclusion generators operated primarily for the purpose of generating a profit from the scheme The scheme will be closed to new connections after midnight on 30 September All new connections made after August 31, 2010 will need to satisfy the new eligibility criteria in order to participate in the amended scheme. ACT gross feed in tariff In July 2008, legislation was passed in the ACT's Legislative Assembly for a gross feed in tariff to be implemented and originally paid 50.05c/kWh for systems up to 10kw capacity and 40.04c/kWh for up to 30kW capacity. The program was revised in April 2010; from 50.05c/kW to 45.7c/kWh for all systems up to 30kW capacity installed from July 1 and that price will remain in place for two years. All contracts are valid for 20 years from the date of contract. In September 2010, the ACT government released details of a proposed expansion of its feed in tariff scheme that may incorporate medium and large-scale generators, up to 200kW capacity and beyond. In April 2011, the ACT government announced the new medium scale solar power payment percentage would remain set at 75% of the micro-generator category rate, a price of c per kilowatt hour Tasmania net feed in tariff The current feed in tariff rate for Tasmania solar power production is $0.20 per kilowatt-hour; but there have been moves to introduce a gross feed in tariff in the state soon. Sign up for our newsletter via the subscription box on the right hand menu of this page (towards the bottom of the news box) and we'll keep you up to date with developments in the Tasmania solar power feed in tariff situation. Northern Territory net feed in tariff For new connections, the Northern Territory feed in tariff is 1-for-1 - whatever the customer's consumption tariff is: residential customers: c/kwh commercial: c/kwh commercial time-of-use customers: peak c/kwh and off-peak c/kwh Customers under the Alice Springs Solar City initiative receive c/kwh, still capped at $5/day, but that rate is only for existing customers under the initiative. The funding has been fully allocated now, so no new customers can receive this rate. Western Australia net feed in tariff After previously announcing a rate of $0.60 per kilowatt hour based on a gross model starting some

7 time in 2009, the Western Australian government rescinded the rates and conditions in June 2009 and decided on a net feed in tariff model. On May 27, 2010, the Western Australian Government announced the Residential Net Feed-in Tariff Scheme will commence August 1, 2010 and pay a rate of 40 c/kwh for net electricity exported to the mains grid; in addition to any schemes offered by electricity retailers. Residential Net Feed-in Tariff Scheme participants will receive the premium rate for 10 years. Solar power systems will be limited in size to 5kW for Synergy customers and 10kW per phase (30kW in total) for Horizon Power customers. *** Note: System size must be consistent with Renewable Energy Buyback Scheme (REBS) which is 5kW for Synergy customers and 10kW per phase (30kW in total) for Horizon Power customers (Horizon Power customers installing greater than 5kW must consult Horizon Power first). These are determined by the size of the inverter. The feed in tariff is in addition to the price paid by Synergy and Horizon Power under the Renewable Energy Buyback Scheme. Further information Queensland net feed in tariff The Queensland Government Solar Bonus Scheme commenced on 1 July Grid connect solar owners participating in the scheme will be paid $0.44 per kilowatt hour (kwh) for surplus electricity fed into the grid, plus local electricity companies may choose to over additional payments above that. A 10kW limit applies to each phase of power supply. If you have 3 phase power, it would be possible to set up 3 separate 10kW systems and still get paid the 44c for every kwh fed into the grid. This tariff is open to residential, business and community buildings. New South Wales gross feed in tariff Rates for the hugely popular feed in tariff program in New South Wales, the Solar Bonus Scheme were reduced to 20c/kWh for new connections after midnight, October 27, Furthermore, in mid-january 2010, the NSW Government announced the 300MW of installed solar capacity under the program was rapidly approaching, with applications already in the system exceeding that amount. After the 300MW cap is reached, the program may be ended, however, some NSW electricity retailers are offering payments separate to the Solar Bonus Scheme and net metering is also an option for new connections whereby electricity exported to the mains grid is credited to an account. The New South Wales Government originally announced details of the state's feed in tariff incentive

8 (called the Solar Bonus Scheme) on June 23, 2009, but on November , made a decision to switch from a net feed in tariff to the gross model; a much more generous arrangement. Pays 60 c/kwh on a gross basis (for new connections made up until October 27, 2010; after that, new connections will receive 20c/kWh) Maximum system size 10 kw Commences 1 January 2010 NSW gross feed in tariff and electricity meters According to the information we have on hand, current as at late December 2009, there are 3 distributors who will all be handling the GFiT separately; a) Integral (West & South Sydney) - Integral meters can be reprogrammed and the gross feed in tariff will be offered from 1/1/2010. Customers must apply for the gross feed in tariff and may need to pay a fee. b) Energy Australia (North Sydney) The gross feed in tariff will not commence until 1/7/2010 for Energy Australia customers, but the net feed in tariff will be available before this time. Energy Australia's meters cannot be reprogrammed. Customers will need to change to a net meter on 1/1/2010 and then to a gross meter on or around 1/7/2010. It is likely that customers will need to pay for 2 meter changeovers. c) Country Energy (the rest of NSW) As per Energy Australia; the only difference being since January , all grid interactive metering became contestable works. This means that although there is no charge for the meter, customers are asked to engage a level 2 Accredited Service Provider (ASP) to complete the installation of the meters. This will incur a varied cost Why do we need feed-in tariffs? Residential solar power is disadvantaged in Australia. The market fails to take into account the true value and many benefits to the electricity network which arise from the adoption of renewable energy technologies embedded within the electricity grid. Solar PV, like other renewable energy sources, provide environmental benefits through reduced atmospheric pollution, and social benefits through industry development and job creation - for example through the installation of grid connect solar systems, each with related economic benefit. When electricity is transmitted over a distance, some is lost through what's called line loss. By installing rooftop solar arrays on houses, the electricity can supply not only the house on which it's installed, but the surplus can feed other houses close by. Centralised power generation facilities also provide a relatively easy target for hostile parties and can be destroyed in natural disasters such as cyclones or fires. A decentralised network or grid connected systems allows for better energy security as it's much cheaper and faster to repair a substation than it is to replace an entire plant. It's in the interests of our national security to decentralise power generation. During the summer months, it's becoming increasingly common for blackouts to occur due to an overload of the mains grid. It's during these months that solar power installations can make their greatest contribution. A feed-in tariff for grid connected systems redresses these systemic market failures and threats and rewards solar electric generation for its true value to the electricity market and wider society, by providing a financial incentive for the adoption of renewable energy. Design of a feed-in tariff scheme For a feed-in tariff to be effective, it is essential that the tariff offered is designed in a way as to

9 adequately reward solar PV proponents. LB-Windservice believes that in order to provide an incentive for people to install grid-connected solar systems, and thus achieve the goals of the scheme, there are three key elements of a feed-in mechanism which need to be considered: The price level of the tariff; the means of metering; and the duration of the scheme. It is the proper combination of these three elements, which will determine the success or failure of a feed-in mechanism. LB-Windservice strongly believes that an effective scheme would involve a feed-in tariff of at least 80 cents per kwh, paid on the entire output of a solar power system (via gross production metering), and offered for at least 15 years. Only a gross feed-in tariff set at or above these levels would adequately reward the adoption of solar PV for the range of environmental, social and economic benefits arising from this technology, and encourage the uptake at sufficient levels to achieve the policy goals. It is important that the 80 cents per kwh gross production feed-in tariff is established in conjunction with the Australian Commonwealth Government s Solar Homes and Communities Plan. Only then will a feed-in tariff scheme be effective in encouraging uptake of rooftop solar photovoltaic systems by helping owners to recoup the cost of their system. However, for any feed-in tariff to totally phase out the federal means-tested $8000 rebate scheme, we believe a feed-in tariff mandated at 80 cents per kwh would be more effective and there should be a crossover period where the rebate is still available. Although several states in Australia already have feed-in tariff schemes in place, those introduced in South Australia, Queensland and Victoria recently are net feed-in tariffs, meaning they only pay homeowners for the electricity exported to the grid minus what is consumed in the home at the time of production. This system of metering significantly discriminates against both owners of smaller grid-connected systems and those who are more likely to consume electricity during the day, such as pensioners or stay-at-home parents. Alternatively, double incomes families who are typically away from home during the day manage fine under net metering, but now it is these households who have become ineligible for the solar rebate, due to the $ per household income means test. LB-Windservice' feed in tariff standpoint At LB-Windservice we believe that for a feed-in tariff scheme to make the most impact in Australia it must be a gross feed-in tariff. When Germany introduced gross feed-in tariffs in 2000 it doubled the amount of electricity generated from renewable energy sources and adjusted its 2010 target of 12.5% of total energy consumption. It is now three years ahead of schedule. As a consequence of this success, Germany recently increased its renewable energy target to 27% of all electricity generation by Also the gross feed-in tariff has created nearly 250,000 new jobs in the renewable energy industry, which will soon surpass the car industry as that nation s number one employer. The German solar power sector is now creating three times the number of jobs per

10 installed megawatt as the coal fired electricity industry - all of this in a country receiving half the sunshine Australia does. International experience tells us that gross feed-in tariffs can be very successful in stimulating the uptake of renewable energy, addressing climate change and creating strong local industries and employment. However our state governments, through inventing a net feed-in tariff have made a fine mess of a policy, which has delivered so much for the solar power industry overseas.